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there are day-to-day problems and operations on NATO events or activities where we do get into that.

General Larkin is a part of both of them in a way, in that he has closer relationship with the mutual weapons development program, which is a regional program, rather than the rest of us in DEFREPNAMA in the end-item program. This is quite a change from what it was before December 10. Before that, our office was in the channel of MDAP things and papers, requirements of different countries, military equipment, and so forth, passed through our office. That is no longer the case. We also had certain operating responsibilities before December 10 on the facilities assistance program, which is an investment program designed to help build up a production base for ammunition and certain weapons here and the OSP program. Both of those operating responsibilities were taken away and vested in the services on December 10.

Mr. FASCELL. Mr. Haskell, where is your headquarters? Mr. HASKELL. Our office is in the Hotel Talleyrand, as they call it, which is a building at the other end of the Place de la Concorde, where the entire United States delegation to the European regional organizations is located. That includes organizations such as NATO and the OEEC and so forth. They are housed there.

Mr. FASCELL. Do you have any field stations or branches?
Mr. HASKELL. No, sir; we do not.

Mr. FASCELL. As the top representative of the Secretary of Defense in this area, then basically your job is one of implementing the policies of that Department and seeing that the policies are carried out?

Mr. HASKELL. Yes; with particular reference to NATO and MDAP where it concerns questions of policy. That is, the Secretary of Defense's responsibility with respect to our troops. We are not called upon to do much in that area and it is pretty well tied into the regional aspects of the aid program and the NATO aspects of these activities. Mr. FASCELL. How big a staff do you have?

Mr. HASKELL. I have 46. That does not include the mutual weapons development team.

Mr. FASCELL. You were giving us the operational functions which were changed on December 10. Did you give us all of them?

Mr. HASKELL. We had a couple of people in there working on the general programing and establishing priorities. For example, on offshore procurement the great bulk of that was handled in the normal, routine way, through the services but it was authority vested in my predecessor and up until the 10th, to give broad policy direction and guidance to procurement agencies here and to direct procurement where it was strategic or for reasons of national policy it was considered desirable.

As I mentioned before, we were in the channel of these papers, multitudinous papers that came through from the MAAG's with the end-item requirements on their way to EUCOM and then from EUCOM to the Assistant Secretary of Defense's Office in Washington. We were in that. We were sort of looking at the mass of papers in an endeavor to pick out from them specific things that might be of great significance to NATO which needed particular attention. I think most of us came around to the view that there was a degree of duplication in that activity between what we did and the review that EUCOM did by maintaining close liaison with EUCOM, and we were thus able to eliminate that seeming duplication. I cannot think of anything else.

Is there anything else that anybody of our group would like to mention?

Mr. FASCELL. Let me see if I understand. I want to understand accurately what your responsibility was prior to December 10 with respect to procurement.

I want to understand the responsibility of your office with respect to procurement prior to December 10.

Would you mind repeating that?
Mr. HASKELL. Shall I try to restate it?
Mr. FASCELL. Yes.

Mr. HASKELL. There were times recognized in the past which were becoming less and less where it would seem important that exceptions might be made to normal procurement policy to best serve the interests of the United States. Maybe you could get a nut, bolt, or tank a penny cheaper in some area that was politically undesirable from the interests of the United States. In other words, there might be cases where bids being the same, or practically the same-always for offshore procurement, as far as I am aware-lower than United States prices, and it would be advantageous for either strategic or political reasons to throw the order for weapon procurement in a certain way. That importance or desirability had practically disappeared by the time I came onto the job, which was a year before this December 10, I think you are all aware of the efforts the United States Government made to support United States policy in Italy to hold back certain large contracts on offshore procurement. This had to do with plants where either management or unions were known to be Communist-dominated. My predecessors had to struggle with such things as that.

As I say, as somebody in the Defense Department mentioned about a year ago, the offshore procurement in countries now has dwindled to so little that it does not make any sense whether you could affect whether Italy goes Communist or not, with offshore procurement orders, where it may well have done so several years ago.

. Mr. FASCELL. So that in the light of the offshore procurement program, where several million dollars were involved annually, it was a major consideration for your office, but since that time, since the program has dwindled, the change became effective December 10?

