FOREIGN NEEDS FOR UNITED STATES ECONOMIC ASSISTANCE DURING THE NEXT THREE TO FIVE YEARS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP67-00059A000400130002-1
• Release Decision: RIFPUB
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• Document Page Count: 143
• Document Creation Date: November 11, 2016
• Document Release Date: August 20, 1999
• Sequence Number: 2
• Publication Date: July 1, 1947
• Content Type: REPORT

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CONFIDENTIAL
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FOREIGN NEEDS FOR UNITED STATES ECONOMIC ASSISTANCE DURING
THE NEXT THREE TO FIVE YEARS
Report of the Economic 'Working Group on Economic Aid
to the Special Ad Hoc Committee of the
State-War-Navy Coordinating Committee
Reference: SWN-5280
July 1, 1947
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Table of Contents
Page
Summary and Conclusions (i)
Conclusions (i)
Summary (v)
I. Introduction _Objedtives.of.U. S. Economic
Assistance Policy 1
II. World Financial Needs 6
III. 7orld Situation for Critical Commodities 24
IV. Relation between Regional and 1.:orld
Approaches to Economic Assistance Policy 44
Table I. "P.TORLD CAPITAL IMPORT REQUIREENTS, BY
COUNTRY, 1947-1949"
Table II. "PROJECTION OF UNITED STATES BALANCE OF PAY-
LWTS UNDER PRESENT FINANCIAL POLICIES,
AUTHORIZATIONS AND PROGRAS, BY AREAS,
1947-1949"
Table III. "ANNUAL DOLLAR AVAILABILITTES UNDER PRESENT
POLICIES, BY COUNTRY, 1947-1949"
Appendices
A. Calculation of Country Net Capital Import
Requirements
B. Utilization of Gold and Dollar Reserves
C. Breadgrains and Feedgrains
D. Fats and Oils
E. Coal
F. Dry Cargo Shipping
G. Steel
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FOREIGN NEEDS FOR UNITED STATES ECONOMIC ASSISTANCE DURING
THE NEXT THREE TO FIVE YEARS
Report of the Working Group on Economic Aid
to the Special Ad Hoc Committee of the
State - War - Navy Coordinating Committee
Reference; OWN- 5280
Summary_and Conclusions
Conclusions
Foreign needs for economic assistance have been re-examined by the
7orking Group on Economic Aid. While in some particulars the outlook
now differs from that given in the previous Interim Report of 2 May
1947, the major conclusions of that study have been re-affirmed. Two
of the conclusions were:
a. that under present programs and policies the world will not be
able to continue buying U. S. exports at the 1946-47 rate and
b. that the current volume of V. S. foreign financing is not ade-
quate to secure either world economic stability and a desirable
world trading system or our political objectives in critical coun-
tries.
Requirements of the world for economic assistance based upon the rising
levels of consumption and capital formation necessary to the realization
of U. S. political objectives are far in excess of the amounts the U. S.
is prepared to supply under present policies, authorizations, and pro-
grams. Requirements unsatisfied in 1947-1949 are estimated to total
0.1 billion; of the sixteen countries participating in the Paris Confer-
ence on European Recovery the eight considered to confront unsatisfied re-
quirements account for 6.6 billion, and four of the eight--the U.K., France,
Italy, and Hi-zonal Germany--account for $5.6 billion.
In the
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In the measure that the cooperative program of recovery being formu-
lated in Paris by Western European countries provides for meeting their
requirements and is supported by the U. S., a large part of the total prob-
lem will be met. In addition to carrying forward with thetMarshall Plant
members of the working group consider that the following financial measures
are required to secure U. S. foreign policy objectives in other areas than
Western Europe.
1. Present U. S. government policies and programs of rendering fi-
nancial assistance to other countries than those participating in the
Marshall Plan should be continued and carried forward in the measure
anticipated in this Report, including
a. realization of $1.1 billion of International Bank lending
in the three years 1947-1949 to non-Marshall Plan Countries,
b.. the appropriation in Fiscal Year 1949 of funds for con-
tinued civilian relief in Japan, and
c. appropriation of a grant-in-aid for Korea.
2. The U. S. Government should scrutinize the projects of non-Marshall
Plan countries noted as unfinanced in this report to determine which
of them might under a more liberal loan policy than is now employed,
be appropriately financed by the International Bank.
3. To the extent not required to aid in implementing the Marshall
Plan the uncommitted lending power of the Export-Import Bank, amount-
ing on July 31 to 800 million, should be employed to finance the most
productive of the requirements of non-Marshall Plan countries remain-
ing unsatisfied under present policies, authorizations, and programs.
4. The ship sales act should be amended and renewed and the disposi-
tion of ships should be pursued with vigor to the end of putting into
service under foreign flags U. S. government owned merchant vessels
that are
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that are now, and in view of present policies will likely continue,
idle.
The Working Group also reaffirms the view expressed in its Interim Report
as to the necessity for giving authority to the Maritime Commission to
operate government owned vessels and to apply revenues from operation of
ships for government account to meet expenses of operation.
The cost of realizing our political objectives cannot wholly be
measured in money. Reaching the objectives will require overcoming world-
wide shortages of commodities--particularly grains, fats and oils, coal,
and steel. Solution of the problem posed by such commodity shortages de.,
ponds on the continuation or imposition and the strengthening of controls
in the U.S. over exports and domestic consumption. Such controls should
be used to divert supplies, subject to considertItions of international
equity, to their most important uses as measured by their effect in relax-
ing political tensions in the non-Soviet world and promoting positive po-
litical attitudes toward the U.S.
In its Interim Report the Working Group noted certain specific mea-
sures required to deal with commodity shortages then anticipated. It was
held necessary:.
a. to commit ourselves firmly to the export goal of 15 million tons
of grain, to direct this amount of grain into export channels by tak-
ing measures for control outlined in the Report, and to continue col-
laborating ,with IEFC in programming the allocation of exports,
b. to continue U.S. coal exports to Europe at a maximum during 1947
and for n. considerable period thereafter, to give highest priority to
a coordinated program for increasing European coal production, and to
continuo supporting the principle of international allocation in ac-
cordance with need in the distribution of available coal,
c, to direct, by governmental action, nitrogenous fertilizer, steel,
and certain capital equipment items into export channels, and
d. to extend governmental powers expiring June 30, 1947 (i) to al-
locate and assign priorities to export of a limited list of critical
commodities
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commodities, (ii) to control exports, and (iii) to assign priorities
to transport of exports.
The 7orking Group in this report has examined the outlook for grains, fats
and oils, coal, and steel. The world grain situation has deteriorated markedly
since the Interim Report was prepared. It is no longer in prospect that the
U. S. Could make available for export in 1947-48 approximately 15 million metric t
tots of grain without curtailing domestic consumption.; 12 million tons only are
now in Bight for export; and foreign import requirements have increased because
of crop failures abroad. The deficit in prospect has increased from 9 million
tons to 16 million tons. To achieve U. S. political objectives it willbe
essential to take maximum efforts to step-up U. S. grain exports. Maxiaum
efforts include
1. restoring 1946 controls., particularly provisions for higher flour
extraction rates,
2. shipping a larger proportion of U. S. wheat as wheat rather than as
flour to take advantage of .higher extraction rates abroad and provide
foreign countries a larger supply Of by-products for feed, and
3. the efforts noted above in (a) which the Working Group re-affirms.
It also re-affirms the necessity of measures noted above in (b) and (c) for
dealing with the prospective shortages of coal and steel. In this connection
the Working Group wishes to stress the importance to easing the critical world
steel situation of renewing the Ships Sales Act anft pressing the disposition
of ships with vigor. Approximately 12 million d.w.t. of U.S. Government-owned
shipping, currently inactive, could be put into service under foreign flags to
minimize the need for constructing new vessels abroad. The working group also
believes continuation of world allocation of -fats and oils necessary to prevent
bidding up of world prices and to insure as equitable distribution as is possi-
ble. The Powers to direct and regulate the export of critical materials and to
allocate transportation equipment, noted above in (d), have been renewed until
March 1, 1948*.
*Estimates in this report were prepared ? early in the summer and, in varying
degreesvhave been superseded. However, it is believed that if appropriate
revisions were made, they would serve to strengthen the conclusions of the
report since they would raise European unsatisfied dollar requirements and
requirements for critical commodities, particularly grains, fats and oils, and
coal, while lowering prospective exportsalfpliea. Even though the estimates are
not, in detail, the best that could now be-made, it is felt that the over-all
analysis and a)nclusions- are substantially correct and a useful purpose will
be served by presenting the report at this time. (9/18/47)
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Summary
Oblectives of U. S. Economic Assistance
Economic assistance to foreign countries by the United
States follows logically from a major tenet of United States
foreign policy: that U. S. security will be served by support
from the peoples and governments of Western Europe, the Near
East, the Far East, and Latin America and the strengthening
of economic-military potential of friendly areas not likely
to be over-run by hostile powers in the event of war. To
this end, and equally to the end of peace, U. S. policy seeks
the elimination of political tension and violence within and
among countries in the non-Soviet world (a) as a means of
avoiding the occasion for competitive intervention by the
U. S. and USSR, (b) to establish conditions for the peaceful
political evolution and cooperative unification of the non-
Soviet world, with the United States in a leading role, and
(o) to demonstrate to the Soviet world the necessity of
revising a foreign policy grounded in the prognosis of the
inevitability of economic rivalry and political strife among
capitalistic countries culminating in war.
Political tension within and among countries of the non-
Soviet world arises from disappointed hopes for economic
betterment cherished by a country or by classes in a country.
In the case of the more advanced war devastated European
countries, hopes of urban lower-income groups for a quick
return to
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return to living standards enjoyed before the war have been
disappointed despite marked improvement in their condition.
Disappointment and loss of hope for rapid realization of
economic aspirations have given birth to, and in the next few
years will nourish, hostility and aggression toward the more
favored classes in their awn country, toward national
authorities, and toward the U. S., the principal country able
to provide means for improvement. In the case of under?
developed countries not suffering devastation, internal class
? tensions and xenophobia arise with the emergence of new social
and economic classes conscious of the favored position and
wealth of native ruling groups, colonials, and foreign con?
? cessionaires. Hostility toward rich countries and toward the
metropolitan powers, civil war and colonial rebellion are the
potential or actual results in many areas.
U. S. economic assistance in adequate amounts to war
devastated and underdeveloped areas is indispensible to
eradicating these causes of political conflict within and
among countries of the non?Soviet world and to promoting their
peaceful political evolution and cooperative unification.
It will, by making possible a more rapid increase in urban
living standards and by terminating the seemingly endless
procession of economic crises, restore hope and morale and
strengthen moderate, democratic governments in the more ad?
vanced war devastated European countries; in underdeveloped
countries it will accelerate the process of capital formation
necessary
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VII
necessary to an increase in mass living standards and the
relaxation of dangerous political tensions but only if stripped
by all appearance of foreign exploitation and if accompanied
by radical social and political reforms.
Such assistance will help ispell hostility toward the
U. S. engendered by envy and desperation and will promote
more positive attitudes. International cooperation and
planning will also be promoted by such aid, and U. S.
political leadership will be increased because it will be
identified with the common objective of
standards throughout the world.
Measurement of Financial Requirements
Measurement of the economic assistance
particular country of the world to maintain
raising living
needed by any
or create the
political, economic, and social conditions of high morale,
peaceful development, and support of U. S. political leader?
ship is necessarily a difficult question of judgment which
must take account of existing political circumstances and
recent economic experience. The neede of the world for the
Years 1947-1949 for "capital imports", the extent to which
they will probably be met out of existing resources or from
financial assistance advanced under existing policies and
programs of the U. S. Government, other governments, and the
'Jorld Bank
41' The phrase "capital import requirements" is used in this
report to denote the difference between (i) a country's total
needs for imports of goods and services and for repaying obliga?
tions.and (ii) the sum of (a) its current account resources
(its exports of goods and services, its sale of new gold and
its net receipt of private remittances) and (b) prospectAve
loans by other countries than the U. 5,
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TABLE I
C41
TCRLD CAPITAL IMPORT REQUIREMENTS 1947-1949: SUMARY P7 AFIA*
CD rbillions of dollars at prices prevailing in the last half
co 1946)
CD
CD
CD
C4
141
CD
C?
CAD
CL
0
All Areas
Europe
Western Europe
Eastern Eucope
Near East & Africa
Far East & Oceania
-Western Hemisphere
Unallocable
1947
Total "Required"
Net Dollar Capi-
tal Imports
Total
Allowance for prob-
able financing**
Ttal
N47
1947
1,3
7n3aisfied. Capital
import F.equirements
1948
1949
1947
1948
1949
3.2
1,4
10)Q
1949
Tztal
11.3
6.9
8.9
6.3
6.9
4.6
27.1
17.8
10.0
6.1
5.1
3.0
18,3
1047
3.7
3,2
8.8
7.2
5:8
1.1
5.1
1.2
4.0
.6
14.8
2.9
---7:3
.6
27
.4
1.2
.2
9.1
1.2
,4
.5
- r
,8
2.7
.4
1.7
.6
1.8
1.9
71
.7
1.2
.6
.1
-.T
1.2
.5
.2
1.7
4.2
3.1
.3
.5
1.5
1.8
/
.2
.9
.5
.1
.3
1.0
.4
.2
1.3
3.5
2.8
.3
.1
.3
.1
.2
.3
.1
.1
.2
. .1
L
. 4
.8
.3
Discrepancies in the last decimal of totals are due to rounding.
** Out of United States Government credits and aid, International Bank credits, private investment, and the
8 liquidation of gold holdings and. dollar assets.
73
>
2
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World Bank, and the extent to which they are likely to remain
unsatisfied are given in Table 1. A summary by areas of this
table is given on page viii.
Capital import requirements of non-Soviet war devastated
countries provide (a) for a sufficiently rapid improvement in
levels of consumption to make probable the survival of moder-
ate democracy and (b) for the restoration of war damage and a
moderate improvement in capital plant to ensure (i) rapid
achievement of self-support and (ii) in some cases capacity
to carry a share of responsibility for maintaining world
peace and security. Capital import requirements for Soviet
satellites have been based on loss favorable consumption and
capital improvement standards. They have been included for
the sake of giving a complete picture and not necessarily bo-.
cause their satisfaction in full is essential to attainment
of U. S. objectives. Estimated requirements of Europe tend
to be understated for a number of reasons.
Capital iMport requireMents of underdeveloped areas of
the world permit a moderate rate of agricultural and industrial
capital formation and include some allowance for financing
internal costs (by currency stabilization credits) where deemed
necessary. it is believed that the postulated rates of -develop-
ment for such areas in general are up to the limits established
by rates of domestic saving and rates at which necessary new
institutions can be established and new workers trained. A
larger program would tend to be dissipated in inflation and
wasted
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wasted in graft. In general, requirements estimates do not
include the,foreign exchange cost of military assistance.
The net capital import requirements of all areas are ex?
pected to decline from 11.3-billion in 1947 to 7.1 billion in
1949 as the tempo of world recovery and expansion accelerates
and the flow of exports from the devastated areas increases.
Requirements of Near East and Africa are expected to increase
in 1948 and be larger in 1949 than 1947; requirements in
Western Europe are expected to fall by about 1./3 in the course
of the two years; those of the Far East and Oceania are like?
wise expected to 'all' about 1/3; but requirements in the
Western Hemisphere are expected to fall precipitously to
Slightly more than 1/4 of the 1947 level by 1949. The pre,.
cipitous decline in Western Hemisphere capital import require?
ments reflets a lack of provision for the continuation of
the present high rate of U. S., exports to that area. The
present rate is made possible by the liquidation of dollar
assets and the transfer-of funds from Europe to Western Hemi?
sphere countries in satisfaction of current trade balances
and blocked sterling accounts. It is expected that in some
measure the high level of Western Hemisphere demand exhibited
in 1947 is temporary and reflects a war?time accumulation of
deferred demands. To a considerable extent, however, these
demands can be expected to continue, and the hope is that, as
the dollar holdings of the Western Hemisphere decline and the
ability of European countries to pay in dollnrs dimishes,
Furopels,
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Europe's ability to supply Latin American and Canadian needs
will increase se that the net dollar capital import require-
,
ments of Western Hemisphere countries will, properly, decline.
Financing Now Available or in Sight
A substantial part of all net capital import require-
monts of the world 1947-49 will be satisfied if present finan-
cial policies and programs (including 12.4 billions of
national Bank loans) are realized, if certain foreign coun-
tries carry out present programs for liquidating dollar gold
assets in excess of the bare minimum, and if favorably situ-
ated countries succeed in securing private financing. A
relatively small proportion of the total financial require-
ments estimated for the Near East and Africa, Far East and
Oceania, and the Western Hemisphere will remain unsatisfied.
However, for a handful of countries financing now available
or in sight will fall far short .of requirements; the unsatis-
fied needs will be particularly serious in four western
European countries; the United Kingdom, France, Italy, and
Bizonal Germany.
The United States balance of payments has been prOjected
on the assumption that present financial policies, authoriza-
tions, and programs are not changed and on certain assumptions
regarding the future course of prices and national income in
the United States. It indicates that United States exports
and the United States trade balance may be expected to decline
sharply in 1948 and further in 1949 from the 1947 level as
shown in the following summary table:
Prospective
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'Prospective United States Exports of Goods and
- Services and Trade Balance, 1947-1949,
Under Present Financial Policies,
ro rams and Authorizations
billions of dollars at then current prices
1947
1948
1949
Total
Exports of Goods and Services 19,02
13.67
12.37
45.06
Trade Balance on Goods and Services
Account 10,68
6.01
_3.96
20,55
It is believed that the decline in United States exports
ie
will contribute to a minor buslness recession in the United
States, reaching its deepest point toward the end of 1948,
and to a fall in United 'States prices continuing into 1949.
On this prognosis slack will appear in the American economy,
slack which could be employed in part at least in meeting the
unsatisfied capital import requirements of the rest of the
world.
The decline in the exports and trade balance of the
United States has been projected in Table II for major areas
of the world. Under present aid policies and programs, the
-
Most marked declines in prospective capital imports from the
United States will be experienced by Western European and
Western Hemisphere countries. Eastern European countries will
experience a relatively large decline in total and net imports
from the United States, United States trade with the Near
East, Africa, the Far -East and Oceania will by comparison
remain relatively steady.
- A striking feature of the balance of payments projection
is the allowance that has been necessary for the inter?area
transfer of funds (gold and dollars) from Europe to other
areas, particulprly the Western Hemisphere. An explanation
of this
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of this phenomenon is to be found in the changed character of
world trade induced by the war--more specifically, by the in?
ability of European countries to increase exports, by their
liquidation of foreign investments in underdeveloped areas,
and by the change in terms of trade between the processing
countries of Europe and their sources of raw materials.
Unsatisfied Financial Needs
It may be seen from Table I (See the Summary by Areas,
al)ovel page viii) that net unsatisfied capital import require?
,
ments for the years 1947-49 may be expected on the basis of
present financing policies, authorizations, and programs to
total $8.8 billions at fixed prices (i.e., prices prevailing
in the last half of 1946). This residual figure is not, how,
ever, an entirely satisfactory measure of the dollars that
would be. required to fulfill the objectives of the United
States as reflected in the real capital import requirements
of the world because, since the last half of 1946, prices
have increased markedly. A price increase affects not only
the value of goods represented by the $8,8 billion deficit;
it affects also the whole volume of goods required by a
country. It is possible to compute the sums which at as?
sumed prices in 1947, 1948 and 1949 would be required to
satisfy the real requirements measured in the first column
of Table I*. The following table gives the results of that
computation:
Dollars
*The assumption has been made that prices will take the
following course: - Last half 1946 equals 100%, 1947 equals
110%, 1948 equals 99%, and 1949 equals 97%.
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Dollars Required to Finance the Unsatisfied Capital
Imiport Reauirements at Current Prices: By Area
(billions of dollars at then current prices)
1947
1948
1949
Total
All Areas
2.3
3.4
3.4
9;1
Europe
1 3
2.9
3.0
7.2
Western Europe
.8
2,2
2,6
5,6
Eastern Europe
.5
.4
1.6
Near East and Africa
.2
-.7
7
.1
.4
Far East
465
13
.2
1.0
Western Hemisphere
.3
.1
.1
.5
If the assumed decline in prices during 1947-49 does not
in fact materialize or if it is less than 'assumed, substantially
larger amounts will be needed to meet the unsatisfied real
requirements. On a somewhat different .assumption vit., that
prices remain at the level assumed for 1947 (real national in-
come of the United States conforming to the pattern assumed it
the balance of payments projection) - it is estimated that
unsatisfied world capital import requirements would be increased
by $2.1 billions in the two years 1948 and 1949 to a total of
$11.2 billions for the three years.
These estimates of the Unsatisfied net capital import re-
quirements of the areas of the world are useful as a benchmark
and as a guide to analysis. They must not be employed dogmatic-
ally since they are based on a number of very uncertain factors.
Beyond 1949 the prospects are more obscure. It is to be
hoped that a well coordinated three-year assistance program
of this magnitude would bring Western Europe at least within
sight of becoming self-supporting. Some further assistance
will undoubtedly be required after 1949.
Unless their unsatisfied capital import requirements
are met, U. S. political objectives in respect of strengthen-
ing the more important Western European countries UK, France,
Italy
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Italy and Bizonal Germany -- and of holding out a beckoning
hand to the Russian satellites, will not be achieved. As
noted above, unless further aid is forthcoming to Italy and
France, it may reasonably be expected that their existing
moderate governments will give way to governments partially
or wholly controlled by the communists. The prospect for
the UK, while less dramatic, is nevertheless serious; the
immediate result of relying wholly on present programs and
Policies of financial aid will be to force a reduction in
British gold holdings and dollar balances below the minimum
considered by the U. K. Government necessary to meet the
uncertainties of the next few years, to force a sharp reduc?
tion in living standards, and greatly to retard economic
development. The UK has already found it necessary to re?
quest freedom from the commitments under the British Loan
Agreement, and it would probably have recourse to more
stringent bilateral trading arrangements, more exclusive
preferences, and more comprehensive state trading. The
U. K. 'a war potential would suffer; it would be probably
forced to relinquish most of the load it has been carrying
in occupied areas; and its ability to perform as a full,
fledged partner in a worldwide program of collective security
would disappear.
' Some part of the unsatisfied dollar requirement's may con?
ceivably be met out of lending by the International Monetary
Fund but such loans should be considered short term since they
must be otherwise refinanced within a short time. Export?
Import Bank financing out of its remaining lending power may
be possible for a number of development projects in under?
developed areas, and it is possible that a few projects in
Europe
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Europe could be so financed once other unsatisfied European
requirements had been met. The allowance made for lending by
the International Bank is excessively modest in comparison
with the Banils authority under its charter. iless conserva-
tive policy than has been assumed for the Bank Might provide
the means of financing some of the reconstruction and develop-
ment projects remaining unsatisfied.
While total.gold'and foreign awned dollar assets in the
world- are are not held by the most needy countries
in amounts greatly exceeding minimum reserve requirements.
World Commodity Problems
Even though funds were made available to meet the un-
satisfied capital import requirements of the world, the pro-
spective world supply of some commodities would be Inadequate
to cover demands thereby made effective. World demand for
pertain critical commodities and services is so great, even
under present financial policies, authorizations, and programs,
that within the context of the U. S. balance of payments pro-
jection referred to above,. deficits may be expected and
diffidulty will be encountered in covering the most urgent
world needs without resort to export controls An the U. S.
and curtailment of domestic U. S. consumption.
Broad and Feed Grains:- Deficits aggregating 14 million
tons in 1947/48 and 10 million tons in 1948/49 are in prospect
for the net grain importing countries of the world, which are
mostly in Europe. Requirements are expected to be balanced
by the increased supplies anticipated in 1949/50. The grain
requirements of the importing countries of the World have been
calculated on the basis of calorie levels somewhat higher than
those attained in 1946/47. Local
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?
Local production in deficit countries and world export
availabilities are expected to increase over the next three
years. U. S. objectives require that the politically most
critical countries (in Western Europe) enjoy a continual ?
improvement in urban food supply. TO accomplish this, it will
be necessary (1) to increase grain exports from the U. Ss by
restricting U. S. consumption and by increasing U. S. extrac-
tion ratios and (2) to favor these countries in the allocation
of available supplies to the maximum extent consistent with
considerations of international equity.
