this single aspect of our total program. Only with the assurance that they will not be left in midstream will the recipient countries be able to do their part of the job. Only this assurance will persuade the other developed countries to enter into full partnership with us.

our part, it will enable us to manage our own contributions more effectively and to know that we have put them to the most useful purpose.

GOAL OF WORLD PROGRESS TOWARD FREEDOM AND STABILITY

The free countries of the world, wealthy or poor, less advanced or more advanced, have an unprecedented opportunity to work effectively together toward a goal of progress which will bring hope to millions of people. It is my strong conviction that the bill before you is essential to enable us to play our full part in this great enterprise-in making the decade of the sixties-in the words of President Kennedy

the period in which an enlarged community of free, stable, and self-reliant nations can reduce world tensions and insecurity.

(The annex previously referred to follows:)

ANNEX TO THE STATEMENT BY THE HONORABLE HENRY R. LABOUISSE, CHAIRMAN OF THE PRESIDENT'S TASK FORCE ON FOREIGN ECONOMIC ASSISTANCE

AMOUNTS REQUESTED BY CATEGORIES OF AID

Development loans.-Authorization is requested for the lending of funds for development purposes, in the following amounts: (a) $900 million authorized to be borrowed from the Treasury beginning in fiscal year 1962; plus an additional $1.6 billion beginning in each of the next 4 fiscal years, to be financed in the same manner; and (b) an average of approximately $300 million a year over the next 5 years from the proceeds of certain loans made in prior years under the mutual security and other programs. All loans under this authority would be repayable in dollars, would bear interest at low-interest rates or be interest free, and would have terms up to 50 years. The loans would be made in accordance with specific criteria set forth in the proposed legislation.

Development grants.-Obligational authority of $389 million (including $380 million of new authority and an estimated $9 million of unused authority from the current year), to be available on a no-year basis. The grants would be used to finance educational and other activities contributing to the development of human resources, as well as economic overhead projects in new countries whose capacity to carry even relatively soft loans is at present doubtful. This would include grants to permit selected countries to secure expert help in preparing long-range development programs, to survey natural resources or sectors of particular economies, and to appraise particular capital project possibilities. The minimum requirements for carrying forward in fiscal year 1962 activities initiated in prior years-as distinguished from requirements for new activitieshave been projected. Of the $389 million requested for development grants, $259 million represents these continuing costs. All continuing activity will be subjected to a careful review in the light of the new development criteria, to determine whether they should be continued, expanded, or terminated.

The balance of $130 million has not been programed by country. Of this amount $5 million is required to pay the handling, transportation, renovation, and other costs of nonagricultural excess property acquired from agencies of the U.S. Government. The remaining $125 million will be used to finance new programs and projects. This represents our best estimate, an estimate we shall constantly review, as to the minimum amount that is needed and can be effectively employed this year.

Supporting assistance.—Obligational authority of $610 million (including $581 million of new authority and an estimated $29 million of unused authority from the current year). Supporting assistance will be used in cases where urgent U.S. national security and political foreign policy needs are a major considera

tion and where the circumstances requiring assistance do not provide adequate assurance that development criteria can be met. In the fiscal year 1962 program supporting assistance is now projected for 24 countries in all regions of the world.

Development research.—An appropriation of $20 million is being requested for fiscal year 1962 to begin a program of development research, including applied research on the application of research and development within the economie assistance program. This will be the first concerted program of research de signed to contribute the results of scientific investigation to the improvement of our economic assistance program, and follows the lead already taken by private enterprise and other Government agencies in allocating an adequate expenditure for purposes of research. The program follows recommendations made by the President's Science Advisory Committee to secure more efficien: use of aid resources through intensive research directed at problems of the aid program. In most instances, the actual research would be carried on outside the Government in private laboratories and institutions and by private individuals under grants or contracts.

Voluntary contributions to international organizations.-A program of $158 million (including $153.5 million of new appropriations and $4.85 million to be carried forward from the current year) is requested to finance voluntary contributions in fiscal year 1962 to 13 international organization programs specified in the chapter in the presentation on this subject. These contributions are over and above assessed contributions to international organizations for which financing is provided in separate legislation. The major elements to be financed include $40 million for the U.N. Technical Assistance Administration and Special Fund, $62 million to support U.N. military and economic activities in the Congo, and contributions to the U.N. Relief and Works Agency for Palestine Refugees, the U.N. Children's Fund and the Indus Basin Development Fund, The figures are set forth in tabular form on page 79 of the presentation book. Contingency fund.-Appropriation of $500 million is being proposed for contingencies which might arise during fiscal year 1962. Those contingencies include those clearly not foreseen at this time and those anticipated events whose costs cannot be estimated now with any reasonable degree of accuracy. As the President stated in his May 25 message, this represents a $250 million increase over the sum previously requested-an increase made imperative by the growing threats to freedom around the globe, as illustrated by recent events in Southeast Asia.

