REMAINING AID ACTIVITIES TO BE FINANCED BY ANNUAL APPROPRIATIONS

All the other activities, namely, development grants, development research, supporting assistance, the contingency fund administration and voluntary contributions to international organizations will continue to be financed by annual appropriations from the Congress. This year we need $1.69 billion to carry out these important activities. I would like to stress that we hope to be able to reduce this amount in succeeding years as an increasing number of recipient countries work out development plans and self-help programs which will qualify for development lending assistance. We are asking that the appropriation of the $1.69 billion be on a no-year basis of availability. This will avoid the pressures for year-end obligation and enable us to maintain essential standards in granting our assistance.

LONG-TERM DEVELOPMENT LENDING AND BORROWING AUTHORITY

As I have already mentioned, the most important tool by which we intend to implement the new program is the development loan. All loans made under this authority would be repayable in dollars, would bear interest at very low rates or would be interest-free, and would have terms up to 50 years. The loans would be made in the light of specific criteria set forth in the proposed legislation.

Our ability to make long-term development commitments within the borrowing authority requested is really the keystone of the program. It is the best-and I would daresay, the only-means by which we can persuade the recipient countries to undertake the longterm planning and to make the hard political decisions essential for them to succeed in their development efforts. In addition, this ability will put us in a much better position to lead the other industrialized nations toward a working partnership with us in helping the lessdeveloped nations. And finally, it will promote the most efficient use of our own funds.

BORROWING AUTHORITY WILL NOT OBVIATE CONGRESSIONAL CONTROL

The mechanism by which the authorization to make long-term commitments will be effected involves the use of borrowing authority by the President from the Treasury. This procedure does not provide for annual appropriations, but it by no means follows that congressional control over the lending program would be lost. Such control would be exercised in several ways:

First, through the proposed legislation, the Congress would establish the annual availability of funds and the criteria for their use.

Second, the proposed legislation requires the submission of quarterly reports to the Congress on the use of the funds; it also provides for the establishment of an Interagency Loan Committee, in which Treasury and the Export-Import Bank would participate to establish under the direction of the President standards and criteria for the agency's development loan operations in accordance with the foreign and financial policies of the United States.

Third, when the portion of the economic assistance program requiring annual appropriations is presented to the Congress each year, a detailed report of lending activities will be required as well as an

indication of plans for the coming year. Based on these reports, the Congress could curtail or terminate the borrowing authority at any time.

Finally, the legislation would require the submission of an annual budget program in accordance with the provisions of the Government Corporations Control Act; this will give the Appropriations Committees the opportunity each year to review and approve expenditures under the lending authority.

ADDITIONAL AID CATEGORIES

The other categories of our aid include

(a) Development grants, which will be used in large measure to carry out the objectives of the point 4 program to build the educational, technical, and professional skills so badly needed by these lesser developed countries.

(b) Development research, long used by private enterprise and other Government agencies, will employ recognized methods of investigation and analysis to improve our aid programs.

(c) Supporting assistance aimed primarily at immediate political or military objectives.

(d) Voluntary contributions to multilateral organizations which provide essential participation in activities of the U.N. and other international agencies.

(e) Contingency fund to meet emergency needs which cannot now be readily identified or estimated.

In order to save the time of the committee, there is before you as an annex to my statement a description of these additional aid categories, the amounts we have estimated for our requirements, and a brief statement of the manner in which they will be used.

FISCAL YEAR 1962 DESCRIBED AS A YEAR OF CONTINUING EVALUATION OF THE PROGRAM

Fiscal year 1962 will inevitably be a year of testing and experimentation. The new aid agency will just be getting started. We will need to continue to take a hard look at what we have been doing, cut back on certain existing programs and to change the emphasis of others. We will be faced with the problems-as yet not clearly defined-of many new nations which have only begun to take an inventory of their basic needs. For these reasons, certain aspects of the program being presented to you cannot at the present time be spelled out in as much detail as we have been accustomed to doing in the past. This will, however, in no way lessen the vigilance we shall apply in working out and evaluating each program before it is finally implemented.

LONG-TERM ASPECTS OF THE PROGRAM VIEWED AS MOST IMPORTANT

I have concentrated, in this presentation, on our request for borrowing authority to enable us to enter into long-term commitments, because I am deeply convinced that the whole concept of our new program turns on the ability to introduce a long-term perspective into our aid efforts. I cannot overemphasize the importance we place upon

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. For 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 esential 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 economic 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 efficient 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 Spe cial 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 provision, 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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