Fats and Oils: World export availabilities of fats and
oils are expected to be 54% of the pre-war level during 1947
rising to 77% in 1949. If import requirements of European
countries except Germany are calculated as those needed to
meet :prewar consumption standards and of non-European coun-
tries ,(including the U. S.) as pre-war imports, the annual
world deficit in 1947 is expected to be as much as 1,600
thousand tons, oil equivalent. With the U. S., a net importer
of fats and oils, maintaining its per capita consumption at
pre-war levels, competition on the buying side has been, and
will continue to be keen and prices very high. The dollar
-
poor importing countries of Europe have suffered a dispropor-
tionate reduction in consumption leels, in part because
international allocation has not 'been very equitable.
The relation between achievement of U. S. objectives
and the level of consumption of fats and oils in critical
countries is not as close as in the case of grains. With
world export availabilities in 1949 of no more than 77% of
pre-war and with the U. S. maintaining its pre-war consump-
tion, it is clear that there is no hope of European importing
countries reaching pre-war consumption levels during this
period
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x/iii
period. At most it might be hoped that Europe would partici-
pate somewhat more than proportionately in increased supplies
in 1946 and 1949. This would permit a very considerable
improvement of consumption in Europe during this period. To
realize this improvement it will be essential to continue and
improve world allocations of fats and oils to prevent the still
unsatisfied U. S. demand from absorbing all the increases,
Coal; Europe is the critical coal deficiency area al-
though the Far East also has unsatisfied requirements and
Latin America is a net importer on a small scale. Europe is
unlikely to attain self-sufficiency in coal until 1951. In-
cluding the deficiency in Germany and the U. K., production
in Europe during 1947 will fall short of requirements by 115
to 130 million tons, Excluding Germany and the U, K., the
1947 deficit of European not importing countries is between
70 and 60 million tons. A part (36 million tons) of the
deficit can be mot from the U. S. and another part (estimated
at 20 million tons) will be met, from Poland and Germany in
1947. The net unsatisfied deficit of coal importing coun-
tries of Europe is therefore set at 15 to 25 million tons
in 1947. U. S. coal exports to Europe could probably be
increased above the 36 million ton level.
Poland anr1 Germany are expected to export 35 million
tons in 1946, and 50 mall ion tons in 1949 U. S, exports can
thus make up approximately '1-10 full requirements of the normal
importing countries in tho,5e years,
An adequate supply of coal for Western European countries
is essential to restoring their, production and exports and to
raising )..iving standards. The problem of coalr like that of
grain
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xix
grvt,?e?
grain, lies at the heart of the problem of achievizw U. S.
the
objectives. It can be solved within/time horizon of this
report, but at a Cost that becomes manifest in a need for
dollar assistance. It is almost certain that under present
financial policies and programs the world shortage of dollars
would make it impossible for European countries to continue
importing coal from the U. S. at the rateS projected above.
Dry?Cargo Ocean Shipping,: The world supply Of ocean?
going dry?cargo shipping is sufficient in real terms to move
the goods implied by the capital import requirements estimated
in Table I above. However, the ownership distribution of the
tonnage available imposes a financial burden upon European
countries accustomed before the War to earn a good part of
their living by rendering shipping services. The efforts of
European countries to build new fleets imposes an additional
burden on their limited resources, Both this physical burden
and the financial burden of the present dollar cost of shipping
services Would be eased to the extent U. S. vessels were made
available on reasonable terms to foreign countries. U, S.
Government awned dry?cargo tonnage now idle totals about 12
million tons deadweight.
Steel: World steel production is expected to increase
by more than 18 million ingot tons between 1947 and 1949.
Nevertheless, production will be short of requirements by
28.7 million tons in 1947, by 21.9 million tons in 19480 and
by 13.3 million tons in 1949. The combined deficits of the
USSR,
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xx
USSR, Germany, and Japan account for 12.5 million tons of the
total in 1949. Outside these countries, therefore, it may be
expected that approximate balance can be. reached in 1949
(subject to an important qualification regarding the extent
to which unsatisfied deficits in, previous years will carry
over).
With U. S. steel exports for this period estimated at
only 7 million tons annually, their careful allocation among
countries in the light of our objectives will obviously be
necessary.
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July 1, 1947
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FOREIGN NEEDS FOR UNITED STATES ECONOMIC ASSISTANCE DURING
THE NEXT TOM] TO FlITE YEARS
Report o? Norking_21E2u_a_Esonomic Aid
to the Social Ad Hoc Committee of the
tatearNa
Reference: SINN-5280
I. Introduction: Objectives of U.S. Economic Assistance Policy
United States economic assistance policy derives from three tenets of
United States foreign policy:
1. The support or friendly neutrality of the peoples of 'Western Europe,
the Near East, the Far East and Latin America Would be of incalculable valuc.
in maintaining and furthering the security of the United States. The Economico-
military potential of areas of the globe not likely to be overrun by hostile
powers in the event of war -is of military concern to the United States.
2. The political stability, peaceful political evolution and cooperative
unification of the countries and peoples of the non-Soviet world will strongly
influence our own political moraleand economic well being, and with them the
favorable or unfavorable evolution of our domestic political institutions.
Furthermore, and of equal or greater importance, high Morale and peaceful and
prosperouS development of the *non-Soviet world will Strongly influence the
attitudes and confidence of Soviet and satellite-Communist leadership because
it will directly contradict the Communist prognosisfor the future of the non-
Soviet world. A sharp contradiction of Soviet theory by world facts (including
loss of ground by Communist parties abroad) may not unreasonably be expected,
in time, to. bring about important modifications in Soviet foreign policy, which
is squarely based upon this prognosis. On: such a modification the worldls hope
for peace depends._
3. Political instability, the strengthening of extreme political parties
and the outbreak of violence within or among the countries of the non-Soviet
world will increase U.S.-U.S.S.R. tension and the likelihood of conflict, because
they will invite competitive political and military intervention by the
. United States
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United States and the U.S.S.R. The validity of this proposition may be judged
Rrt7111 thr4 dpt.erioration in U.S.-U.S.S.R. relations growing directly and
indirectly out of the Greek civil war. The cases of Iran and China are also
pertinent.
It follows from these tenets that the day-to-day operations of United
States foreign policy are or should be based upon a politico-economic strategy
whose objective is to weaken and if possible, eradicate the causes of political
conflict within the non-Soviet world and thus to promote its peaceful political
evolution, and to find common purposes for and to build -the cooperative unity,
both intra- and internationally, of 'the non-Soviet world, with the United
States in a leading role.
In the realization of this objective United States economic assistance
has a major part to play. The importance of this role arises -out of the close
causal nexus, the reciprocal relations between -political stability and
economic welfare and, similarly, between economic stagnation or retrogression
and political conflict. This is, of course, a gross oversimplification; the
relationship between economic change and political conflict is a very complex
one. more precise general statement of this relationship might run somewhat
as follows: (1) serious frustration of the aspirations of classes or countries
for improvement (real or apparent) in their living standard is apt to turn
into hostility and aggression toward other classes, or the "powers that be",
or toward other countries; (2) such frustration arises out of a wide and con-
tinuing discrepancy between, on the one hand, people's economic aspirations and,
on the other, their current economic situation and/or their short-run-
expectations; (3) people's economic aspirations result from what they .have
known in the recent past, from what they are conscious that others enjoy, and
from their collective judgment of their own capabilities for raising their
economic level if given the opportunity.
With reference- to the situation of the war-devastated countries and of
some of the underdevelopedareas of the world, economic assistance can make
the following
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the following contributions to the realization of the above objective: ?
1. In the non-Soviet war-devastated areas, particularly France and Italy,
class conflict is now eXacerbated by the low level and maldistribution of real
income, and is accompanied by growing hostility toward the United States. The
urban lower-income groups) because their living standard is far below pre-war,
because they see other classes and other countries enjoying -a living standard
as high or higher than pre-war and because they fool, that "given a chance"
(i.e? different price and wage policies by their government, more foreign
aid, etc.) they could do much better, have aspired since liberation to a rapid
recovery of living standards. There is a wide gap between their present
economic condition and their aspiration.; and, much more serious, their short-
run expectation of rapid improvement is dwindling as they lose hope. Their
,consequent frustration is expressed in hostility, more or' less intense,
, against_ more favorably situated classes, the national authorities, and against
-the United States (as the convenient symbol for countries which are better off
and should be helping them more). This hostility further expresses itself
in a tendency to support the more extreme political parties. The resulting
polarization of politics and intensification of political struggle further
A
impairs the effectiveness of the government in dealing with the economic
difficulties which are at the root of the whole process.
This over-simplified statement helps explain the apparent paradox that
economic conditions in France and Italy (including the living standards of
the urban lower income groups) have improved markedly since liberation, and
yet so has the membershiP and voting strength of the Italian and French
Communist parties. The reason, of course, lies in part in the fact that the
French and Italian urban lower income groups had, at liberation, high hopes -
of rapid recovery. Two years later their actual condition has improved, .but
much more slowly than they had hoped; as a result, their hope and morale have
seriously deteriorated; and their sense of frustrated aspirations has been
_correspondingly intensified.
In this ,
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.In this kind of situation, United States economic assistance. in adequate
amounts can obviously make an important contribution by permitting urban living
, standards to rise more rapidly and by dissipating the atmosphere of government
by crisis and improvisation, thus restoring hope and Morale and at the same
time tending, both directly and indirectly, to call forth more positive
attitudes toward the United States.
2. In many of the underdeveloped areas of the non-Soviet world, internal
(class) tensions are rising and hostility toward the metropolitan powers and
toward the ?richu countries generally is growing. In a number of cases since
the war, it has already resulted in civil war and/or colonial rebellion - for
example in China, Indonesia, Indochina, Burma, Madagasear, Palestine,, Syria
and French North Africa. In others, for example in several Latin American
countries, in India and in other Arab states, large-scale political violence
apparently lurks just below the troubled surface.
The general statement above of the relationship between economic change
and political conflict can also be helpful in these cases: Gradual economic
development and urbanization of these areas have given birth to. new social
and econofIlic classes which have become increasingly aware both of the
enormous gap between their living standards and that of the numerically small,
wealthy native ruling groups, of the occidental colonists, and of other
countries and of their own capacity to rise in the economic scale if given
a chance. Their advance is, however, frustrated by the entrenched position
and normally unenlightened attitudes of the native ruling groups, by static
and anachronistic economic institutions (e.g., feudalistic land tenure) by
the interests and power of colonists, the colonial authorities, foreign
business interests, and so on. Under these circumstance's, acute political
tensions are bound to accumulate and to find expression in intense Xenophobia,
in a conviction that the advanced countries are indifferent or hostile to
development of the area except for purposes of exploitation, and in civil war,
colonial
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colonial rebellion and the like. CommUnist organizations find such conditions
favorable for their operations,
United States economic assistance to such underdeveloped areas will be
indispensible to the prevention or relaxation of such dangerous political
tensions because it is a necessary condition of their economic advance.
However, United States economic assistance will have to be stripped of the
appearance of exploitation and be accompanied by radical social, political,
colonial administration reform if it is to have the desired effect, For, in
the absence of 'such reform, an increase in the rate of economic development
is likely merely to step up the rate at which social and political tensions
accumulate.
3. As evidenced by the reaction to Secretary Marshall's Harvard -speech
(June 5, 1947), United States economic assistance can be a powerful lever for
promoting the unity of. non-Soviet Europe.; United States economic assistance
can aid should also be used to promote cooperative international planning and
action over wider areas.
4. United States economic assistance can be used to maintain and increase
United States political leadership in the nen-Soviet world. This is not only,
or even primarily, due to the direct influence and bargaining power which may
accrue to the United States as a result of economic aid. It is much more
because, as the source of economic assistance, we may promote and identify
ourselves with the common objective of rising living standards. The idea of
rising living standards and of economic justice, expressed concretely in a
cooperative international policy of rapid reconstruction and economic
development, is a common purpose around which the non-Soviet world can rally
and under whose symbols the United States can effectively assume the desired
role of political leadership. United State p political leadership cannot be
obtained by asking for it as the price of economic assistance; it will come
only as the by-product of an intensification of cooperative relations based
upon economic assistance.
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The following sections are devoted to an over-all View of the most
immediate major world economic problems and to the extent to which the United
States can contribute to their solution and thus to the attainment of the
objectives indicated above. Section II deals with world financial needs.
Section III deals with world needs for and Supplies of certain commodities now?
in world short supply. Section IV deals with the relation between regional and
world approaches to economic assistance policy. .
II. World Financial Needs
A.
Financial Implications of United States Objectives
1. The Measurement of Requirements
Measurement of the needs of the world for capital imports* in the light
of the foregoing objective requires the establishment of specific consumption,
reconstruction, and economic development. goals.. These must be designed to
maintain or create in foreign countries the political, economic, and social
conditions of high morale, peaceful development, and support of United States
political leadership..- The formulation of such goals, country by country, is
necessarily a difficult question of analysis and judgment which must take into
account the existing political circumstances and recent economic experience
of each country.
In estimating world capital import requirements, it is necessary to
differentiate between (a) war devastated countries those production, Consumption,
and exports are substantially below .pre-war levels and (b) backward or under-
developed areas of the world. In the former category a further subdivision
between countries of the non-Soviet world and Soviet satellites is required.
Capital import requirements of the non-Soviet war devastated countries
may be roughly defined by the need for (1) an improvement in levels of con-
sumption Sufficiently rapid to make probable the survival of moderate
democracy
* The phrase "capital import requirements" is used in this report to denote the
difference between (i) a country's total needs for imports of goods and services
and for repaying obligations and (ii) the sup of (a) its current account
resources--exports of goods and services, sale of new gold, and net private
remittances--and (b) prospective loans by other hard currency countries than the
United States.
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democracy and (2) the restoration of war damage and a moderate improvement in
capital plant.to ensure rapid achievement of self-Support and in some cases of
capacity to carry an appropriate share of responsibility for maintaining world
peace and security.
United States economic aid policy toward Soviet satellites has not, as of
this date, been fully clarified. Capital import requirements for
countries, based on somewhat arbitrary standards explained below,
been calculated for the sake of giving a complete picture. Their
these
have, however,
inclusion
is not meant to imply that satisfaction of those requirements in full is
necessary to the attainment of the general objectives delineated in Part I.
The estimated capital import requirements of the underdeveloped areas of
the world likely to be net importers of capital permit a moderate rate of
agricultural and industrial capital formation. They include some allowancefor
financing the internal costs of such development by currency stabilization
credits, where such were deemed necessary,. The estimates provide also for a
rate of development of 'backward areas which can be defended as consistent
with "economic justice" (although it may not in all instances meet the
ambitions of the people of some areas). Such a rate must be primarily
determined by the rate of domestic saving and the rate at whichsturdy
institutions (e.g., new firms, new markets) educational facilities, and effective
and honest government) can be; established and new workers trained. Considerable
time and major political and social changes will be required for such growth,
and the rate of capital import must accordingly be adjusted thereto. he-
quirements estimates used in this report for backward areas are within limits
set by these concepts.
In view of these serious obstacles to a more rapid development of such
areas, it is doubtful whether the often grandiose economic aspirations of their
peoples could be realized even if considerably larger capital imports than shown
herein were forthcoming from the United-States.
be dissipated in inflation and wasted in graft.
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A larger program would tend to
The quantitative definiteness
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of this conclusion must, however, be tempered by the extremely rough and
tentative nature of the estimates themselves.
In general, requirements as estimated in this report do not include the
foreign exchange cost of any military assistance; to the extent that United
States policy may require such assistance during the next three years, some
adjustment of the estimates herein would be required.
2. World Capital Import Requirements
The requirements given in Table I, column 1, express the informed
judgment of experts close to .the conditions in each country as to the net
capital imports required to accomplish the objectives indicated above.. Nec-
essarily, different criteria have been employed in different countries. The
economic goals for and capital requirements of each country are described in
detail in Appendix. A,*
Measured against the objectives they are to achieve, the dollar require-
ment S given in Table I for the war-devastated areas of Europe tend to be under-
stated for several reasons:
(a) It is
* Estimates of unsatisfied requirements given in Table I do not entirely agree
with similar estimates carried in the country studies submitted to the Ad
Hoc Committee of ?MCC. The differences arise from the necessity of
introducing into Table I estimates made early in the summer when most of the
country studies were Still in preparation. In the case of several of the
critical countries for which special studies were made, notably Afghanistan,
Spain, Portugal, North Africa, Korea,- Indonesia, NEI, India, the Philippines,
and Siam no unfinanced requirements (after allowing for requirements to be
met under present policies and programs) were then known to exist.
On the.basis of. Appendix the estimate's employed in Table Thy be comphred
with those carried in the country studieshile'discrepanciep il be seen to
exist;,the tenct'to cancel. and in aggregate, it-iLbelievedithe principal
findings of this report would not be greatly _affected by revi4oh, on the bas3A
of the estimates submitted to.th6 Ad Hoc Committee, of table-fand tables
depending on Table I,
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(a) It is assumed that each country's total exportable surplus can
(with certain obvious exceptions) be sold for currencies convertible into
those needed to buy essential imports;
(b) It is assumed that existing barriers to inter-European trade would
be removed; and
(c)? It is assumed that production and trade in Eastern Europe would
revive pari passu production in Western Europe so that all countries in Europe
would benefit from mutually advantageous exchanges; however, to the extent that
revival in Eastern Europe is retarded by political circumstances or that trade
remains confined to the present narrow bilateral channels, net capital import
requirements to be financed from the outside will be larger;
(d) Financial-requirements are likely to be the larger to the extent
that shortages of essential commodities develop, which are not already allowed
for in the estimates; however, even though shortages will prevent or render
impossible import of these items, immediate savings in foreign exchange are
likely to be more than offset as a result of the longer time taken to reach
the postulated consumption, reconstruction, and development goals.
(e) It has been further assumed that a high level of income will be
maintained in the United States. From this it is inferred that United States
imports will continue increasing. However, any major United States recession
would reduce imports and would seriously impair the foreign exchange position
of many foreign countries.
(f) The capital import needs of each European country have been estimated
independently, except for the assumption noted above that all would improve;
however, somewhat different estimates might result if the Western European
countries effect a more efficient intra-European allocation of scarce resources.
Such allocation would tend somewhat to reduce the capital imports required to
reach the postulated goals.
(g)' The requirements of Table I, column 1, are computed at prices pre-
vailing in the last half of 1946. A substantial price increase has occurred
since
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since that time, and country requirements in current dollars are, therefore,
larger than the figures shown in Table I, column 1. An adjustment for such
price changes as they affect total area requirements is given on page #18
below.
3, Critical Countries
As shown in Table I, four important Western European countries confront
large unsatisfied net capital import requirements. Those countries are the
United Kingdom, France, Italy and Germany. They constitute the "problem" of
Western Europe. It is particularly essential, therefore, to understand how
requirements were estimated for those countries. The estimates for China albo
call for special comment.
?
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(a) United Kingclom
It is ehimated that the United Kingdom requires net dollar capital
imports in the amount of $6,550 million from 1947-1949. This figure pro-
vides (a) for maintaining the carrent austere British standard of living,
(b) a substantial increase in the rate of investment (even assuming that
the pre-war rate of domestic saving is realized), (c) the liquidation of
$400 million annually of the blocked sterling balances and 61) interest
payments at 0.5 percent p.a. on the remaining sterling balances. Account
has been taken in the estimate of existing credits by other countries than
the United States and of a moderate retrenchment in the foreign commitments
of the United Kingdom.
It is expected that Great Britain will achieve equilibrium balance of
payments at adequate levels by 1950 if these capital import requirements
are met. Such a goal is essential to restoring the United Kingdom to a
satisfactory role in world economic affairs. Unless equilibrium in the
British balance of payments can be achieved, At a high level, the Anglo-
American economic, political and military partnership must necessarily re-
main essentially one sided.
(b) France
Net dollar capital import requirements totalling $3,800 million are
estimated for France for the period 1947-1949.
The figure is based on the
goals of the Monnet Plan, but allowance has been made for reaching these
goals over a longer period than the Monnet Plan envisages. It provides
(a) an average level of consumption rising from 75-80 percent of 1938 level
in 1947 to the 1938 level in 1949, (b) for capital formation in 1947 equaling
15 percent of the total of goods and services available during 1947, and
rising during 1948 and 1949, and (c) a 40 percent increase in industrial
production by 1949 over the low 1938 level expected for 1947. Account has
been taken of credits available to France from Canada, Brazil and the
Argentine.
Failure to
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Failure to meet this program for France would aggravate popular dis-
satisfactions, strengthen the factions on the right and left advocating
extreme solutions, and render impossible continued moderate left-center
government.
(c) Italy
The estimate of total net capital import requirements of $1.3 billions
for Italy in 1947-1949 allows (a) approximately the pre-war average per
capita caloric intake, (b) consumption of other consumer non-durable goods
rising from 85 percent of pre-war in 1947 to 115 percent in 1949 and (2)
a considerable expansion of canital formation rendering unemployed Italian
labor productive and providing the economic base for a permanent rise in
the Italian standard of living above pre-war levels.
The political situation in Italy is the most critical in Western Europe.
It can be expected that Italy, in the absence of such capital imports, will
be torn by political and economic dissension from which could emerge a to-
talitarian regime securely entrenched in power. Such a regime probably
opposed to United States European policy in all aspects, would menance
United States security interests in the Mediterranean and would seriously
affect the political orientation of the rest of Western Europe.
(i) Germany
The 1 1/2 billion net capital imports required for Germany would pro-
vide (a) for raising the level of industrial capacity in the bi,-zonal area
to about 70 percent of the 1938 level by 1949; this contrasts with the ori-
ginal "level of industry plan, which contemplated achieving a 50-55 per-
cent level by 1949. (b) Complementary with this increase in industrinl
capacity it provides for retention of increased amounts of industrial goods
as incentives for German workers and for increasing urban food consumption
from the present theoritical level of 2,000 calories in 1947 and 2,300 in
1948 to 2,500 in both 1948 and 1949. Such a program would require a total
net capital import of about $2 billion of which $1 1/2 billion would be
contributed
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contributed by the United States, the remainder by the United langdom. If
the United States should take over the United Kingdom's obligation, this
would reduce pm tanto the United Kingdom's own capital import needs.
An increase in German production and trade with Europe will tend to
reduce Europe's dollar needs, though in the short run this will be offset
by smaller German coal exports and, therefore, larger European imports of
expensive United States coal: German exports will be substituted for United
States exports, and increased imports from Germany can in a measure be paid
for out of increased exports to Germany; the terms of trade of European
countries will improve by at least the amount of the large difference in
transportation costs; and some economies may result from a more even dis-
tribution of world demand for manufactured goods, since steeply increasing
costs resulting from uneconomically high rates of operation will be avoided.
Germany previously provided the outlet for some exports of European coun-
tries not now marketable (e.g., fruits and vegetables from Italy, tobacco
from Greece, transit services through the low countries, iron ore from
France and Scandinavia, non-ferrous metals from the Balkans).
Failure to provide for recovery in Germany will consequently have the
effect of increasing net capital import requirements needed to achieve ob-
jectives in other European countries.
(e) Chia
A range of estimates from $150 million to $1,600 million for the three-
year period 1947-1949 of the net capital import requirements for China has
been prepared, The smallest figure allowing'?50 million per year would
provide for only small-scale relief during the indefinite continuation of
hostilities. The somewhat larger figure of 400 million given in Table I
would provide, in addition to relief, capital imports that can be effective-
ly utilized under conditions of civil war, but it would exclude the financ-
ing of domestic costs and the importation of goods for inflationary controli,
It is
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It is envisaged that such aid would be predicated upon military retrench-
ment and fiscal and political reform and would be timed according to po-
litical progress. A larger figure totaling $1,300 million would cover full
scale peacetime reconstruction including internal financing and the impor-
tation of goods to control inflation. A still larger figure of ,,114.00
million would supply military support sufficient only to promote an armed
stalemate. Finally, 'p1,600 million in three years would be the sost of
full military support to the nationalist government in full scale hosti-
lities against the Communists. The selection for Trible I of figures based
upon the aid that can be effectively utilized under conditions of civil
war reflects the arbitrary judgment, in the absence of a firm United States
position, that it is the course most likely to be adopted.
The general standards used for Eastern European countries (except for
They would provide some aid above post-UNRRA relief standards.
Greece) are less favorable than for the rest of Europe./ In general, allow-
ance is made fora rise in industrial production and domestic consumption
from about pro-war levels in 1947 to somewhat above pre-war levels in 1948
and 1949.
The standards employed for backward areas have been dismissed above.
