TO AUTHORIZE THE EXTENSION OF CERTAIN NAVAL VESSEL LOANS IN EXISTENCE AND NEW LOANS, AND FOR OTHER PURPOSES THURSDAY, AUGUST 20, 1970 U.S. SENATE, AD HOC SUBCOMMITTEE, Washington, D.C. The subcommittee appointed to consider H.R. 15728, an act to authorize the extension of certain naval vessel loans in existence and new loans, and for other purposes (composed of Senators Inouye (chairman), Byrd of Virginia, and Goldwater) met at 10:10 a.m. in executive session in room 212 of the Old Senate Office Building. Present: Senator Inouye (chairman). Also present: Labre R. Garcia, professional staff member, Herbert S. Atkinson, acting chief clerk. Senator INOUYE. The subcommittee will please come to order. Before we proceed to hear the witnesses, I might state for the record that this special subcommittee was appointed on April 28, 1970, by the chairman of the Armed Services Committee. In his letter to me appointing me as chairman, Senator Stennis has asked that the subcommittee consider H.R. 15728, which would provide for new loans and extension of existing loans of naval vessels to certain foreign nations. Specifically the bill would authorize the extension of existing loans of one submarine to Greece and one submarine to Pakistan, and would authorize new loans in the form of two destroyer escorts to the Republic of Vietnam, two destroyers and two submarines to the Government of Turkey, and three submarines to the Republic of China. I believe it is important to note that authority for the proposed loan of three submarines to the Republic of China was not requested by the executive branch. This particular loan was added to the bill by the House. On April 11, 1970, the Senate Armed Services Committee requested a report from the Secretary of Defense expressing a coordinated position of the executive branch with respect to the loan of three submarines to the Republic of China. The administration's position on this matter was not received until August 7. I might state for the record that the executive branch has interposed no objection to the loan of the three submarines to the Republic of China on the basis that the loan, if authorized, would be permissive in nature and not mandatory. A copy of the letter from the Navy Department will be made a part of the record. (The document follows:) Hon. JOHN C. STENNIS, Chairman, Committee on Armed Services, U.S. Senate, Washington, D.C. DEPARTMENT OF THE NAVY, DEAR MR. CHAIRMAN: Your request for a report representing the coordinated views of the Executive Branch on the authorization of the loan of three submarines to the Republic of China contained in H.R. 15728, an Act "To authorize the extension of certain Naval vessel loans now in existence and new loans, and for other purposes," has been assigned to this Department by the Secretary of Defense for the preparation of a report thereon. H.R. 15728 would authorize the extension of existing loans of one submarine each to Greece and Pakistan and new loans of two destroyer escorts to Vietnam and two destroyers to Turkey as requested by the Department of the Navy. In addition, as passed by the House of Representatives, the legislation contains authorization for new loans of two submarines to Turkey and three submarines to the Republic of China. With respect to the three submarines for the Republic of China, the Executive Branch recognizes the need for continuing improvement of the Republic of China's defensive naval capability and steps are being taken to assist in correcting its deficiencies. As the Committee knows the Executive Branch did not request the inclusion of the authority to lend submarines to the Republic of China. Rather, this amendment was added by the House committee. While the Executive Branch thus did not recommend this amendment, in view of the fact that it is permissive and not mandatory, it will interpose no objection should the Congress wish to enact it. The Department of the Navy has now arrived at the point where the timing of several ship transfers within H.R. 15728 has become critical. Vietnamization turnover plans call for the transfer of the first destroyer escort in August 1970. In order to commence the required pre-transfer overhaul and training actions, the Navy needs assurance of turnover authority as soon as possible. The Navy is inactivating and otherwise retiring a significant number of combatant ships during this fiscal year. Utilization of these units, instead of the mothballed ships previously used to fulfill ship loan requirements, could provide financial savings to both the Navy and the Military Assistance Program, while immediately enhancing the operational capability of allied navies. Such is the case with the Turkish ships now in the bill. However, if timely authorization for the requested loans is not forthcoming, the opportunity to use these retiring ships will pass. For the foregoing reasons, the Department of the Navy, on behalf of the Executive Branch, urges that H.R. 15728 receive favorable consideration at the earliest possible time. This report has been coordinated within the Department of Defense in accordance with procedures prescribed by the Secretary of Defense. The Office of Management and Budget advises that, from the standpoint of the Administration's program, there is no objection to the presentation of this report on H.R. 15728 for the consideration of the Committee. Sincerely yours, MEANS JOHNSTON, Jr. Rear Admiral, USN, Chief of Legislative Affairs (For the Secretary of the Navy.) Senator INOUYE. We have with us today witnesses from the Defense and State Departments. It will facilitate matters if the Defense witnesses are heard first. The subcommittee has also invited Dr. Arnold Kuzmack from the Brookings Institution who will also be heard after the witnesses of the executive branch. Gentlemen, we welcome you here. Please be seated and state your names for the record and your official positions. If you have prepared statements you may proceed in any way you would like. (The bill follows:) 91ST CONGRESS 2D SESSION H. R. 15728 IN THE SENATE OF THE UNITED STATES MARCH 24, 1970 Read twice and referred to the Committee on Armed Services AN ACT To authorize the extension of certain naval vessel loans now in existence and new loans, and for other purposes. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That notwithstanding section 7307 of title 10, United States 4 Code, or any other law, the President may extend on such 5 terms and under such conditions as he deems appropriate the 6 loan of ships, previously anthorized as indicated, as follows: 7 (1) Greece, one submarine (Act of October 4, 1961 (75 8 Stat. 815)) and, (2) Pakistan, one submarine (Act of Oc9 tober 4, 1961 (75 Stat. 815)). 10 SEC. 2. Notwithstanding section 7307 of title 10, United 11 States Code, or any other provision of law, the President 1 may lend two destroyer escorts to the Republic of Vietnam 2 and two destroyers and two submarines to the Government 3 of Turkey and three submarines to the Republic of China 4 in addition to any ships previously authorized to be loaned 5 to these nations, with or without reimbursement and on 6 such terms and under such conditions as the President may 7 deem appropriate. All expenses involved in the activation. 8 rehabilitation, and outfitting (including repairs, alterations. 9 and logistic support) of ships transferred under this section 10 shall be charged to funds programed for the recipient gov11 ernment as grant military assistance under the provisions 12 of the Foreign Assistance Act of 1961, as amended, or suc13 cessor legislation, or to funds provided by the recipient government. The authority of the President to lend naval 15 vessels under this section shall terminate on December 31, 14 16 1971. 17 21 SEC. 3. All new loans and loan extensions executed 18 under this Act shall be for periods not exceeding five years, 19 but the President may in his discretion extend such loans 20 for an additional period of not more than five years. Any agreement for a new loan or for the extension of a loan 22 executed under this Act shall be made subject to the condi23 tion that the agreement may be terminated by the President 24 if he finds that the armed forces of the borrowing country 25 have engaged, at any time after the date of such agree |