Vessel. Mutual defense assistance—matériel program by category-Continued NAVY 6, 586, 000 23, 367, 560 1,536, 175 815, 600 17,811, 588 106, 150, 000 22, 000, 000 30, 500,000 46,500,000 7,150,000 14, 250,000 114, 000, 000 13,500,000 7,372, 436 5, 488, 100 5,907, 160 8,970, 849 13, 716, 007 16, 250,000 21,750,000 62,500,000 2,281, 630 1,999, 370 Aircraft, spare parts, and aeronautical equipment and supplies. $74, 645, 904❘ Mr. ENGEL. Mr. Chairman, are we going into detail now, or is it still general questions? Mr. SHEPPARD. It is my intention to proceed with general policy and then to pick up the details later. Mr. SIKES. I am perfectly willing to have this handled when you get to the breakdown. Mr. SHEPPARD. I know you are, sir. (Off the record discussion.) CHARGES AGAINST APPROPRIATION ACCOUNT Mr. ENGEL. Congress has appropriated in effect to the use of this program first a definite amount of money. That is correct, is it not? General LEMNITZER. That is correct, sir. Mr. ENGEL. Which can be used for purchasing, repairing, or anything else within the limits of the act. General LEMNITZER. That is correct. Mr. ENGEL. No. 2, they have appropriated excess equipment, or made use of excess equipment not to exceed $450,000,000 worth; is that right? General LEMNITZER, That is right. Mr. ENGEL. Let us go back now to the antiaircraft gun. Here we have a new antiaircraft gun which does not need repair, out of excess. The cost of that gun would be charged against the $450,000,000. Mr. TABER. The cost. Mr. ENGEL. The cost of it would be charged. General LEMNITZER. That is right. Mr. ENGEL. That goes against the equipment appropriation, if I may use that term. When you have charged against that appropriation $450,000,000 worth of equipment of that type you must stop. That is the end of it. That is correct, is it not? General LEMNITZER. That is the maximum amount of excess equipment we can use; that is correct. Mr. ENGEL. But if that piece of equipment has to be repaired the repair charge comes out of the money end of it and is charged against the money appropriations. The difference between that and the cost of the new equipment is charged against the $450,000,000; is that right? General LEMNITZER. No, sir. The difference between these two is not charged anywhere, if I understand your question correctly. If it comes from excess there is no problem of replacement, sir. Mr. ENGEL. I see. General LEMNITZER. There is no replacement. Mr. ENGEL. That is right. General LEMNITZER. May I clear that up? Mr. ENGEL. Only excess equipment that is fit to be used is charged against that fund? General LEMNITZER. That is right. That is the only kind we are using in this program. Mr. ENGEL. When the cost of that equipment reaches $450,000,000 you must stop? General LEMNITZER. We must stop. Mr. ENGEL. That means that Congress intended to place a limitation on the amount of excess equipment we could turn over? General LEMNITZER. That is right, sir. Mr. OHLY. I would like to interject that in the amendments to the legislation this year the amount of $450,000,000 was raised to $700,000,000. Mr. ENGEL. I am just talking about the problem. Mr. ENGEL. Of course, the other item of the repair matter was handled by the discussion with Mr. Sheppard and Mr. Sikes on the record. General LEMNITZER. Yes. (Discussion off the record.) RESTRICTION ON EQUIPMENT SHIPPED TO MDAP COUNTRIES Mr. ENGEL. You testified, General, that this equipment was furnished to these countries pursuant to an agreement, and that agreement provided restrictions as to the transfer of that equipment to other countries. General LEMNITZER. That is right. Mr. ENGEL. Has that agreement been kept, or has any country actually transferred any equipment in violation of this? General LEMNITZER. Not to my knowledge, sir. Mr. ENGEL. Not to your knowledge? General LEMNITZER. No, sir. PRODUCTION OF EQUIPMENT IN MDAP COUNTRIES Mr. ENGEL. Now, in discussing the question of furnishing raw materials and money to these countries for the production of equipment in their own country by their own effort how do you determine the value of their services in making up their contribution? Mr. OHLY. We do not transfer money to any of them. Mr. ENGEL. I know you do not. Mr. OHLY. At the moment, except as we propose this year to buy things from some of them. General LEMNITZER. I think we should explain the method of handling additional production projects. Mr. ENGEL. Let us go off the record. (Discussion off the record.) Mr. ENGEL. Just how does this joint program operate? Mr. PAUL. The countries concerned submit additional production project statements to the United States. These documents give the information, first of all, as to what they intend to make, the quantity of the equipment they are going to make, the value of that equipment translated into dollars, and the amount of United States aid in the