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B. Present Financial Assistance Policies, Programs and
Authorizations
Table III presents an estimate program by program, including
the International Bank, of the dollars now likely to be made
available to each foreign country from United States Government
financial assistance. These estimates have been entered in Table
I, column 2. As indicated in columns 2, 3 and 5 of Table I, it is?
expected that a substantial part of all net import capital require-
ments will be satisfied if present financial policies and programs
(including t2,4 billions of International Bank loans) arc realized,
If certain foreign countries carry out present programs for liquidat-
ing gold reserves and dollar assets in excess of the bare minimum,
and if favQrably situated countries succeed in securing private
financing. The present program will go far toward meeting the
objectives of the United States in most areas but it will fall
short in a handful of countries and the failure will be particularly
serious in the four Western European countries mentioned above.
In Table II the United States balance of payments under present ,
financial policies, authorizations and programs is projected.
Together, Tables I and II indicate that United States' exports and
the United States trade balance may be expected to decline sharply
in 1948 and further in 1949 from the 1947-level, as shown in the.
following summary table.
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Prospective United States Exports of Goods and Services and
Trade Balance, 1947-1949, under present financial policies,
programs and authorizations.
(billions of dollars at. then current prices)
1947 . 1948 1949 Total
Exports of Goods & Services - 19.02 13.67 12.37 45.06
Trade Balance on Goods &
Services Account 10.68 6,01 .96 20.65
It is believed that the decline in United States exports
will contribute to a minor business recession in the United
States, reaching its deepest point toward the end of 1948,
and to a fall in United States prices continuing into 1949.
On this calculation, slack will appear in the American economy,
slack which could be employed in part at least in meeting the
unsatisfied capital import requirements of the rest of the
-world..
The decline in the exports and trade balance of the
United States has been projected in Table IT for major areas
of. the world. The most marked declines in prospective
capital imports from the United States, it is expected, will
be experienced by .Western European and Western Hemisphere
countries, Eastern European countries will experience a
relatively large decline in total and net imports from United
States. United States trade with the Near East, Africa,
the Far East and Oceania will remain relatively steady /by
comparison.
The geographical analysis of the prospective balance Of
payments of the United States is based largely upon the
pattern observed in the first quarter of 1947 when it appeared
that exports of goods and services were going out in sub-
stantially greater measure to non-European countries and in
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substantially lesser measure to European countries than could
be expected from dollar resources immediately available. It
appeared that this flow of goods and services could only be
explained by a sizeable inter-area transfer of dollars from
European countries (notably the United Kingdom) to other areas
in payment for net imports of goods and services received by
Europe from thoseareas. An allowance for such interarea
-transfers of funds has accordingly been made in Table II.
Included in this interarea transfer item are both capital
movements and the funds which the British are compelled,
either on grounds of equity or legal obligation, to make
available to countries of the Sterling Area for conversion
into dollars of blocked sterling balances and balances accumu-
lating on current account. The magnitude of this interarea
transfer of fundsappears to be one of the factors responsible
for the unexpectedly high rate at which the United Kingdom
loan has been utilized.
An explanation for this dollar drain on Europe is found
in the changed pattern and term - of wirld trade induced_ by
the war. The delayed revival of European exports, the
volatility of raw material prices in relation to prices of
manufactured- poductS and the liquidation of Europe's over-
seas investments to finance the war and reconstruction have
upset the pre-war, world-wide system of multilateral balancing.
In the 1920's and 1930's tropical countries on balance sold
goods to the United States .and used the proceeds to pay returns
on European investments and to buy goods and services,
particularly non-durable goods and shipping services from
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Europe, especially the U. K. And Europe paid for a balance of
imports from the United- States largely out of the returns on
investments in tropical and newly settled countries. Temporarily
creditors on current account vis-a-vis Europe and unable to
secure goods and services from their former sources in volume
commensurate with their demands, .the non-European areas have
turned to the United States as the only remaining, albeit high
cost, source of goods, and have sought to obtain dollars for
their export surplus to Europe to pay for U.. S. goods, The
result is a drain upon Europe, especially the U. K., for dollars
with which to finance exports from the U. $. to non-European
countries, as well as the rapid depletion of dollar reserves
of non-European countries.
C. Unsatisfied Capital Import Requirements.
It should be observed that the requirements estimates
given in Table I and the balance of payments projection in
Table II are not directly comparable since the latter is
computed in current prices while the former is in fixed prices.
The balance of payments projection is based on the assumption
that the level of real income in the United States will decline
10% from the level reached in the third quarter of 1947 to the
fourth quarter of 1948. Accompaying the aecli.ne of real
income, it is assumed, prices will fall from 110% of the
level prevailing in the last half of 1946, in 1947- to 99%
in 1948, and 97% in 1949. The lower level of prices is expected
to sot the stage for a subsequent rise in real income during
1949. No change in the U. S. terms of trade over the period
is assumed.
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It is possible to compute the additional sums which at the
assumed current prices would be required te satisfy the real
requirements measured in Table I. The following table gives
the results of that computation.
Dollars Required to Finance the Unsatisfied Czpital
Import Requirements at Current Prices: By Area
--(billions of dollars at then current prices)
1947
1948
1949
Total
All Areas
2.3
3.4
3.4
9.1
Europe
1.3
2.9
3.0
7,2
Western Europe
.8
2.2
2.6
5,6
Eastern Europe
.5
.7
.4
1.6
Near East & Africa
.2
.1
.1
.4
Far East
.5
.3
,2
1.0
Western Hemi sphere
.3
.1
.1
.5
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If the decline in prices during 19477-49 does not in fact
materialize or if it .is less than herein assumed., substantially
larger amounts would be needed to meet the unsatisfied require-
ments.*
It is .not possible, of course, to turn back the clock and
meet the-requirements that have gone unsatisfied thus far in
1947. Speedy action ill the last few months of 1947 resulting
in a firm- indication that new aid would be forthcoming might
make it possible for foreign countries to secure a limited
amount of .short-term financing (for example, from the Inter-
national Yonetary Fund) or to draw somewhat upon funds ear-
marked. for future years in order to cover some of the other-
wise unfinanced 1947 deficit. To some extent, moreover,
reconstruction and development scheduled in Table I for 1947
could be pushed forward into 1948 and 1949 with an accelera-
tion of the reconstruction programs in those years; while
some projects scheduled for 1948 and 1949 would have to be
deferred because of failure to meet objectives in 1947,
meeting. consumption objectives in 1948 and 1949 in the face
of the lower level of production ciet.fl L947 roa1izations
may be more costly.
* If it is assumed (I) that ;:i_e 2L1 1947 level,
(2) that nevertheless real nat.lonai OC of the 1;% U.
conforms to the pattern msumou in eotln,P loule II, and
(3) that the higher prices :,):fct on.14 the costs of exporting
and importing goods and ser\-iee items (1,e,. items
remain unchanged), the recemputc(:1 world require-
ments should be increased by W,n1 billion in the two years
1948 and 1949. They become:
(billions of dollars)
1947 1948 1949 Total
All Areas
2.3
4.5
4.4
11.2
Europe
1.3
3.5
3.6
8 4
Western Europe
.8
2.6
3.1
6.5
Eastern Europe
.5
.9
.5
1.9
Near East and Afriec,
.2
.3
.1
.6
Far East and Oceania
.5
.5
,4
1.4
Western Hemisphere
.3
.2
.3
.8
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It must .also be borne in mind that the estimated unsatis-
ficd requirements are based upon assumed price an national
income patterns that would be affected by the effort to meet
these requirements. Prices would undoubtedly be higher and,
since U. S. imports from devastated areas are limited by
physical supply conditions, a higher U. S. income level would
not likely raise imports from Europe sufficiently to affect
appreciably the higher costs of meeting U. S. objectives re-
sulting from higher prices.
Although it is impossible to estimate quantitatively the
net result of these effects, the amounts needed through 1949
to secure the indicated objectives of American foreign policy,
in addition to amounts already committed and prospective from
the World Bank, might be of the order of. 09 billions.
Beyond 1949 the picture is obscure. It is to be hoped.
that a well coordinated threc-year assistance program in
these magnitudes would bring Western Europe, at least, within
sight of becoming self-supporting. Some further assistance,
however, will undoubtedly be required after 1949, particularly
if the requirements given in Table I prove to be substantially
underestimated.
Unless their unsatisfied capital import requirements are
met, U. S. political objectives in respect of strengthening
the three important Western European countries -- UK, France,
and Italy -- and of holaing out a beckoning hand .to the Russian
satellites, will not be achieved. As noted above, unless
further aid is forthcoming to Italy and France, it may reason-
ably be expected that the existing m:)deT'at govenments will,
give way to governments partially or :4Liol1y conUrolled by
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Communists. The prospect for the UK, while less dramatic,
is nevertheless serious;. the immediate result of relying
wholly on present programs and policies of financial aid will
be to force a-reduction in British gold holdings and dollar
balances below the minimum considered by the U. K. Government
necessary to meet the uncertainties of the next few years,.
to force a sharp reduction in'living standards, and greatly
to retard economic development; The UK would find it necessary
to request freedom from the commitments of the British Loan
Agreement and weuld probably have recourse to More stringent
lei-lateral trading arrangements, more exclusive-preferences,
and more comprehensive state trading. The U. K.'s war
potential would suffer; it would be probably forced to
relinquish most .of th@ load it has been carrying in occupied
. areas; .and it would no longer be able to perform as a full-
fledged partner in a worldwide program of collective security.
D. Financing the Unsatisfied Requirements
It is not within the scope.of this study to consider in
detail alternative methods of financing the unsatisfied capital
import requirements of the world. Some general observations
? 4,
may, however, be made.
No allowance has been made in Table I and only a small
allowance has boon made in the calculations of unsatisfied
requirements above for lending by the international Monetary
Fund. Some part of the unsatisfied requirements may con-
ceivably be met from this source, but such loans should be
considered short-term. While total loans of the International
Monetary Fund outstanding at any time may be expected to be
fairly large, the Fund cannot be relied upon to provtdo long
term capital for the purposes represented by th r.Dot.l.r2ments
estimates in Table I. Requirements met COT C:1oai from the
Fund must, within a short ttm.3, T-%a cAle:raise re-financed.
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No allowance has been made in Table .I for new lending by
the Export-Import Bank. It is to be expected that a number
of the development projects in underdeveloped areas of the
Western Hemisphere, the Near East, Africa, and the Far East,
unfinanced under present programs and polcies, would become
appropriate candidates for Export-Import Bank loans. It is
possible that a few projects in Europe could be .so financed
once it, had been determined that other unsatiefled European
requirements would be met in other ways. It is not, however,.
possible in advance to estimate for .individual countries or
areas the extent to which the Export-Import. Bank might finance
otherwise unsatisfied requirements out of its uncommitted
lending power, which stood at 8OO millions at the end of
July 1947.
Allowance has been made for a sizeable program of lending
by the International Bank. However, the program is modest -
indeed excessively modest - in comparison with the lending
authority of the Bank under its charter. The estimate of
unsatisfied requirement given in this report assumes continua-
tion by the Bank of a conservative policy both as regards the
nature of its loans and the volume of its securities to be floated.
The question may fairly be put as to the possibility that
countries confronting unsatisfied capital import requirements
might use gold holdings or liquidate dollar assets, public or
private, in meeting their deficits. The examination in Appendix
B of this possibility for the countries confronting the lagest
deficits indicates tentatively that little contribution to the
problem of Western Europe can be expected from this source
beyond the allowance in Table I. Some contribution might be
made to meeting deficits elsewhere, but before any reliance
is placed upon it a detailed examination should be made to
determine the extent to which each country's reserves are com-
mitted or otherwise encumbered. Some of the requirements shown
as unsatisfied for the Near East, Fa]. CrICL -7.7,qtern Hemisphere
also may be met by the inter-area trar?fer ,e-1 funds from Europe
allowed for in Table I..
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III. World Sitgation for Critical Commodities
Of equal importance with the problem of financing essential
world trade to achieving U. S. objectives is the problem of
allocating scarce resources -? of insuring that maximum supplies
of critical commodities are made available for export and are
properly distributed. The persistence of shortages of a number
of vital commodities is a basic factor impeding recovery in the
post-war world. Under these conditions, availability of funds
does not automatically guarantee that importing countries will
' be able to satisfy their essential requirements. Analysis of
the situation, commodity by commodity, and world commodity pro-
grams to insure distribution in accordance with agreed ob-
jectives are also essential.
A logibal approaCh to analyzing the commodity problems in-
volved in realizing U. S. economic assistance objectives would
be: (1) estimate requirements fo-r individual commodities im-
plied by the dollar requirements of Table I and (2) the supply-
requirements balances for individual commodities implied in
the U, S. balance of payments ,projection based on present fi-
nancial policies and programs; from these estimates a de-
termination could then be made of (3) the corollary realloca-
tion of t: S. and world resources and manpower required to
meet the unsatisfied needs of the world. It has not been
possible to proceed in this fashion. The commodity-by-com-
modity balancing of supPly and demand implicit in the U. S.
balance of payMents projection of Table II has not been worked
out, and the requirements for commodities implicit in the
basic standards of consumption and investment employed in
calculating
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calculating Table I are not known. However, world demand for
certain critical conmodities and services is so great that even
within the context of the U. S. balance of payments projection
of Table II, deficits may be expected and difficulty encountered
in covering the most urgent world needs without resort to ex-
port controls in the U. S. and curtailment of domestle U. S.
consumption of sem? of them.
A. Situation for Critical Commodities
1. Breadgrains and Feedgrains
In 1947/48, total world grain export avallabilities
(in food and feed) will reach 31 to 34.5 (median 33)
million metric tons; but they will still fall short of
total requirements of 47 million tons by about 14 million
tons. The corresponding deficit figure for 1948/49 will
be approximately 10 million tons. These deficit figures
are based on requirements estimates using consumption
goals somewhat higher than the low levels realized in
1946/47.*
It is thus apparent that the acute post-war world
grain shortage will continue for at least two more years.
In 1949/50, however, world exportable supplies and import
needs are now expected to balance, though with total ex-
.
ports at a level of 27 million tons, as compared with 16
million tons pre-war.
Two
For 1946/47, requirements used in this report are
3,000,000 tons lower than the preliminary total re-
quirements stated by the claimant countries to IEFC.
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Two factors have been primarily responsible for the
post-war world grain shortage: (1) in Europe, the dis-
location of grain production and its distribution to urban
areas (2) in the Far East, decline in rice production,
These two factors coupled with the increase in popu-
lation have increased world grain import requirements in
1947/48 by 31 million tons above the pre-war world grain
import level.
In Europe alone (including Germany and the U. K.),
grain import requirements have increased from 9.4 million
tons pre-war to about 19 million tons in 1947/48. France
and Italy account for 4 million tons Of this increase,
even if they are allowed only 90 percent of their pre-war
grain consumption. The grain import needs of Bi-zonal
Germany, resulting from its separation from the eastern,
grain-producing laender and from general economic dis-
location, account for another 2.4 million tons of in-
crease of the 1947/48 European requirements over pre-war.
Europe's additional grain imports, excluding freight, will
cost Europe in 1947/48 above $1.2 billion* more than pre-
war almost entirely in dollars or other scarce currencies.
Additional freight charges add about another100 million
to the bill,
At
Estimated in terms of f.o,b. wheat prices, 1938 and
1947, of 1.78 and 4,2.20 per bushel, respectively, at
60 pounds per bushel. 19 million tons in 1947 is esti-
mated to cost 1.5 billion; 9.4 million tons Pre-war esti-
mated to cost $269 million, in terms of wheat and ex-
cluding freight.
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At least through 1948/49, the United States and
Canada must be the major suppliers for grain deficit
areas of the world. It is estimated that the United
States bumper wheat crop will make available f:Dp export
in 1947/48 12.5 to 13.5 million tons of wheat compared
with 10.5 million tons in 1946/47. With 6.5 V::
million tons from Canada of wheat and rye, about 2 to 2.5
million from Argentina, 1.5 to 2 million from Australia,
2 million tons of wheat and rye from all other suppliers
(including USSR), world export availability of Wheat and
rye is expected to be 24,5 to 27,5 million tons in total.
Course grains, now used in higher proportions for human
consumption, add 6.5 to 7.0 million tons to total world
export supplies, of which 1.5 to 2.0 million tons are
expected from the United States. Thus, total world grain
export availability for food and feed will reach 31 to
34.5 (median 33) million tons, but as noted above., will
still fall short of total requirements of 47 million,
by about 14 million tons.
U. S. production of wheat has Increased from 20.6
million tons pre-war to 38.1 million estimated in 1947/48,
while exports are expected to increase from 1,1 million
to between 12.3 and 13.6 million tons. Thus, of the 17.5
million increase in U. S. output over pre-war, 11..2 to
12,5 million tons are intended for export, only 1,4 million
tons for increased domestic consumption as wheat and 1 to
1.6 million for increased consumption as feed, the re-
mainder for carry-over and other uses.
The
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In view of the magnitude of the world grain deficit
for the next two years, it is clear that a U. S. foreign
aid program should include maximum efforts to sten up
grain exports. This conclusion is reinforced the ,
prospect that the only other possible source dditional
suPplies of grains in 1947/48 is the U.S.S.R. w'_ich alone
among important European suppliers has a good narvest in
sight and which may be counted upon to turn surpluses
squeezed from domestic consumption to telling political
account.
In 1949/50 as noted above, restoration of production
in the Far East and in some European countries is expected
to balance world exportable supplies and requirements of
breadgrains, though at a considerably higher level of
world exports. This increase in exports is necessary
mainly because of failure of production in importing
countries to keelp pace with anticipated population in-
crease. Continental Europe, excluding Germany, is ex-
pected to require at least 1 to 2 million tons more
grain from abroad, Western Germany 3.9 million tons more,
and Italy, 400,000 tons more than pre-war. In addition,
no 1949/50 exports to Western Europe are estimated from
Eastern Europe including the Soviet zone of Germany and
former Gorman territory now under Polish control. Normal
population increase is taken into account, but practically
no allowance is made for improvement over pre-war con-
sumption levels or a decrease in uneconomical grain
production in Europe.
For details of the world grain balances 1947/48 -
1949/50, see Appendix C.
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Fats and Oils.
During the calendar years 1947-49, the annual world
deficit of fats and oils is expected to range between 450
and 575 thousand tons (oil equivalent) and may be as much
as 1,600,000, if 1949 world import requirements are pro-
jected as the sum of (1) imports required to meet pre-war
consumption standards (European countries except Germany)
and (2) pre-war imports (non-European countries). World
requirements of fats and oils are, in fact, expected to
exceed available supplies so long as Far Eastern sources
of vegetable oils remain below pre-war levels of production.
Because of dislocated production and normal population
increase, countries of continental Europe, excluding Germany
and the United Kingdom., are expected to require almost
300,000 tons additional imports of fats and oils in 1949
as compared with the pre-war figure, merely to equal by that
year a pre-war level of cOnsumption. German consumption
in 1949 is estimated herein at 425,000 tons below pre-war.
European countries as a whole will depend on imports for 62%
of fats consumed as compared with 56% pre-war. For European
countries, which are the most important fats and oils im-
porters, the major problem will be one of securing a fair
share of world availabilities to meet increased requirements
insofar as possible during a period of seriously deficient
world supplies. Continuing world allocation, therefore,
will be essential to insure as equitable distribution as
possible of scarce fats and oils.
It is estimated that world export availabilities of
fats and oils will be only 54% of the pre-war level during
1947. Even with moderately optimistic assumptions on re-
covery of oil production, world production in 1949 will have
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recovered to only 77% of pre-imr. If European countries
obtain a fair or perhaps more than fair share of world
export supplies, it may be possible for them to attain
on the average 75% of their pre-war consumption level in
1947, 90% in 1948 and 100% in 1949.
The physical scarcity of fats and oils is sufficiently
marked perhaps to relegate the problem of financing essen-
tial imports to a secondary position. Since theUnited
States is an importer and not a supplier of fats and oils,
financing is not necessarily a dollar problem, although
dollar financing may be needed for countries with deficit
trade balances or inconvertible currencies.
The current high level of fats and oils prices, however,
Intensifies the problem of financing such imports. For
example, it is estimated that European importers must pay
$661 million more in 1947 (excluding additional freight) to
obtain less than 3/4 the pre-war volume of imports of fats
and oils. If prices remain more than three times the pre-
war level, estimated requirements for 1949 (or even a pre-
war volume of imports) would cost European countries ap-
proximately $1 billion more than the same volume of imports
at 1938 prices, excluding changes in transportation cost.
Removal of fats and oils from world allocation undoubtedly
would lead to even more marked price increases. Without
allocation, the financially weaker claimants, including many
European countries, would probably not receive a "fair" share
of world supply in the ensuing international bidding-up of
fats and oils prices.
Coal
Europe is the critical coal deficiency area. Pre-war
(1937) it consumed about 550 million tons of coal and requires
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about 575 to 590 million tons in the post-war period. Pro-
duction in 1947 is estimated at 460 million tons, which is
115 to 130 million tong short of post-war requirements and
90 million tons short of pre-war consumption. The United
States is expected to _export some 36 million tons of coal
to Europe in 1947 as a consequence of which the deficit will
be reduced to between 80 and 95 million tons.
Europe is unlikely to attain self-sufficiency in coal
until 1951. Germany and Britain, which are normally ex--
porters of coal are now short of coal themselves. Despite
this shortage, they are not to be considered coal importing
countries in the traditional sense. Most countries of
Europe have been and will continue to be net coal importers.
Prior to the war, they imported 70 million tons of coal.
Their current and post-war import requirements are estimated
to be between 70 and 80 million tons. This deficit figure
does not, of course, include the German and U.K. deficits,
since neither Germany nor the U.K. are expected to import
substantial quantities of coal over the next four years.
(This omission explains the difference between the 70-80
million ton figure and the 115-130 million ton figure men-
tioned above.)
It is not anticipated that European countries will be
able to obtain all their coal import requirements from
European sources unti1.1951. In 1947 they will obtain only 20
million tons from other European sources, namely, Poland and
Germany. They might import about 36 million tons in 1947
from the United States., leaving an unsatisfied deficit,
after imports from Poland and Germany, of 15 to 25 million tons.
In 1948 these countries might be able to import 35 million
tons from Poland and Germany, in 1949. 50 million tons in 1950,
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65 million tons and in 1951, 70?to 75 million tons. At
this rate of import from European export sources, and
considering the demand upon the U.S. as residual, the
demand upon the U.S. is likely to decrease progressively
as follows:
Millions of Tons
1948
35-45
1949
20-30
1950
5-15
1951
0-10.
The anticipated cost of U.S. coal c.if. European ports
at the stated levels of demand follows:
'Millions of Dollars
1947
$675
1948
600-760
1949
305-455
1950
40-160
1951
0-80
It is significant that by 1948 the European coal im-
porting countries might be able to close the gap between
supply and requirements for coal conditional upon the avail-
ability of dollars with which to pay the charges, not only
for U.S. coal, but for German and for part of Polish coal
as well.
The attainment of a rising level of coal production
in Europe depends upon the availability of labor mine sup-
plies and equipment, adequate transport facilities, an ad-
equate standard of living for miners, and the export of
equipment from the U.S. to rehabilitate both the mining and
transportation industries.
The ability of the U.S. to maximize coal exports and
assure their equitable distribution depends upon the con-
tinuation of export controls under the Export Control Act,
adequate transport facilities, both inland and waterborne,
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and continued participation in the European coal Organization,
whose functions are now being transferred to the Economic
Commission for Europe.
Latin America is traditionally a coal importing area.
Practically all of its coal imports are now secured from the
U.S. The net import requirement of South America is only
2 1/2 million tons per year, and this is met in full from
U.S. sources. Although the Far East is experiencing a short-
age of coal, it is not anticipated that that area will draw
upon the U.S. for significant quantities of coal.
22.2212_021221DE
Shifts in the ownership of and freight rates charged by
the world's ocean going dry cargo fleet as a result of war-
time sinkings, the unprecendented U.S. shipbuilding program
and large volume of traffic have deprived a number of European
countries of an important source of foreign exchange income
and have greatly increased Europe's dollar expenditures on
current international account. Financing this cost and the
cost of rebuilding European fleets, by purchase and perhaps
to' some extent by new construction, will necessarily be an
Integral part of the U.S. contribution to a European re-
covery program.
Shipping as income.
Of the world's total ocean going dry cargo fleet, the
United States now operates 50 percent (in terms of deadweight
tonnage) as compared with 11.6 percent pre-war: Since the
world's active fleet is actually somewhat smaller than in
1939, European shipping has declined drastically, in absolute
as well as relative terms. The loss of shipping as a source
of income and foreign exchange are of special importaxIce to
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Norway, for which pre-war shipping earnings were 36.5 per-
cent of the value of merchandise exports, for Greece (24.1%),
for the United Kingdom (13.4%), for the Netherlands (9.2%),
for Denmark (7.1%), and for It6l1 (an undetermined but sig-
nificant amount in comparison with merchandise exports).
