Mr. BONNER. Mr. Brownson? Mr. BROWNSON. When you have disposed of this scrap you were telling about, do you not still have to issue a permit to export to the purchasers? Mr. MURPHY. From the foreign country? Mr. BROWNSON. From the country where your scrap is located. I am particularly thinking of the scrap out on Guam. Mr. MURPHY. That is covered by the same export procedures that govern the United States, but I believe it can be brought back into the United States. Mr. BROWNSON. But, in the case of Guam, if you issued a permit you would know where they finally sold the stuff? Mr. MURPHY. They would have to declare their intentions there; that is correct. Mr. BROWNSON. You were talking about policy. Is the policy on scrap being determined by the State Department based on the economic conditions of the country involved? Is there any review once you have made that determination, or is the State Department's word the final word on it? DECISIONS ON SURPLUS DISPOSALS Mr. MURPHY. Usually it is not sort of a mandatory decision. We get together and talk with the agency and with the people in the State Department, frequently check with Commerce, talk with ECA, and since the coming into effect of these emergency agencies like NPA, they are contacted, so it really is not a decision that the State Department just makes and says this is how it shall be done, but there is not a higher authority as far as I know. Mr. BROWNSON. Was it in Germany that you had some lead included in the scrap? Mr. MURPHY. I think it is lead. Mr. MEIGS. Scrap aluminum and lead. Mr. BROWNSON. Who is going to make the final decision? Will your section in the State Department make it? I mean the decision as to whether it is more important that this scrap goes into Germany or comes back to the United States or goes to France? How is that decision made? Mr. MURPHY. Well, that decision has already been made in the case of this sale. We have given the green light to the Army, and those very things were taken into consideration, and it was decided by everybody who put their attention on the problem that the best thing to do was to sell it in Germany. It is my recollection that there is a requirement for aluminum in Germany, and I think that ECA pointed out they would like to avoid a cross haul if possible, and sell it for use in Europe. There is a need there for aluminum. I know that is one concept that is frequently followed. BOOKKEEPING ON DISPOSALS TO JAPAN Mr. BROWNSON. I was curious quite a while back there when you were talking about the funds that accrued in Japan, this $14 million that the Japanese Government Mr. MURPHY. That accrued to the United States. Mr. BROWNSON. Yes; that is right, and then you were talking about how we would spend those funds over there. Do you have to have special authority to spend that $14 million? What is the bookkeeping transaction there in the case of the $14 million worth of surplus which was sold to the Japanese Government? Mr. MURPHY. The Japanese now owe us that money. Mr. BROWNSON. And now you are spending part of that $14 million in Japan! Mr. MURPHY. Yes, sir; that is right. Mr. BROWNSON. Do you have any special authority-do you have to have any special authority to spend that in Japan? How does that work? USE OF LOCAL CURRENCIES DERIVED FROM SURPLUS SALES Mr. MURPHY. Well, there are several laws that permit the use of local currency, and one is what they call the FBO law, the foreignbuildings law, under which the State Department builds consulates and embassies abroad-buildings abroad. Under that law they are permitted to use local currencies that were acquired under surplus property and lend-lease, and they buy those local currencies from our Treasury after we draw them down from Japan or Korea or whoever it might be, and they deposit dollars in the Treasury, so there is no outflow of dollars. Mr. BROWNSON. In other words, that does not serve, then, to augment your appropriation? Mr. MURPHY. Oh, no. Mr. BROWNSON. If you have, as the saying goes, X number of dollars appropriated to build an embassy in Japan and you use part of this $14 million to build that building, you have to deposit or put back in that much of your appropriation? Mr. MURPHY. That is correct. You have to buy that local cur rency. Mr. BROWNSON. So you are buying the yen with American dollars in order to build that embassy? Mr. MURPHY. That is right. Now, that does not apply to the Fulbright program. Under the Fulbright law, they can draw the local currency and use it for the exchange of scholars and students and teachers, and they do not have to deposit a certain sum of money. They just draw the local currency and it is considered as being used. Mr. BROWNSON. Of course, that is an activity that has no appropriation, as such? Mr. MURPHY. That is right. Mr. BROWNSON. So that is why it would have to work that way. Mr. MURPHY. On the administrative expenses the new appropriation for the State Department authorizes the use of some of this local currency to defray some of our administrative expenses, but I understand that the appropriation is tailored to fit that possibility, so there is no dollar appropriation made. SURPLUS PROPERTY ACT PROVISIONS ON FOREIGN SURPLUS NOT TESTED Mr. WARD. May I ask a question, Mr. Bonner? Was it a good idea to change the concept of the Surplus Property Act where one agency handled the disposal of foreign surplus to permit the Army and the Navy to do that, or would it be better to have one agency and coordinate it? Mr. MURPHY. Really, I do not think there has been enough time to test it properly. That did not come into effect until July 1949, and they did not get underway until some time in 1950, so I could not answer. I do not think we have had enough time to know. Mr. WARD. You have seen no lack of coordination as between the agencies? Mr. MURPHY. NO. The Department of Defense has, in my opinion, made a determined effort to try to manage the thing properly from Washington, here. In January of 1950, we, the State Department, wrote a letter to all of the executive agencies, a copy of which the committee has, outlining the general framework within which they thought, or we thought, they ought to operate, and that letter was worked out after a long series of meetings with people from all of the interested agencies, and until Korea came along, I