better conclusion as to the capacity of other countries to produce the specific types of things we will talk about later.

Mr. RABAUT. All right.

I did not quite understand the one statement you made about the percentage of their own effort. You talked about their own effort in this manufacturing, and at their own expense, at the expense of each of the countries, did you not?

Secretary JOHNSON. Yes, I did.

Mr. RABAUT. What percentage did you put that at, or was it just an X amount?

Secretary JOHNSON. That is off the record.

Mr. RABAUT. All right.

(Discussion off the record.)

Mr. RABAUT. That is all I have, Mr. Chairman.

Mr. MAHON. Mr. Norrell?

Mr. NORRELL. There is just one point, Mr. Chairman, that I would like to ask a question about. This is addressed to Mr. Acheson, the Secretary of State.

NEED TO ACCELERATE DEFENSE EFFORTS

In the next to the last paragraph of your statement, Mr. Secretary, you say:

The immediate urgent need is for all of us to step up our defenses. I am sure that is correct. I am wondering if you care to elaborate to the committee regarding the activity of our potential enemy, on which that statement was based, especially since I notice that 3.5 billion dollars of the money is to be used in the North Atlantic area. I guess you would want this off the record. I do not care, but I think the American people want to know what is going on by our potential enemies. They should have as much information as is possible to give them.

(Discussion off the record.)

Mr. NORRELL. The evidence you have is that we are going to need the total, or that as it looks today we will need the total, or probably more?

Secretary ACHESON. I think we will need the total of all the effort we can all put into it.

Mr. NORRELL. That is all.

Mr. MAHON. Mr. Engel?

DIVISION OF KOREA AT THE THIRTY-EIGHTH PARALLEL

Mr. ENGEL. Mr. Acheson, when the Japanese Army surrendered in China, Manchuria, and the thirty-eighth parallel was set as a dividing line, that part of the Japanese Army which was north of the thirtyeighth parallel surrendered to Russia, and that part of the Japanese Army which was below surrendered to the Chinese; is that correct?

Secretary ACHESON. Those below surrendered to the Americans. Mr. ENGEL. Was that a military decision or agreement, or was that a State Department agreement, or a joint military-state agreement? Secretary ACHESON. That was a joint military-state recommendation which went to the President and was approved by him.

Mr. ENGEL. It was approved by him and adopted and accepted by the Russians?

Secretary ACHESON. Accepted by the Russians at the time.

Mr. ENGEL. That was construed as defining zones of occupation of Russia and the United States?

Secretary ACHESON. It was intended to be purely a military line for the purposes of accepting surrender, but it solidified itself.

Mr. TABER. It developed into that?

Secretary ACHESON. It developed into zones of occupation. It was intended to be purely a line of convenience for the acceptance of surrender of the Japanese forces. The Russians were north of the thirty-eighth parallel; we were south.

SURRENDER OF JAPANESE TROOPS IN KOREA, CHINA, AND MANCHURIA

Mr. ENGEL. How many Japanese troops surrendered to Russia, with their equipment, and how many to the United States? Do you have that figure?

Secretary ACHESON. I do not have that, but we can get it.
Mr. ENGEL. Does anybody have it?

Secretary JOHNSON. It is available.

Mr. MAHON. You can supply it for the record?

Secretary JOHNSON. We will supply it, but it involves some information which is secret.

(The information was supplied to the committee off the record.) Secretary ACHESON. Do you want the total number of Japanese troops everywhere, or just south of the thirty-eighth parallel?

Mr. ENGEL. I want the total number of Japanese troops who surrendered to the United States.

Secretary ACHESON. South of the parallel, or everywhere?
Mr. ENGEL. South of the parallel.

Secretary ACHESON. In Korea?

Mr. ENGEL. No, I am not talking about in Korea, but China. Secretary JOHNSON. We will gladly furnish the information but it will not mean very much.

Off the record.

(Discussion off the record.)

Secretary ACHESON. There were three areas of surrender, Mr. Engel.