Shipping as cost.
Europe's need to import critical bulk commodities re-
gardless of cost or shipping distance from the source of
their availability and to find dollars to finance United
States shipping services have intensified the balance of pay-
ments difficulties of all European countries. The necessity
to import more goods over longer distances arises from world
commodity scarcities that force countries to import coal,
wheat, etc. from wherever they can be found. The increased
burden of dollar shipping costs on Europe's limited dollar
resources reflects, of course, the predominance of United
States vessels in world shipping and the corresponding de-
cline in Europe's merchant fleet. The increase in maritime
rates over pre-war is directly related to the continuing
shortage of dry cargo shipping, measured (1) in terms of
active tonnage (which is now somewhat less than the 60 mil-
lion d.w.t. pre-war) vs. shipping traffic (somewhat more
than the 200 million tons per-war) and (2) in terms of the
decrease by comparison with pre-war in tonnage carried an-
nually per d.w.t. of vessels in operation due to longer
average hauls and decreased operating efficiency, again by
comparison with pre-war, as a result of war dislocations,
such as port damage, inefficient stevedoring, etc.).
Prospects for 1949
The United Kingdom, Norway, France, Netherlands, Sweden,
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Denmark and Belgium have developed plans for rebuilding
fleets lnrger than pre-war, but the prospects for Greece
and Italy appear much less favorable. The United States
active fleet, moreover, is expected to decline by about
10 million tons to a total of 25.2 million or 32% of the
world total. These factors plus eventual improvement in
the operating efficiency of European ports should increase
the share of European fleets in the world total, although
not to their pre-war level of maritime importLnce. Since
world sea-borne trade in 1949 is estimated at 240 million
tons, a level necessitating substantial United States flag
participation, world maritime rates are expected to remain
above pre-war in order to cover the high cost of American
operations. The increased shipment of European goods in
European l'ottems, the restoration of international trade
to more normal commodity patterns (e.g., coal from Europe,
grain from European sources) should operate to decrease the
absolute end the dollar cost of ocean transportation for
European countries, and to restore, in whole or in part,
the shipping income of Europe's maritime powers.
Immediate steps in this direction are the efforts of
European countries to:
(1) implement an ambitious program for new ship coz.).-
structiong 1,521,000 d.w.t. are now under construction in
European yards.
(2) acquire D share of the currently inactive United
States Government-owned fleet. Applicatiom already has been
mode for 3.7 million of the total 12 million d.w.t. now in-
active.
With world steel supply now one of the chief factors
limiting reconstruction, building of new ships while United
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States war-built vessels remain inactive is apparently
uneconomic. Although many of the United States surplus
of war-built vessels are not considered efficient in
terms of competitive cost, such ships can well be used
ad interim, if sold or chartered now to European countries,
and the program for building new and more efficient ships
thus deferred to n period of less critical steel scarcity.
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N.
World steel production is expected to increase by more than 18 million
ingot tons between 1947 and 1949. Nevertheless, world steel production is
expected to fall short of world steel requirements by 28.7 million tons in
1947, by 21.9 million tons in. 1948 and by 13.3 million tons in 1949, in terms
of ingot equivalent. These requirements estimates are rather arbitrary
and may substantially underestimate in the case of the war devastated areas
the quantities which could be effectively used.
It should be noted that Germany is estimated to account for 7 million
tons of the world steel deficit in 1949 (production 8 million; requirements
15), with coal supply rather than Level of Industry restrictions as the
principal limiting factor. (Germany's steel needs for rapid reconstruction
probably exceed 15 million tons per year). Japan accounts for 1 million tons
of the world deficit in 1949, and the USSR for another 4.5 million tons. If
it is assumed that USSR steel imports from Europe will be mainly machinery
and manufactures and will be a relatively small tonnage in terms of the
world deficit, and that German and Japanese steel deficits will not constitute
an effective demand for steel on world markets, the 1949 situation can be
considered almost in balance, with requirements only 800,000 tons more than
steel production. This conclusion is, however, subject to the important
qualification noted above concerning the requirements figures and no
allowance is made in these estimates for carry-over into future periods of
needs not filled in 1947, 1948 or 1949.
Abnormally high reconstruction needs and abnormally low production in
most countries of continental Europe are chiefly responsible for these deficits.
It should be noted, also, that the world steel balance is computed entirely
in overall terms. Within the totals ofewailabilities and requirements may
be included serious shortages of steel in the particular forms desired by
importing countries (e.g., shortages of castings or sheets preferred to
imports of finished products). In the same way, requirements estimates
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do not take into account the extraordinary demands for steel that may arise
in connection with extensive programs of industrialization, and in any case
are highly dependent on a wide range of possible assumptions as to levels of
steel consumption.
The United States is the principal producer of steel available for
export; U.S. exports in the amount of 7 million ingot tons per year in the
form of semi-finished or steel products are herein assumed. Europe, including
the UK and Turkey but excluding the USSR, is now expected to produce only
33.4 to 44.5 million tons while European requirements will be 53 millions
(the gap mainly represents a 7 to 11.5 million ton German deficit). Thus,
Europe can absorb entirely whatever steel surpluses are available in Europe,
from Belgium (3 to 4.5 million tons) and from Poland and the UK (relatively
small amounts). No part of the USSR production of 16.5 to 20 million tons
can presumably be regarded as available fOr export.
Claimants for US surplus production therefore, will be: Euro m (with
a 6:9 to 1.5 million ton deficit, 1947 to 1949 excluding the German deficit
and an 18.4 to 8,5 million deficit in the same period when Germany is
included in the total); South America, (a deficit area of approximately
2.5 million tons), and the Far East (a deficit area of 2.9 to 1,5
million tons, 1947-49, excluding Japan, and a deficit area of 4.9 to 2.5
million tons if Japan is included). Thus claims totalling 25.8 million tons
In 1947 and declining to 13.5 million tons in 1949 (including Germany and
Japan) will be presented against U.S. exports of 7 million tons. This will
make necessary the allocation of U.S. steel exports according to a priority
pattern which reflects considerationsof foreign policy and equity.
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B. Stops Required to Deal with Critical Commodity Problems
It is clear, from the foregoing analysis of the major scarce commodities
that the following ateps are essential if the problem is to be handled
satisfactorily:
1. There must be a determination of agreed world-wide requirements and
availabilities. In the past the fact that total requirements, as stated by
individual importing countries, have been in excess of total availabilities
has crdated a haphazard allocation pattern which has failed to produce maximum
benefits from such supplies as have been forthcoming. It is necessary to
bring requirements and supplies more closely into line with each other in
such a way that both claimants and exporters are satisfied that the results
are equitable and economic. This involves a consideration of goals and
standa
ds used by importing countries in determining requirements and also
by Xporting countries in determining availabilities. It also involves the
establishment of priorities by area - in the case of steel, for example,
placing the reconstruction of Europe ahead of new development in Latin America.
See Part IV.) These are extremely difficult problems but they cannot be
avoided. Failure to deal with them will simply produce a result achieved
without careful consideration, the political repercussions of which will
probably be disadvantageous to United States aims.
2. Once agreed requirements and availabilities which are reasonably
in balance have been established, the task of insuring that current shipments
conform to allocations and that allocations are adjusted equitably to
unforeseen changes in supply must be undertaken. Consideration should also
be given in determining allocations to incentives to world recovery. For
example, food allocations might be increased above a basic minimum depending
upon the recipient country's performance with respect to such matters as
extraction rates, collection of indigenous supplies, control of black markets,
etc.
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3. international machinery is required to implement these proGrams.
The international emergency rood Council is an example of the typo of agency
which is useful in this field. however, such agencies have heretofore
always included amon?, their membership some soviet-uominated countries. If
we unrertake to insure a priority in allocetion of scarce commodities to
countries outside the soviet sphere, eo may force the withdrawal of the
satellite countries. Such a priority seems, nevertheless, to be necessary,
thouLh it should be tempered te the extent thet Soviet satellites may be
able to participate at the working level in a buropean aecovery ran. Trade
on the basis of mutual benefit would still be poesible between the Soviet eerld
and the non-Soviet world providing the soviets do eot undertake to initiate
full-scale ecelyomic warfare.
4. Within the United States there is 4 need to strengthen the machinery
available for dealing with this problem. The Second Decontrol Act of 1947,
which provides limited priorities and allocations powers, expires on
February291 1948. (.)eo iote follvAng.) If Con'Tess should appropriate
subetanti .1 funds for Ad to urope or other deficit areas, it would be
necessary not only to extend the powers of the Second Decontrol e.ct but also
to strengthen them, it is also necessary to strengthen the administrative
m, chinery for supervising exports. e,t present, this function is divided
between the Departments of Commerce and -griculture. Personnel are not
available to these agencies to do an ade-uate job of determining the 'United
States position eith respect to requirements and supply of scarce commodities
and implementin these decisions as outlined in the foregoing parar:rwhs.
zither a no. aeoncy should be established to iprform this funcAon or an
existing agency or agencies should be adeeuately staffed to do the job.
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5. In planning. for tho implementation of United States aupport 07 a
European Recovery Plan, we must bear in mind the fact that the commodities
which are critical to Europe are also critical to the world and must be
handled on a uorld-vide basis.
iota on The Second DitumlasgstUILIMAZ
The Second Decontrol Act of 1947 (Pub. L. 3iX 80th Cong.) which became
law on July 15, 1947.extenda certain emergency powers over allocations and
priorities as well as controls over exports, from July 16, 1947 to February 29,
1948.
These powers are continued in order to complete reconversion, to protect
the health, safety and welfare of the American people, and to support the
foreign policy 'of the United States, with respect to specified materials and
facilities which continue in short supply at home and abroad as a result of
the war.
Their retention is declared necessary, (1) to protect the domestic
economy from the injury which would result from adverse distribution of the
materials which continue in short world supply; (2) to promote production in
the United States by assisting in the expansion and maintenance _of production
in foreign countries of materials critically needed in the United States;
(3) to make available to countries in need, consistent with the foreign policy
of the United States, those commodities whose unrestricted export to all
destinations would not be appropriate and (4) to aid in carrying out the
foreign policy of the United States.
Authority
Extended until February 29, 1948 by the amendment of Title III of the
Second lax. Powers Act are the powers, authority, and discretion conferred
on the President, (with respect to allocations, priorities, etc.) over the
following:
"(1) The materials (and facilities suitable for the manufacture of
such materials), as follows:
"(A) Tin and tin products, except for the purpose of exercising import
control of tin ores and tin cbncentrates;
"'(B) Antimony:
"(C) Cinchona bark, euinine, and quinidine, when held by any Government
agency or after acquisition (whether prior to, on, or after July 16,
1947) from any Government agency, either directly or through intermediate
distributors, processors, or other channels of distribution, or when
made from any of such materials so acquired;
"1(D) Materials for export required to expand or maintain the production
in foreign countries of materials critically needed in the United States,
for the purpose of establishing priority in production and delivery for
export, and materials necessary for manufacture and delivery of the
materials recuired for such export;
"(F) Materials (except foods and food products, manila (abaca) fiber
and cordage, agave fiber and cordage, and fertilizer materials, including
petroleum and petroleum products, required for export, but only upon
certification by the Secretary of State that the prompt export of such
materials is of high public importance and essential to the successful
carrying out of the foreign policy of the United States, for the purpose
of establishing priority in production and delivery for export, and
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materials necessary for the manufacture and delivery of the materials
required for such export: Provid21, That no such priority based on a
certification by the Secretary of State shall be effective unless and
until the Secretary of Commerce shall have satisfied himself that the
proposed action will not have an unduly adverse effect on the domestic
economy of the United States; and
"'(2) The use of transportation equipment and facilities by rail
carriers.'
"Congress by concurrent resolution or the President may designate an
earlier time for the termination of any power, authority or discretion under
such title III.
"The authority to negotiate contracts with or without advertising or
competitive bidding under the Act of June 28, 1940, as amended, ended on
July 15, 1947. The Act of March 29, 1947 (Pub. L.24) protecting the domestic
rubber producing industry, and the Act of March 31, 1947 (Pub. L. 30)
entitled the Sugar Control Extension Act of 1947 are continued in force.
,'The control over the export of articles, technical data, materials, or
supplies established by the Export Control Act of July 2, 1940, as amended,
is extended until February 29, 1948.
"Sections 3 and 10 of the Administrative Procedure Act (60 Stat. 237)
regulating publication of procedures, and judicial review, apply to this Act.
"Authority is given to the Secretary of Commerce to administer the Act.
A quarterly report is required from him. It is to be noted that under
paragraph (F) above certificates of the Secretary of State ce required on
certain products needed for export to carry out foreign poli.c.it
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Iv: Relation between Regional and World Approaches to Economic Assistance
Policy
The problem of economic assistance is world-wide. The fundamental
problem of the post-war world arises from the high productivity of the
Western Hemisphere, particularly the United States, on the one hand and,
on the other, the relative failure of productivity to recover in the Eastern
Hemisphere. Practically all areas of Europe and Asia, with the exception
of the U.S.S.R., are having difficulties in attaining a self-sustaining
pattern of trade. Even a number of countries in the Western Hemisphere are
confronted with a dollar problem.
Although the problem is world-wide it is necessary to approach its
solution by giving attention to regional differences. vestern Europe is the
area where the Soviet-Western conflict is most critical. It is also the
area where economic assistance can produce the most immediately significant
r sults in reviving world economy. Consequently the decision has been taken
to give principal attention to this area for the immediate future.
Present plans for implementing Secretary Marshall's suggestion at
Harvard call for:
1. The formulation of a program for European Recovery by the 16
participating nations which will involve the maximum possible degree of
self-help and effective regional coordination and the presentation of this
prbgram to the United States in September.
2. Study of the program and the role of the United States in assisting
to carry it out by the public and by Congressional committees, looking toward
legislation early next year.
3. Authorizations and appropriations calling for extraordinary
assistance to the participating countries in large sums over a period of
4 to 5 years, and possibly longer.
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4. Special organizations in Europe and in Washington to insure the
successful functioning of the program.
At the present time it is contemplated that a regional program of this
nature involving United States aid and a regional integration of national
economies should be limited to Europe for the following reasons:
1. The degree of economic interdependence and community of interest is
greater for Europe than for any other region.
2. Progress in solving the problem of European recovery will go far
toward eliminating the needs for special assistance elsewhere in the world.
As indicated in Part II, above, many non-European countries have increased
their imports from the United States because their traditional suppliers in
Europe cannot meet their needs. Or, like Canada, they financed a pre-war
deficit with the United States through a surplus with Europe which they
cannot now convert to dollars. European recovery will permit a revival of
these patterns and a resulting improvement in the dollar position of many
non-European countries.
3. Non-European countries other than devastated areas may be able to
rely to a large extent upon existing agencies such as the International
Bank, Export-Import Bank and private capital for necessary financing; the
validity of this conclusion, however, will depend upon a considerably more
ambitious lending program by the International Bank.
It will, however, be necessary to provide special financial assistance
in implementing the "crank-up" program for reviving Japan's production to
render that country self-supporting. Southern Korea will also require special
aid, and as indicated in Part II, a special assistance program for China
may be required,
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*Mt aNtli....??????,.
4. The short-run aspects of the European problem can be distinguished
from the problem in other areas as primarily one of recovery and reconstruc-
tion rather than development. The task of developing backward areas
requires different techniques from those being developed under the European
Recovery Program. Much heavier emphasis should be placed on the role of
private investment. Techniques for stimulating such investment in Asia,
Latin America and the Middle East must' be formulated. Reliance upon the UN
should be emphasized where possible particularly with respect to plans for
regional development. Much additional analytical work on the magnitude and
nature of long-term capital requirements Of underdeveloped areas in the
light of the objectives and considerations outlined in Part I is needed.
When such analysis is available, it will be possible to judge whether or not
new national and international financial and development institutions and
assistance programs may be required to achieve the objectives of United
States policy in these areas.
The possible gains to the economy of the Far East through a program of
regional economic integration buttressed by a coordinate United States aid
program are now being explored in the State Department.
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Area and Country
Western Europe
United Kingdom
Francs
ItelY
No the rl ands
Belgium
Nortal
Sweden
Denmark
I celand
Blame Germany
Triente
Eastern Europe
Finland.
Auntria
Onachoslovacia
Poland
Emma
Yugoslavia
Albania
Rumania
Sulpria
Greece
linrope
Total Europe
2/
Near East & Africa
EgYnf
Iran
Lebanon &Syria
Liberia
Saudi Arabia
Turkey
Palestine
Iraq
e/
Far East and Oceania -
Bursa
Chins
French Indo China
Japan
Western Be.dephare 2/
Unallocable
Total
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Total "IlequIrett"
Nat Dollar Capi-
tal. Import.
TABLE I
WORLD COITAL INPCRT REQUIREMENTS, BY COUNTRY, 1947-1949
(millions of dollars at pricec prevailing in the last half of 1946)
U.S. Gov't Credit
Use at Unsatisfied Net Capital
Dollar Meets e.54 Import Requirements Be-
fore Orme Private Capital
Net
Unsatisfied Capital
Orme
Jr
1947
a/
1948
1949
Total
1947
14,239
1948
1,806
1949
561
Tot eL
6,60w
1947
1,010
1948
700
1949
420
Iota
2,130
1n41
518
2,218
2607
1949
2.974
Tot4
6.099
1947
76
1948 rips zeta
155 185 416
1947
1442
194s
0J492
,94a ....--,
2.759 5.659
5,767
5,113
3,955
14,8
2,450
2300
2,000
6.5
2.450
700
?
3,150
-
zoo
zoo
400
-
1.200
1,800
3,000
-
_
-
-
-
1,200
1,800 3,000
1,500
1,400
800
3,7
735
475
195
1,405
700
300
loo
1,100
65
625
505
1.195
-
-
-
-
65
625
505 1,15
640
415
260
1,31
365
132
50
547
-
-
-
-
275
263
210
768
-
-
-
?
275
263
210 768
400
350
250
1,00
241
137
75
453
150
150
100
400
9
63
75
147
9
63
75
147
-
-
- -
loo
75
75
25
48
43
-
91
.
-
-
-
52
32
75
159
52
32
75
159
-
-
_ _
146
SO
50
27
51
20
15
86
..,
-
-
80
15
60
35
110
15
60
35
110
-
-
- -
40
40
20
1
-
-
-
-
40
40
20
3.20
-
-
------
_
-
- -
62
43
-
10
32
33
-
65
30
10
-
140
-
-
-
-
-
-
-
-
-
-
- -
20
10
-
10
10
10
-
20
-
-
-
-
10
10
- 20
400
600
500
1,500
308
266
226
goo
-
-
-
-
92
334
274
700
-
-
-
-
92
334
274 700
9
9
-
-
9
-
-
-
-
-
-
1,144
1,180
615
2.939
676
373
187
1,236
5
-
-
5
463
807
42a
1,698
-
-
_
_
463
807
428 1.698
40
40
33
110
32
20
52
1044
5
-
-
5i
3
20
22
1
-
-
20
22 1
210
250
175
635
117
15
-
132
-
-
-J
93
235
175
503
-
-
-
-
93
235
175 503
40
50
50
140
34
55
40
129
-
-
-
6
-5
10
11
-
-
-
-
6
-5
10 11
250
200
-
450
130
113
95
338
_
_
_
120
87
.95
112
-
-
87
-95 112
100
100
100
300
9
_
_9
5.
loo
100
291
-
-
-
-
91
loo
100 291
118
100
100
318
36
-
-
36
-
-
-
60
100
100
280
-
-
-
--
80
100
100 280
6
6
-
-6
-
_
-
-
-
--
-
-
-
- -
50
50
50
150
--------
50
50
50
150
- -
-
-
50
50
50 150
20
20
10
50
--------
20
20
10
50
- -
20
20
10 50
280
370
100
750
280
170
-
450
-
-
-
-
200
100
300
- -
-
-
200
100 300
30
-
-
30
50
-
-
30
'
^
-
-
_
_
-
..
-
-
- -
-
-
.
69
70
-
139
-
-
-
-
69.
-70
-
-139
-
-
-69
-70
-119
6,911
6.293
4,570
17,771414,9814
2,849
748
72401
1,015
700
420 2,135
93,2
3.344
3,40e
7,658
96
155
185
416
836
3189
3217 7,24S
550
68'
440
1,673,
82
212
110
404
270
70
0
350198
406
320
924
100
200
200
500
98
206
120 424
34
69
34 137
30
30 60
28
29
9 66
2
3 5
N
0
5
AVAILABLE
5
4
4 13
50
25 75
7
6
6 19
24
16
9 49
1821
1,187
1,213
4,221
990
692
805
2,487
390
180
110
700 441
315
275
1.03,
120
40
40
200
321
275
238 834
50
30
20 100
100
150
150 400
N 0
T
A
V
A LABL
E
35
25
15 75
3.30
70
53 259
1930
620
549
3,10,
151
186
183
$20 1,4411
92
-30
1,500 339
352
395
1.087
250
230
260
740
89
122
136 347
39
85
175
299
39
85
175
299
11251_5am.
a 947
27,075
6.246
1.424
2.091
11.691 3,115
1,040
530
4,625 a890
4.1,31
4396
10 703
546
625
_666,4856
41,
1.792 1.711
8,847
On the definition of capital import requiremento used in this report, excludes needs met from the proceeds of (i) exports of goods and services, (ii) the rale of new gold,
(iii) private remittances, and (iv) loans by hard currenoy countrim other than the United States; includes dollars requiredto unblock sterling and funds required to
provide for return flow of capital to the United States.
h/ On a disbursement haulm includes, (1) Export-Import Bank Credits, (2) Foreign liquidation Camission and Maritime Ocemmielion Credits, (3) Special country loam & grants
(U.K. loan, Civilian Relief for Occupied &el Liberated Countries, empected U.S. contribution to IRO, etc.), (4) 1947 Balance of UNRRA program, (5) Probable Internatiorml
Break lendirog (including loans financed by International Bank debentures). Scorner "Annual Dollar AvailabilitLes Under Presort Policies, by Country, 1947-1949, dated June 17,
1947 (Revises).
2/ Based on present policies of tke foreign governments herring plane for liquidating publip and private foreign invereamte of their nationals (as in the case of Franca and the
Netherlands), and on an analysis (a) of mold reserves and public dollar balances ani (b) of the rate at which these were evidently liquidated in the first quarter, 1947.
1/ It is teemed that Netherlands, Belgium, amd Norway can meet uneatiafied capital requirements in the order indicated by resort to private capital markets. The total of groin;
private capital outflow to Western Europe so indicated is only alightly larger than is allowed for in Table II, the "Projection of United State. Balance el* Payment. under Present
financial Policia. and Programs, by Areas, 1947-1949..
2/ Unzatieficel capital import requirmente ware cosputed for countriee in these areas on the asemption that the nemr development program could not employ funds beaming available
through private inveetmtt, tits liquidation of gold holding and dollar balance., or the conversion of sterling and other eurrenoy holdings into dollars. This assumption may not
Reid for countries in the Near. and Per East receiving or holding sizeable starlit:. balance.. and the unsatisfied requirements of those countries mrqr be overstated on that account.
The country breakdown for these areas applies only to tie owlam giving unsatisfied capital import requirements{ the totals for other colurone inch 65 all countries in the
areas jan question including, for example, the critical countries for which country studies have been prepared but which were not, at the time this table was prepared,
known to have requirements unfinanced after account was taken of resources prospective under present policies mod programs as ahem in Table III, namely, Afghanistan,
Portugal, Spain, French Northwest Africa, Korea, Indonesia, India, MI, the Philippines, and MM.
N.B. Estimates of unsatisfied requirements given Lithe last mime do not entirely agreesith aisdlar eetimatee parried lathe country studies submittedtothe Ad Boo Comittee.
