Page images
PDF
EPUB

MUTUAL DEFENSE ASSISTANCE CONTROL ACT OF

1951 (BATTLE ACT)

(H.R. 1621, H.R. 1939, and H.R. 4550, 82d Cong., 1st Sess.)

FRIDAY, MARCH 9, 1951

HOUSE OF REPRESENTATIVES,

COMMITTEE ON FOREIGN AFFAIRS,

SUBCOMMITTEE ON H.R. 1621 AND H.R. 1939,*

Washington, D.C.

The special Subcommittee on H.R. 1621 and H.R. 1939 met in executive session at 10:30 a.m., in the Foreign Affairs Committee room, G-3 in the Capitol, Hon. Laurie C. Battle (chairman of the subcommittee) presiding.

Mr. BATTLE. The committee will come to order.

In further consideration of H.R. 1621 and H.R. 1939 we have with us this morning Mr. Loring K. Macy, Deputy Director, Office of International Trade, Department of Commerce. Mr. Macy has several gentlemen with him. They are going to testify and answer questions. I believe Mr. Macy has a short statement which he will give first. Afterward, Mr. Macy, if you will introduce your assistants to the committee, we will appreciate it.

I would like to say before we start that this is an executive session. We are taking minutes for committee use only. We have and will continue to do our very best to see that nothing gets out that is given in secret. So with that, Mr. Macy, if you will start off, we will appreciate it.

STATEMENT OF LORING K. MACY, DEPUTY DIRECTOR, OFFICE OF INTERNATIONAL TRADE, DEPARTMENT OF COMMERCE

PURPOSE OF PROPOSED LEGISLATION

Mr. MACY. Thank you, Mr. Chairman.

H.R. 1621 and H.R. 1939 are similar bills intended to accomplish two purposes; first, to prohibit exports of strategic or war materials from the United States to Russia and her satellites in Europe, and to Communist China: and second, to deny economic or financial assistance from the United States to any country which does not likewise restrict its trade with Russia and her satellites and Communist China.

OPPOSITION TO PROPOSED LEGISLATION

We would be opposed to the enactment of such bills in so far as exports from the United States are concerned, because there is already

See footnote 1, p. 7. for list of subcommittee members.

in existence adequate statutory authority to control our exports, and we believe, as I shall indicate, that it is being effectively exercised to accomplish the purpose of these proposed bills. And, it is my understanding that you have already heard from representatives of the Department of State the objections which there are in principle and from a practical viewpoint to carrying out literally the second objective of these bills.

Under the Export Control Act of 19491 the President is authorized to prohibit or curtail the export of any materials or commodities for reasons of short supply, or to further our Government's national security and foreign policy objectives. This authority has been delegated to the Secretary of Commerce and, within the Department of Commerce, is administered in the Office of International Trade, of which I am the deputy director.

We are required under the law to report to Congress every 3 months on our export control operations and I have brought with me for your information and use extra copies of the reports covering our operations during the past year. You will note there from that we have for a long time been regulating U.S. exports to Communist-dominated areas of all goods of any strategic importance-since early 1948, in the case of the Soviet bloc in Europe, and since 1949, in the case of China.

REGULATION OF EXPORTS TO SOVIET BLOC

Russia: We have been regulating exports to the Soviet Union and its satellites in Eastern Europe since March 1948, when they clearly demonstrated their hostile intentions toward this country through opposition to the Marshall Plan program.2

A complete export embargo was not considered desirable, and it was felt necessary only to take action to eliminate the contribution which our exports might make to the military potential of unfriendly countries. Accordingly, the judgment of military officials of the Government as well as commodity technicians has been obtained in determining what goods should be controlled for export. In addition, advice has been obtained on these controls from the State Department and the Government's security agencies, including the National Security Council and National Security Resources Board.

