Other contemplated economic aid, including $220,000,000 for Korea and Japan and an increase in the lending power of the Export-Import Bank for Latin-American loans amounting to $500,000,000 are not included in the bill since they are of less urgency than the needs therein specified. The President has asked the Congress to appropriate $55,000,000 of interim aid funds already authorized but not yet appropriated to take care of urgent western European needs from April 1, 1948, to the effective date of the European recovery program. Since this is already authorized it is not included in the recapitulation presented above. B. DOLLAR REQUIREMENTS OF THE EUROPEAN RECOVERY PROGRAM Estimates of the volume and kinds of commodities that will, in fact, be required to enable the countries of western Europe to effect economic reconstruction are necessarily subject to wide margins of error owing to the variety of assumptions upon which the estimates are made, including possible changes in prices, crop conditions, and availability of supplies. "Economic reconstruction" is a concept that can, and does, serve as a useful over-all target. In and of itself, however, it provides no yardstick as to detailed requirements. "Recovery" does not mean that Europe should recover exactly what it had before the war. Indeed, in certain respects, the prewar economies of certain European countries left much to be desired. At the very heart of the philosophy of the European recovery program lies the hope that western Europe will develop on a continental, or at least a group, basis rather than along the lines of national self-sufficiencies. What is hoped for is voluntary action on the part of those countries that will make them economically self-supporting as opposed to economically self-sufficient. For such an objective there clearly can be no advance pattern. To have one, and to establish the controls and means of enforcement that would be necessary to bring it into being, would necessitate the use of some of the very kinds of outside pressures to which the United States and other democratic nations are unalterably opposed. C. WORK OF THE PARIS CONFERENCE When the representatives of the 16 participating European countries met in Paris, following the suggestion made by Secretary of State Marshall in his speech of June 5, 1947, they were confronted by the necessity of working out a joint program for their own recovery. They then had to match the commodity and equipment requirements of such a program against their own resources so as to arrive at estimates of needs from non-European sources. The remarkable fact is, not that the figures that their experts worked up can in many cases be questioned, nor that they left much to be desired in allowing for regional, as opposed to nationalistic, development, but rather that they were able to agree upon anything at all definitive. Equally noteworthy was the fact that they were able to do it in a relatively short time. The speed with which the report was turned out undoubtedly accounts for its omissions and ambiguities. Such an accomplishment was made possible by the establishment of a number of technical subcommittees which, largely through the use of questionnaires addressed to the participating countries, prepared reports on requirements and production in the fields of food and agriculture, fuels and power, iron and steel, transport, timber, and manpower. The final report of the Paris Conference (known as the Report of the Committee of European Economic Cooperation or, more briefly, as the CEEC report) was transmitted to the United States Department of State on September 22, 1947, and shortly thereafter was made public. The reports and findings of the technical subcommittees were turned over to a Balance-of-Payments Subcommittee that used them to construct an over-all balance-of-payments picture. Comparison of the various sections of the CEEC report is rendered difficult for a number of reasons, an important one of which is that the reports of the technical commodity subcommittees included estimates of the needs and availabilities of the dependent overseas territories of the United Kingdom, France, Netherlands, and Belgium, whereas the over-all balance-of-payments figures apply to the mother countries only. Comparison of the various parts of the CEEC report with one another, or with the Administration's "Outline" (Proposals of the U. S. Executive Departments), which includes the dependent territories in its estimates of requirements, is therefore a difficult task. The Paris Conference estimated that the 16 participating countries would have a net balance-of-payments deficit with the American Continent in 1948 amounting to approximately 7.6 billion dollars. It was estimated that, in addition, the combined deficit of their overseas dependent territories would amount to $460,000,000 bringing the total deficit of the participating countries and their overseas territories to a little more than 8.0 