The differences &ries from the necessity of using estimates made early in the summer whim most of the country studies were still in preparatiot
CONFIDENTIAL
Approved For Release . - DP67-00059A000400
1. S. Exports of Goods & Services
CD
2. @7S. Imports of Goody & Services
3. Eg.,. Trade Balance:
9inenced by:
4. .1.168. Gov't Loans & Aid
CD
5. (her Sources of Dollars
........Private Remittances
(:)
CC/Private Cepital 01port
0.)Less Return Flows of:
Gov't long & short-term creCit
0 Private long. & short term cred
)11.0 Gov't unilaterol transfers
,iiPPrivato unilateral transfers
g6. uidatIon of Gold & Dollar Asse
Illd Reserves & Long 4 Short
cm Assets
gmles of New Gold
7. emotional konetary Fund
8. 1,g1pr-Area Transfers
Cablocking of Sterling
Caher Transfers of Gold
And Dollars
CD
CD
CA)
CD
CD
CD
CONFIDENTIAL
TABL1_ II
PnOJLCTION OF UITED STATES BALAI.CE CC PAY13To FINA.0C14 POLICIES, ArThORIZATIONS AND PROGRAMS, 7Jf AREAS, 1947-1949
(Millions of dollars at then current prices)*
All Areas
'.:111-ope
Western Europe
Eastern Europe
Pear East & Africa
Far Lest & 0ceenie
Western Hemisphere
Undistributed
M
C)
'S
1212121,1s
19,020 13,670
lila
12,370
Total
,L4'.1
7,360
1913
1549
3,450
Total
19,-,7
1943
194;
Total
j,..4
1948
870
7749
zglia
2,730
1047
13hi
1,320
2.949,
1,200
Total
1047
1,..)43.
1949
Total.
1947
1948
1943
Total
1947
1998
,1949
190
Total ;A:1
45,060
4,940
15,750
1,170
4,070
2,780
13,020
1,190
670
1,350
3,910
3,340
2,890
3,420
9,650
6,350
4,410
4,113
15,370
70
120
CD
330
CD
8,340
7,660
8,410
214,613
1,970
2,100
2,350
6,420
1,670
1,790
2,000
5,460
300
310
350
960
690
530
540
1,760
1,160
1,660
2,130
5,450
4,020
3,370
3.390
10,780
OD
OD
10,6so
6,olo
3,960
20,650
9,390
2,340
1,100
9.330
4,505
2,230
780
7,560
390
560
320
1,770
700
790
660
2,150
1,630
1,230
1,290
4,210
2,330
1,040
720
4,590
70
120
190
380 CD
6,246
3,424
2,022
11.691
4,984
2,249
748
7,531
4,303
1,476
961
6,745
676
373
187
1,236
32
212
110
404
? 950
692
305
2,437
151
186
133
520
39
85
175
299 C.0
C.0
530
620
600
1.750
260
130
110
500
loo
10
10
120
160
120
100
330
200
210
410
60
110
90
260
180
150
170
500
30
30
20
ta....2
600
0
840
500
1,940
500
350
300
1,150
340
230
200
770
110
120
100
330
50
50
50
150
130
140
100
370
130
30
30
150
30
30
20
SO (D
.......
570
570
600
1,740
100
100
100
300
100
100
100
500
100
200
200
500
120
4o
10
200
250
230
260
740
al
, -150
-210
-200
-56o
-130
-191
-130
-500
-130
-190
-130
-500
-20
-20
-20
-60
0
ts-310
-130
-200
-690
-60
-60
-30
-200
-60
-60
-30
-200
-20
-20
-20
-60
-90
-20
-20
-130
-140
-30
?30
-300
)211
-230
-70
-350
-110
-10
-150
-110
-10
-150
'..100.
-100
-70
-30
-100
-40
-10
-20
-70
1
X
-140
-90
-100
-330
-40
-30
-30
-100
-43
-30
-30
-140
-30
-30
-20
-80
-30
-20
-30
-SO
C
71:1
.8.1700
1,640
1,150
6,490
1,345
1,030
760
3,135
1,360
1,030
760
3,130
5
250_
150
loo
60o
400
200
150
750
1,600
260
140
2.000
CP
.....
3.120
1,040
530
4,690
1,015
700
420
2,135
1,010
700
420
2,130
5
5
270
70
LC
350
390
130
130
700
1,440
90
...30
1,500
6
C:
580
600
620
1,800
330
330
340
1,000
330
330
340
1,000
SC
30
90
250
10
20 .
20
50
160
170
170
500
C:
Cr
200
330
190
720
200
300
120
120
150
230
90
470
50
70
30
150
30
70
100
CC
)1111-
1 400
-370
-640
-2,910-1,600
-370
-640
-2,910
270
200
170
640
230
270
240
'00
900
440
23a
1.570
c:
.
c:
-360
-370
-390
-1,120
120
120
130
370
250
210
240
700
10
20
20
50
c:
.D
C
-1,010
-500
-250
-1,790
150
SO
40
270
890
420
210
1,520
C:
C..:
C:
C:
C:
IN
1
*Current prices are prices expected to prevail in the future, reppectively 1947 = 119% 1948 = 99%, and 1949 a 99% of prices prevailing in the last half of 1942.
TABLE III
Approved For
Area and Country Export-Import Bank
Releile.-M.9/.04,Fit--
Total
PLC Credits
Total
S 8 C.
Special Country Lome and
:
1947 191o8 1949
0059A00040.0.1.30002
Total
....._
1q07
1947 1948 1949 ToteS
1947
1908
1949
1947 1946
1907
Other Unilateral Traneferl
1947 1946 1.949 Total
All Areas 9941
293.7
135.7
1,423.5
199.8163.0
362.8
198.4
4,086.1,902.871.
6,859.
355.
1,065.1,015.2,05
412.6
6,245.9 3.423.7
2.021.7
11.691.3
Enrols . 803.7
175.0
67.4
1,045.1
95.3
103.0
198.3
168.3
3,331.
1,189.
226.
4,746
335,
780.
455.
1,570
-2-5;.Tgr:,9,A.--249.0
746,4_
49815
_
Albania
5.8
5.5
5.8
Austria .6
.2
.8
8.1
6.1
86.
15.
101
22.7 117.4
15.2
132.6
Belgium and Losemburg
18.1
3.0
21.1
30.
40.
70.
48.1
43.0
91.1
Gsechoslovakia 7.7
.2
44.9
5.
55.
40.
100.
20.8 33.5
55.2
40.
128,1
Denmark 2.1
2.9
5.0
10.0
10.0
30.
20.
50.
32.1
32.9
65.0
Dodecanese Island..
.1
.1
Finland 31.9
9.5
2.4
43.8
.1
10.0
10.1
50.
50.
.1 32.1
19.5
52.4
101.0
Trance 504.0
70.0
574.0
50.
50.
30.8
200.
355.
195.
750.
734.8
475.0
195.0
1,404.8
Germany
303.
206.
226.
800
308.0
266.
226.
600.
Greece 6.9
4.7
11.6
21.2
10.
31.2
52.5
185.
155.
300.
14.0 279.6
169.7
449.3
HungarY
2.0
2.0
6.
6.
.9 5.9
8.9
Italy 25.4
37.0
50.0
115.4
10.
10.
05.8
209,
209.
15.
85,
100.
67.1 365.3
132.0
50.0
547.3
Netherlands 163.0
2.0
165.0
17.2
10.
27.2
11.2
50.
125.
75,
250.
241.4
137.0
75.0
453.4
Norway. 15.0
20.0
15.0
50.0
8.1
8.1
28.0
51.1
20.0
15.0
86.1
Poland 20.1
13.5
33.6
19.6
19.6
33,
33.
5.
100.
95.
200,
52.0 129.7
113.5
95.
335.2
Trieste
9.
9.
9,
9.
United Kingdom
2,450.
700.
3,150.
2450,
700.
3150.
.9
29.3 30.2
30.2
Yugoelavia
38.0 38.0
36.0
Mier. Evros, 24.0
17.0
41.0
45.
53.
98.
69.
70.
139.0
Near Fast and Africa 2L1_
19.8
5.0
51.1
1,.
33.0
44.5
44,
64,
108
.je5
200.
82.1
500.5
110.
403.9
LC/Pt
50.
50.
50.
50.
Ethiopia 1.8
1.2
3.0
.6
.6
.3 2.7
1.2
3.9
1.646466
2.5
2.5
2.5
2.5
Liberia
4,
4.
8.
Saudi Arabi. 6.4
8.6
5.0
20.0
.5
6.9
8.6
5.0
20.5
Turkey 18.1
10.0
28.1
4 6.8
6.8
00.
50.
100,
20.
SO.
100.
60.9
90.0
80.0
254.9
Union of South Africa
I
2,0
2.0
2.0
2.0
Yemen
1.0
1.0
1.0
1.0
Iran
1.1
30.0
31.1
25.
25,
50,
1.4
55.
25.
41.1
Far Baet and 0 a ia 42.3
12,3
54.6
13.9
27.0
517.9
22,0
681.
603,
605.
1.899.
50.
200,
250. 156 0 990.2
692.3
805.0
2/93 5
Australia
.6
.6
.6
.6
Burma
5.0
5.0
5.0
5.0
China 42.3
12'3
54.6
4.0
4.0
22.0
27.
27.
154.0 249.3
124
261,6
French Indo-China
45,0
11.0
11.9
11.9
India
150.
150,
150.
150.
Calms
13.6
6.
19.6
327.
267.
257.
851.
340.6
273.
257.
670.6
Korea
18.9
18.9
169.
194.
172.
535.
.7 168.6
194.
172.
554.6
Netherlands East ladien
31.7
31.7
50.
50.
100,
31.7
59.
50.
131.7
New Zealand
?,
.8
.8
Philiffine Islands
Sian
5.4
10.0
154
Misc. Far East and Oceania
Western Hemisphere 121 L_14.6
63.3
269.6
1,0
6.2__4.o
8.1
20,
95.
120.
235.
150.6
185.6
180.3
919.7
Argentina
.1
.1
Bolivia 4.8
6.5
11.3
4,6
6.5
11.3
Brasil 39.3
21.9
61.2
4.
4.
6.8
50,
50. 46.1
25.9
50.
107.0
Chile 25.6
23.7
49.5
20.
20. 25.6
53,7
69,5
Colombia 12.3
3.7
16.0
8
14
2.5
13.1
5.4
12.5
Costa Rica
.3
.3
.3
.3
Ecuador 3.3
3.8
3.3
10.4
3.3
3.8
3.3
10.4
Mexico 33.1
19.2
40.0
92.3
50.
50.
100, 33.1
69.2
90.
3920
Peru
1.3
1.3
1.3
0r4,8n8Y 2.0
1.7
3.7
.2
2.2
1.7
3.9
Venezuela
Mier, West. Hem. 1.0
4.0
20.0
25.0
20.
25.
20.
65.
21.0
29.
40.
92.
UnaOeaift,U .1
1
9.1
5.1
30
40.
40
no.
45.
135.
180.
p.,, ma
85.
175.
298.7
Approved For___-__Release
? ? ? S.
Pe_
CON
-- 111_? AIllall
1
02-1
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
CONFIDENTIAL
Report of Economic Working Group
to Special Ad Hoc Committee
APPENDIX
CALCULATION OF COUNTRY NET CAPITAL IMPORT REQUIREMENTS
A. European Countries
Requirements estimates for United Kingdom, France, Italy
and Germany have been discussed above in the Text. This appendix
will be confined to an analysis of the methods employed in
estimating requirements for other European countries. Reference
is made below to the Post?UNRRA relief standards. These
standards are briefly defined as allowing; 2,200 calories per
day for the urban population of a country, 70 percent of its
pre?war supplies of non?durable consumption goods other than
food, and sufficient imports to maintain the current level of
industrial production.
1. The Netherlands
The capital import requirements of the Netherlands are
based upon the assumption of a general consumption level rising
from roughly 80 percent of pre?war in 1947 to reach the pre?war
level by 1951 or 1952. A high rate of investment, which is
planned by the Government, is also assumed. It is estimated
that at the assUmed rates of consumption and investment and
with the financing of the required imports the Dutch balance of?
payments will be in equilibrium by 1950.
Netherlands nationals hold approximately $840 million of
dollar investments. It is estimated that the Government will
probably attempt to liquidate $400 million of these.assets, but
that any further liquidation would meet with considerable re?
sistance both in Government and private circles. ? It seems
probable that the Netherlands will be able to round. out its
dollar capital needs from non?United States Government sources.
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2. Belgium
The dollar capital needs of Belgium are estimated at $250
million for 1947-49 in line with the Government's tentative
10 year investment program of $8.4 billion. This program will
be used to raise the standard of living which is at present
roughly equal to 90 percent of pre-war and which is threatened
by a continued disequilibrium in the balance of payments now
being financed largely by funds accumulated during the war.
It is estimated that most of the crrdits which the investment
proLram will probably require from abroad will come primarily
from non-United States Government sources. No further liquid-
ation of the Belgian foreign exchange holdings or gold reserves
is anticipated.
3. Norway
Norway has experienced a steady economic recovery. Its
food position which is at present quite good is steadily
improving. Its moderate foreign exchange requirements since the
end of the war have been larr,ely met from accumulated hard
currency reserves. These are being supplemented by the sale of
securities in the Swedish and American money markets. Total
additional dollar capital requirements during the period
194?-49 will probably approximate $100 million and will be
used primarily for investment purposes. The facility with
which Norwegian bonds recently have been sold indicates that
Norway should have no serious difficulty in raising these funds
on the United States money market. Norwegian dollar require.,
ments include $36 million to allow for purchase of Maritime ?
ComFtis-ion vessels and surplus property on credit. Credits
in that amount have already been arranged
4. Sweden
While Sweden is now quite prosperous, it is experiencing
balance of payments difficulties due to relatively high
internal prices, to overbuying of dollar imports and to
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inconvertibility of other European currencies. For that
reason it is estimated that Sweden will draw down dollar
reserves by about $100 million during the period under con?
sideration. The imposition of more restrictive import and
? foreign exchange controls has met considerable resistance in
Sweden, but will nevertheless be necessary.
5. Denmark
Denmark is having balance rf payments difficulties because
the world?wide shortage of fodder and fertilizer has restricted
Its agricultural production for export and forced limitation of
domestic consumption. To prevent further lowering of living
standards (among the highest in Europe) Denmark will probably
liquidate $40 million of dollar assets in the period 1947-49.
A probable International Bank loan of $50 million in 1948
will provide for a moderate amount of capital improvement,
primarily in the transportation system.
6. Finland
The Finnish standard of living is substantially below
pre?war. The reparations burden and the resettlement of the
population from the territories ceded to the Soviet Union have
strained the economy. It is estimated that in order to raise
the Finnish standard of living to something less than pre?war
levels by 1949 and to increase Finnish industrial production
to pre?war levels by 1948 primarily through the accumulation
of working supplies of raw materials, Finland will need
slightly more than
110 million in the periOd under considera?
tion. Towards this end it will probably liquidate $5 million
of its dollar assets and the recent
25 million Export?Import
Dank credit. The additional $80 million which will be required
can probably be obtained from the International Bank aid
United States private investors.
Appendix HAll
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7. Iceland
Iceland probably needs help from abroad to cushion the
shock of the forthcoming sharp reduction in its standard of
living even though it is, however, considerably above ore?
war. The current fall in the price of fish, Icelandls 1)rincibal
exoort, is turning the terms of trade against Iceland. In
addition, the foreign exchange revenues received from the
American garrison in Iceland during the war are no longer
available. Since considerable investment was made just befcre
and during the war, it is doubtful whether new investment can
increase productivity sufficiently to prevent the drastic de?
cline in its standard of living from present levels to roughly
pre?war levels. It is likely that $30 million in the form of
credits or in the form of supporting high prics of the
Icelandic fish catch would be adequate to cushion the shock
Of a suddenly lowered standard of living, This may be necessary
since Iceland is considered to be politidally a 11oritical"
country.
8. Austria
The Austrian estimates provide for an average urban diet
of 2,400 to 2,500 calories in 1948 and 1949 and for sufficient
imliorts of raw materials and capital equipment for the level
of industrial production to reach 100 percent of 1938 by 1948.
The present program for Austria is much more restricted.
It provides for an average urban diet of 2,000 calCries per day
which may be increased to 2:300 in the fall of 1947. The present
minimum estimates call for new credits in 1947 r'f $45 millions
(in addition to Post?UNRRA grant of about $ll5,000,000, and
existing grants (UNRRA and U.S. Army) equal to $50 million)
in 1948 of $150 million, and in 1949 of $75 million for a total
of $405 million, as compared with the more liberal program of
635 million for the same period used in this report.
9. _Czechoslovakia
por repair and expansion of plant, including industrializa?
tion projects for Slovakia, and tp finance a small current
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required by Czechoslovakia during 1947-49. In addition,
Czechoslovakia will require about $20 million of goods in 1947
already financed by the United Staten contribution to UNRRA and
by the unused portion of an Export?Import Bank cotton credit.
If the necessary credit is provided, the country should be able
to maintain an export balance sufficient to meet its dollar
obligations (including payments for nationalizati9n compensation,
transit chnrr'es in Germany, and repayment of principal and
interest on outstanding loans) which will total at least $50
million pveri the next three years,
It is estimated that Czechoslovakia will probably receive
an International Bank loan of $100 million leaving $20 million
of its requirements as yet unfinanced.
10. Poland
Under strict Post?UNRRA relief standards it has been
estimated that Poland needed $130 million of financial assis?
tance in 1947. In addition, to assist in its domestic invest?
ment program which includes the improved mechanization of the
coal mines and the transport system, it is estimated that $300
million will be required from abroad during the period 1947-49.
This would allow Polish coal exports to increase from 14 million
tons in 1946 to perhaps 35 Million tons in 1949.
11, Hungary, yq.goslavia.,,. iLourno.nia?, and. Bulgaria
It is estimated that the total required net dollar oapital
imports of Hungary, Yugoslavia, Roumania and Bularia will
amount to about
800 million in the three?year period under
? crnsideration. These estimates are based on the assumption that
in 1947 industrial production no'l domestic food consumption will
approximate pre?war levels, that in 1948 and 1949 theyyill be
somewhat above pre?war levels, and that there will he a-con?
siderable expansion of capital formation, Yugoslavials capital
requirements will be reduced to the extent that it receives
reparations,
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Under the Post-UNRRA relief standards these countries
would require $160 million of goods in 1947 as follows:
Hungary S60 million
Roumania S35 million
Yugoslavia $65 million
Bulgaria 0
It is. estimated that none of these countries will liquidate
the meagre dollar assets and gold which they have available.
12. Greece
It is assumed rather arbitrarily that $200 million in 1948
and $100 million in 1949 will be required tn round. out the
Greek Aid Program begun in 1947 with an appropriation of $300
million divided roughly equally between civilian and military
programs.
B. Eear_East and Africa.
Estimates for the Near Eastern countries are based on
known and intimated desires and on the over-all cost of certain
development projects. At the present time it does not appear
that any substantial portion of such total costs would represent
a demand on the United States for credit in view of local and
other foreign credits available to the Near Eastern countrioQ_
There appears to. be some value, however, to presenting these
figures as over-all outside possibilities and then defining
the forseeable demand on the United States in the light of
the whole
In considering possible over-all credit needs of the Near
Eastern countries the following factors have been considered:
(a) currency stabilization, (b) agricultural development
plans including irriution development to increase living stand-
ards, and (c) industrial and other financial requirements
necessary for a more balanced economy, including possible balance
of payments deficits.
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A. Currency Stabilization
The following countries have indicated currency stabiliza-
tion needs:
Egypt $80,000,000 to $90,000,000
? Levant States $40,000,000 .
Iraq $10,000,000 to $20,000,000
Total. $130,000,000 to $150,000,000
It seems unlikely at the present time that any of this
amount would be considered as a credit requirement against
United States resources, although the United State S has been
approached in this connection.
B. Agricultural Development
credit needs for
$240,000,000 to 400,000,000
The following estimates of possible
agricultural development have been made:
Egypt and Sudan
.Palestine and Treinsjordan
50,000,000
to
70,000, 000
Syria and Lebanon
100,000,000
Traq
100,000,000
to
120,000,000
Saudi Arabia
35,000,000
Total
$525,000,000
to
$725,000,000
These figures include estimated costs of various river
irrigation projects inthe various countries as well as improve?
ment.of agricultural production designed to provide improved
living standards. At the present time it would appear that
there would be only a limited demand for immediate United
States credit facilities in-connection with these projects.
Egyptian sterling credits are more than ample to cover the cost
of initiating its schemes, Saudi Arabia can probably cover the
immediate cost of agricultural development. Syria and Lebanon
on the other hand are expected to require outside credit assis?
tance, probably in the form of bank credits.
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C. Industrial Develolomer;it
Possible credit needs for industrial development are diffi-
cult to determine in the absence of specific knowledge of
industrial development programs. The recent war stimulated
the industrialization process in the Near East but there is -
some question as to how much of the war-time industrialization
can survive post-war world-wide competition and as to how far
toward industrialization these countries can during the next few
decades, inasmuch as these countries are largely agricultural
in character it, has been assumed for the purposes of this paper .
that 10 percent to 20 percent of the need, for agricultural
development would represent a fair guess as to the cost
requirement for industrial development. This formula would
result in the following credit needs:
Egypt $50,000,000 to 080,000,0001/
Palestine and Transjordan 10,000,000 to -15,000,0001/
Syria and Lebanon 20,000,000W
2/
Iraq 3000o,00
Saudi Arabia 30,000:000 to -60,000,00W
It is believed that the above figures would represent
a relatively low demand for United States credit assistance,
The following country analysis are based on a compilation
of the above figures.
1/ Egypt ?and Palestine tend to be more highly industrialized
and the 20 percent base was used in obtaining these figures.
?
2/ Syria, Lebanon, and Iraq are less highly industrialized and
the 10 percent base was used in obtaining these figures.
The Saudi Arabia estimate is based. on a probable cost of
some $30,000,000 for the proposed railway from the
Persian Gulf to the Capital, and proposed east coast
harbor works.
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1. Egylyl.
The possible total local and foreign financial requirements
of Egypt and the Sudan are estimated as follows:
a. Currency stabilization $ 80,000,000 to 90,000,000
b. Agricultural development 240000,000 to 400,000,000
c. Industrial and financial 50,000,000 to 80,000,000
Total $370,000,000 to 570,000,000
-Egypt has requested a currency stabilization loan to permit
her to establiSh an independent currency free of the pound
sterling. This would envisage a 10 to 15 year loan to become
available in the first year. The agricultural program envisages
a 20 year comprehensive development of the Nile, to include
irrigation, flood controls to improve culture methods pre-
requisite to raising the standard of living of the Egyptian
fellahim - the majority of the Egyptian population. This would
envisage an outlay of approximately 2/3 of, the funds in the first
ten years of the program, and an estimated outlay Of S64 to
$104 million in the first four years. The Five-Year Industrial,
Program is assumed. to require $50 to $80 million, approximately
20 percent of the AFricultural Program, for the:approximate
ration of the value of Egyptian industrial output to total .
output. It is assumed that the average annual financial re-
quirement will be approximately the same throughout the five
years - "D?JD to $16 million. Thus, the breakdown by years, for
the next four years is estimated, to be approximately as follows:
Currency
In Millions-U.S,
Dollars
1950-51
Total
4 Years
1947-48 1948-49
1949,50
stabilization
80-90
80-90
Agricultural
development
16-26
16-26
16-26
- 16-26
64-104
Industrial
developmett
1g-16
10-16
10-16
10-16
40-64
Total
106-132
26-42
26-42
26-42
104,258
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Of the above needs it is estimated that Egypt would
require United States sources only relatively small amounts
for industrial development. The foreseeable demand at the
moment inCludes some $5,000,000 to cover the cost of initiating
the Delta fertilizer project and the possibility that some
credits will be required in connection with the Aswan Hydro-
electrication scheme. The measure of requirements in connection
with the latter will depend largely on the proportion of
United States participation, if any, which has not yet been
determined.
2. Palestine and Tranglordan
The possible local and foreign financial requirements of
Palestine and Transjordan are estimated as follows:
a. Agricultural development
b. Industrial development
Total
$ 50,000,000 to
70,000,000
10,000,000 to 15,000,000
$ 60,000,000 to $85,000,000
These estimates assume no change in the political and
economic status Quo, in Palestine and Transjordan. Assuming
the relative annual requirements to be similar to the
relative requirements in Egypt, the estimated breakdown by
years, for the next four years is estimated to be approximately
as fol1ows:2/
In Millions U.S. Dollars
,1947-48
1948749
1949-50
1950-51
Tota2,
Agricultural
development
3.2-4,6
3.2-4.6
3.2-4.0
3.2-4.6
12.6-18.4
Industrial
development
2,0-3.0
2.07310
2.0-3.0
.2.0-3,0
8.0-12.0
Total
5.2-7.6
5.2-7.6
5..2-7.6
5.2-7.6
20.8-30.4
1/ The combined Anglo-American study group which investigated
the cost of implementing the recommendation of the Anglo-
? American Committee of Inquiry to admit 100,000 Jews to
Palestine estimEited the cost of a 10-year Arab .program to
be $180,000,000. One-fourth of this, $45,000,000 was
? considered essential in the first year, and of this
$23,000,000 was considered non-suitable for a self-
liquidating loan,
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and
3. Syria and Lebanon
The possible local and foreign financial needs of Syria
Lebanon are estimated as follows:
1. Currency stabilization 440,000,000
2. Agricultural development
3.
a. Syria
704000,000
b. Lebanon
30,000,000
Industrial development
10,000,000
$150 000,000
A currency stabilization loan would permit Syria and
Lebanon to establish an independent currency free of the
French franc. This would envisage a 10 to 15-year loan to
- become available in the first year. Assuming that the relative
annual requirements for the funds to be similar to the relative
requirements in Egypt. Tile eStimated breakdown by years, for the
first four years of the program 'would be approximately as
Currency stabili-
zation
In Millions U.S. Dollars
Total_
40.0
1947-48
1948-49
1949-50
'1950-51
40.0
Agricultural
development
6.6
6.6
6.6
6.6
26.4
Industrial
development
2.0
2.0
2.0
2.0
0.0
- Total
48.6
8.6
8.6
8.6
74.4
Syria and Lebanon will probably require the assistance of
United States financing in connection with any large-scale
agricultural development. ? Present requirements to initiate the
program are estimated at
believed that reasonable
credit sources.
approximately S20,000,000 and it is
aid may be secured from United dtates
4. Iraq
The possible local and foreign financial needs of Iraq
are estimated as follows:
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1.
