APPENDIX VIII

TEXT OF SENATE REPORT ON H.R. 4550, MUTUAL DEFENSE ASSISTANCE CONTROL ACT OF 1951

[Senate Report 698, 82d Cong., 1st Sess.]

PROVIDING FOR THE CONTROL BY THE UNITED STATES AND COOPERATING FOREIGN NATIONS OF EXPORTS TO ANY NATION OR COMBINATION OF NATIONS THREATENING THE SECURITY OF THE UNITED STATES, INCLUDING THE UNION OF SOVIET SOCIALIST REPUBLICS AND ALL COUNTRIES UNDER ITS DOMINATION

AUGUST 16 (legislative day, AUGUST 1), 1951.-Ordered to be printed

Mr. SPARKMAN, from the Committee on Foreign Relations, submitted the following

REPORT

[To accompany H.R. 4550]

The Committee on Foreign Relations, having had referred to it H.R. 4550, to provide for the control by the United States and cooperating foreign nations of exports, and S. 1987, providing for the termination of assistance to foreign countries exporting war materials to Russia and her satellites, and having considered the same, reports H.R. 4550, with amendments, and recommends that the bill do pass.

MAIN PURPOSE OF H.R. 4550

The main purpose of this bill, as amended, is to prohibit "all military, economic, or financial assistance to any nation" which permits the shipment of "arms, ammunition, and implements of war, atomic energy materials, petroleum, transportation materials of strategic value, and items of primary strategic significance used in the production of arms, ammunition, and implements of war" to "any nation or combination of nations threatening the security of the United States." Provision is made, however, for the President to continue aid to certain countries which permit "shipments of items other than arms, ammunition, implements of war, and atomic energy materials when unusual circumstances indicate that the cessation of aid would clearly be detrimental to the security of the United States." The bill also fixes responsibility in a single officer in the executive branch to see that the purposes of the bill are given effect.

BACKGROUND

Since 1948 Congress has incorporated in foreign aid bills, provisions designed to limit or prohibit the export of war materials to iron-curtain countries from nations receiving United States assistance. (See Public Law 843, 81st Cong., ch. XIII, sec. 1304; and Public Law 45, 82d Cong., sec. 1302.) The last of these actions, the Kem amendment to the Third Supplemental Appropriation Act, became law on June 2, 1951.

The Kem amendment was adopted because of the belief by some Members of Congress that the administration either had not been diligent in giving effect to earlier provisions of law or that the earlier provisions of law had not been specific enough to prevent in fact the shipment of substantial quantities of war materials to iron-curtain countries actively engaged in, or supporting, aggression in Korea.

Prior to, and during the time when the Kem amendment was being considered, a subcommittee of the House Committee on Foreign Affairs, under the chairmanship of Congressman Battle, of Alabama, held executive hearings on the subject

of east-west trade, directing "its efforts toward determining the current status of controls of exports to the Soviet bloc by the United States and by other nations"; appraising "the effectiveness of these controls"; and seeking to determine "what legislative action should be taken in order to make the controls of such shipments more effective." On July 16, the full Foreign Affairs Committee approved H.R. 4550, which was passed by a voice vote in the House on August 2.

Meanwhile, the executive branch of the Government operating under the Kem amendment, and relying on a provision that exceptions to the Kem amendment might "be made upon an official determination of the National Security Council that such exception is in the security interest of the United States." had reported a number of such determinations to the Congress. The executive branch took the position that these exceptions were in the security interest of the United States. Some Members of the Congress believed, however, that the administration was using the exception provision of the Kem amendment in such a way as, in effect, to nullify the intent of Congress expressed in the policy portions of the amendment.

On August 9, 1951, Senator Kem introduced S. 1987, which was referred to the Committee on Foreign Relations.

COMMITTEE ACTION

The Committee on Foreign Relations has during the past few years received a number of confidential reports from officers of the executive branch on steps that were being taken informally to encourage nations receiving American aid to limit and prohibit the shipment of war materials to the Soviet Union and its satellites.

A subcommittee under the chairmanship of Senator Theodore Francis Green, of Rhode Island, which visited Western Europe during July 1951, took the opportunity to inquire closely into the extent of east-west trade. The report of the subcommittee noted:

"The subcommittee did learn of some situations in which limited amounts of exports from Western European countries to the east may be justified. For example, foreign officials referred to a number of specific instances in which the export of some materials to the east is in fact a quid pro quo for the acquisition by the west of much needed critical materials. The situation in Berlin is one which requires particular attention. Since the western sectors of Berlin must live by the export of many of their products to Soviet-controlled areas surrounding them and from which essential foodstuffs are imported, the embargo of exports from western Berlin becomes a matter of considerable political and economic consequence."

It expressed the belief that it is "*** most important that east-west trade shall not be permitted to increase the war potential of the Soviet Union at the expense of Western Europe."

Language in legislation, the subcommittee observed-"*** must be carefully fashioned so that it will not only make congressional intent clear beyond doubt but also so as to enable the Administrator to interdict such trade with tact but certainty."

Based upon this background, the Committee on Foreign Relations considered the issues involved in executive session on August 17, and agreed to report H.R. 4550 to the Senate, with amendments, and recommend its approval.