billion dollars. They then estimated that the International Bank for Reconstruction and Development would be able to finance capital equipment (other than agricultural and mining machinery) amounting to about $900,000,000, thereby leaving to be financed a net over-all deficit of 7.1 billion dollars. D. SCREENING BY UNITED STATES EXPERTS Experts in the various departments of the United States Government were immediately impressed by the fact that the requirement figures had been inadequately screened, both in the light of the needs themselves and the availabilities of certain of the items in short supply. In fact, because of the nature and speed of the operation, about all that the Paris Conference had been able to do was to add up the individual country estimates of commodity requirements and present the totals as the needs of the entire area. Such a procedure, obviously, fails to discount the natural tendency to overstate national requirements. It also tends to inflate the requirements of national economic ambition as contrasted with the needs of the nations as members of a closely coordinated economic group. Upon receipt of the report of the Paris Conference the State Department created a number of interdepartmental commodity committees to review the data. In general they paralleled the technical committees that had been set up at Paris with several additions. All of them except that on petroleum, were headed by experts from either the Department of Agriculture or the Department of Commerce. The data on petroleum were reviewed by the already-existing interdepartmental committee headed by an expert from the Department of State. Interdepartmental "country" committees were also established together with a working group on the over-all balance of payments picture. The commodity committees first concentrated on minimum requirements without regard to availabilities. With regard to food, account was taken of the needs of the various populations on the bases of calorie intake, the need of proteins and fats and oils, and of historical differences in living standards. Emphasis was then shifted to estimates of European indigenous production and the possibilities of intra-European trade. The net requirements of the 16 countries, as a group, were finally set against estimated global availabilities. In some cases the requirement figures were scaled down because of world shortages and substitutions of goods in more abundant supply made. Thus, the requirements figure for bread grains was cut to 79 percent of the CEEC figure, but the figure for processed milk was increased over the CEEC estimate by 44 percent. Similarly, the estimated requirement of 1,400,000 tons of steel scrap was eliminated altogether and in substitution for it the estimated requirement for finished steel was increased from 449,000 to 1,200,000 tons. To assist in this phase of the work a number of the European technical experts who had assembled the original CEEC data at Paris were called to Washington to answer questions by the United States experts. Throughout all of the work the experts relied heavily upon the reports of the Krug, Nourse, and Harriman committees. În some cases supplemental questionnaires were circulated to the participating countries in order to round out what had been provided by the experts at Paris. In general, estimates were first made in terms of physical quantities which were later translated into dollar equivalents. The work of these committees served as the basis of the administration's Outline of European Recovery Program which was submitted by the Department of State to the Congress, together with the administration's proposed draft legislation, on December 19, 1947. E. THE ADMINISTRATION PROGRAM Consideration of the problem of United States financing of the European recovery program for the first 10 months involves five basic factors: (a) The estimated dollar deficit of the participating countries over the 15-month period, April 1948 to June 30, 1949, with the Western Hemisphere. (b) Dollar funds which the participating countries might be expected to obtain from sources other than new United States funds. (c) Additional funds ($200,000,000) needed to build up the volume of shipments from the Western Hemisphere to western Europe. (d) Segregation of authorized funds as between the Department of the Army and the Economic Cooperation Administration. (e) Reducing the financial requirements from a 15-month basis, as presented by the executive branch, to a 12-month period. The estimated balance-of-payments deficit of the participating countries, including western Germany, with the Western Hemisphere for the 15-month period, April 1, 1948, to June 30, 1949, is 8.5 billion dollars. An additional $200,000,000 was included to cover a portion of the uncovered deficit of bizonal Germany with nonparticipating countries outside the Western Hemisphere. The dollar deficit of the participating countries to be financed, therefore, is