Currency stabilization
10,000,000
$ 20,000,000
2.
Agricultural development
100 000,000
- 120,000,000
3.
Industrial development
10)000t_000
-
Total
$120,000,000
- 6150,000,000
Iraq has requested a loan which would permit her to establish
an independent currency. This would envisage a 10 to 15-3rear
loan to become available at once. Assuming that the relative
annual requirements for other funds would be similar to that of
Egiypt, the estimated breakdown bY years, for the next four years
would be approximately as follows:
Currency stabili-
zation
In Millions U.S. Dollars
Total
1947-48
1948-49
^
1949-50 1950-51
10/-20
10-20
Agricultural de-
velopment
6-8
6-8
6-8
6-8
24-32
Industrial de-
velopment
22
2
2
?
Total
4.4
4.4
4,4
4.4
17,6
It is believed that the largest portion of Saudi- Arabian
financial needs will be met locally or from-oil royalties or
loans arranged through banking channels with the assistance of
the oil or of development companies, However, it is possible '
that the EXport-Import Bank may be asked to finance as much as
5,000000 in connection, with the estimated $30,000,000 railway
and labor development in the east. -Other projected railway
plans are not expected to develop credit demands within the next
few years. Public utilities and airport developments in which
the ruler is extrememly interested may result in subsequent
credit requests of the Export-Import Bank.
5, Iran.
World dollar
to be
1947 -- None
capital
needs of Iran for 1947-49 are estimated
1948,--
$30,000,000
Partial payment on a loan of
for a five-year period. -
$150,000,000
1.949
030,000,000
Partial payment on a loan Of150,000,000
for a five-year period.
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6. Turkey
In the absence of firm estimates, it has been assumed
arbitrarily that the present Turkish Aid Program will be in-
adequate and that $50'million in 1948 and-$25 million in 1949
will be required to carry out United States obligations in
Turkey.
7. Liberia
A small allowance of $5 million has been made for new
development programs in Liberia. This amount has been determined
by capitalizing, over a long period of time and at a low rate
of interest, the ability of the Liberian Government to carry a
development loan an deomonstrated by the rate at which the
Firestone obligation has been retired. A Portion of such a
development loan might be used to help finance the much-talked-
of railroad Project and part might be employed for projects
worked up by the United States Government Economic Mis ion in
Liberia. The costs of (a) the Mission, (b) port construction,
(c) the U.S. Public Health Mission, (d) the Programs of the
Office of International Intelligence and Cultural Affairs,
(e) Roberts Field maintenance, and (f) the Centennial
celebration are already financed and are included in the figure
on total net capital import requirements on the Near East and
Africa.
C. Far_East and Oceania
Requirements for China have been discussed above in the
text. From the point of view of their needs for and ability
to utilize a loan the slight information available indicates
that Burma might usefully employ about 100 million and French
Indo China might make good use of $75 million. The estimated
capital import requirements for Japan are based on the assumption
of a "cranking-up? program. They are dollar deficits only and
do not take account of export surpluses in sterling in currencies
of other areas, such as might, on the assumption of
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convertibility, provide a part of the funds needed to balance
Japan's foreign trade. ? Examination of the prospects for Siam:
Korea and India has not reveale?j any firm capital import
requirements beyond those that would be satisfied under present
financial policies and programs.
D. Western Hemisphere
The unsatisfied capital import requirements allowed for
western hemisphere countries may well be too low. By comParison
with the three?year total of
347 million c;iven in Ta5le I,
implied figure of $632 million has been developed in a more
detailed analysis by the Latin American Area Subcommittee.
an
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Economic Working
to Special Ad Hoc Committee
Appendix B
UTILIZATION OF GOLD AND DOLLAR RESERVES
Western Europe
The Scandinavian countries in Western Europe are expected
to solve their import problem by drawing upon known reserves
of gold and dollars. Of the four important Weotern European
countrieo facing an unsatisfied deficit Bizonal Germany hao
no significant dollar reserve, the United Kingdom and France
are expected to liquidate sizeable amounts of dollar and gold
holdings, but Italy is not.
The United K14Igdom
United Kingdom gold holdings and short-term dollar
balances amounted to an eotimated
2,587 million on December,
31, 1946. It is expected that these holdings will be drawn
upon to the extent of $400 in meeting anticipated dollar re-
quirements in 1947-1949. While this is by no means a maximum
program, it would provide for reducing reserves to near the
figure ($2 billion) considered by the British necessary to
meet the uncertainties of the next few years. Thus, a further
reduction might be effected in United Kingdom, gold and dollar
reserves in meeting the unsatisfied deficit; if no new aid is
forthcoming from the United Stateo, it io likely that reserves
will be drawn down to the minimum in the course of the period
1947-1949.
During the war the United Kingdom liquidated about $4.5
billion of private British assets in the United States; in
consequence, remaining private holdings either are difficult
to liquidate or are encumbered (ao, for example, by being
pledged against the RFC loan).
France
Gold holdings and official dollar assets of France on
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December 31, 1946 came to $943 million. It is expected that
$460 million of these will be liquidated early in the period
1947-1949 reducing reserves by the end of 1947 to an all-time
low despite assurances to the French public that they would
be maintained at one billion. In addition, France has under-
taken a program of marshalling private French assets. A survey
of private foreign French holdings was made, and the present
_plan of the French Government provides for liquidating about
680 million of private securities and other assets which can
be converted into dollar exchange. This program on top of
past liquidations amounting to about
300 million will leave
intact only those private assets which are difficult to
liquidate.
Italy
Except for holdings of the Vatioan and those under Allied
control, Italian gold holdings and dollar balances amounted
to 192 million on December 31, 1946, including 4)183 of short-
term dollar balances, These balances are. substantially larger
than Wa,s maintained pre-war. Unless they are in some way
en-
cumbered, they might be drawn upon, perhaps, to the extent of
$150 million in helping to meet the unfinanced Italian import
deficit amounting to $768 (this would partioularly be the case
if the net realization of '43 million for Italy from the lgold
pot' held in Germany were employed as a foreign oxbhange reserve
rather than as a local currency reserve); even so, a sizeable
dollar deficit would remain unsatisfied,
Eastern Europe
The seven Eastern European countries facing an unsatisfied
import,deficit, Austria and Greece have gold holdings and dollar
exchange balances too small to offer any significant sources
Of dollars to finance the deficit as indicated in the following
comparison between the deficit and gold and official dollar ex-
change resources of Eastern European countries,
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dollar
deficit
unsatisfied
1947-1949
gold holdings and
official dollar
exchange balances
Dec. 311 1946
,
(millions ,of dollars)
Austria
503.
10
Czechoslovakia
11
20
Poland
112
66
Hungary.
291
39
Rumania
150
274
Bulgaria
50
26
Greece
300
34
The other five countries might cover at least a part of their
deficits by drawing down gold holdings or dollar balances. The
extent to which this might be possible, however, would require
a detailed examination of the situation in each case, exploring
such questions as the need of the country for reserves and en-
cumberances against which they Inust apply (for example, nearly
one-quarter of the Rumanian reserves are regarded as "loot" re-
ceived from Germany and some part of this may have to be returned).
Other Areas
Allowance has been made in Tables I and II for reduction
Of gold holdings and dollar assets of non-European countries
as follows:
Official gold Anticipated
holdings & dollar Liquidations
balances in the 1947-1949
U.S. (12/31/46)
(millions of dollars)
Near East and Africa
1,513
350
Far East and Oceania
1,933
700
Western Hemisphere
4229
l50
Canada
1,225
500
Latin America
3,004
1,000
It has not been possible to relate the anticipated liquida-
tion of gold and dollar assets, which has been estimated for
these broad geographical areas, to the development programs
Of particular countries. It has been assumed in the prepara-
tion of Table I that the capital import programs. of non-European
- 3 - Appendix "B"
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AfiiiitidlilWraelease 1999/09/16 : CIA-RDP67-00059A000400130002-1
cduntries, for which no specific financing was-known to be
available were over and above the capital imports to be financed
either by private foreign investment, by funds received on
inter-area transfer or by the liquidation of gold holdings
and dollar assets. There is a distinct possibility that tnI0
assumption is erroneous. Where the "Unsatisfied Capital import
requirements" of a country have been estimated from its over-all
trade balance (as was the case with Japan) the liquidation of
gold and dollar holdings in the measure already allowed for or
the use of sterling and other currency balances may suffice
to meat some part of the deficit.
Even assuming that the unsatisfied capital import require-
ments shown for non-European areas are additional to requirements
satisfied out of the available dollar supplies shown in Table I,
it is possible that these unsatisfied requirements might, to
some extent be met out of the gold and dollar holdings remain-
ing to non-European countries, particularly Japan, China, Tur-
key, Iran, and Brazil. A careful study should be mPc1,: o-P each
country's position to determine the extent to which these
possibilities exist.
- 4_
CONFIDENTIAL
Appendix "B"
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AmpiaAF?fEelease 1999/09/16 : CIA-RDP67-00059A000400130002-1
e ort of Workin G-rup n Economic Aid To
Special Ad Hoc, Committee
Preliminary APPENDIX
ESTIMATED WORLD GRAIN BALANCE, 1947/48 THROUGH 1949 po
Estimates of world exPortable supplies of all grains
(apart from rice) and import requirements of these grains for
use as breadgreins for the consumption years 1947/48 through
1949/50 can be summaried as follows:
1. The year 1947/48 is expected to be the record period
for world import requirements, 45 million long tons ns com?
pared with 37 million in 1946/47. World exports Of all grains
,may reach 29 million tons, one million tons more than 1946/47,
leaving a deficit for breadgrains alone of 16 million tons,
This cOmpares with a shortage of 9 million during the 1946/47
consumption year ending June 30, 1947.
2. In 1948/49, world exportable grain supplies are
estimated at about 29 million tons while requirements are
expected to drop sharply to about 33.5 million tons, thereby
reducing the deficit between supply and breadgrain require?
ments to approximately 4,5 million tons.
3. During 1949/50 a further increase in exportable supplies
to a level of 30.5 million tons is expected, while requirements
will continue to decline to about 32.5 million tons, thereby
reducing the gap between supply and requirements to almost
2. million tons.
4. When account is taken of grain import requirements
.for feed use, the gap between supply and requirements in
1947/48 can be increased by 6 million tons -- the additional
stated requirements for feed use. In 1948/49 ahd 1949/50:
import requirements for feed are expected to be higher than
? 1 ? Appendix "C"
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Alwv-pckf9flaielease 1999/09/16 : CIA-RDP67-00059A000400130002-1
six million tons, but since exportable supplies will not meet
breadgrains needs of importing countries, these additional
import requirements of grains for feed must be almost
entirely disregarded,
? 2 ? Append4x iron
,C(NFIT)ENTIAL
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? CONFIDENTIAL
CZ' Table 1. WORLD GRAIN TRADE BALANCE: ACTUAL PREWAR AND 1946/47;
;71
c)
13 ESTIMATED 1947/48 THROUGH 1949/50
c)
c) (000 long tons)
CD
el
Tm V
CD
C)
cc))
0)
In
C)
c)
c?
N.
CAD
0-
C)
0
ci
' (.)
CAD
cc
cPrewar
'cc'cc
Imports or Requirements
Exportable Suoplies.
Wheat, Rye, Flour
Coarse Grains
Total
Deficit
(1935-3s) '
28,964
15,610
13,35)4
2g,964
1946/47
37,000a
20,000a
8,000a
28;000a
9,000
1947/4g
45,0008
22,050
6,950
29,000
16,000
s
19 /49
33,650
21,000
8,800
29,080
4;570
'
199/50
32,350
19,700
11,600
30,580
1,770
01
01 01
01
Tm
a) a)
as NOTE: Actual prewar and 1946/47 and estimated 1947/48 data obtained from Tnternati nal Emergency Food Council. aS
u) u)
75 75 1948/49 and, 1949/50, IFI estimates.
a) a)
LI.o
L_
8 a. Rounded. 0
Um Um
73 73
W W
> >
2 2
pm 0.
. pm
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Table 2. WORLD EXPORTS OF GRAINS: ACTUAL PREWAR AET 1946/47,
PROPOSED By IEFC FOR 1947/48 AliT ESTIMATED
FOR 1948[49-1949/50
(000 long tons)
Country
Prewar
Average
0-935/38
1946/47
1947/4s
1948/49
1949[50
United States
Wheat, flour, rye
512.2
10,734.0
12,000
8,000
6,700
Coarqe grains
76.9
4,166.0
1,500
1,400
2,700
Total
5s9.1
14,900.0
13,500
9,400
9,400
Canada
? Wheat, flour, rye
4,656.1
5,900.0
5,65o
6,000
6,000
Coarse grains
5o.s
505.8
oo
100
100
Total
4,706,9
6,4o5.s
5,650
6,100
6,10o
Argentina
Wheat, Flour, rye
3,009.9
1,662.0
2,000
2,500
2,500
Coarse grains
7,29o.s
2,55s.5
3,500
4,000
4,500
Total
10,300.7
4,220.5
5,500
6,500
7,000
Australia
Wheat, flour, rye
2,s04.1
1,314,7
1,900
2,500
? 2,500
Coarse grains
39.5
50
80
80
Total
2,885.2
1,354.2
1,950
2,580
2,580
Other Countries
Wheat, flour, rye
4,627,5
425.3*
500
2,000
2,000
Coarse grains
5,s54.9
493.0.!J/1,900
2,500
3,000
Total
10,482.4
918.32J 2,400
4,500
5,000
Total -- World
Wheat, flour, rye
15,609,8
20,036,02/,
22,0.50
21,000
19,700
Coarse grains
13,354.5
7,762,824
6,950
8,080
10,880
Total
28,964.3
27,798.82J
29,000
29,080
30,580
Note; Prewar, 1946[47, 1947[48 data obtained from IEFC: 1948[49, .
1949/50, IFI estimates.
Data incomplete for the last two months of 19146/147.
- 4 -
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Appendix
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ApfteklidgeilRelease 1999/09/16 : CIA-RDP67-00059A000400130002-1
Table 3. WORLD GRAIN TRADE OF SPECIFIED IMPORTING COUNTRIES:
ACTUAL PREWAR AND 1946/47, PROPOSED BY IEFC FOR 1947/48,
AND ESTIMATED FOR 1948/49 AND 1949/50
- (000 long tons)
'Prewar '
1946/47
'
1947/48 t
'1935- '
Stated '
I
Stated 'ProposedI1948/49 1949/50
Country or Area '1938 ' Import
I 'Require-
I
I
Imports' Import 1 IEFC
: Estimated
IRequire-IAlloca- Import
I
ments
'
I
ments Itions 'Requirements
Albania 15
9
o
0 o o 0
Austria 746
467
474
872 540 750 750
Belgium 2,355
1,308
1,021
1,183 810 1,250 1,350
Bolivia 40
71
40
50 45 50 50
Brazil 945
1,200
948
1,200 720 1,000 1,000
China 272
800
378
1,200 540 1,000 1,000
Cuba 122
250
247
300 225 300 250
Czechoslovakia 44
203
135
774 360 250 200
Denmark 704
0
0
361 135 50 50
Egypt & Red Sea Area 1.1.9
100
127
350 135 250 100
Finland 232
359
327
353 300 350 300
France 1,036
1,444
1,321)
2,598 1,890 1,500 1,250
French North Africa -552
542
)
800 450 300 100
French Colonies _624
221
113
211 110 0 -200
Germany (UK-US) 2,227)
3,438
2,992
5,300 3,600 4,250 4,250
Germany (French) )
470
235
594 315 550 Goo
Greece 550
441
414
851 495 500 500
Hungary -510
116
23
0 0 -200 -300
India 298
3,610
2,096
5,315 2,700 4,000 3,500
Ireland 704
183
256
455 225 250 200
Italy (US Zone) )
111
115
125 90 100 100
Italy 833)
1,731
1,759
3,261 2,070 1,750 1,750
Japan, Korea & Ryukyu I. 123
2,719
1,539
3,011 1,710 3,000 3,000
Mexico 15
548
392
425 360 400 300
Netherlands 1,765
1,147
989
1,288 990 1,000 1,000
Neth. East Indies -37
80
74
150 90 100 100
New Zealana 56
144
137
160 135 150 100
Norway 499
363
352
400 300 350 350
Peru 127
152
110
200 110 200 150
Philippine Is1ands 109
294
265
300 135 200 150
Poland -741
913
416
1,197 225 0 -100
Portugal 40
275
309
480 300 300 300
Rumania -1,594
720
86
75 70 -loo -250
Spain 52
300
391
350 315 350 300
Sweden 96
130
61
477 315 0 0
Switzerland 890
453
519
656 1450 450 450
Union of So. Africa 349
93:8
527
350 180 350 350
United Kingdom 9,560
5,714
5,732
6,261 5,130 5,500 6,000
United Kingdom Areas . 0
2,236
1,455
2,067 1,260 1,750 1,250
Uruguay -66
125
165
150 135 loo 50
Yugoslavia -616
1,610
12
0 0 -100 -200
Miscall, or other 10,144
1,400
1,241
1,100 990 1,000 1,000
Total World 29,000
37,000
28,000
45,000 29,000 33,650 32,350
Note: PrOwar, 1946/47, 1947/48 data obtained from INFO; 1948/49, 1949/50
IFI estimates.
Prewar includes over 13 million tons of coarse grains, most of which
was used for feed by importing countries. Requirements for 19)46/147
through 1949/50 do not include feed.
- 5 - Appendix 'IC"
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Awyr..M.p/Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
II. THE WORLD SUPPLY OF AED DEMAND FOR DRY-CARGO
OCEAN SHIPPING 1N192+7
The worldls ocean-going dry-cargo fleet in January 1947
approximated 71:9 million deadweight tons (0.w.t.),1 an increase
of 12.7 percent over the 63.8 million 0.11,t. in 1939. (See
Table 1)-. At present, however, the large number of vessels laid-
*
up and in repairs reduces reduces the fleet in active operation to
somewhat below the 6o million d:w.t. in service in 1939. In
addition to changes in the size of the fleet, its total capacity
is affected by several factors which render the existing merchant
marine less able to handle annually the same amount of cargo per
unit of active shipping space than in 1939. These factors are:
(1) Longer hauls (primarily US to Europe) arising: from the
movement of large quantities of bulk commodities under relief,
reconstruction, and rehabilitation programs.
(2) Congestion and consequent delays at piers resulting from
war destruction of port facilities, failure to replace outmoded
loading and unloading equipment, shortages of skUled port labor,
and the decreased efficiency of unskilled labor required to
perform heavy work on limited food allowances.
(3) Lower efficiency of vessels as a result primarily of a
higher percentage of war-built tonnage, i.e;, 70 percent in 1947
as contrasted with 20 percent in 1939.
The volume and pattern of world demand for the services of
the 1947 fleet cannot beprecisely determined. The US Maritime
Commission has estimated, that all types of ocean-borne-freight
approximated 245 million tons in 1937,3 and the volume is some-
what higher today. In dry-cargo terms this is estimated to be
about 200 million tons in 1937 and possibly 10 percent higher in
1947.
1. Deadweight tonnage is the weight in long tons required to
depress a vessel from light water line to load line. It is
therefore the weight of the cargo, fuel, and stores which a
vessel can carry safely.
2. The US alone has about 12 million cY.w.t. laid-up and there
is substantial tonnage undergoing repairs in Europe.
3. W.W. Smith, Chairman US Maritime Commission, Journal Of Com-
merce (N.Y.) May 22, 1947, p. 6A.,- The effects of possible.
large scale US aid to foreign countries do not appear to have
been given consideration in the development of these estimates,
? 6 - Appendix "F"
C0M DE IAL?
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Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
CONFIDENTIAL
aexar:L2fengo Gpoup on conomic Aid
to Special Ad E7oc Committee
Preliminary Appendix D
Estimate of World Exportable Supply and Import
Requirements of Fats and Oils, 1947-1949
I, SUMMARY
1. World exports of visible fats and oils for edible
and industrial purposes during the calendar year 1947 are
estimated at 3.2 million metric tons as compared with 2.6
million tons in 1946 and 5.9 million tons average during the
? 1935-39 period. (See Table 1). World import requirements,
calbulated here on the basis of 75 percent of prewar per caput
consumption for 8 selected European countries Austria, Belgium,
? Czechoslovakia, France, Italy, Netherlands, Poland, Lold Portu-
gal and on the basis of expected import demand in the rest of the
world, total 3.75 million tons, leaving a world deficit of 575
. thousand tons. Of the one million tons of imports needed to meet
such goals in the countries named, 750 thousand tons actual
imports are expected.
2. In 1948, world exportable supplies are estimated at
4 million metrid tons, 68 percent of prewar, Import require-
ments, based on about90 percent of prewar per oaput consump-
tion for these named countries 1.d minimum demand for the rest
of, the world, are estimated at 4,45 million tons, 19 percent
higher than in 1947, the gap of 450 thousand tons between
estimated exportable supplies and requirements will have to be
met either by lower imports into these countries or decreased
effective demand in other parts of the world,
3. World exportable supplies are expected to total about
4.6 million metric tons in 1949, 78 percent of prewar. Import
requirements to provide approximately prewar per caput con-
sumption in the countries listed above, and to meet the import
demands of other countries, are.estimated to be 5.15 million
metric tons, let'ving a deficit of 550 thousand metric tons.
1 - Appendix "D"
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CONFIDENTIAL
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II. FATS AND OILS
Exportable Supplies. World exports of visible fats and
oils (including butter and olive oil) in the calendar year 1947
may total 3.18 million metric tons in terms of oil, which is 21
percent greater than the 1946 exports of 2.63 million tons but
only 54 percent of the prewar level of 5.9 million metric t.ms.
Although exports in 1947 show increases over 1946 for most types
Of fats and oils, the improvement is attributable mainly to the
rapid rehabilitation'of the Philippine copra industry and to
the increase in the world marine nil supply.
Assumptions have been made of cNntinued low exports from
Manchuria and the N.E.I., higher consumption in the major pro-
ducing areas, maintenance of the present export-price p.:lioies
in Argentina, and continuation nf international agreements
limiting the whale catch to a maximum of 16,000 blue-whale units
(one half the 1938 level). With continuing recovery of copra
and coconut nil exports which in the prewar period accounted for
20 percent of total world fats and ?-11s exports, and with small
increases in other oils, total world exports for 1948 are ex-
pected to reach 4 million metric tons, 20 greater than in 1947.
By 1949, even though exports of copra are expected considerably
to exceed prewar levels, total exports of fats and oils are
likely to be only 4.6 million metric tons, 77 percent of prewar,
but 45 percent greater than in 1947.
Import Requirements. For the 8 countries, Austria, Belgium,
Czechoslovakia, France, Italy, Netherlands, Poland, and Portugal,
imports of fats and oils totalling ,ne million tons would be
necessary in 1947 to provide, fnr each of these countries when
added to indigenous production, per caput supplies 75 percent
of prewar (see Table 3.) The volume of imports -.e.quired to
reach this consumption goal corresponds to tonnage requirements
used in the provisional fats and oils allocation schedules for
1947 prepared by the International Emergency Food Council, to
provide an estimated 70 percent of prewar per capita consumption.
- 2 -
CONFIDENTIAL ?
