1949 CONTENTS Foster, William, Deputy Administrator, ECA.. Hoffman, Paul, Chairman, ECA.. White, Bert, consultant to the Administrator, ECA.. 22 III SMALL BUSINESS PARTICIPATION IN ECA PROGRAM MONDAY, JUNE 6, 1949 UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C. The committee met, pursuant to call, at 10:30 a. m. in room 301, Senate Office Building, Senator Burnet R. Maybank, presiding. Present: Senators Maybank (chairman), Taylor, Fulbright, Robertson, Sparkman, Freer, Capehart, Flanders, and Bricker. The CHAIRMAN. The committee will come to order. This meeting is called in order that the committee might hear Mr. Paul Hoffman, chairman of the Economic Cooperation Administration, with reference to plans of the ECA to assist small business enterprises in accordance with the wishes of Congress as expressed in section 7 (d) of Public Law 47, Eighty-first Congress. The pertinent provisions of this law are as follows: (d) Section 112 of such act is hereby further amended by adding at the end thereof the following new subsections: “(i) (1) Insofar as practicable and to the maximum extent consistent with the accomplishment of the purposes of this title, the Administrator shall assist American small business to participate equitably in the furnishing of commodities and services financed with funds authorized under this title by making available or causing to be made available to suppliers in the United States, and particularly to small independent enterprises, information, as far in advance as possible, with respect to purchases proposed to be financed with funds authorized under this title, and by making available or causing to be made available to prospective purchasers in the participating countries information as to commodities and services produced by small independent enterprises in the United States, and by otherwise helping to give small business an opportunity to participate in the furnishing of commodities and services financed with funds authorized under this title. "(2) The Administrator shall appoint a special assistant to advise and assist him in carrying out the foregoing paragraph (1). Each report transmitted to the Congress under section 123 shall include a report of all activities under this subsection. Will you proceed, Mr. Hoffman? STATEMENT OF PAUL HOFFMAN, CHAIRMAN, ECONOMIC COOPERATIVE ADMINISTRATION Mr. HOFFMAN. I will be very glad to open this with a few remarks. In the first place I would like to make my own personal attitude, if I may, clear, as far as smaller enterprises are concerned. That is, that I have a natural bias toward small business, because I have been in two small businesses myself, and as president of one corporation, most of my business life was spent in competing with bigger businesses. Therefore, whatever bias I admit to is a bias for smaller enterprises. 1 I think also that I do have some knowledge of this field because, when I was active in the Committee for Economic Development, working under Senator Flanders, who was then chairman of our research committee, one of our most important studies was a study of the special problems of smaller business. As a matter of fact, the chairman of that committee, which conducted that study for over 2 years, with the help of Professor Caplan of Brookings Institute, was Ambassador William C. Foster, who sits on my right, who just returned to America within the last 2 days. Out of that study all of us learned a good deal of the special problems of small enterprises. We recognize that if you are going to have a healthy America, you must have a healthy small business. That is a conviction and a very deep conviction on our part. As far as ECA is concerned, there are definite limitations on what it can do for smaller enterprises, or larger enterprises, for that matter. We are not a procurement agency. I have said that, I think, in every talk that I have made about ECA for the past 14 months. Yet, there still persists the idea that we buy things. We do not buy anything. I think it might be worth while taking not over 90 seconds to tell The CHAIRMAN. I wish you would take more than that, because it is an unfortunate situation with which I believe many Senators are faced. They can speak for themselves, but I know that in many instances it is believed that you are a procurement agency, whether it be for manufactured articles or anything else, and small business is always asking why they do not get some share of it. The same situation applies in the shipping industry. Representatives of the shipping industry want to know why everything goes through New York, for example, and why doesn't some of the shipping go through the port of Newark or Houston. Those questions come up all the time. Senator CAPEHART. Who does the procuring? Is that what you are going to develop? Mr. HOFFMAN. It proceeds, really, in a very simple fashion. I happen to think that the Foreign Assistance Act was one of the most well-thought-through acts ever passed by Congress. I think whatever success we may have had in administering it is due to this very wise provision which kept us out of the procurement business, and also the very wise provision that gave us the directive that, insofar as possible, we encourage the use of normal private trade channels. The CHAIRMAN. Can you encourage the normal private trade channels in the direction of small business, to any extent? If you can develop that, I think we would be very interested in hearing it. Mr. HOFFMAN. I think we can, sir. I think we can do even better. However, here is the best way to understand what takes place. Let us take a typical transaction, let us say the situation of an English foundry man wanting to modernize his plant. There is a special machine made in the United States that this English foundry man wants to buy. Now, he has to go to his British Government and convince them that the purchase of that particular machine will fit into the general recovery program and contribute to it. If his Government decides that that machine, if purchased, will contribute to recovery, then they can do two things for him: No. 1, they can give him an import license so that he can import that machine; No. 2, they provide exchange for him so that he can trade his English pounds for American dollars and get the American dollars to send to the American manufacturer. That is all that takes place, except this: That when the transaction is completed, the English pounds that he put up in exchange for those American dollars go into the recovery fund for Great Britain. The proceeds of that recovery fund can be spent only upon the joint approval of the Economic Cooperation Administration, with the advice and counsel of the then NAC, the National Advisory Council, and the Government of Great Britain. So that the transaction, as it finally develops, is a transaction between an English manufacturer who wants a foundry machine, and an American manufacturer who has a foundry machine to sell. We come into it only by providing dollars to the British Government, so that they can, in turn, give dollars to that manufacturer in exchange for pounds. Senator CAPEHART. The foundry man has dollars and an import license. How does he proceed from that point on? Mr. HOFFMAN. He proceeds in the normal way to buy that machine. Then under our blanket procurement authorization, giving approval, let us say, to a category of machine-tool items for Great Britain, the recovery program may include, let us say, $3,000,000 for such items. That will be broken down somewhat The CHAIRMAN. How do the business firms know that you approve of that? Small business firms, I mean? Mr. HOFFMAN. I will come to that a little later, sir. The CHAIRMAN. I will not interrupt you any more. Senator ROBERTSON. Before you leave this point, would not this be a good place to explain the lumber situation? All of us from States which have any sawmills or lumber plants have had pressure put on us to put pressure on you to buy lumber from the United States rather than from some foreign country. I do not know whether you are getting lumber from foreign countries, as they say, I do not know where you are getting it. They claim that you are getting it from behind the iron curtain. I imagine you are getting it from Norway and Sweden, some country of that kind. However, I also know that we are consuming our lumber at the rate of 50 percent of our replenishment. Therefore, it would be helpful if you would explain your policy on lumber, each country buying its own supplies, the differential between price and freight or between buying lumber from Norway and shipping it into England, or from New England in the United States, to a foreign country? Mr. HOFFMAN. I will be happy to do that. I want to be sure that this process is understood first. I will be happy to take this on later, sir. Senator BRICKER. Your dealing is entirely with the governments? Mr. HOFFMAN. That is right. All we do is supply the dollars. The government to which we supply the dollars gets its equivalent or counterpart in their own country for every dollar that we supply, and that government jointly with ECA supervises that recovery fund. The proceeds from that fund are expended to promote recovery in the country. Generally speaking we have found a condition where there is either inflation or deflation threatening. If the forces are inflationary we use those proceeds to help combat inflation. That has |