Mr. LANTAFF. Why is that? Why should a treaty be negotiated in Italy and not one with France? Mr. WILLIAMSON. Because the Italians were very much in favor of that and wanted it, first; secondly, because of the-well, the desire on our own part to bring about investment in the economic possibilities in Italy and to encourage investment in the economic possibilities of Italy. Mr. CURTIS. Actually, the more private money that goes in there, the less you will need from our Government. Mrs. HARDEN. Mr. Chairman, may I ask a question? Mr. LANTAFF. Yes, Mrs. Harden. Mrs. HARDEN. How many changes have there been in the French Government since 1935? Mr. WILLIAMSON. Offhand, I do not know. I mean I would have to go back to the record and count them. I really would not want to guess, unless I guessed off the record. Mr. LANTAFF. Well, go off the record. (Discussion off the record.) Mr. LANTAFF. Any other questions? Mrs. HARDEN. No. Mr. MEADER. I would like to ask one. Mr. LANTAFF. All right. Mr. MEADER. Are you familiar with what happened to our surplus property in France and Italy? Mr. WILLIAMSON. No sir; I am not. Maybe Mr. Murphy is. Mr. MEADER. I had one other question that I had forgotten to ask in connection with Italy. The Parke-Davis Co. in Detroit has complained that the Italians have not been respecting the treaty or living up to it. Are you familiar with that? Mr. WILLIAMSON. Personally I am not. There are people in my office who have discussed that question with various representatives of the drug firms in the United States. Mr. MEADER. Off the record. (Discussion off the record.) Mr. LANTAFF. Mr. Williamson, I think we are about through here. Is there anything further that you wish to add with reference to anything within your sphere? Mr. WILLIAMSON. Nothing, sir, except to say we would be delighted to inform all of our people of your interest so that they can, ahead of time, get the desired materials collected. Mr. LANTAFF. We will have it prepared within the next day or two. Mr. WILLIAMSON. And so you can get the exact answers to your exact questions. Mr. LANTAFF. Well, our time has expired. I am willing to adjourn for this afternoon. (Whereupon, at 4: 45 p. m., the subcommittee adjourned.) FEDERAL SUPPLY MANAGEMENT (Overseas Survey) THURSDAY, OCTOBER 11, 1951 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTERGOVERNMENTAL RELATIONS, OF THE COMMITTEE ON EXPENDITURES, IN THE EXECUTIVE DEPARTMENTS, The subcommittee met, pursuant to adjournment, at 2:45 p. m., in room F-14, United States Capitol, Hon. Herbert C. Bonner, chairman of the subcommittee, presiding. Members of Congress present: Herbert C. Bonner, chairman, W. J. Bryan Dorn, Sidney A. Fine, Bill Lantaff, Cecil M. Harden, Charles B. Brownson,, and George Meader. Staff representatives present: Christine Ray Davis, chief clerk; Thomas A. Kennedy, general counsel; Herbert Roback, staff member; Ray Ward, Bureau of the Budget. Mr. MORELAND. When we closed yesterday we had on deck Mr. Beale, who can give you some background information on Great Britain. I would suggest, if you wish to hear him, that he be first, and then we can move into our lend-lease and surplus property staff. Mr. BONNER. All right, sir. Mr. MORELAND. This is Mr. Beale, who is in the British Commonwealth and Northern European Affairs Office. Mr. BONNER. Mr. Beale, will you give your full name? STATEMENT OF THOMAS BEALE, OFFICER IN CHARGE, ECONOMIC AFFAIRS, OFFICE OF BRITISH COMMONWEALTH AND NORTHERN EUROPEAN AFFAIRS, DEPARTMENT OF STATE; ACCOMPANIED BY ALLEN MORELAND, CONGRESSIONAL LIAISON OFFICER, DEPARTMENT OF STATE Mr. BEALE. My name is Thomas Beale and I am Acting Officer in Charge of Economic Affairs in the Office of British Commonwealth and Northern European Affairs. I think that of the main points in connection with the United Kingdom, the most important is the size of their defensive program. They have programed for the 3 fiscal years of 1952, 1953, and 1954, 4.7 billion pounds sterling, or about $13 billion. NOTE.-Asterisks denote classified material deleted for security reasons. I think it is not unfair to say that the United Kingdom is making one of the largest and most effective contributions of any of the NATO countries with, of course, the exception of the United States. Mr. BROWNSON. Is that 13 billion for the 3-year period, Mr. Beale? Mr. BEALE. Yes, it would be scheduled over the 3 years. Out of the $13 billion or the 4.7 billion pounds sterling, the British have estimated that about 2 billion pounds sterling will go for matériel for the defense program, and out of that 2 billion pounds sterling they have already contracted for about 1 billion pounds sterling, and expect shortly to have that go up to about 1.3 billion pounds sterling. BALANCE-OF-PAYMENTS SITUATION IN UNITED KINGDOM As you know, the United Kingdom is currently in a very difficult balance-of-payments situation which has become increasingly serious in the last quarter. They have expected a surplus on over-all account for 1950-51 of about $500 million, and if the situation continues to deteriorate, they anticipate a deficit in the current fiscal year ending next June. At the beginning of 1949 the gold and dollar reserves of the sterling area stood at about $1.9 billion, and as of June this year they stood at about $3.8 billion. During the past 3 months ending September 30 the gold and dollar reserves of the area as a whole fell by about $598 million, and now stand at about $3.2 billion. The situation facing the British today is a combination of a good many different factors. The terms of trade have turned against them in the sense that the volume of their imports has increased, the price of their imports has increased, and the volume and prices of the exports have not gone up to an equivalent extent, so that they have been at a disadvantage from that standpoint. They have had to plan for losses as a result of the Iranian situation, and