_
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AppnyEgifsfelease 1999/09/16 : CIA-RDP67-00059A000400130002-1
The difference of 5 percent is dub to higher IEFC estimates of
prewar per capita consumption and to lower IEFC estimates of
1947 production. Import requirements of one million'tons for
the group of countries would be 86 percent of their prewar
imports However, actual imports by these Countries in 1947 are
expected to total about 750,000 tons, (65 percent of prewar
imports), which will provide about 67 percent of prewar per caput
supplies when added to indigenous production. Allocations and
import requirements to other selected countries (Turkey, Iran,
Bolivia, Brazil, Chile, Ecuador, Haiti, China, Netherlands East
Indies, Philippines), most of which are net exporters, are neg?
ligible. Expected exports under allocation to the rest of the
world amounted to 2.75 million metric tris, about 60 percent
of prewar imports by these areas. Of this 2.75 million tons,
the 'United Kingdom accounts for 920 thousand tons and the United
States for about 100 thousand of net imports;
Estimates of import requirements for the calendar tear
1948 and 1949 for the 8 continental European countries named are
based on consumption goals of 90 percent and 100 percent of
prewar per caput supplies (except for Italy 90 and 105 percent
and Portugal 100 and 105 percent), Such standards give import
needs reaching 1.2 and 1.4 million metric tons in 1948 and 1949
respectively, after allowing for the gradual increase in these
countries of indigenous supplies as estimated in Table 3,
Only France, Czechoslovakia, and Portugal are expected to reach
prewar levels of fats and oils production by 1949.1 Population
growth is also taken into account.
For the rest of the world, 1948 and 1949 estimates of
import requirements are minimum demand based on the expected
actual imports in 1947 of 2.75 million metric tons and gradual
1, National average prewar total caloric intake for the selected
continental European countries ranged from 2461 for Portugal
to 3012 for France (including wine). Calories from fats and
Oils for the same period for these countries varied from 192
? or 7 percent of total calories in Poland to 573 or over 19 '
- percent of total calories in the Netherlands.
3
CONFIDE,NTIA4
Appendix "D"
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NpcppygINFRJARelease 1999/09/16 : CIA-RDP67-00059A000400130002-1
annual increases to reach levels of 3,25 million metric tons in
1948 and 3.75 million metric tons in 1949.1 Imports of 3,75
million metric tons, representing only BO percent of prewar
imports for the rest of the world, are not based on any fixed
standard of per caput consumption in these countries. Larger
fat supplies from increased indigenous production in some count-
ries and from greater retention of domestic supplies formerly
exported will be offset by the demands of substantially larger
populations.
Estimated world exportable supplies of 4 million metric tons
in 1948 and 4.6 million metric tons in 1949 leave prospective
gaps of 450 and 550 thousand metric tons. Closing these gaps
can of course be done either by restricting increases in Imports
and consumption of the importing countries Or by further increas-
ing world production and export supplies, or both.
After. 1949 increasing production can be expected to decrease
the world deficit somewhat, even with maintenance of consumption
standards in all countries and increases.in some, However,
unless export prospects in such important areas as Manchuria and
the Netherlands East Indies improve more than now appears probable,
there is little possibility that world export supplies' will equal
import requirements for several years beyond 1949.
The estimates presented above are based on the assumption
that allocations continue through June 30, 1948. The discontin-
uance of alloCations will probably result in some increases
both in production and exports due to the price stimulus resulting
from competitive bidding especially in colonial and primary
producing areas. However, this larger world trade will be
accompanied by a less equitable distribution than now exists,
perhaps even at the expense of soMe of the European countries
specifically considered in this report.
1. This trend of imports, if projected, into 1950-55, would fall
between the high and low estimates made by the Food and
Agriculture Organization of the UN.
- 4 - Appendix HD"
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AkaigiLgGAR-release 1999/09/16 : CIA-RDP67-00059A000400130002-1
The estimates of requirements and demand are not based
on any particular price relationship between different types of
fats and oils or between fats and other commodities. General
financial and economic developments over the next few years will
largely determine the price prospects for all commodities, in?
cluding fats and oils and will directly affect potential demand
for them. The extent to which importine countries will use their
limited foreign exchange resources for purchases of oilseeds,
fats and oils will also help to determine the general price levels
and price relationships between fats. Since the United States,
a net importer of fats, is a major exporter only of lard, the
shortage of dollar exchange is not as critical a problem for fat
importing countries as for certain other important products for
which the United States is the sole or principal source of
supply. Unless there is a severe economic recession, there is
little dOubt that world exportable supplies will be short of
potential demand in the next few years. Even such a depression,
which will adversely affect demand for fats and oils, may not
reverse the trend of increased consumption of both edible and
industrial fats. and oils.
? 5 ? Appendix "Dm
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Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
CONFIDENTIAL
Table 1. FATS AND OILS1 WORLD TRADE BALANCE,
PREWAR, ANNUAL ESTIMATES1947 THROUGH 1949
Import Requirementn
Prewar 1947 1948 1949
(1,000 metric tons of oil)
Selected Countries2
1,155
1,000
1,200
1,400
Rest of Wor1d3
4 775
2t750
3,250
3,750
World
5,930
3,750
4,450
5,150
Exportable Supplies
5,930
3,175
4,000
4,600
Deficit
575
450
550
1.. Visible fats and oils for both edible and industrial
purposes.
2. Austria, Belgium, Netherlands, France, Italy, Poland,
Czechoslovakia, Greece, Portugal, and Hungary. Import
requirements for other countries under special considera-
tion are negligible, -Import requirements for these
selected European countries are based on the following
total per caput supplies of fats and oils for all purposes
as a percent of prewar for each country; 1947 75%;
1948 - 90%; 1949 100%, except for Italy (at 105 percent
In 1949) and Portugal (at 100 and 105 percent in 1948
and 1949).
3. Estimated demand in 1947 with gradual annual increases.
- 6 - ,APPendix
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Table 2.. FATS AND OILS:. WORLD EXPORTS,,
PREWAR AVERAGE, ESTIMATED ANNUAL 1946-1949-`
Commodity
Prewar 1946 1947 1948 1949
Edible Oils
(1,000 metio tons oil or fat equivalent)
Cottonseed
173 40 _36 45 45
Peanut
775
286
300
375
450
Soybean
400
61
65
75
150
Sunflower
29
62
64
100
100
Olive oil
-158
11
23
40
65
Sesame
59
5
5
40
60
Total
1,594
465
493
675
870
Palm Oils
Coconut
1,170
539
875
1,150
1,250
Palm kernel
318
233
225
250
270
Palm
495
211
230
' 270
300
Babassu
18
. 16
9
25
Total
2,001
17566
1,340
1,695
_25
1,845
Industrial Oils
Linseed
648
295
286
325
400
Castor
92
75
77
100
100
Rapeseed
41
6
9
35
40
Oiticica
4
15
9
10
10
Tung
81
3?
41
50
50
Perilla
36
0
0
5
10
Total
902
428
422
525
610
Animal Fats
Butter
417
240
250
400
450
Lard
173
227
191
200
225
Tallow
177
100
116
130
150
Total
767
567
557
730
825
Marine Oils
Whale
530
145
320
325
350
Fish
136
27
45
50
100
Total
666
172
365
375
450
Grand Total
5,930
2,630
3,175
4,000
4,600
1. Preliminary estimates for 1946 and 194? and revised estimates
for 1935-39 average from the Office of Foreign Agricultural
Relations, US Department of Agriculture, Preliminary esti-
mates for 1948 and 1949 made in the Office of Intelligence
Research, State Department,
? Appendix "D"
CONFIDENTIAL,
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C0771-77'TILTh
Table 3. EATS= OILS: ESTIMATES OF AHTuAL PRODUCTIOY, CONSUIIPTION GOALS Aun IMPORT REQUIREMENTS1 FOR
CZ'
SELECTED EUROPEAN COUNTRIES, 1947, 1948 and 1949, WITH PRT:AR COMPARISONS CV
c)
c) (1,000 metric tons oil content) - c)
c)
elC)
?- 01
C)
a_ X
C) Prewar 1947 1948 1549 ? c)
,1 2
.1 Con- Net Import z
c) Pro- Con- ret Selected Pro- Con- Net Import Pro- Con- Yet Import Pro- o 0
g auction sumption Imports Countries2 auction sumption Reomt. auction samption Reamt. auction sumption Reamt. Pi C)
Pi a
-4 4c
414
in
4C
?Cr)
141
C)
c)
9
r.
to
al_
c)
?k
P
to
.%-
ar3
CDC)
....
CY)
01
0)
63
94
135
365
478
14o
267
114
215
269
901
605
263
303
113
51
121
134
536
127
123
36
27
.1.1.stria
Belgium
Czechoslovakia
France
Italy
Netherlands
-Poland
Portugal
37
56
101
305
319
70
89
80
89 .
171
165
660
490
222
154
102
52
115
64
355
171
152
65
22
43
65
115
325
430
85
120
82
97
191
200
795
595
270
184
142
54
126
85
47o
165
185
64
6o
47
75
125
345
455
100
145
84
117
218
222
875
695
306
207
150
70
a43
97
530
240
206
62
66
W
M
M
U)
1,628
2,783
1,155
1,057
2,053
996
1,265
2,474
1,209
1,376
2,790
1,414
I-4
E-
1.-74
fl
0
a
a
9
(13
ar3
Cr)
Cr)
Cr)
W
m
m
w
-15 15
L. Import requirements for selected European countries are based on following total per capita supplies of fats and oils for all purposes as percent 0
O of prewar for e.--ch country: 1947 - 75; 1948 - 90; 1949 - loo, except for Italy at 75-90-105, and Portugal at 70-100-105 percent. 8
LI72. FunTary and Greece not includea in Euromean group because they are expected to be self sufficient. Other selected countries in the Middle East, LII-
7, 77
W Africa, Latin America and the Far East are not included because they are either net exporters or have negligible import reauirements. These W
> countries are: Turkey, Iran, Bolivia, Brazil, Chile, Ecuador, Haiti, China, Yetherlanas East Indies, Philippines. >
2 2
m m
m m
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APPENDIX "E"
Ruort of Working Group on Economic Aid to
-Special Ad Hoc Committee
Probable Supply-Requirements Position of Coal
in Europe, 1947-51, Probable Demand for U. S.
Coal, and Estimated Dollar Requirements for
Coal from U.S?-,Poland. and Germany
Production 1/
Table 1, attached, 2/ shows actual hard coal production
in Europe in 1937 and 1976 and gives estimates of production
for the years 1947 to 1951, inclusive. In 1937, 582-million
tons of coal were produced in Europe; in 1946 production was
,406 million tons or 176 million' tons below 1937. Production in
1947 is expected to reach 454 tons, 128 million tons below the
level of output in 1937. :Hard coal production in Europe is
expected to attain the 1937 level of Output by 1951. 3/
? Comparison of the magnitude of production between current
and prewar levels does not fully reveal the deterioration in
European coal production, for the quality of coal and the
efficiency of consuming plants have deteriorated. It has been
estimated that the quality of coal is now 5 to 7% below pre-war.
The decline in quality has been caused by poor grading and
segregation of different classes of coal. As the supply of
coal increases, the grading and quality may be expected to improve.
The country breakdown of coal production shown in Table 1
indicates that Britain, which accounts for about 40% of total
European coal production, will not have attained her 1937
level of output by 1951. A number of reasons are likely to
prevent England from attaining her pre-War level of coal pro-
duction. The principal restraining influence is likely to be
the shortage Of manpower. Given the shortage of Manpower and
the need of the British to increase exports in order to overcome
1/ All data on production and consumption given herein refer
To hard coal only. Brown coal has been omitted because it does
not move in international trade to any ektent and because its
inclusion would not materially affect the analysis. Note that
broWn coal production is now not as far below pre-war rates as
hardcoal production and that brown coal productic5n problems
for the reason that brown coal is usually mined by open cast
methods, are not as refractory as hard coal production probleMs;
Germany produces very large quantities of brown coal; Austria
and Czechoslovakia also produce significant quantities measured
in relation to their needs.
2/ All tables are annexed hereto,
3/ Provided, of course, the requisite ineasures are taken.
- 1 -' -Appendix "E"
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CONFIDENTIAL
the long-term deterioration in her terms of trade, Britain
is likely to restrict her coal production to the level of her
internal needs, for owing to the labor shortage, she may be
expected to try to maximize the net return on exports by con-
centrating on the export of finished goods rather than of raw
materials.
Britain, of course, can increase her coal output to a
greater extent than anticipated in Table 1, even within limita-
tions imposed by manpower shortage, if she were able to increase
productivity substantially. Over-all output per manshift had
declined 10% between 1935. and 1947, from 1.17 to 1.05 tons per
manshift. Even if productivity were restored to the pre7war
level, (a 10% increase in productivity)1/ to produce. 230 million
tons of coal, Britain would need between 125 to 140 _thousand.
additional mine workers.2/ Although Britain might be able to
raise the output per man abovethe average attained during the
third decade she could do so only by introducing revolutionary
changes in the conditions and methods of mining as outlined in
the Reid Report of March 1945.3/
A glance at Table 1 shows that Poland might produce 77
million tons in 1951 4/, as compared with 66 million tons in
1937, some 91 million-under the Germanloccupation during the
World WarII, 47 million in 1946, and an estimated 57 million
in 1947. Reserves of Polich coal are extensive, ore occurences
lend themselves to extensive mechanization, the systems of mining
now in use are conducive to efficient operatien, so that from
the technical point of view there is every reason to believe
that Poland can attain her stated plan of 77- million tons per
year. The Polish and Silesian mines before the war were among .
the most productive in Europe. The Reid Report indicates
that next to the U.S., Polish coal is most easily won. However,
the attainment of the planned target of output depends upon the
receipt of generating and other surface andunderground equip-
ment. Poland has sought a loan .from the - World Bank to finance
imports of required equipment. Although Polish plans call for
the attainment of 77 million tons of production by 1949., this
1/ Productivity increased about 5% shortly after the intro-
duction of the 5 day week.
2/ On the assumptions that output per man is 1.17, that each
employee is Scheduled to work 250 days per annum and that
absenteeism averages 10% compared with 15-16% now. Current
employment is about 730-740 thousand. The tetal increase
required would be lower if surface operations were ration-
alized.
3/ "Coal Mining". Report of the Technical Advisory Committee,
HMS Office, 1935.
This is the official target figure (reduced from 80 mil-
lion originally) for 1949. It is believed to be within the
realm of attainment by 1991 rather than by 1949.
- 2 Appendix "E"
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level of output has been deferred in Table 1 to 1951 on the
presumption that even if credits were attained, delivery
? of equipment, particularly generating equipment, is likely
to delay the attainment of target production. ? Polish ability
.to export coal is likewise limited by shortage of rail trans-
port facilities and port loading facilities at the Baltic
.ports, The ability of Polish exports to keep pace with the
rising level of coal production depends upon the installation
of adequate'loading facilities at the Baltic ports and also
upon sufficient all-rail transport facilities to Western
countries .1/
. Table 1 indicates that an annual production of 132
million tons by 1951 is anticipated in the Ruhr-Aachen area.
It is assumed that by that time that area will have attained
the pro-war rate of daily production which was 440,000 tons.
Although the Monnet Plan calls for production of 65-
million tons of coal in France by 1950, this level of pro-
duction is considered extremely ambitious in view of the
shortage of labor and the low level of productivity of the
French mines.. Prior to the war, French productivity was
about- .85 tons per man-shift over-all, next to the lowest in
Europe.2/ At the present time, productivity in French mines
is .65 Tons per man-shift, only 75% of pre-war; it still
ranks second lowest in Europe. France has been able to exceed
her pre-war level of production by employing a total of
100,000 more workers than she did before the war. Almost
-50,000 of these are POW's, which are now being returned.
Assuming that productivity in Franco is restored to the pre-
war level, (which would require a 30% increase in produc-
tivity) France would require 285,000 workers to attain an
output of 65 million tons or 15,000 workers more than currently
employed after deducting 50,000 POW's.3/ After deducting the
loss of50,000 POW's she would require 260,000 workers -(or
10,000 fewer than currently employed) to attain the 60 million
tons shown in Table 1. Both of the preceding calculations
assume continuation of the present six-day week.3/ The miners'
union, however, has indicated that it will seek a. five-day
weok, and if this is the case, then 345,000 workers (or
75,000 more than currently employed excluding POW's) will be
required to produce 65 million tons and 285,000 workers (or
15,000 more than currently empl(!)yed excluding POW's) to
produce 6o million tons. These data are -summarized on the
following page.
Poland may also experience shortage of manpower and
technicans.
2/ -Productivity in the Belgian mines was slightly lower
than that ?in the French mines.
Calculations assume 10%. absenteeism as compared with 16%
currently.
- 3 -
CONFIDENTIAL
Appendix "Eri
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Current
total
Employment
Estimated Emplo yment
Productivity
To produce
65 million tons
required at pre-war
To produce
60 million tons
on 5 day on 6 day on 5 Oay on 6 day
week , week week week
Total
POWls
Civilian
320,000
52,000
268,000
345,000
3k5,000
-285;000--
epoommwmpoomo
285,000
285,000
0.11 INN 41.?
285,000
260,000
260,000
? Note that since calculations are based on output per man-shift
of underground and surface workers, the labor requirements may
be somewhat over-stated because the surface operations, such
as preparation and maintenance, can e)cpand activities with less
than proportionate increases in manpower.
As for the other countries, Table 1 anticipates production
in Belgium by 1951 will have been restored to the 1937 level;
that production in Czechoslovakia will have increased by
15% over 1937; and that the Netherlands will produce roughly
at the pre-war level.
Consumptionl/
Table 3 compares pre-war with estimated post war consump-
tion. Total European consumption in 1937 was 550 million
tons and estimated total requirements for the period 1950-51
are 506 million tons. Consumption in 1950-51 is estimated
to be 35 million tons higher than 1937 and about 100 million
tons above the rates of consumption in 1947.
An explanation of the estimated increase in requirements
between 1937 and 1951 can be had by comparing individual
country requirements for the respective years. It is esti-
mated that Britain will require a 17% increase in the level
of consumption or 30 million tons more than in 1937 owing
to a higher level of export of finished goods, a higher
standard of living for lower income groups, ,and a level of
business activity sustaining full employment. The 225 million
ton requirement for 1951 assumes that 5 to 10 million tons
would be required for overseas bunkers. By 1951, Britain is
expected to have increased her fuel oil consumption by an
equivalent of 10 million tons of coal so that she may-av..
available 4o million tons more coal than in 1937,
Although the Monnet Plan calls for an annual coal con-
sumption of 87 million tons by 1950, this has been reduced
by 7 million tons because it is highly probable that -shortage
I/ Covers hard coal requfFeEgnts an consumption only.
- 4 -
CONFIpENTIAL
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CONFIDENTIAL
of labor in France will limit expansion of production. Even
the 8o million ton level ofconsumption assumed in Table 3
is 18$ above the 68 million tons consumed in 1937 and may
.also be rather high. 1/
It is assumed that the level of industry established for
Germany will require a rate of coal consumption 83% of that
of 1937. Assuming that German brown coal consumption will
have attained pre-war levels by 1951, which is not unlikely .
as .it is already over 90% of pre-war in the Western Zones,
then Germany is likely to have available for internal con-
sUmption1about'.147 million tons of coal, in SKE equivalents,2/
or 87% of pre-war consumption counting both hard and brown
coal .3/
Requirements for Poland for 1951 estimated at 4o million
tons, slightly lower than 1937 consumption. This would
give her a per capita .consumption in 1951 of 1.7 tons. Per
capita consumption in Britain is expected to increase from -
about 4.1 tons in 1937 to about 14.,7 tons in 1951. The per.
capita consumption in France is expected to increase from
1.7 in 1937 to 2 tons in 1951, while that of Germany is
expected to be about 1.6 in 1951.
The U.K., France, Germany, and Poland consumed 430 million
tons of coal prior to the war,- as Compared with anestimated
post-war consumption of 450 million tons. The other European
countries consumed 120 million tons in 1937 and, according to
the calculations in Table 3, are .expected to consume 136
million tons in 1951. These countries are therefore expected
to increase their level of consumption by 11%. Assuming, as
in ,the ECO report GPC/16, that half their energy requirements
will be met by hydro power, so that they would require only
about a 5% increase in coal supply, they would require only
6 million additional tons or a total of 126 million tons in
1/ Note, however, that the Monnet. Plan calls for steel
production by 1950 which is over 80% above the 1938 level .
and a like increase in rail carrying capacity. It aims to
,attain a level of production 25% above that of 1929, when
79 million tons of coal were consumed. If the level of
output actually attained by 1950 is equal to but not higher
than 1929, then obviously the Consumption of coal would be
lower than 1929'8 consumption owing to the long term increase
in industrial production relative to given units of coal
consumption.
2/ Brown to hard coal ratio of 9 to 2 used herein.
3/ Germany produced about 42 million tons of brown coal
prior to the war (in SKE equivalents). Pre-war consump-
tion estimated to have been equalto 127 hard coal plus
42 million brown coal or a total of 169 million tons.
- 5 .Appendix "E"
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CONFIDENTIAL
1951. Total European requirements between 1950 and 1951 are
therefore expected to range between 575 and 585 million tons.1/
Note that in estimating requirements account has,not
been taken of current inventory needs, which are probably
substantial.
Supply-Requirements Position
Tables 1 and 3 indicate that Europe was self-sufficient
in coal in 1937 and, in fact, .had a net exportable surplus
of. some 30 million tons, a good deal of which was used for
overseas bunkers. The estimates in these tables indicate
that by 1951 Europe will probably have become self-suffi-
cient in coal once again. At the 1947 rate of production,
Europe is 125 million short of. attaining the rate of production
necessary to become self-sufficient by 1951. Coal con-
sumption in Europe in the years, 1947-1951, inclusive is
estimated in Table 3. The estimates indicate that. in 1947
Europe will consume 482 million tons (446 from indigenous
production plus 36 million from the U.S.). Consumption in
1948 is estimated at 512 million tons, comprising 472 from
indigenous production and from 38 to 43 million from the
U.S. Consumption in 1949 is estimated at 552 million tons
comprising 524 fr9m indigenous production plus 25 to 30 ,
million tons from the U.S. The Table indicates that total
consumption is expected to increase almost 15% in 1947 as
compared with 1946, by 10% in 1948 as compared with 1947, by
3% in 1949.as compared with 1948, and by 6% in 1950-51 as
compared with 1949.- Although the gap between European
indigenous production and requirements in 1949 is still
expected. to be over 50 million tons, the rate of U.S. exports
to Europe is expected to begin declining sometime in 1948 or
at the beginning of 1949 owing to the fact that ,the demand
for U.S. coal is restricted to the traditional coal importing
countries of Europe, whose purchases of U.S. coal will begin
declining as the level of exports from Germany and Poland
increases.2/ For the reason that Britain is not likely to
.11 Note that the extent to which coal will be'displaced by
substitution to fuel oil and other forms of non-coal energy
by dieselization, -use of oil for heating and so forth, have
not been taken into account except in the 'U.K. Other countries,
notably Belgium, have ambitious conversion programs.
2/ Demand for U.S. coal is estimated in terms of the supply
requirements position of the traditional European coal im-
porting countries without reference to their dollar resources
for the purchase of U.S. coal. This report also presumes
that the UK will not purchase US coal in significant quan,-
tities or over considerable length of time and that her
current purchases were induced by the need to avoid entering
the winter of 1947-48 with a low inventory.
- 6 - Appendix "E"
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import coal in any substantial. quantities and that Germany,
despite her shortage of coal for internal consumption, will
be required to export coal for political and economic reasons,
these traditional coal export countries will probably be
unable to bridge their respective- difference between supply
and requirements until 1950-5]. while the traditional coal- -
impOrting countries will have bridged the difference by the
end of 1947 as a result of the high level of U.S. export.
Table 4 indicates the supply requirements .position of
the U.K. in the six year period, 1946 to 1951. It indicates
that Britain- is unlikely to resume exporting coal before
1950 ,Euld that her exports are likely to be small as compared
with her prewar volume of exports of about 50 million tens,
of which 35 million was exported to the Continent. ?
Table 5 shows the supply requirements position for Germany
in the six-year period, 1946 to 1951.
Table 6 presents similar figures for Poland.
The traditional .coal importing countries imported on a
not basis about 72 millidm tons of coal annually in 1935-38.
The data in Table 8 show that these countries will probably
have an equivalent- net import requirement in 1950-51-. Their
current net import requirement is probably higher than 72
million tons owing to deterioration in the quality of coal,
deterioration of industrial equipment, and need to increase
stocks .1/ The current level of net import demand is, therefore,
probably 75 million tons minimum. These countries, as is shown
in Table 2, will probably import from other European sources
19 million tons in 1947, 32 million tons in 1948, 45 million
tons in 1949, 63 million in 1950, and will have available in 1951
some 74 million tons from other European sources; or enough
coal to meet total net import requirement without drawing on
U.S. supplies. Residual demand on the U.S., in the respective
years, is estimated at about 53, 40, 28, 9 and probably zero
million tons.
