The Lend-Lease Act requires international agreements with the countries to be aided. Inasmuch as the war supplies available now and in the near future are quite inadequate to meet the needs of the United States and the various countries to be aided, difficult questions are raised as to the proper distribution of stocks and production among the various countries involved. Lend-lease activities must not only be organized in the United States but to a reasonable extent they must be organized in the countries to be aided in order to assure proper and effective use of aid rendered. ORGANIZATION In order to meet the above requirements, the following organizational concept has been followed which is believed to be in accord with the understandings reached with your committee at the hearings on the basic act. The central organization records, supervises, and coordinates lend-lease activities and makes over-all policies. We are trying to keep the organization small and manned with workers. We are proud of our personnel. Many of them are career men with the broad Government experience and discipline so necessary to this complicated task. Other functions are decentralized to the maximum extent possible. The establishment of the aid programs, within certain limitations, and their execution is assigned to the following five United States agencies in accordance with their normal governmental functions: The War Department, the Navy Department, the Treasury Department, the Agriculture Department, the Maritime Commission. It is to be noted that the United States procuring agencies are all old and seasoned Government organizations with the many protections and advantages that flow from their long established procedure and their experienced personnel. Questions of foreign trade and foreign exchange are coordinated with the assistance of the State and Treasury Departments. Lend-lease agreements are being negotiated by the State Department. Recommendations as to distribution of inadequate war supplies as between the United States and various countries to be aided are submitted to the President by the Army and the Navy. Cognizant United States agencies and also the central lend-lease organization are establishing representation in the theaters of use. PROCEDURE The most important points in procedure are that official requisitions for aid must be submitted by the various countries involved. These requisitions must give such information as is deemed essential for records and action. They are forwarded to the interested United States Government agency for detailed recommendations. Based upon such recommendations, decision is made as to whether or not a requisition will be honored. If it is approved, after review by the Division of Defense Aid Reports and the Bureau of the Budget, funds are allotted to the proper agency for procurement. It is to be emphasized that funds are not turned over to foreign governments. At the appropriate time written authority is given to transfer the aid to the country involved. This system produces a simple but sufficient record and control. With the improvements that come with experience it should be quite satisfactory. ACCOMPLISHMENTS The second report of the Division of Defense Aid Reports gives a detailed statement of results achieved. The more important points are as follows: (a) The over-all needs of organization and procedure are now quite well known and are in large part met not only by this government in its various echelons but also by the countries to be aided. (b) General and specific programs of aid are being evolved for the various countries and they are being integrated into the strategic requirements and production expectations of this country. (c) The act of March 11, 1941, authorizes transfers to a limit of $1,300,000,000 in value from stocks obtained or to be obtained from appropriations made prior to that date. Of this authorization it has only been possible to utilize to date some $100,000,000. This is due to the fact that stocks either do not exist or the needs of America are so urgent that they cannot be spared. It is expected that large additional transfers will soon be justified. (d) Of the $7,000,000,000 appropriation, some 90 percent has been definitely allocated to the various United States agencies and to specific projects of aid. The balance is quite fully programmed. (e) Approximately 50 percent of the appropriation has been committed by the various United States agencies concerned and the rate of contracting is increasing. (f) Actual transfers of aid in the form of goods and services have been made to the extent of approximately 5 percent of the total appropriation. (g) British records show that of the total dry cargo shipped to the United Kingdom and the Middle East from the United States, the following percentages were lend-lease: The oil cargoes are substantial also and now comprise practically all oil shipped from the United States to England and some 40 percent of all oil shipped from the Western Hemisphere to England. (h) In those cases where there is a ready supply of American goods, such as food, oil, gasoline, and some raw materials, a very substantial amount of help is being given. (i) In the case of long-term munitions items which are so vitally necessary, substantial backlogs of orders are already placed and these are rapildy growing, but deliveries are not large. Shipments will depend upon the over-all ability of America to produce. It should be remembered that these orders are necessarily placed with American industry after very large-scale similar orders of the United States and Great Britain for their own account and these are not yet in full quantity production. Important contributions are being made in the field of ocean transport. Large numbers of cargo ships and tankers have been chartered under lendlease. Many merchant ships have been and are being repaired and outfitted in our harbors. Construction has started under lend-lease on 227 ships, including 87 tankers. This program is separate from the Maritime Commission's other emergency program under which there are to be constructed 1,090 cargo vessels and tankers. CRITICISMS Some of the more important criticisms received with reference to the execution of the work are as follows: Lack of speed.