Mr. ENGEL. That is right.

Secretary ACHESON. The Japanese troops in Manchuria and in Korea north of the thirty-eighth parallel surrendered to the Russians. The Japanese troops in China and on Formosa surrendered to ChiangKai-shek. The Japanese troops elsewhere surrendered to the United States.

Mr. ENGEL. So we got very few of them?

Secretary ACHESON. No. We got a very great number of them, through the islands and on the mainlands.

Mr. ENGEL. The various islands where they were fighting and so on? Secretary ACHESON. Yes.

DISPOSITION OF MANCHURIA AFTER SURRENDER OF JAPAN

Mr. ENGEL. What agreements were made between the United States and Russia regarding Manchuria prior to that time? Did we turn Manchuria over to Russia before that time by an agreement?

Secretary ACHESON. No. Manchuria was to be turned over to China.

Mr. ENGEL. Turned over to China?

Secretary ACHESON. Yes. The only agreements I can recall now which were made were the agreements at Yalta.

Mr. ENGEL. Those agreements turned Manchuria over to China? Secretary ACHESON. Yes, Manchuria was to go back to China. Port Arthur, Dairen, and the Kurile Islands were to go to the Russians. Mr. ENGEL. But the Yalta agreement was that China was to have Manchuria?

Secretary ACHESON. I believe that was at Yalta.

Mr. ENGEL. The industrial development was greater in Manchuria than in any other part of China. That is true, is it not?

Secretary ACHESON. That is correct.

Mr. ENGEL. It had been highly developed by the Japanese, who had possession for many years.

Secretary ACHESON. That is correct.

Mr. ENGEL. How long did Japan have possession of Manchuria? Secretary ACHESON. Japan had had rights in Manchuria for some time before 1931, when the Japanese took over Manchuria. We never recognized the legality of that.

Mr. ENGEL. Prior to that time?

Secretary ACHESON. We never recognized it at all.

SURRENDER OF JAPANESE EQUIPMENT AND SUPPLIES IN MANCHURIA

Mr. ENGEL. Now, when the Russians took the surrender of that great Japanese Army in Manchuria they took with that surrender, of course, all the equipment and weapons and supplies that that army had?

Secretary ACHESON. That is correct.

Mr. ENGEL. What became of those supplies and the weapons? Did they keep them?

Secretary ACHESON. There is no clear proof of that. They took the weapons. Some of them have turned up in the hands of Chinese Communist forces. Others may now be in the hands of some of these North Korean forces. I do not know. We have no proof of it.

Mr. ENGEL. But there was a tremendous amount of weapons and supplies up there because Japan had a large army on the Manchurian side of the border and the Russians had a large army on the Siberian side. That is correct, is it not?

Secretary ACHESON. That is right.

Mr. ENGEL. They fought some pitched battles, as I recall the testimony, for years even before the war.

Secretary ACHESON. That is right.

Mr. ENGEL. When Russia took the surrender of those Japanese troops and equipment, did that not put them in a position where they could practically equip the Communist army, if they were turned

over to the Communists, and decide the issue so far as the Communists and Nationalists were concerned?

Secretary ACHESON. It would put them in a position where they could turn that equipment over to anyone they wanted to. It would put them in a powerful position.

Mr. ENGEL. Of course they did turn much of that equipment over to the Communists.

Secretary ACHESON. We believe so, yes.

Mr. ENGEL. Was there anything we could have done about it at that time? I want to be fair, Mr. Secretary.

Secretary ACHESON. Nothing that I know that you could have. done. We had no troops in that area and they did.

Mr. ENGEL. The Russians had a big army. They could have come down and taken the surrender anyway?

Secretary ACHESON. Surely. They were there. They were in occupation at the time of the surrender.

Mr. ENGEL. That was the result, at any rate?

Secretary ACHESON. Yes, sir.

Mr. ENGEL. They have possession of Manchuria right now, do they not, through the Communists?

Secretary ACHESON. They would deny it.