The U.S. exported in the months of April and May of 1947
at the rate of 3.8 million tons per month to Europe. Assuming
availability of coal, and adequate inland and ocean freight
facilities, the U.S. should be able to export about
45 million tons of coal to Europe per ?year. A comparison of
Tables 2 and 7 .indicates that the demand upon and the probable
supply of U.S coal will probably be in balance in 1948 and
that thereafter U.S, export capacity might be greater than
demand.
An attempt'. is made in Table 9 to estimate the dollar
requirements for U.S. coal in the years 1947-51, inclusivP.
.1/ Although stock requirements are not known, they are probably
substantial.
- 7 - Appendix "E"
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These estimates, are, of course, subject to wide margins of
error for they are based on estimates of the price of export.
coal, of ocean freight rates, and of the proportion of
estimated exports carried-in U.S. flag vessels over a period
of five years. The total dollar cost for the five-year period
is estimated at between 1,665,000,000 and two billion dollars
, An estimate of the probable dollar cost which the coal
importing countries will have to pay for German and Polish
coal is shown in Table 10.- It is .assumed therein that the
price of Polish and German coal will be determined by the -
average price of U.S. coal delivered in Europe as the U.S.
coal. at least as long as it exceeds 510 per ton, may properly
be considered marginal. In column 8 of Table 9 LP shown the
estimated average dollar cost per ton. These estimates are
used in Table 10 .(see column 2) for determining the probable ?
price of Polish and German coal. It, is assumed in Table 10,
however, that as long as a sellers' market for coal obtains,
the price will be determined by the export price of the -coal
producing country whose costs are highest. This is likely
to be Britain. As the cost of producing British coal is
probably now in excess of $8.at the mine, it is assumed that
$10 will be the price for European coal as long as British
coal is required. The estimates shown in Table 10 .indicate
that the dollar cost of German coal, assuming that all German
coal ex-Ports will be paid for. in dollars, will be about
51,050,000,000 for the five-year period. It is'assumed, as
in ECO/GPC/16, that approximately one-third of Polish coal
exports will be paid for in dollars. The estimated total
cost of Polish coal for the five-year period is S487,000,000.
The total dollar cost for coal from all three sources -- U.S.,
Germany, and Poland, comes to between $3,200,000 and
$3,500,000,000. Note that the dollar requirements for capital
goods necessary to raise the capacity of European coal mines
have not been included. The-ECO report estimates that
$1,565,000,000 are required for maintenance and development
and $260,000,000 for new capital equipment; only $50,000,000
worth of equipment are estimated to be requiredfrom the US,
although more might be -obtained if more US capacity were .
available. The ECO -report presumes that for most of the
equipment, dollar expenditures would not be required as most
Of the equipment could be produced in Europe. However, the
equipment to be imported from Germany, which by.far is the
largest supplier of such equipment, will have to be purchased
for dollars. The ECO estimate of dollar requirements for
equipment is therefOre on the low side. ,A more determinate
estimate of dollar requirements for capital equipment will:
have to wait upon studies:now in process under the auspi0.09
of ECO and the Paris ecoziomic conference.
- 8 - Appendix "E"
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Comparison between Foregoirla and ECO Report
Production
Production data as given in Table 1 are compared with
ECO/GPC/16 below:
. Per Cent
Increase
This Over Year
Report2/Preceding.
ECO Report2/
Per Cent
Increase
Over Year
Preceding
1937
.572
56o
1947
454
440
1940
480
6%
490
11%
1949
529
10%
525
7%
1950
573
8%
550
5%
1951
589
3%
570
4%
1. The difference in 1937 is attributable to the
exclusion of Spanish production in the ECO report.
2. 1947.. Spanish production about 10 million tons
excluded in ECO report. This roport2/ presumes that Ruhr
Aachen will produce 70 million, tons, an average for the year
of 230,000, per day, .and the Saar 10 million tons, 80 million'
in all. The ECO report is low by 8 million tons, This
report .also presumes that UK will fall below the 200,000,000
. ton target by 2.million tons.
3. 1948 and Thereafter.. On an overall basis, ECO
estimate for 1951 is reconcilable with this reportif Spanish
production is are to estimates in farmer. However,.
individual-country estimates vary, as follows( for 1951):
U.K.
Germany
Poland
France
Belgium
Netherlands
Czechoslovakia
Saar
Other
ECO Report This Report
240 -10
124 / 8 3/
8o - 3
6o
28 /2
12 0
18 /2
0 /13
8 / 7 (Exclusion of
Spanish pro-
duction)
? I/ Millions of tons.
2/ "This report" refers to foregoing report as distinct -
from ECO report.,
3/ There is no reason for presuming, on technical or
physical grounds, that the Ruhr - Aachen area cannot
attain the pre-war level Of production.
- Appendix "E"
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It will be noted that the ECO report, as compared
with this _report, closes the gap between the current and
projected levels of production at a faster rate in the
early years and a slower rate in the later years.
Consumption
The ECO report presents a 1951 requirement for
Europe of 560 million tons; ? this report, of 586 million
tons At least 10 million tens .of the total difference
of .26 million tons is attributable to the exclusion of.
Spanish requirements in the former report. The estimates
of British requirements .do not differ material1y--225 in
this report; 121 in the gco report. This report presumes
that Germany will require 83% of pre-war consumption; the
ECO report, 75% of pre-war. The former is probably closer
to current "level-of-industrythinking. The difference
for Germany is 10 million tons. Of the total difference
of 26 million tons, 20 have therefore. been explained. The
remaining difference can be-explained by French require-
ments. The ECO report presumes a 5% increase for all .
other countries,.. including France. This allows France
post-war- requirement of 71.5 million tons. This is
probably too low. An 80 million ton.requirement is
allowod in this report. The remaining differences are
negligible.
Dollar Costs
ECO Re ort This Report
Billions of Dollars)
1.663-1.982
0.487
1.051-1.066
U.S. Coal Sl.550
Polish Coal o.4-oo
German Coal 0
Considering the differences in methoA, the two
estimates are fairly close. The ECO report writes off the
dollar cost of German coal while this report includes, the
cost of German coal.
?
- 10 -
CONFTDENTI4L
Appendix "E
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
Appri:Nfeict-f9irlease 1999/09/16 : CIA-RDP67-00059A000400130002-1
Table 1. European Hard Coal Production, 1937, 1946 and
estimates for 1947-51, inclusive.
Millions of Metric Tons
1937
1946
1947
1948
1949
1950
1951
Belgium
30
23
24
25
27
28
30
Czechoslovakia
17
15
17
18
19
20
20
France 1/
44
47
53
55
57
58
60
Netherlands
13
8
10
10
11
12
12
Germany 2/
141
55
70
85
100
125
132
Poland 3/
66
47
57
62
68
73
77
U.K.
244
189
198
210
220
230
230
Saar
13
8
10
11
12
13
13
Others
14
14
15
15
15
15
";, 15
Total . 582 406 454 480 529 573 589
I/ Compare Monnet Plan Targets (which includes about 1-2 million
Tons of liguite, which is excluded in table above): 1947,55
million; 1948, 59; 1949, 62; 1950, 65. Manpower in France is
likely to be too tight and the additional production too marginal
to permit an expansion to 65 million tons. The point of optimum
returns, in fact, may be exceeded at a level well below 60
million.
2/ Assumes pre-war daily output of 440,000 tons per day in Ruhr-
Aachen areh will have been attained by 19514 ?
3/ Includes former German Silesia.
- 11 - Appendix "E"
CONFIDENTIAL
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
App.14idARSUFAMease 1999/09/16 : CIA-RDP67-00059A000400130002-1
Table 2. Probable European Demand for U.S. Coal 1947-1951 1/
Year
1000 Metric tons
European Export Availability
Germany Poland2/ U.K. Saar
_
Total?
Residual
Demand on USA3/
1947
9
o
..
0
1
19
51 - 56
1948
14
16
0
2
32
38 - 43
1949
16
25
0
4
45
25 - 30
1950
20
33
5
5
63
7 - 12
1951
27
37
5
5
74
0 - 1
1/ Covers traditional coal iinporting Countries only, whose .net
import requirements are estimated at 70-75 million tons per
annum. They imported about 72 Million tons per annum in the
period 1935-38. ,
2/ Other than USSR, which is expected to cease importing coal
from Poland in 1950,
3/ Demand On USA is considered residual because. of-high
transportation costs. USA export availability estimated at
45-50 million tons to Europe assuming favorable supply of
coal and of inland and overseas transport.
- 12 - Appendix "E"
CONFIDENTIAL
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
CONFIDENTIAL
Table _3. Hard
estimates
Codl,Consumption
for 1947, 1950-51.
Estimate
Actual
in Europe: 1929, 1937, .1946 and
(millions of metric tons)
Estimate
for for
1929
1937
1946
1947
1948
1949
1950-51
Ta
1,84
192
1981/
199
225
Gormany2/
136
127
433/
6o
105
France
.79
68
- 58
68
8o4/
Saar
7
75/
65/
7
8
Belgium-
34
31
27
31
33
Luxembourg
Italy
14
13
7
11
14
Netherlands
14
15
11
156/
16
Czechoslovakia
17
16
15
17
19
Poland7/
_
51
43
32
408/
40
Scandinavia/
13
19
10
13
20
Iberia10/
10
8
lo
11
11
Balhans11/
?4
3 .
2
3
5
others12/
lo
8
6
7
10
Totals
573
550
425
48213/
51214/ 55215/
586
1/ Includes stock Irawdown.
2/ All data estimated.
3/ Actual consumption probably higher owing to inventory draw
down.
4/
Monnet Plan estimated requirement is 87 million tons; this is
redueedby 7 million on presumption that Monnet Plan and
other European economic plans together create excess indus-
trial Capacity, a matter which might ultimately be reconcil
by the Conference for European Economic Recovery.
. 5/ Estimated.
6/ Netherlands could get an additional 1 million tons of coal
from IJS. if her dollar resources were adequate.
- 13 - Appendix "E"
CONFIDENTIAL
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
Arff9ivr..fIZREelease 1999/09/16 : CIA-RDP67-00059A000400130002-1
- V. Includes German Silesia. Figures for 1929 and 1937 estimated.
0/ Retention of coal could be reduced by 6 million tons if
transport were available.
.2/ Covers Denmark, Sweden, Norway and Finland
ioJ Spain and Portugal
11/ Greece, Bulgaria, Roumania, Hungary and Yugoslavia
12/ Austria, Ireland, Switzerland
12V European production in 1947 estimated at 454 of which 8
million from Poland is destined for USSR, leaving 446 for
Europe. U.S. exports estimated at 36 million, giving .
Europe availability of 482 million tons.
14/ European production equals 480 less 8 million to USSR plus
38 to 43 million from USA
is/ European production equals 529 less 5 million to USSR pluS
25-30 from USA. Country breakdown for 1948 and 1949 not
given as it would involve too many assumptions regarding
the distribution of coal imports.
- 14
COEFIDENTIAL
Appendix "E"
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
ApporrisiEFRrillelease 1999/09/16 : CIA-RDP67-00059A000400130002-14
Table 4.
U.K.: Probable production and Exports of Coal,
1946-1951
Production Exportsl/ ConsuMption2/
(millions of metric tons)
1929
263
79
184
1937
244 .
52
192
1946
189
3;
198 3/
1947
198
0
198 4/
1943
210
0 .
210 .
1949
220
. 0
220
1950
230
5
225 5/
1951
230
F.,
,
225 5/
1/ Excluding overseas bunkers
.2./ Current requirements estimated at 220 million tons,
Requirements in 1951 at 225 million tons
Accomplished by drawdown of stocks
Of which onlyabout 190 will be available for
consumption owing to need to augment stocks. UK will
have imported about 1 million tons US coal by end of
1947.
Includes 5-8 million tons for overseas bunkers,
leaving about 220 million for internal use.
4/
- 15 - Appendix "E"
CONFIDENTIAL
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
.
Akailitielease 1999/09/16 : CIA-RDP67-00059A000400130002-1
Table 5..
1929
1937
Germany:
1946-1951
Production
135
141
Probable production and Exports of Coal 1/
Available for
.Exports internal con-
(millions of Metric tons). sumption 2/
NA 2/ 136
28 127 4/ .
1946
55
12
43 5/ .
1947
' 70
lo ?
6o
1940
85
14
71
1949
loo
16
84
1950
125
20
105
1991
132
27
105
I/ Present rump Germany excluding Saar.
2../ Rump Germany excluding Saar consumed about 127 million .
tons of hard coal in 1937. New level of industry decisions
will probably require about 105 million tons, 83% of 1937 '
consumption. It is assumed that Germany will ,retain a
major portion of rising coal output; that shy will retain
her full requirement by 1950 anthat -thereafter incre-
ments in output will redound largely to the benefit of
the rest of Europe.
Consumption data are rough estimates as data on movement
of coal from Silesian fields to rest of Germany are not
available.
Probably between 22-25 million tons.
Production less exports are lower than this figure because? .
part of Silesian coal production was consumed- in Germany. .
Available from current production. Actual consumption
was probably higher owing to Oraw-own of stocks.
- 16 Appendix "E"
COEFIDENTIAL
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
1999/09 il
ApprigviestEpraelease 16 : CIA-RDP67-00059A000400130002-1
Table 6. Poland: Probable production and Exports of Coal
1946-1951
Available for In-
, Year Production ternal Consumption Exports
Total_ USSR Other
(millions of metric tons)
1937
66
43
234/
NA
NA
1946
47
32
15
10
5
1947
57
4o.?../
17
8
9
1948
62
.38
24
8
163/
1949
? 68
38
30
5
25
1950
73
40
35
o
33
1951
77
40
40
o
37
I/ Including Upper and Lower Silesia
2/ Poland requires about 36 million tons and according to
Polish Minos Administration, is retaining 40 million owing
to transport shortages.
3/
2.11/
Assumes-considerable improvement in transport facilities at
Baltic ports. Present optimum transport capacity for coal
is about 5-10 million tons to areas other than USSR, com-
prising 7 to 7,5 million by way of Baltic- ports and
remainder by all rail movement. Delivery of port loading
equipment in time to accomplish a significant increase in
port capacity by 1948 is doubtful,
Of which a considerable proportion was consumed in Germany.
-
CONFIDENTIAL
Appendix "F"
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
co ITIDENTIAL
Table.7.
Year
Estimated Coal Exports available to European Coal
Importing Countries 1/ 1946-1951
FrOra European Sources From USA .Total
(millions of metric tons)
1946?
19
17
36
1947
19
36
55
1948.
32
38 - 43
70 75
1949
45
25 - 30
70 - 75
1950
63
7-12
70 75
-1951
74
0 - 1
74 - 75
1/ Assumes European Coal importing
? million tons of net imports.
Source: See preceding tables.
countries require. 70
- 75
Table 8. Estimated net import requirements of Traditional
European coal importing countries in 1950-1951 1/
(millions of metric tons).
Total ' - Net import
Country Production Requirements Requirements
Belgium-Luxembourg 30 33 3
France 6o 80 20
Neth:,rlands 12 16 If
Italy. 1 14 13
Scandinavia 0 20 20
Others 1 13 12 2/
Total 104 176 72
. I/ Derived from preceding tables.
2/ Covers Austria, If million; Portugal, Ireland, 2;
Switzerland, 3; Greece, 1.
- 18 - Appendix "E"
CONFIDENTIAL
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
Table 9. Estimated dollar
cost for U.S. coal, C.I.F., 1947-51
, (1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
U.S. Coal
Coal FOB
Cost FOB
Ocean freight
Tonnage carried
Est. freight
Total dollar
Av. dollar
Exports
Pier 1/
Pier
per ton 2/
on U.S. flag
cost
cost
cost per ton
(1) x (2)
vessels 3/
(4) x (5)
(3) plus (6)
? 36
$1o.oqy
$360.0
$10.00
27
? $270
$630
$17.33
38-43
9.75-10.00
370.0-430.0
10.50-11.50
26-31
273-356
643-786
16.92-18.28
25-30
9.00-9.25
225.0-277.0
8.50-9.00
11-16
93-144
318-421
12.72-14.03
7-12
8.00-8.00
56.0-96.0
8.00-8.25
2--5
16-41
72-137
10.29-11.58
0-1
7.75
0-07.8
0
o-8
7.75
106-122 1011-1170.8
Assumes full employment in US and conseouent high level of internal coal
assumed to vary directly with foreign demand.
652-811 1663-1982
consumption. Price fob pier is also
Assumed to vary directly with foreign demand for coal. Differences in rates to various destinations are
smoothed over.
Approximately 75% of coal carried in US vessels in 1947 and 9 million tons carried in foreign flag vessels.
Foreign flag tonnage assumed to increase in coming years so that ton.r.age carried by US flag vessels -will be
residual except for statutory requirement that coal bought with 2xim,-bank funds be carried in US vessels.
Price of US coal averages about $10.50-$11.00 since new wage contract. Pre-contract price averaged about
$9.50.
Appendix "E"
0-1
Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1
? Table 10. Dollar costs to Europe of Polish and German Coal Exports, 1947-51
.%- (1) (2) (3) (4) (5) (6) (7)
CV
0 Av. price AssuMed price German. Coal Dollar cost Polish Coal Polish Exports Dollar cost of
0 US coal per European Ex- .Exports y of GermanExports U at 1/3 of 5 3/ Polish Coal
1/1
0 ..
co ton Port coal Exports (6) 'ac (7)
.%- (2) x (3)
0
0
NI'
C) 1947 $17.00 $17.00 10 $100-115 1_1_/ 9 3 .?_i $ 51
0
0 1948 17.00-18.00 17.50. 14 245 16 5 87
?C 1949 13.00-14.00 13.50 16 216 25 8 108
a)
ul 1950 10.00-12.00 11.00 20 ,220 33 11 121
0 1951 7.75 10.00 27 270 37 12 120
0
C?
N- Total 1051-1066 487
to
IL
C)
GC
ci Total Dollar Costs
(.)
- Country 1947 1948 1949 1950 1951
to Total
.%-
ai USA $630 $643-786 $318-421 $72-137 $0-8 $1663-1982
0 Germany 100-115' 245 216 220 270 1051-1066
01
01 Poland 51 87 108 121 120' 487
01 Total 781-796 975-1118 642-745 413-478 390-398 3201-3535
.%-
a)
co
3] CIF Europe
as
a)
a) Ei Millions of metric tons
DC
8 Assumes, as does E0O/5PC/16, that one-third of Polish coal exports will be paid for in dollars. Polish coal
UL is now selling for between $14-18 per ton at Polish border; ECO estimate of $10 per ton for Polish-coal appears low.
73
a)
p,> V Current German export price is about $10 per ton. If no increase occurs, then cost to importing countries is estimated
L' at 100 million dollars. If price is raised to $15.00 then cost is estimated at 115 'million dollars. It is assumed
CL
0_ that the price of German export coal will be raised in subsequent years in line with the policy of making Germany

2
CL
m
?c
?
.1547
PRODUCTION
Ingots
? 1948
1949
1941
- CONSUMPTI07
Ir,,,,ot Eouivelent
1948 .
1949
1947
RuiR
EqE=TT s
.Ingct Eouivalent
194S 1949
Canada
United States
2,700 ?
78,000
2,750
79,000
2,800
80,500
2,700
70,200
2,750
71,100
2,800
72,450
2,700
71,200
2,750
72,100
2,800
- 73,1450
Mexico
280 ?
300
320
. 620
640
bso
700
700
700
Cuba.
100
. 110-
120
100
110
120
Other Central America ?
100
110
110
100
110
110
Total North & Central
America
80?1-9-80
82,05o
83,620
73,720
74,710
76,160
74,800
75,770
77,180
Colo:flbia
150
155
160
160
lbo
a6o.
Ecuador.
, 1)4
11!
1 4
14
14
14
Venezuela..
120
130
150
150
.15o
150
ParagParaguay14
14
14
14
14
14
Uruguay
100
100
110
100
100
110
Bolivia
----
18
18
18
18
18
18'
Argentina
150
? 180
200
1 200
1,300
1,500
1500
1,500
1,500
Peru
---
---
90
100
110
.110
110
110
Chile
35
4o
50
170
180
190
190
190
190
Brazil
250
270
300
650
700
750
750
750
750
Total South America
435
490
550
2,526
2,711
3,016,
3,006
3,006
3,016
Austria
300
400
500
300
350
400
boo
600
600
Belgium-Luxembourg
5,000
5,500
6,500
1,250
1,500
2,000
2;000
2,000
2,000.
Czechoslovakia
1,850
? 2,100
2,400
2,000-
? 2,300
2,500
2,500
2,500
2,500
Denmark
---
---
350
350
350
450
45o
450
pinipnd
75
.85
90
250,
3co
350
390
? 390
390
France
4,84o ?
4,50o
6;5x
5,700
b,27o.
6,900
8,000
8,000
Germany.
3,500.
5,000'
8,000 ?
3,500
5,000
8,000
15,000
15,000
?185:000000
Greece
---
---
100
100
- 150
150
150
? 150
Hungary
350
400
450
350
400
4 450
560
560
560
Approved For Release 1999/09/16 : CIATRDP67-00059A000400130002-1
SECRET
PRODUCTION'
Ingots
1947
1948
1949
1947
cc7s=7.1=
Ingot Equivalent
1948
1949
REQUIREYETTS
Ingot 7quivalent
1947 1948
1949
Italy 1,700
2,000
2,400
1,700
2,000
2,400
3,000
3,000
3,000
7etherlands 100
120
150
500
600
700
1,500
1,500
1,500
Yorway 30
50
70
330
350
370
1400
0-00
400
Poland 1,600
1,950
2,200
1,300
1,400
1,500
1,750
1,750
1,750
Portugal ---
---
100
loo
120
150
150
150
Rumania 100
150
200
? 150
250
300
450
450
450
Spain 650
65o
650
? 650
650
650
650
650
650
Sweden 1,200
1,200
1,200
1,700
1,700.
1,700
1,700
1,700
1,700
Switzerland negl.
negl.
200
250
300
'400
450
500
Turkey 50
,100
lop
27
325
325
350
350
350
United Kingdom 13,000
13,000
13 ,000
11,000
11,030
11,000
12,500
12,500
12,500
Yugoslavia .50
75
loo
100
150
200
350
350
350
Total Europe 34,395
38,220
44,510
31,805
35,345
42,665
52,850
52,900
52,950
Union of South Africa 650
700
750
1,250
1,300
1,350
1,300
1,300
1,350
Other, incl. Egypt, Algeria,
Tunisia, French Morocco, Belgian
Congo, French Equatorial Africa,-
=Trench Test Africa, 'Northern -Rhodesia
SOO
850
900
900
900
900
Southern Rhodesia, British '..lest Africa.
Total Africa 650
700
750
2,050
2,150
2,250
2,200
2,W)
2,250
'Burma
45
6o
70
70
70
70
China 30
40
50
300
300
350
500
500
500
India 1,100
1,300
1,500
1,100
1,300
1,500.
1,500
1,500
1,500
Indochina
10
10
50
100
100
100
Japan 1,000
1,500
2,000
1,000
1,500
2,000
3,000
3,000
3,000
Korea 20
30
70
20
30
50
50
50
50
Malaya
150
150
200
250
250
250
Nanchuria
Yetherlands East Indies
150
250
350
400
400
400
CIA-RDP67-00059A000400130002-1
CAD
v-
Zi
a
as
a)
47)
0
u_
73
CD
0
0-
0-
SECRET
1947 ?
PRODUCTIONS
Ingots
1948
1949
1947
CONSUMPTION
Ingot Equivalent
1948
1949 -
REQUIREMENTS
? Ingot Equivalent
1947 1948
1949.
c4i
0
-CD
E130
---.-- CO
a
C:D
'cr
0 0
P40
-4 <
01
in
0
0
C?
i?-
to
. Philippine Republic
Sian
Total Asia
Australia..
New'Zealnd
U.S.S.R. ?
TOTAL WORLD
1,150
1,500
.. 7--
16,500
136,610
---
2,870
1,600
18,500
144,490
3,620
1,700
___
20,000
154,750
120
20
2,915
1,500
350
16;500
131,136
130
40 _
3,770
1,600
350
18,500
139,136
140
60
4,770
1,700
350
20,000
150,911
150
70
6,090
1,500
350
24,500
165,296
150
70
6,090
1,600
350
24,500
165,416
150
70
6,090
1,700.
350
24,500
168,036