THE COMMITTEE AMENDMENTS

H.R. 4550, as passed by the House, authorized the appointment of a Mutual Defense Assistance Officer to be responsible for carrying out the purposes of the act and to be compensated at the rate of not to exceed $16,000 per year. His principal job was to determine initially, and on a continuing basis, the items which were "for the purpose of this Act, arms, ammunition, and implements of war, atomic energy materials, petroleum, transportation materials of strategic significance used in the production of arms, ammunition, and implements of war should be embargoed In making these determinations, this officer was to give "full and complete consideration" to the views of the interested departments.

The Foreign Relations Committee agreed that responsibility for protecting the national interest in east-west trade matters should be lodged in one man. It felt,

however, that this individual should not be in a position where he might become the head of a separate and new Government agency. The committee, therefore, amended section 102 of H.R. 4550 to make it clear that responsibility for giving effect to the purposes of the act should be lodged in the official to be principally responsible for the administration of the Mutual Defense Assistance Act of 1949, whoever he might be and wherever that function might be carried on in the executive branch.

The committee feels there is good justification for putting responsibility on this officer. He will be intimately concerned with economic problems of the countries receiving aid and will occupy a central position in the administration of foreign aid. He will also be familiar and directly concerned with the military situations of those countries and with the operations of American military representatives in countries receiving military aid. So far as the Congress is concerned, the fixing of this responsibilty in the man who administers the foreign-aid programs will enable Congress to look to one man for reports and for the effective carrying out of the provisions of this legislation.

At the time of reporting this bill, the committee does not know precisely the nature of the administrative provisions that will be included in the Mutual Security Assistance Act now being considered by the Congress. For that reason it has not in this amendment been able to designate with absolute certainty the title of the official who may, under that act, have primary responsibility for coordinating American foreign-aid programs. It is the intention of the committee, however, that the official who may be responsible for the administration of the aid programs under the pending legislation and, in particular, the man charged with giving effect to the main provisions of the Mutual Defense Assistance Act, as amended, shall be given responsibility under this act. Until such time as the proposed Mutual Assistance Program is approved, the present senior official responsible for administering the Mutual Defense Assistance Act of 1949 will be responsible for giving effect to this legislation.

The committee does not want the administration of this act fixed in the President who is too heavily burdened to give the practically continuous attention that this problem requires. Neither does the committee want the Administrator to sit at such a low level in the governmental hierarchy that no effective authority can be exercised over other agencies operating in the field of export control.

In addition to the amendment of section 102, the committee made certain other amendments to bring the draft bill into line with the changed section 102 and to make minor drafting corrections.

NATURE AND SCOPE OF EAST-WEST TRADE

The report of the House Committee on Foreign Affairs contains interesting tables on the scope and nature of east-west trade. The tables from that report which are reproduced below show (1) United States trade with the Soviet bloc, (2) export from the United States and imports to the United States from Soviet bloc states, including those in Asia, and (3) trade between Western and Eastern Europe.

1. UNITED STATES TRADE WITH SOVIET BLOC

UNITED STATES EXPORTS TO THE SOVIET BLOC, BY COUNTRY-QUARTERLY AVERAGE, 1947-49; QUARTERLY, JANUARY-SEPTEMBER 1950

TOTAL U.S. EXPORT AND IMPORT TRADE WITH THE SOVIET BLOC OF EASTERN EUROPE AND ASIA, BY COUNTRY

Note: Prepared in the Department of Commerce by International Economic Analysis Division, Office of International Trade, from basic data of the Bureau of the Census, March 1951.

SUMMARY PROVISIONS OF THE BILL

1. The bill declares it to be the policy of the United States to embargo the shipment of "arms, ammunition, and implements of war, atomic energy materials, petroleum, transportation materials of strategic value, and items of primary strategic significance used in the production of arms, ammunition, and implements of war to any nation or combination of nations threatening the security of the United States ** *."

2. It is also declared to be the policy of the United States not to give "military, economic, or financial assistance" to any nation unless it embargos such shipments.

3. Responsibility for carrying out the purposes of the act is fixed in a single official who is to be the same as the official responsible for the administration of the Mutual Defense Assistance Act of 1949, as amended, and as it may be amended, in the future.

4. This Administrator is to have responsibility, after full consideration of the views of the interested agencies, to determine the items which for the purposes of this act are to be embargoed. His determinations are to be "continuously adjusted to current conditions ***"

III. TRADE BETWEEN WESTERN AND EASTERN EUROPE

WESTERN EUROPE: 1 TRADE WITH EASTERN EUROPE, 1948-49 AND JANUARY-JUNE 1950
[Value in thousands of dollars]

1 Western Europe includes Austria, Belgium-Luxemburg, Denmark, France, Germany, Greece, Italy, Netherlands, Norway, Switzerland, Sweden, Turkey, and the United Kingdom.

Eastern Europe includes Albania, Bulgaria, Czechoslovakia, Hungary, Poland, Rumania, and U.S.S.R., Finland and Yugoslavia are not included.

The January-June 1950 figures exclude the trade of Portugal, Switzerland, and Turkey. For the full year 1950 the value of Switzerland's exports to Eastern Europe (ex-Finland and Yugoslavia) amounted to $75,172,000. The value of imports for the same period amounted to $44,495,000.

Note: The figures shown above should be interpreted as rough estimates and not as an accurate tabulation of the trade of Western Europe. The data was assembled from compilations made from the published sources of the Western European countries which were based on principal commodities only. The figures in the above tabulation, therefore, do not necessarily represent the entire trade in the individual items with Eastern Europe. Any unidentified balance would be included in the "all other" category of the commodity group. Arbitrary decisions had to be made in an attempt to match the basket group with the list of selected items; thus, the margin of error is probably substantial.