Mr. HASKELL. Yes, sir; but as my recollection serves me, I do not think in any 1 year it amounted to a billion dollars. I think the total offshore procurement program over the whole period from 1952 to 1957 amounted to around $3 billion. I would like to check that,

Mr. FASCELL. I think that is approximately correct.

Mr. HASKELL. I do not think there was any 1 year—it may have been around that-I do not have the figures for those past years, but it was certainly a multibillion dollar program.

Mr. FASCELL. The thing that occurs to me at this point is that if you are going to take politics into consideration, which is another way of saying international foreign policy, that this decision could not be made by the Secretary of Defense representative in Europe on his It would seem to me that the State Department would have to come into play somewhere.

Mr. HASKELL. Of course, it was sometime strategic or military. It might be considered better if there were too many plants to close to transfer the order and it might be better to put the facility further back, such as in Greece, Spain, or somewhere like that. The Defense representatives did not act on their own, but in consultation and on instructions and authorization in the general range of objectives and certain policy limitations set by the orders. It involved very close collaboration with the State Department and, as a matter of fact, I think that is why, or one of the reasons why, it was delegated in this

area.

Mr. FASCELL. Specifically on the problem of offshore procurement on the question of no profits and tax exemptions, and other related items, I believe you said that is now in the hands of Mr. Hoagland ?

Mr. HASKELL. As far as the tax exemptions are concerned, we have not been directed or called upon to get into those negotiations. My understanding of it, and Mr. Shafer will give you more information, is that the agreements on taxes were negotiated through the embassies in the different countries, such as Germany, Greece, France, or whatever the case might be, in collaboration with the procuring services. Now the operations of those tax treaties, and living up to agreements for treaties, are matters handled by the procurement services and the embassies in particular countries.

Mr. FASCELL. In other words, government-to-government problems primarily which the State Department undertakes to coordinate with the particular military services involved, is that what you are saying?

Mr. HASKELL. The agreements were worked out on the governmentto-government basis. The understanding to waive certain taxes, that is, I understand they vary as between countries and I think we have copies of most of these, but since we have not had the responsibility of administering them, I am not sure that our copies are up to date. We are not in the administration or operation of those matters. We stand ready, as representatives of the Defense Department, if they want us to do anything though.

Mr. FASCELL. You are not called upon to enter into the negotiations between the United States and any government dealing on the problem of tax exemptions in the offshore procurement contracts?

Mr. HASKELL. We have not been so far, at least in my day. Whether we were or not before

Mr. FASCELL. I mean as of now?

Mr. HASKELL. No. On the offshore procurement, while we no longer have any operational responsibility for that, back in 1955, the job of representing the Defense Department and coordinating the activities of the Embassies on the no-profits clause, that was given to my office as a special assignment. Mr. Warren Hoagland from Connecticut and New York was retained as the principal Defense negotiator to work with the embassies in the countries concerned in dealing with the foreign governments on the negotiation of that matter.

Mr. FASCELL. Mr. Haskell, can you tell this committee why it is necessary for the Defense Department to be cooperating or coordinating between the governments on the question of the no-profit clause? You no longer have any jurisdiction or responsibility where there is hardly any procurement ?

Mr. HASKELL. Most of the problems, of course, relate to contracts let sometime ago. My understanding of the advantages of having it at the Defense level rather than the service level is that when you finally get to dealing with the upper reaches of the Government, you are speaking with one voice. We have these different procurement agencies, as you gentlemen know very well, such as Army, Navy, and Air Force. There might be a possibility of playing one off against the other in dealing with these governments. This would involve such matters as would seem to us in Defense-this is what I have always assumed—where Defense reasonably ought to put up a single united front and have 1 man talk with the Ambassador rather than have 3 going back for instructions to the scervices.

Mr. FASCELL. That is certainly sensible.

Mr. HASKELL. We work awfully close with the services. We are in constant touch with them, particularly the unified command at EUCOM.

