THE UNIVERSITY OF MICHIGAN LIBRARIES (The prepared STATEMENT OF RO Madam Chairma I am very please on Europe of the asked for the view October 7, 1966 b Writers concernin The Departmen his specific efforts countries of Easte of the matters m shall confine my r including the U.S. First, I wish t items requiring v lowing the Presid Export Bulletin 9 over 400 non-str except the Sovie been supplied wit In making thes ment and placed that fall into the to these destinati manufactures an consumer goods. agencies, includi cies. This actio export control sy Eastern Europea welfare interests munity and the parture from bas the Export Cont and facilitates th Europe. We believe th impact on the a international tr businessmen ar peaceful goods import from th United States a Regarding tr European count cluding the U.S billion, divided riod. U.S. trad about equally h 0.5% of total U we do not fore believe there is The Departm to use U.S.-ori by Western E actions most of but some of th direct export t or licensees of transactions. creasingly depend upon the willingness of the United States to share in the credit arrangements involved, particularly in transactions requiring substantial sums. In direct trade with Western European countries, the availability of credit guarantees for industrial goods and technical data not only opens another credit source to these countries-thus expanding their ability to purchase from the United States-but also increases the competitiveness of the U.S. exporter in obtaining a larger share of the Eastern European market. We believe that in the past some worthwhile transactions have not materialized because of the marked advantage achieved by other countries through their credit arrangements for trade with Eastern Europe. More significant, however, will be the long-term impact of such guarantee availability in enabling our industrial trade with these countries to grow and to keep pace with their ability to earn larger amounts of dollars and convertible foreign exchange and to exchange goods with us. The legislative authority desired by the President to facilitate negotiation of commercial agreements with Eastern European countries is of both psychological and commercial importance. The potential trade significance of each agreement would depend not only upon the country involved and the details of the agreement, but also the willingness and ability of each Eastern European country to develop products which are salable in the U.S. market, to produce in quantities necessary to meet the needs of our type of market and to make other necessary arrangements for marketing their products successfully in the United States. Over all, we would expect such agreements to assist materially in increasing two-way U.S. trade with these countries. STATEMENT OF ROBERT L. MCNEILL, DEPUTY ASSISTANT SECRETARY FOR TRADE POLICY, DEPARTMENT OF COMMERCE Mr. MCNEILL. In the light of your request for brevity, I will talk from my statement rather than read it formally into the record. First, I would like to refer to the Department of Commerce's recent reduction in the number of items requiring validated licenses to most Eastern European nations. Following the President's speech, the Department on October 12 issued its Current Export Bulletin 941, which removed the validated export license requirement from more than 400 nonstrategic items for shipment to Eastern European destinations except the Soviet-occupied zone of Germany. In making these revisions we have removed from the specific licensing requirement and placed under our general license procedure additional commodities that fall into the category of peaceful goods which may now be freely exported to these Eastern European destinations. These include textile products, certain manufactures and machinery, chemical materials and products, and a variety of consumer goods. In taking this step the Department consulted other interested agencies, including the Departments of Defense, State, Agriculture, Interior, as well as the intelligence agencies. This action is part of a continuing effort by the Department to keep its export control system up to date, to reduce the obstacles to doing business with Eastern European countries wherever consistent with the national security and welfare interest, and to reduce the workload imposed upon both the trading community and the export control authorities of the Department of Commerce. The action represents a continuing policy rather than a departure from basic policy. We believe such action improves the administration of the Export Control Act, is consistent with the security requirements of that act, and facilitates the President's objective of expanding peaceful trade with Eastern Europe. We believe that the President's statement will have a significant and positive impact on the attitude of the U.S. trading community as well as of the broad international trading community toward U.S. trade with Eastern Europe. American businessmen are expected to be more willing than in the past to export their peaceful goods and technical data to the coun tries of Eastern Europe and import products from Eastern European countries. The eventual result we hope will be increased trade between the United States and the Eastern European countries. The legislative authority desired by the President to facilitate negotiation of commercial agreements with Eastern European countries is of both psychological