about 8.7 billion dollars. The executive branch estimated that almost 1.3 billion dollars of dollar funds could be obtained in this 15-month period from the International Bank, the Export-Import Bank, private investors, and by credits extended by other Western Hemisphere countries and certain of the participating countries. Deducting that 1.3 billion dollars from the uncovered dollar deficit of 8.7 billion dollars leaves 7.4 billion dollars of financing which would have to be met by new funds from the United States. The executive branch, in rounding out its estimates, also had to take account of the increased flow of goods from the Western Hemisphere to the participating countries. Of the shipments going forward in the 15-month period, an estimated $600,000,000 was in the pipe line at the start of this period. The rate of shipments would increase during the period. In order to sustain that increased rate of shipments, the executive branch estimated that $800,000,000 would be in the pipe line as of June 30, 1949. This net increase of $200,000,000 in the pipe line would also have to be financed with new United States funds, making 7.6 billion dollars in all. This dollar deficit of 7.6 billion dollars for the 15-month period, the executive branch recommended, should be financed by appropriating about $800,000,000, as part of the Department of the Army's budget to prevent disease and unrest in occupied areas, and 6.8 billion dollars to the European recovery program. F. ADJUSTING THE FINANCIAL REQUIREMENTS FROM 15 TO 12 MONTHS The executive branch also submitted estimates of an illustrative pattern of obligations, shipments, and expenditures which might take place in the actual operation of a 6.8 billion dollar European recovery program in the 15-month period. Estimatd shipments financed by new United States funds under the European recovery program would amount to 1.5 billion dollars in the 1949 April-June quarter. Consequently, when the Senate reduced the initial period of the program from 15 to 12 months, this 1.5 billion dollars was deducted from the requested authorization of 6.8 billion dollars for the first 15 months. In authorizing 5.3 billion dollars for the European recovery program for the first 12-month period, this committee recommends that the executive branch's requested authorization be accepted and that the period be adjusted from a 15- to a 12-month basis. In this manner the basic request of the executive branch for the European recovery program will be preserved. IV. DOLLAR REQUIREMENTS AND AVAILABILITIES A. NATURE OF THE PROBLEM Even though both the Paris Conference report and the administration program approach the import requirements of the 16 participating countries from the point of view of individual commodity needs, the total requirements of United States financial assistance are closely related to the estimated combined net deficit in the balance of international payments of those countries with the Western Hemisphere. The 6.8 billion dollars requested to be authorized in the administration program for the initial 15-month period was derived from the estimated balance-of-payment deficit based on estimated commodity needs, exports, and other factors as follows: Summary of proposed financing of balance-of-payments deficit of the participating countries, 15 months, Apr. 1, 1948, to June 30, 1949. [In millions of dollars] 1. Deficit with Western Hemisphere of all countries including western Germany: (a) In July 1, 1947, prices - - 2. Uncovered deficit of Bizonal Germany with nonparticipating countries outside the Western Hemisphere.. (7,962) 8, 527 200 8, 727 4. From sources other than new U. S. Treasury funds: (b) From other Western Hemisphere countries_ 500 700 85 Subtotal.... 1, 285 5. From new U. S. Treasury funds: (a) Grants and loans for procurement in the United States. 3, 805 2, 615 822 7. Total U. S. Treasury financing with new funds...... Subtotal. 6. Uncovered deficit of Bizonal Germany (same as item 2 above) 8. Authority to obligate funds for procurement of items to be delivered in subsequent years. 10. Of which to be covered by Department of Army's appropriation for GARIOA.... 7, 242 200 7, 442 200 7, 642 822 11. Authorization requested for ECA.... Above in round amount.. 6, 820 6, 800 1 Includes disbursements from unutilized balances of existing Export-Import Bank credits as well as new private investment and disbursements from International Bank loans whether new or already granted. 2 Represents the deficits with the Western Hemisphere of Portugal, Turkey, and Switzerland, where such are recorded, adjusted to account for price changes. Surpluses of these countries with the Western Hemisphere are not deducted from the gross amount of the recorded deficits. 3 Government and relief in occupied areas. This is that portion of appropriation requests to be made by the Department of the Army to meet requirements to prevent disease and unrest in the bizonal area of Germany. |