-We know, and we know that the country knows, the importance of speedy action in time of war. We appreciate the necessity of creating as rapidly as possible large reservoirs of needed supplies that can be distributed quickly to the theaters of use throughout the world. That is our goal, but we do not contend that we are yet moving toward it at full speed. We are not satisfied with the relatively small trickle of aid in the form of fighting materials which is flowing to the countries at war. We are trying to streamline our central procedure to the maximum and to assist in similar action in other United States agencies and in foreign organizations. We are trying to stimulate quick action. In the case of doubt as between speed and perfection, we try to err on the side of speed. Progress is being achieved, but in spite of every effort our lend-lease speed will obviously be less than that of the speed of the various United States agencies, for they are the operating agents and their efforts must be coordinated with those of the central agency and the various countries to be aided. This latter task is in many instances quite difficult, as full information must be obtained from the home governments. The country knows quite well the time factors required by the War, Navy, and other departments to convert their own appropriations into contracts, contracts into production, and production into delivered articles at point of use. Permitting Great Britain to use lend-lease as a means of maintaining or expanding her foreign trade to the detriment of the United States.-This question has been the subject of friendly negotiations with Great Britain and an agreement has been reached which is satisfactory to both Governments. This contains two assurances as follows: Lend-lease materials which might be available for reexport have been and will be used within the Empire and only for needs essential to the war effort. The British will not permit exports of materials similar to those lend-leased to *em in any manner which will enable their exporters to enter new markets or nd their trade at the expense of United States exporters. The above defines a policy which in reality has been in effect since the passage of the act. THE NEW BUDGET It is desired to summarize how this new budget was built up. Last June, in order to expedite the digestion of the appropriations already made, the five United States agencies which procure the lend-lease materials and services were asked to program their funds, on which over-all limitations had been set, as to items, quantities, and countries and to do this in consultation with the countries to be aided. They were also asked to submit estimates for the additional funds they thought to be necessary to procure justifiable items which could not be purchased with existing funds. In due course the five agencies submitted their recommendations and stated in substance that existing funds were inadequate to meet justifiable needs under lend-lease and asked that an additional appropriation of several billions of dollars be provided as promptly as possible. These requests have been the subject of lengthy discussion and study by representatives of Great Britain, China, the Bureau of the Budget, and the various United States agencies. Modifications have been made to meet changing circumstances. This budget, therefore, is the joint work of all interested parties. It is believed the needs included are real and that they are fully supported by the United States agencies concerned as well as by the countries involved. The agencies are responsible for defending in detail their parts of this budget. Incidentally, it is to be noted that lend-lease budgets are particularly troublesome and difficult to build. The ideas of five United States agencies must be coordinated with the ideas of the several foreign countries involved. This budget as it is tentatively developed at this date (September 12, 1941) definitely does not and is not intended to meet all the justifiable needs of the countries to be aided. It is only intended to cover commitments that should be made prior to March 1, 1942, when additional funds should be provided. Furthermore, it is built around the assumption that a substantial part of the needs will be met by transfer from the reservoir of orders already financed through regular appropriations of the Army and Maritime Commission and that in due course the law will be changed to permit this. Delivery-time factors considered in arriving at the proposed budget are as follows: (a) Through May 31, 1942, on simple military and industrial articles and on services available on a pay-as-you-go basis. (b) Through December 31, 1942, on agricultural items to cover deliveries from the 1942 harvests, for which implied commitments will have to be entered into prior to December 31, 1941. (c) Through December 31, 1942, on military and naval items requiring considerable productive effort and forward planning. (d) Through June 30, 1943, on complex military and naval items requiring long-term development of designs or facilities, or both. It is appreciated that two important questions must be answered: (a) Why are these additional funds required now? (b) What does the future hold forth with reference to lend-lease appropriations? In answer to these questions, my conviction is as follows: As time goes on and we analyze the munitions and supplies needed by ourselves for safety and by our friends for a victorious war effort, we realize more and more that the stocks required are colossal. The curve seems to be an ever-ascending one. The main enemy is now, and for several years has been, devoting the effort of approximately one worker out of two to the war effort. He is now aided by the semislave labor of many millions in the subjugated nations. The enemy's effort must be outmatched to achieve victory and must be equaled to achieve even a stalemate. The production of England plus British orders in America plus lend-lease orders already provided for are not sufficient even with full Russian assistance. As this latter decreases, British needs increase; and, conversely, the more Russian assistance can be strengthened the better it is for England and the other actual or prospective enemies of the Axis Powers. Even the funds included in the new budget are far from sufficient to achieve equality in munitions power. England has apparently realized this for some time, for when the original appropriation legislation was being discussed she submitted estimates of needs that were very much larger than the appropriations finally made. Furthermore, lend-lease has had to finance so-called spot purchases, or the day-to-day emergency needs that the fortunes of war create, and they have been very substantial. In the field of food, the yearly requirements as now supported by the Department of Agriculture have proven to be some three times as great as the amounts provided for in the first appropriation act. The oil requirements as supported by the Navy and the Oil Administrator are more than double