and commercial importance. The potential trade significance of each agreement would depend not only upon the country involved and the details of the agreement, but also the willing ness and ability of each Eastern European country to develop prod ucts which are salable in the U.S. market, to produce in quantities necessary to meet the needs of our type of market, and to make other necessary arrangements for marketing their products successfully in the United States. Overall, we would expect such agreements to assist materially in increasing two-way U.S. trade with these countries. That is the completion of my statement. Mrs. KELLY. Thank you, Mr. McNeill. Without objection we will place in the record at this point the cover page from the Current Export Bulletin No. 941, dated October 12 1966, which outlines the changes recently made in the U.S. commodity control list. The remainder of that bulletin, including the full list of the commodities in question, will appear as appendix 1 to the record of this hearing. (There was no objection. The item referred to follows:) [From Current Export Bulletin No. 941, Oct. 12, 1966] Subject: Revisions in the Commodity Control List (§ 399.1). The U.S. Department of Commerce made the following announcement today; "Secretary of Commerce John T. Connor today announced that the Department of Commerce is revising the Commodity Control List to permit approximately 400 non-strategic commodities to move under general license to the U.S.S.R. and other Eastern European Communist countries. Validated export licenses previ ously have been required for this movement. The revision does not apply to the Soviet-controlled zone of East Germany, with which the United States has no diplomatic relations. The Department of Commerce action followed Presi dent Johnson's announcement on Friday, October 7, that 'we will reduce export controls on East-West trade with respect to hundreds of non-strategic items," as one of several measures designed to facilitate trade with Eastern Europe. "In revising the List, the Department of Commerce has removed from the specific licensing requirement commodities that fall into the category of peaceful goods, which may be freely exported without any risks to United States national interests. The commodities which are being placed under general license include textile products, certain metal manufactures and machinery, chemical materials and products and a variety of manufactured articles. The Commerce Depart ment consulted with other interested departments, including Defense, State. Agriculture, Interior, and the Intelligence Community, in taking this step. "Although the export of these commodities may now be made to communist countries of Eastern Europe without prior specific approval of the Department of Commerce, the requirement continues for individual licenses with respect to other goods. Removal of the non-strategic commodities from the Commodity Control List will reduce the administrative task of both business enterprises which sell these commodities and the Government. Business firms will no longer be required to apply for and await the issuance of a license before agree ing to a transaction. The changes in the List will also facilitate the President's objective of expanding peaceful trade with Eastern Europe. "The Commodity Control List has also been revised to remove a few commodities from licensing controls for shipments to Hong Kong, Macao, and other countries." The details of the Commodity Control List revisions are described on the following pages. Mrs. KELLY. Mr. Sauer, we will be happy to hear from you now. STATEMENT OF HON. WALTER C. SAUER, FIRST VICE PRESIDENT AND VICE CHAIRMAN I believe it pertinent to the present inquiry to give a brief history of past relations between the Export-Import Bank and Communist oriented countries. Indeed, it may be of some interest to recall that the Export-Import Bank was created to finance trade between the United States and the U.S.S.R. The time was February 1934. An immediate and substantial increase in trade between the two countries was expected to follow United States recognition of the U.S.S.R. which was extended in 1933. These expectations, of course, have never come to pass and the U.S.S.R. has never actually applied for nor has the Bank ever extended any financial assistance to that country. Immediately following World War II but prior to the time Communist regimes were established in those countries, the Bank extended credits to Czechosolvakia and to Poland. These credits were recognized and serviced by the successor Communist governments. In the fall of 1950, acting in furtherance of avowed U.S. policy to assist Yugoslavia, the Bank extended a credit of some $55 million to that country and subsequently, in 1961 extended another credit for $50 million. Also, in the late 50's, the Bank, acting as agent for and with funds furnished by the Mutual Security Administration, extended credits of some $60 million to Poland. In the summer of 1963, the U.S.S.R. and other Communist countries evidenced interest in purchasing wheat in the United States. Credit terms were considered to be essential for any substantial purchases by these countries and there ensued extended debate in the Congress on the advisability of the ExportImport Bank's extending financial assistance for the purpose. The result was that the Congress imposed a limitation on the Bank's authority to