have the impression it was working out rather well, but there has not been really enough time to test the thing properly. Mr. WARD. I think you will remember, when Public Law 152 was being developed, that no agency wanted to have the onus of handling that surplus. Mr. MURPHY. That is right. Mr. WARD. And I wondered if it had just fallen in the cracks, so to speak. Mr. MURPHY. No, sir; I think it has been working all right thus far. Now, whether it would continue to work well if things quieted down and we then had a tremendous surplus property effort abroad,I just do not know. Mrs. HARDEN. May I ask a question? Mr. BONNER. Did you finish, Mr. Brownson? Mrs. HARDEN. Oh, pardon me. BASIS FOR STATE DEPARTMENT APPROVAL Mr. BROWNSON. In the light of your tremendous responsibility here, as far as this surplus is concerned, the State Department is in a position to weight the balance one way or the other on almost any foreign economy in the world. Take the surplus that develops, let us say, in Korea. If we have two or three countries bidding for that surplus, you would make your decision on the basis of the economic background of the country concerned is that right? Mr. MURPHY. That, and what our foreign policy objectives were— what we were trying to do there from the military standpoint. All of those things would be taken into account. Mr. BROWNSON. You run into a situation, it seems to me, there, where X country might bid an awful lot more money for the same amount of surplus than Y country, and yet you still might make a decision that Y country's economy needed the surplus more; is that not right? Mr. MURPHY. I think that is a possibility. Mr. BROWNSON. Then the private operator in X country who is going to pay more loses his opportunity completely, and the private operator in Y country stands to make a fabulous profit entirely aside from the effects on the national economy? I cannot help but associate this in my thinking with the operations of the Dawson syndicate because our testimony, frankly, has indicated that it did not make too much difference what country bought them. They wound up anyway in the same places in two or three people's hands. Are you empowered to make your decision purely on the basis of the country's economy involved, without regard to the bidding price? Mr. MURPHY. We have never run up against that situation. I think that probably what you say is true, that you might think that foreign policy objectives, military objectives, sort of outweight the difference in return; is that what you have in mind? LACK OF CONTROL OVER RE-SALE OF SURPLUS Mr. BROWNSON. The thing that bothers me is the fact that once you have sold this salvage to the bidder from the country whose economy best fits into the State Department's concept of the new world he may turn right around and sell it back to the other countries that you took it away from. Mr. MURPHY. I would say that was possible, yes. Mr. BROWNSON. That is all I have. Mr. BROWNSON. That is the point I was trying to develop there, and is something I would like to look for, Mr. Chairman, on this trip a little bit because I think that is an interesting point. That same thing happened in Bermuda. That is all I have. Mr. BONNER. Mrs. Harden. DISPOSAL BY MILITARY AGENCIES Mrs. HARDEN. Do the Army and Navy have separate disposal agencies on Guam or do they have a joint and unified agency? Mr. MURPHY. I know that the screening process is unified here in Washington in an office of the Bureau of Supplies and Accounts in the Navy, so that in Washington it is channeled through this one agency. Now on Guam I just do not know the answer to that, whether they operate independently or jointly. Mr. MEIGS. I can answer that, Mrs. Harden. The Army disposes of its own and Air Force property on Guam, and the Navy disposes of its property on Guam. It is not unified, but there is a constant process of cross screening between the services. Mr. MURPHY. That is required under Public Law 152, to screen the materials before they declare them excess. They are supposed to ex change that information with each other. Whether they do or not I just do not know. Are you going to visit Guam? Mrs. HARDEN. We are not planning that, but you were discussing that a while ago. LOCATIONS OF SURPLUS Mr. BONNER. In your experience which is the largest, which base or area in the Pacific has the greatest congregation of surplus materials and scrap? Mr. MEIGS. That would be Guam. That is of the overseas, outside of the tariff barriers. Hawaii of course would be more likely to contain greater quantities of property. Mr. LANTAFF. Do you know how much equipment is available on Hawaii for surplus disposal? Mr. MEIGS. We have no authority on Hawaii. Mr. LANTAFF. Whether or not any of that surplus in Hawaii was going to be sold to Japan or not? Mr. MURPHY. That is under the General Services Administration. Mr. LANTAFF. You have nothing to do with that? Mr. MURPHY. No, sir. Mr. LANTAFF. Would not the question of balances be part of your sphere? Mr. MURPHY. Yes; it would, and usually it works out at what we call the working level. We telephone back and forth. There is no formal procedure set up, and the same was true during the disposal of surpluses after the last war. We here in Washington kept in close touch with the Washington office of the War Assets Administration, and there was a checking back and forth, but there is no formal procedure as far as I know. Mr. LANTAFF. Do you know whether or not in Hawaii the Army, Navy, and Air Force have separate disposal agencies or is it much like Guam with Army and Air together and the Navy by itself? Mr. MURPHY. I do not know. Mr. LANTAFF. That is all the questions I have. Mr. BONNER. Mr. Meader? Mr. MEADER. I would like to ask how large an organization you have now. Mr. MURPHY. I am always delighted when somebody asks that. I have eight. COLLECTION OF PAYMENTS ON BULK SURPLUS SALES Mr. MEADER. And do you have any responsibility for collecting these term payments for bulk sales? Mr. MURPHY. Yes, sir. Mr. MEADER. That is not handled by Treasury? Mr. MURPHY. The Treasury does the bookkeeping and the billing. The State Department is charged with enforcing the agreements and following up on them. Mr. MEADER. Have there been any defaults so far? Mr. MURPHY. Oh, yes, sir, some of the accounts are in arrears. |