the amounts provided for in the first act. Navy requirements also greatly exceeded amounts authorized. The same is true in almost every category of the act and in the case of each cognizant United States agency. The need for additional appropriations is now pressing as existing funds are all quite fully programmed and allocated to agreed-upon projects and there are not sufficient funds available to finance the commitments for emergency needs that should be made prior to November 1 next. The argument can be advanced that even though existing funds are allocated they are not fully obligated and that necessary shifts can be made in the program in order to care for items of high priority. This is possible, but to change programs is very wasteful of time and effort. It should only be resorted to as a rare exception. At best, it can only postpone action on the items of lesser priority. In the interests of effective results, it is important that reasonably sound decisions be executed without modification and delay. It is also important to realize that the earlier our industry can be committed by contract to specific tasks the earlier will we obtain deliveries. The task of transforming appropriations into contracts is at best long and troublesome. The quicker it is started the quicker it can be finished, but it cannot be started until after appropriations are made. Even if our sights should be set too high, which is not the case, it is safer to reduce speed than to try to accelerate it. Insofar as the future is concerned, it must be realized that we have quite definitely pledged to England all aid short of war. The steps that are being taken from day to day indicate that America favors the same policy with reference to the various countries that fight the Axis Powers so long as they continue to fight effectively. Our obvious objective is the ultimate defeat of the Axis Powers. This cannot be done without munitions superiority. Unless some other method is followed, we must therefore be prepared to provide adequate munitions through lend-lease until victory is assured and this will obviously mean continuing huge appropriations. Sincerely yours, J. H. BURNS, The CHAIRMAN. We have with us this morning Mr. Stettinius, the Lend-Lease Administrator, and also Mr. Philip Young, acting executive officer, Division of Defense Aid Reports. It was my understanding that the first statement would be made by Mr. Young; but if you prefer to make your statement first, Mr. Stettinius, the committee will be very glad to hear you at this time. STATEMENT OF EDWARD R. STETTINIUS, JR., LEND-LEASE ADMINISTRATOR, ACCOMPANIED BY PHILIP YOUNG, ACTING EXECUTIVE OFFICER, DIVISION OF DEFENSE AID REPORTS Mr. STETTINIUS. It makes little difference to me, sir. My statement is very, very short, and I think you can dispose of me in a few moments. Mr. Chairman, I think all of you gentlemen are familiar with the fact that I have been Lend-Lease Administrator for only a very few weeks. Consequently, I am coming before your committee well armed with assistants. These men-Mr. Young, Mr. Cox, and others will be glad to furnish you with all the detailed information that you may want during the course of these hearings and to answer any questions raised during your consideration of the President's request for the additional lend-lease appropriation. I want to say, Mr. Taber, that General Burns is in Moscow at the present time, but he left a statement which I think would contribute a great deal to your deliberations on this subject. Mr. Young, who, I understand will follow me as a witness, is as familiar as anyone with the entire lend-lease procedure, even General Burns. Mr. Cox also is here and he is thoroughly able to give you any information that might be required. Mr. LUDLOW. When did you assume the duties of the office of Administrator? Mr. STETTINIUS. Approximately 10 days ago, Mr. Ludlow. Even my very short connection with the lend-lease program has made me terribly aware of its importance to our national security and our way of life. I am glad of this opportunity to make a short preliminary statement concerning the workings of the program, and I shall keep myself available to you throughout these hearings. On March 27, slightly less than 6 months ago, the Congress appropriated $7,000,000,000 to carry out the purpose of the Lend-Lease Act. As of this morning, $6,437,071,079-92 percent of the total 7 billion-had been allocated by the President to the Army, Navy, Maritime Commission, Department of Agriculture, or Treasury Procurement Division for the procurement of specific materials and services for the countries we are aiding under the lend-lease program. The Lend-Lease Administration is not a procurement agency; it is a coordinating and expediting agency. Neither the Congress nor the President favored the creation of a new agency whose functions would overlap those of the present procurement agencies. So the responsibility for the actual procurement of lend-lease articles was placed in the hands of the War, Navy, Agriculture, and Treasury Departments, and the Maritime Commission, and the Lend-Lease Administration was set up with the responsibility of centralizing and coordinating the program. The Lend-Lease Administration carefully scrutinizes the official request of the foreign government to make sure that the article requested is lend-leasable and essential for the war effort. If it is, and the production of the article can be efficiently geared into the other phases of our defense program, the funds for it are allocated to one of the procuring agencies. Up until now, the President has had to pass individually on every dollar allocated under the 7 billion appropriation. This placed a heavy burden upon his time. He has now authorized me to make allocation of funds up to $300,000,000 and to transfer articles up to a like amount. I have also been authorized to make necessary adjustments in allocations and transfers previously authorized. The President will, however, retain close supervision over the program. He will continue to determine what countries are to receive lend-lease aid and he has asked me to give him a report once a month, perhaps more frequently, on all allocations and all transfers made under the lend-lease program. As I said in the outset, we are not a procurement agency. Representatives of each of the actual procurement agencies are going to testify before your committee during your hearings and they will outline the details of their operations and what they plan to do with the funds that are now being requested. I understand that Secretary Wickard is to testify this morning and that he will outline the |