Mr. ENGEL. But the Communists have possession of Manchuria and, of course, they have the arms and equipment and soldiers?

Secretary ACHESON. That is right. We believe that they have substantial control and possession of it.

Mr. ENGEL. That would be a question to be determined under the peace treaty, and, of course, they will never let go of it.

IRAN

How many men are there in Iran? How many troops does Iran have? It is a small country. That is a very small number, is it not? Secretary ACHESON. I do not know. I cannot answer that. Secretary JOHNSON. We will furnish it off the record.

Mr. ENGEL. How much money are we going to put in Iran for national defense?

Mr. MAHON. Off the record.

(Discussion off the record.)

Mr. ENGEL. What I am getting at is this: We have to have the number of troops they have in there, approximately, in order to justify the amount of money which you are going to put in to equip those troops. That is evident, is it not?

Secretary JOHNSON. General Lemnitzer will give you this information when he testifies. His testimony will be based upon what General Bradley and the Joint Chiefs of Staff have recommended for a country or an area. We have those figures, but they are not for publication for security reasons.

Mr. ENGEL. All right. General Lemnitzer will have those figures.

RECIPIENTS OF MUTUAL DEFENSE ASSISTANCE

What nations are going to participate in this $4,000,000,000? Secretary ACHESON. There are three groups. There is the North Atlantic group, which is title I. There is Greece, Turkey, and Iran,

which is title II. There is the general area of China, which includes material for the Philippines, Indochina and those surrounding areas. The totals were $3,504,000,000 for title 1, $193,000,000 for title II, which is for three countries, and $303,000,000 for the far-eastern area.

USE OF EQUIPMENT TO BE SUPPLIED TO MDAP NATIONS

Mr. ENGEL. With regard to this equipment that we are turning over to them outright, does title to that equipment pass over to them? Will they be the owners of it?

Secretary ACHESON. Yes.

Mr. ENGEL. There will not be any lend-lease or anything to quarrel about afterward?

Secretary JOHNSON. There will be restrictions on the use of that equipment and so forth tied into the common defense of that area. That has to be worked out before delivery of this material.

Secretary ACHESON. Of course, they cannot retransfer it. They must use it for certain purposes specifled in the law.

Mr. ENGEL. And it has to be for the common defense?

Secretary ACHESON. That is right. Secretary JOHNSON. That is right. (Discussion off the record.)

USE OF COUNTERPART FUNDS

Mr. ENGEL. Are Economic Cooperation Administration counterpart funds to be diverted to defense purposes?

Mr. FOSTER. I think perhaps the best way of answering that question is to quote a section of a letter which I sent to Senator Connally on July 27, which the Senator has released to the public.

In this connection and because of our own military effort, a question has been raised regarding future use of local currency counterpart funds. While it is clear that in some countries at least a portion of the counterpart could well be directed toward expanding facilities to be used for production of military equipment, there are many instances where present use of counterpart should be maintained best to help attain this new objective. For instance, where the major portion of a nation's counterpart is now being released for such purposes as development of electrical-energy supply, improvements of basic transportation facilities such as roads and railroads, or increasing the facilities of important seaports. These developments can contribute substantially and directly to increasing production for military purposes or to the movement of troops and supplies. It is true, moreover, that wise use of counterpart will further increase the multiplying effect to which I have previously referred and our efforts will be directed to that end.

The multiplying effect which I referred to in the balance of the letter, Mr. Engel, was directed to the point that by the use of a few dollars plus the full utilization of local resources we would get a much greater total production. For instance, in the past in ECA we have in some cases put 5 percent of the total investment in a major capital investment in dollars, matched by 95 percent in local currency, and gotten 100 percent of a total increase in the productive facilities. Thus, the multiplying effect of dollars can be demonstrated.

Mr. ENGEL. You are going to use some of that counterpart to build up their own civilian facilities in their own countries, which are used in the production of military equipment; is that the idea? Mr. FOSTER. That is correct, sir.