The effectiveness of our controls is evident from the official trade statistics. Dollarwise, our exports to the U.S.S.R. in 1947 were about $150 million. In 1948, they declined to $28 million, 85 percent of which left this country during the first 4 months of that year before our controls were put into effect. In 1949, our exports to the U.S.S.R. were about $6,500,000, of which $4.300.000 consisted of cotton, which is of little significance strategically and was not then in short supply; and tobacco and wood rosin made up most of the balance. For the first 9 months of 1950, our total exports to the U.S.S.R. were only $680.000, an obviously insignificant amount in terms of contribution to their war or economic potential.

1 Public Law 11, Feb. 26, 1949 (S. 548). "to provide for continuation of the authority for the regulation of exports and for other purposes." The purpose of the act was to insure a supply of vital commodities for the United States, reduce the inflationary impact of abnormal foreign demand, further U.S. foreign policy, and safeguard national security. 2 The Marshall plan, named for Secretary of State George C. Marshall, was a maior program of economic aid for the reconstruction of Europe after World War II. See the introduction to the hearings on the Foreign Assistance Act of 1948 in vol. III of this historical series.

Mr. BURLESON. They paid cash for all that?

Mr. CHIPERFIELD. That is covered in here.

Mr. MACY. No, sir.

Mr. BATTLE. About the return, have you covered that?

Mr. MACY. I have not. I think some of the boys can give you figures on that, if you do not mind.

In terms of the commodity composition of our exports, the story is even more significant. Since early 1948, all strategic types of machine tools; electrical and electronic equipment, construction and conveying equipment; mining, refining, and pumping equipment; and engines, turbines, and rolling stock have been excluded from the list of permissible exports to this area.

In the field of materials, we have also, since mid-1948, eliminated shipments to the U.S.S.R. of such entire categories of goods as; petroleum products: coal-tar products: iron and steel products: and the strategic nonferrous metals, including aluminum, copper, brass, lead, nickel, tin, and other nonferrous and precious metals. In addition to these broad categories, we have prohibited exports of a large number of individual items which would have been of special significance to the U.S.S.R., such as, abrasives; ball bearings; metallurgical, radio and scientific equipment; and all strategic chemicals and alloys.

U.S.S.R. European Satellites: We have always considered the countries under U.S.S.R. domination in Eastern Europe as part of the Soviet military potential and have applied our export controls accordingly. Therefore, they have likewise for more than 2 years been denied by this country all strategic commodities and industrial equipment of any security significance.

For obvious reasons, Yugoslavia and Finland have been accorded some special treatment, although special care has been given to guard against transshipment through such countries. Our export trade with these two countries makes up almost half of the total export trade to all Eastern Europe, including Czechoslovakia, Poland, Rumania, Hungary and the U.S.S.R.

TRADE RESTRICTIONS WITH CHINA

China: Critical and strategic materials began to be withheld from China under Department of Commerce export licensing policies instituted early in 1949. When the Chinese Communists began their drive southward early in 1949, our first concern was to continue shipments where possible to the Nationalist forces and to stop shipments of those goods which would help increase the strength of Communist armed forces.

At the same time, we permitted shipments of small quantities of goods necessary for the minimum needs of the Chinese economy so as not to penalize the civilian victims of the war in China. In the latter part of 1949, however, as mainland China fell under Communist domination, stringent controls were extended to approximately a hundred items of security significance.

Since January 1950, we have not exported to China any aviation fuel or lubricating oil, automotive fuel; diesel, heating and other fuel oils or kerosene, and only a small amount of other lubricating oils. We have also not exported any pig iron, scrap or semifinished steel, steel rails, ferro-alloys, copper, nickel, tin, molybdenum, vanadium, cobalt,

[ocr errors][merged small][ocr errors]

locomotives and railroad cars, internal combustion engines, and construction machinery and tractors.

In addition, we also stopped the export of practically all metalworking machinery, industrial machinery, trucks and buses, industrial chemicals and coal-tar products, scientific and professional apparatus, petroleum field and refining equipment, and electrical power generating and distributing equipment.

In March 1950, after additional review and study of the situation, export controls applicable to the Chinese mainland and adjacent areas, as well as to all other parts were made coextensive with earlier controls to the Soviet bloc in Europe. This action, in effect, resulted in the stopping of exports of any strategic items whatsoever and took place, it should be noted, several months before the outbreak of Communist aggression in Korea.