Mr. FASCELL. I can see where that would be of great value to the State Department representative, or whoever is charged with the responsibility of negotiating this agreement, from the standpoint of getting the facts and what not. Do I understand, then, that there is no policy which is binding upon the special representative with respect to these negotiations as far as the Defense Department is concerned.

Mr. HASKELL. Yes; it is the general policy. I do not recall the classification this is an unclassified discussion here--but there were instructions which, I believe, are classified as to the general approach, scope, and limitation.

Mr. FASCELL. What I meant-and I certainly appreciate what you are telling mehe has his instructions, and they are classified, but what I am getting at is-I assume, and, I hope, correctly--as far as the Defense Department is concerned, all they are interested in is getting the facts to the Ambassador or whoever is charged with the responsibility of negotiating, so that he can negotiate intelligently and, primarily, after that, getting the money due the United States Government, if any. Also, to see that they are not entering into any political considerations that might be involved in the negotiations, if any.

Mr. HASKELL. I do not know of an occason, but, if you get to the point where there would be an overriding political consideration which would result in having us give up claims and rights which we thought were just

Mr. FASCELL. That would be a matter for the Secretary of Defense ?

Mr. HASKELL. No; I would say State, but we are there. I think there is even a broader purpose. More than getting the money owed to us, it is important for us to help make clear the importance of strictly living up to the rules of the game and doing this job in a spirit of trust and mutuality on both sides. Not only would it hurt our own country, but a foreign country, if they did not live up scrupulously to what we consider fair and just. Naturally, dealing in a field of accountants and accountancy and law and a mixture of all sorts of things, there is room for difference of honest opinion.

Mr. FASCELL. There is no question about that, Mr. Haskell, and the Comptroller General has made it very clear time after time that there has been no fraud involved, but just a question of interpretation of a person's right under a contract. That is why it is very sensible to me to have a very able lawyer to act on behalf of the Defense Department in this matter. I wanted to be clear that, as far as the interest of the Defense Department is concerned in these negotiations, they are not the ones who are making a policy determination with respect to international operations, because, if they are, then I think this committee ought to know about it.

Mr. HASKELL. Our instructions are joint, sir. The terms of ref-
erence are joint which we have received. Am I right?
Mr. HOAGLAND. That is right.
Mr. FASCELL, Joint with respect to what?

Mr. HASKELL. State-Defense. Any matter of serious note, whether a possible disagreement between State and Defense, would have to be ironed out in Washington.

Mr. FASCELL. It would be between the Secretary of State and Defense?

Mr. HOAGLAND. Our general instructions, which are classified, as Mr. Haskell said, are joint instructions from both Departments, State and Defense. As we get additional instructions from time to time, which are also classified in nearly every instance, those are usually, I might say, perhaps, not always, but usually, joint instructions after a joint consideration in Washington between the Departments of State and Defense. I think it is entirely correct, as you suggest, that the Department of State has the responsibility on political matters.

Mr. FASCELL. That is the way that you are approaching it, as far as your position is concerned ?

Šír. HOAGLAND. That is very interesting and, I think it is a very important point, or we would not be getting into this discussion, because we want to tie it down, if there are overriding international requirements, and then we ought to separate them and know about them, if they are there.

Mr. HOAGLAND. It is not always easy to separate all of the elements in these negotiations, because they are very complex. Certainly, throughout the negotiations the Department of State and the respective embassies in each country concerned have the responsibility and make the decisions on all political questions and questions of international political relations.

Mr. FASCELL. To that extent, the Department of Defense, since this is a joint instruction proposition, they must engage in passing judgupon

these matters? Mr. HOAGLAND. Who? Mr. FASCELL. Whoever the Defense representative is who sits in on the joint negotiations.

Mr. HOAGLAND. Well, I would say Mr. FASCELL. Agreement has to be reached, if the State Department has a position with respect to negotiations as an example, that our negotiations have clearly decided, as a matter of law and accounting, and they may decide thắt X number of dollars is due on the contract to the United States and State then says, “Yes, but the overriding implications are that we should not pursue this matter further." At this point an agreement has to be reached by the Department of Defense representative, who says, “Yes; if you say that is right, I agree with you," or "I do not agree.

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