that has been estimated as representing a net dollar loss of about $300 million. In recent talks with the Chancellor of the Exchequer I am not sure whether this should be on the record or off the record Mr. BONNER. Off the record. (Discussion off the record.) Mr. BEALE. In order to deal with the situation, one measure that the British will probably have to take is a reduction in imports into the United Kingdom, and they have indicated that they also plan to talk with the Commonwealth countries about reduction of dollar imports into the Commonwealth countries in order to save dollars on that account and help them meet their deficit. The other point of course is that on October 25 there is an election in the United Kingdom. I take it that this committee is going west, so when you arrive in the United Kingdom that question will be decided. That in brief is the current situation, and I would be very glad to answer any questions. Mr. BONNER. Mr. Fine? Mrs. HARDEN. No questions. Mr. BONNER. Mr. Lantaff? Mr. LANTAFF. I haven't any. Mr. BONNER. Mr. Brownson? Mr. BROWNSON. Do you happen to know anything about the British military supply system. I heard rumors all during World War II that the British had set up a formula whereby they would get back into Great Britain a significant fraction of the total amount of tonnage that went out to support an expeditionary force. In other words, they expected to ship back as salvage part of the gross tonnage that went out. Do you know anything about that? Mr. BEALE. I am sorry to say I do not know whether they did in fact work it that way. BRITISH MILITARY SUPPLY As you know, the Ministry of Supply is, in effect, the Ministry of Munitions in the United Kingdom, and they procure for the ground forces and the air forces, whereas the Admiralty procures for the Navy, and also they have responsibility for those industries that are directly related, the metal-using and electronics industries, so that they have responsibility for iron and steel, for example, and for the motor-car industry. It is up to them to decide, I presume, how many motor cars should be allocated to the domestic market and how many to the export market. Mr. MORELAND. Mr. Brownson, we are requesting our mission in London to let you visit with the appropriate people, to give you this information first-hand. Mr. BROWNSON. Fine. Now, this is my other question: Do you have a pretty accurate and well-established ratio which would describe Britain's relative production today as compared to her prewar production? Mr. BEALE. Yes. I do not recall them offhand, but there are such figures. You mean the gross national product prewar and the gross national product afterward, and then the relationship of the defense effort to that? Mr. BROWNSON. Yes; and I was particularly interested in having it not on the basis of price but on some other comparable basis. Is Great Britain well above her 1938 levels? Mr. BEALE. In productivity? Mr. BROWNSON. Yes. Mr. BEALE. Yes, and she is above her 1938 levels, and it would be very easy to get you the figures on that. Mr. BROWNSON. That is all I have, Mr. Chairman. Mr. BONNER. Mr. Dorn? Mr. DORN. I have one question, Mr. Chairman. You say that the British production, that is for war, would be estimated to be around $13 billion over the next 3 years; is that right? Mr. BEALE. That is right. COMPARISON OF DEFENSE EXPENDITURES AMONG NATIONS Mr. DORN. How would that 13 billion compare to 13 billion spent by the United States? Would it produce more goods for war, or less? You see, what I am driving at is inflation eats up a lot of ours. We appropriate for a military appropriation today. Before it actually gets into the field, inflation gets a large part of it. Is the same condition true in England, or does that $13 billion put out quite a bit of stuff? Mr. BEALE. Well, the $13 billion is, of course, going to be stretched over the next 212 years, so in part the answer to your question must depend upon how effectively they control prices over the next 211⁄2 years, but they have been controlling both wages and prices. Mr. DORN. Better than we are here, would you say? Mr. BEALE. Quite effectively, I would say. Mr. DORN. More effectively? Mr. BEALE. Prices have been rising recently, but they rose by only a few percent over the past several years. Mr. DORN. You see, we have to consider that because I am told that $10 billion in a country like Russia for national defense will go as far as $50 billion will in America, and that is the reason why I am asking that question. I just want to know how it does in England. They are controlling it more effectively, you would say, than we are here? Mr. BEALE. Well, I would not like to make the comparison, but I would say that they were controlling it quite effectively in terms of their own economy. Mr. BROWNSON. Do they still have rationing in England? Mr. BEALE. Not on clothes. They do on food, so far as I know. I have not been there for quite some time, and I do not know exactly. Mr. DORN. That is all, Mr. Chairman. Mr. BONNER. Mr. Meader? Mr. MEADER. Is this $13 billion for the next 3 years their entire expenditures for defense? Mr. BEALE. That is their defense programing, as they would carry it. Mr. MEADER. In other words, they only spend about $4 billion a year on defense compared with something like $60 billion that we spend? Mr. BEALE. Yes; but that in terms of their gross national product would probably work out at an equitable percentage of gross national product. Their gross national product is relatively small as compared with ours, and therefore the $13 billion would compare favorably. Mr. MEADER. Has their first installment on the loan, the threeand-three-quarter-billion-dollar loan that is due December of this year been waived already? Mr. BEALE. No. It is not due until December 31. Mr. MEADER. Well, there is some discussion about it, at least the interest being waived, is there not? |