3

Even more stringent controls have been adopted since the invasion of Korea and the active intervention there of the Chinese. These include the embargo of all U.S. exports to North Korea, and the imposition of licensing control over all U.S. exports, whether strategic or not, to China, Hong Kong, Macao, the U.S.S.R. and its satellites in Eastern Europe. We are also now regulating all shipments of foreign origin goods moving in transit through the United States and destined for any of these countries.

U.S. AID POLICY TOWARD FOREIGN COUNTRIES EXPORTING TO COMMUNIST

NATIONS

The other main purpose of these bills is to require the refusal or the termination of U.S. aid to any foreign country which permits the exportation of strategic goods to the Soviet Union and other Communist countries. Although there are some differences of language between the relevant sections of the two bills, there is no substantial difference between them in this respect. The desirability of preventing as far as possible the movement of goods from other foreign countries to the Soviet Union and the several countries of the Soviet bloc which would increase their war potential is entirely clear. During the past 3 years serious efforts have been made by the United States toward this objective, and these efforts have met with a very considerable degree of success.

Although there continues to be a significant flow to the Soviet bloc of some goods which are strategically important, especially certain raw materials, it is fair to say that this remaining flow constitutes the smaller rather than the larger part of the whole. It is important to note, also, that steps are being taken to bring this remaining flow under discipline and that the United States is not working alone in this task.

CONSEQUENCES OF WITHDRAWAL OF U.S. Am

In considering legislation pertaining to this matter, it is important to bear in mind a number of things which are frequently overlooked.

The reference is to the invasion of South Korea by North Korean forces on June 25. 1950. When U.N. forces, chiefly from the United States, pushed the invaders back toward the Manchurian border, the Chinese Communists entered the war in November 1950 to enforce the defeated North Korean forces.

First, it would be most undesirable if such legislation were to have the effect of requiring the United States to withdraw support from countries not now under Soviet domination but more than likely to fall under it if American help had to be removed. There are countries in this position, and the terms of these bills would bring that result. There are also a number of countries in no present danger of Communist aggression but which have shipped strategic commodities to Soviet bloc countries and from which therefore U.S. financial aid would have to be withdrawn under these bills, despite their longstanding friendship with the United States. Among such countries are several in the Western Hemisphere itself, for example, Chile, Brazil, Mexico.

It would be even more undesirable if legislation were to be so drawn as to make it impossible for the United States to employ its great economic strength to take advantage of any defection or rupture within the ranks of the Communist countries. The support which we have been able to give to Yugoslavia and which we might extend to great advantage in any future similar case would not be possible under these bills.

More fundamental than these cases, however, is the case of the Western European countries generally. These countries remain dependent upon the Soviet Union and the satellite countries for a large part of their supplies of a number of materials vital to the effective operation of their economies. The Soviet bloc countries are not in the habit of making these supplies available unless they can receive in return goods which are of value to them.

Necessarily, the Western European countries have to offer in trade some commodities which contribute to the strength of the Soviet bloc. Otherwise they would be under the necessity of either depending upon an enormous increase in American aid or else suffering very serious economic and political setback.

The appropriate policy in this regard is not that of denying resources to the Soviet bloc without regard to the consequences; it is that of increasing to the maximum degree the differential of strength between the Soviet bloc and the West, to the advantage of the West. This policy, we believe, is already being served, and should continue to be carried forward.

ROLE OF OFFICE OF INTERNATIONAL TRADE

I have with me, Mr. Chairman, three gentlemen from the Office of International Trade, who I think will be very helpful in answering any questions that the committee may have. Mr. Wallace Thomas is Deputy Assistant Director of the Office of International Trade to Mr. Borton, who is in direct charge of the export control operations. Mr. Karl Anderson is Director of our British Commonwealth Division and has been working specifically on East-West trade problems as far as our Department is concerned. Mr. Nathan Ostroff is legal counsel to the Office of International Trade.

I think our major contribution here can be in the export control over commodities from the United States, because that is our responsibility. We assist the State Department in every way possible in its

« PreviousContinue »