form of materials, components and, up to this year, machine tools which they request this country to furnish. We screen these projects in this country and also in the United States elements overseas, including the regional offices in London, the various embassies, military advisory groups and the ECA missions. We look over their requests from the point of view of whether the items they request are available outside the dollar area. If they can get them through use of their own resources, aid is refused. That is a judgment that ECA is in a position to make, because we know the foreign exchange positions of all these countries. The Department of Defense looks over the military aspects and the pricing. For example, they may request a certain amount of copper to make a certain weapon, and we look at that from the point of view of what that costs us to make the same weapon, and the amount of that material we would require for manufacture of that weapon in this country, and if the request seems to be out of line, we shave it down accordingly. Each project is gone through very thoroughly. All the agencies concerned go over it. Then this committee determines how much aid should be furnished to the particular project. Mr. ENGEL. How do they arrive at the value of their contribution? Is that by transferring francs into dollars through foreign exchange and the then rate? Mr. PAUL. Yes, sir; at the then rate. Mr. ENGEL. There would be a change? General LEMNITZER. There is a variable involved. Mr. ENGEL. Yes. There would be a tendency to inflate their contribution in order to get more from us. Mr. PAUL. We have taken that into account in our aid. Mr. ENGEL. The value is upon the rate of exchange at that time, at the time the arrangement is made? Mr. PAUL. That is correct, sir. By and large their prices are lower than ours for comparable equipment. Mr. ENGEL. I understand that, of course. Their wage rate is down. Mr. PAUL. Yes. Mr. ENGEL. Everything is down? Mr. PAUL. Yes. Mr. ENGEL. Their costs are down? Mr. PAUL. That is correct. Mr. ENGEL. That is exactly the reason why I figured that we ought to be able to get more mutual-aid defense value through money which we furnish them and material which we furnish them to make this same equipment. Mr. PAUL. Oh, yes. It is a much larger return on the investment. Also, you must bear in mind that the amount of the United States aid that is furnished is a very, very small portion of their own budgetary outlay in the projects. The percentage of their expenditure to ours might run anywhere from 4 to 1 to a much larger percentage. Mr. ENGEL. Off the record. (Discussion off the record.) Mr. ENGEL. The Atlantic Pact was signed April 4, 1949? General LEMNITZER. That is correct. Mr. ENGEL. It was ratified by the different nations on August 24, 1949? General LEMNITZER. Yes. It entered into force on that date. Mr. ENGEL. The authorization law for the mutual-defense program was signed by the President on October 6, 1949? General LEMNITZER. Right. Mr. ENGEL. And the first appropriation bill was signed October 28, 1949. The speech that I referred to off the record was delivered on March 29, 1948, a year and 4 months before the pact was ratified. Mr. TABER. Was the table that you talked about early this morning produced for the record? 69887-50-pt. 2- 22 ALLOCATIONS AND OBLIGATIONS OF MDAP FUNDS General LEMNITZER. It was the table of allocations and obligations with 1950 MDAP funds. We can put it in the record. These figures are as of June 30, and the figures that Mr. Ohly gave uou were the figures on July 15. Mr. TABER. I think the table should go in the record. Mr. SHEPPARD. It will be inserted in the record at this point. (The table referred to is as follows:) Special report on allocations and obligations of 1950 MDAP funds and contract authority as of June 30, 1950-Preliminary summary, Department of Defense 1 1 This report excludes title IV (section 408e-Cash advances) and fund allocations and obligations within OSD. 2 Authorized obligations represent the sum of obligations of record and obligations in process. Additional allocations necessary to cover such obligations will be made available on justification. Includes funds from which fiscal year limitations have been removed under authority of section 403aPublic Law 329 (ocnstruction of ships). Progress Reports and Statistics, Office of Secretary of Defense, July 12, 1950. CONTRIBUTIONS OF MDAP COUNTRIES IN KOREA Mr. PLUMLEY. Mr. Sikes, did you get a satisfactory answer to your question relative to the contribution which is being made by those who join with us in the Atlantic Pact? Mr. SIKES. That is going to be provided for us, Mr. Plumley. Mr. PLUMLEY. Is it understood it is going to be a matter of record to be discussed on the floor, or will it be confidential? Mr. SIKES. I understand part of it will have to be off the record. |