Private enterprise.-The role envisaged for private enterprise, United States and foreign, under the new program is outlined in the presentation book, under the tab "Private sector." Support for this activity is planned under a variety of different authorities, including development loans, the small business provi sion, investment guarantees, and the employment of the management, technological, and professional skills of American private enterprise through contracting.

The participation of private capital will also be encouraged by a new provision which would permit the United States to bear, in appropriate cases, part of the burden of investment feasibility surveys undertaken by potential U.S. private investors. We propose to start this activity on a modest and experimental basis, to be funded this first year by an authorization of $5 million.

Administration. In addition to the categories of aid described above, we are requesting authorization for $51.55 million for administrative costs of the new program, as more fully described under the tab "Administration" in the pres entation book.

The CHAIRMAN. Thank you very much, Mr. Labouisse. That is a fine statement.

Now we will hear from the Under Secretary of State, after which we will have questions for either or both of you gentlemen. Mr. Ball. STATEMENT OF HON. GEORGE W. BALL, UNDER SECRETARY OF STATE FOR ECONOMIC AFFAIRS

Mr. BALL. Mr. Chairman, I appear before this committee this afternoon to discuss certain aspects of the operation of the new aid program which have not been specifically dealt with by previous witnesses.

Secretary Rusk has laid out the main concepts embodied in the act for International Development and the International Peace and Security Act. Secretary Dillon this morning has discussed the fiscal implications of the new economic aid program and its effect upon our balance of payments. Mr. Labouisse has just outlined the concept of that program and the institutional arrangements for its administration.

RELATIONSHIP OF PROGRAM TO U.S. FOREIGN ECONOMIC POLICY

I propose to address myself primarily to the relationship of this program to our total foreign economic policy.

Foreign economic policy can no longer be confined to the simple issue of protectionism versus free trade which preoccupied our forefathers in the 19th century. Today the issues are more complex and the stakes far higher. Without wishing to be pedantic, I suggest that we must develop foreign economic policies appropriate to our relations with three broad areas.

REQUIREMENTS OF COMMERCE WITH INDUSTRIALIZED NATIONS

First, we must have policies that reflect and support the requirements of commerce with our trading partners in the advanced industrialized nations of the free world. These policies, necessarily grounded on liberalism as befits a great exporting nation, cannot be static in a rapidly changing world. Even in this traditional area of policy, old relations are being altered by the coming into being of the European Common Market and the Free Trade Association. Further alterations would take place should Great Britain and some of the other European countries elect to become members of the Common Market. We must be prepared, therefore, to take a fresh and continuing look at our trading policies, and we are planning to review them fully before the existing Reciprocal Trade Agreements legislation expires in 1962.

NEED FOR A POLICY TO COPE WITH COMMUNIST BLOC EXPORT SURPLUSES

Secondly, we must have effective policies to cope with the growing export surpluses of the Communist bloc countries, and with the threat of market disruption and covert and overt economic warfare that the utilization of such surpluses may pose with regard to certain commodity and industrial sectors.

NEED FOR ECONOMIC POLICY ADEQUATE FOR DEALING WITH UNDERDEVELOPED

AREAS

Thirdly and this is the subject of my testimony today-we must develop a body of foreign economic policy that will enable us to deal effectively with those areas of the world-mostly south of the Tropic of Cancer-that comprise the less developed countries. I shall attempt in a moment to point out how the legislation now before this committee relates to that larger body of policy. First, however, I think it might be useful to make a few observations regarding the size and nature of the area we are discussing the less developed countries of the non-Communist world.