grant assistance to Communist countries by including a provision in the Bank's Appropriation Act of 1964, prohibiting the Bank from extending guarantees or credits to any Communist country unless the President determined it to be in the national interest for the Bank so to do. The provision has been included in each succeeding year's Appropriation Act. In February 1964, the President made a determination that it was in the national interest for the Export-Import Bank to issue guarantees in connection with the sale of agricultural products to the U.S.S.R., Bulgaria, Czechoslovakia, Hungary, Poland and Rumania. The only transactions that have been engaged in by the Bank under this finding were guarantees of $24 million to Hungary and of $4.2 million to Poland, covering the sale of corn, wheat and other agricultural commodities. At the same time that the President found it to be in the national interest to engage in transactions for agricultural products to all the named Communist countries, the President found it to be in the national interest for the Bank to engage in transactions with Yugoslavia for all types of products and services. 4 Since that time, the Bank has engaged in transactions of about $70 million covering the sale of capital goods to Yugoslavia. In June 1964, the President determined it to be in the national interest for the Bank to engage in transactions with Rumania for all types of products and services. Pursuant to this finding the Bank has engaged in one transaction involving $20 million for a petroleum plant. In accordance with procedures instituted by the Bank, it has reported to the Congress, as they occurred, each of the transactions it has engaged in with Communist countries since 1964. It might be also mentioned that all of the credits extended or guaranteed by the Bank to the Communist countries have been paid as they became due although in the case of Yugoslavia there has been one recent deferment granted for a relatively small amount. Since the purpose of the Export-Import Bank is to finance the foreign trade of the United States and since it is the only government agency which has the authority to engage in such transactions with the countries involved, it is quite 72-446-67- -2 appropriate that the Bank be the instrument for financing trade with Communist countries when the President finds it to be in the national interest so to do. On its part, the Bank is quite prepared, within the statutory authority granted it by the Congress, to carry out the spirit of the President's determination of October 7th past that it is in the national interest for the Bank to engage in short and medium-term transactions involving the sale of all types of peaceful goods and services to Bulgaria, Czechoslovakia, Hungary, and Poland. STATEMENT OF HON. WALTER C. SAUER, FIRST VICE PRESIDENT AND VICE CHAIRMAN OF BOARD OF DIRECTORS, EXPORT-IMPORT BANK OF WASHINGTON Mr. SAUER. Madam Chairman and members of the committee, I will touch the highlights of this brief statement which I believe you have before you. It might be of interest to members of the committee, particularly in connection with this inquiry, to recall that the ExportImport Bank was created in February 1934 to finance trade with the U.S.S.R. This followed the recognition of Russia by the United States in the preceding fall of 1933. It was expected to increase the trade between the two countries. This never came to pass for obvious reasons. As a result, the Bank has never extended any assistance to the U.S.S.R. However, we have dealt with other Communist countries. Immediately following the war we extended credits to Czechoslovakia and Poland before Communist regimes were established there, but the credits involved were serviced by the successor Communist governments and they have been paid. Also, in furtherance of avowed U.S. policy to assist Yugoslavia, we extended two large credits to Yugo slavia, one of $50 million in 1950 and another of $55 million in 1961. Also, we extended some credits to Poland, acting as agent for the Mutual Security Administration. We extended those credits with the President's special fund. Mrs. KELLY. What year was that? Mr. SAUER. There were three credits, 1957, 1958, 1959, aggregat ing about $60 million. These transactions with Yugoslavia and Poland were the only transactions that we had with Communist countries prior to late 1963 and 1964. I might also say up until 1963 the Bank's charter had no restrictions on our ability or capacity to deal with the U.S.S.R. or other Communist countries. However, in the fall Mrs. KELLY. No Bank restrictions? Mr. SAUER. NO Bank restrictions. No restrictions imposed by the Congress upon our authority to deal with the U.S.S.R. We could have made a loan any time to the U.S.S.R. under our statute or to any of the other countries, but we had only done what I had indicated. However, in 1963, in the late fall, there was much debate in Congress about the proposed sale of wheat to Russia. It was mentioned that the Export-Import Bank would probably have to finance such a transac tion if the U.S.S.R. was to buy any appreciable amount of wheat. The same thing in connection with the other Communist countries of Eastern Europe. The Congress adopted a rider to our appropriation in the fall of that year to the effect that we were not to extend any credits or guarantees: that is, engage in financing trade with the U.S.S.R. or any of the other |