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DISTRIBUTION OF THE POPULATION

It is not always easy for those of us who reside in the economically advanced countries of the free world to recognize our minority position in the total world scene. We Americans, for example, constitute only about 6 percent of the world population-and this percentage is almost certain to diminish rather than increase. Sometime this year the 3,000,000,000th human being will be born. In fact, on the basis of the statistical average, 200 births will occur every minute I am speaking this afternoon. Of those 200, only 8 will be citizens of the United States. One will be a Canadian, two will be British, two German, and three Japanese. Ten will be citizens of the Soviet Union. But 17 of the 200 will be born in Latin America: 34 will be citizens of India: and 50 will be born on the mainland of China.

POPULATION GROWTH IN UNDERDEVELOPED AREAS

The trend and dimensions of these figures are obvious. The areas of most rapid population growth are Asia and Latin America. Latin America passed the United States in population in 1950. If present curves are extrapolated, in the year 2000 there will be almost 350 million U.S. Americans but 600 million Latin Americans. In 1900 there was one European for every two Asians. By the end of this century, if present curves continue, there will be less than one European for every five Asians.

Of the 3 billion people alive this year, 1 billion are behind the Iron Curtain-a world stretching from the Brandenberg Gate to the Yellow Sea. There are 2 billion people in the non-Communist world. Of this 2 billion, twice as many people live in the economically less advanced as in the more advanced nations.

Any child born today has, therefore, a 2 to 1 chance of being born in one of the less developed nations of the world-in fact a 2 to 1 chance of being born in a nation where the average per capita annual income is less than $50 or $60 per year. Such widespread poverty can no longer be brushed aside as one of the less attractive facts of life. Apart from moral considerations we live in a time when the disparity between the rich and poor nations endangers the security of the world. Modern means of communication, such as the radio, have made it possible to reach the vast masses of illiterate people and to imbue them with new ideas and new hopes, a new sense of unity and new expectations. And, as this committee knows all too well, the last few years have seen the crumbling of old colonial structures under which millions of the less developed peoples have lived.

FORCES OF CHANGE IN THE LESS DEVELOPED WORLD: THEIR POTENTIAL AND THEIR CHALLENGE

The crumbling of these structures, together with the social convulsions occurring in the less developed nations, have unleashed massive forces. These forces, at the same time both complex and violent, spring from the eager desire of millions of people to advance politically, economically, and socially, and to achieve not only decent living standards but a decent measure of self-respect in a rapidly changing world.

These forces of change carry an enormous potential for good or evil. They pose for the Western World a fateful question: Can we through wise and generous policies assist in channeling these forces toward constructive purposes? Or will they be directed toward ends that are not only self-destructive for the new nations but which can place in jeopardy the most precious values of civilization to which we are committed?

COMMUNIST BLOC EFFORTS TO EXPLOIT THE FORCES OF CHANGE

It has been said often enough that this revolution of the less-developed peoples would pose a challenge for the economically advanced nations of the free world even if aggressive communism were not a political fact. Yet it is an undeniable fact that the Communist bloc is devoting substantial energy and resources toward exploiting the forces of change that are at work in the world today. In the exploitation of these forces, the Communist bloc is employing not only political and military but also economic tools in the form of an extensive foreign aid program. But it is foreign aid with a difference.

NATURE OF SOVIET FOREIGN AID

Soviet foreign aid is a part of a political process directed at the achievement of a far simpler task than that which falls to the lot of the Western World. The Communists are not seeking primarily to raise the standard of living of the underdeveloped peoples, or to create conditions conducive to independent political institutions, but rather to employ economic assistance as a weapon of influence and a means of undermining ties with other free countries. They are quite prepared to use aid to exploit the discontent of these people that stems from the built-in inequities and feudal stratification that are part of the heritage of many of these nations.

WESTERN AID EFFORTS AIMED AT ELIMINATING CAUSES OF DISCONTENT

We of the West face problems of a wholly different order. We do not seek to exploit discontent but to eliminate its basic causes. We do not strive to create chaos but rather the conditions for accelerating growth within an environment of stability. If the West is to succeed, we must make it possible for the underdeveloped peoples to devote their newly unleashed energies not only to the building of stable economies and effective institutions but to the accomplishment of those social and economic changes that will eliminate injustice and inequity.

CONTRAST BETWEEN U.S. AND COMMUNIST AID OBJECTIVES

One cannot overemphasize the contrast of objectives between the Communist aid effort and our own. Their goal is the corruption and infiltration of free societies and the creation, where appropriate, of conditions favorable to the capture of power by local Communist minorities. In certain circumstances their aid efforts resemble those of the West; but in a greater number of situations the goal of economic disruption and chaos is clear cut.