Polish exports to the United States approximately $54 million last year cannot increase fast enough to meet Poland's hard currency needs. It would seem to me, therefore, that the one area where some compromise may be possible involves the terms of trade under title IV sales (sales for U.S. dollars). In my view, the United States should be prepared to negotiate these terms in return for some specific concessions. Lack of forward planning in this field may lead to some undesirable consequences. I was distressed to discover that apparently insufficient thought has been given by our people to the mountain of Polish zlotys remaining to our credit in Warsaw. Admittedly, the utilization of these zlotys present certain problems. This alone, however, does not justify what struck me as a lackadaisical attitude with respect to this subject. I hope that the Subcommittee on Europe will pursue this matter. VOICE OF AMERICA An American visitor to Poland is apt to come home with the distinct impression that the Voice of America is a very weak and dull voice at best. Apart from its news broadcasts, it seems to attract only a limited following. In contrast, people in Poland have gone out of their way to indicate that they listen to Radio Free Europe. Wherever we traveled in that country, the people seemed to know about our presence mostly through Radio Free Europe. I believe that Voice of America programs beamed to Poland and Czechoslovakia (we encountered similar reactions in Prague) are in need of careful review. Admittedly, the Voice and RFE are not comparable either in terms of their sponsorship or of their objectives. Still, there is no sense in spending money on Voice of America broadcasts other than straight news summaries-unless people listen to them. We had little evidence that they do so in Poland. AMERICAN PERSONNEL Ambassador Cabot was in the United States during my visit to Poland. I met, however, with the deputy chief of mission, Albert Sherer, and with most of the Embassy staff-including those assigned to Poznan. I came away pleased with the quality of our representation in that country. While many of our officers in Poland are young, they appear knowledgeable and possessed of good sense. I was also favorably impressed by the fact that most if not all of our staff people can get along rather well in the Polish language. This makes a positive impression in Poland-as it would, for that matter, in any other country. I was disappointed, however, by the apparent shortcomings in departmental personnel planning for Poland. Apart from Ambassador Cabot, most of our senior officers in Poland have either left recently or are about to leave. This large turnover of experienced personnel does not speak well for the performance of those who are in charge of personnel assignments for Eastern Europe. It suggests to me an astounding lack of forward planning with respect to an area of the world which is of considerable interest to our Government. I am convinced that the Department's policy and practice with respect to the assignment of personnel warrants a more thorough examination than our subcommittee has been able to accord it to date. CZECHOSLOVAKIA After leaving Poland, I stopped for 2 days in Prague. Much that have said about the general conditions in Poland applies to Czecholovakia as well. There are, however, some notable differences: First, the period of "thaw" in Czechoslovakia is of rather recent origin. It began less than 2 years ago. As in Poland, however, the mpetus for change may be attributed in part to economic stagnation and consequent buildup of popular pressures. By 1962, the per capita growth of the Czech national output was actually beginning to lecline. When the same happened in 1963, the leaders saw the writing on the wall: either they would attempt to change the system or the lid may blow off. They opted for change. As pointed out in the recent report of the Special Study Mission to the Soviet Union and Eastern Europe (Monagan study mission, H. Rept. 15, January 1965), the oppressive rule of the Novotny regime nas undergone considerable revision in the past year or two. Travel in Czechoslovakia is virtually unrestricted. Travel to and from Western Europe is fairly free. Writers and artists are experimenting with new forms. There is a considerable public discussion of economic and social problems. Economic reforms being implemented are more "revisionist" in some respects than those accomplished in Yugoslavia. Contacts with the West are expanding rapidly. The feeling of change is in the air. This does not mean, of course, that any basic change has taken place in the Communist system of government in Czechoslovakia. The same people are still in the saddle. Their ties with Moscow continue very strong for obvious reasons: among them, the instinct for self-preservation. The Novotny government's control over the population appears very effective. Czechoslovakia is still under the domination of communism-but communism which is changing, adapting and, in a sense, becoming somewhat "humanized." Second, Czechoslovakia is economically more advanced than Poland. Its agriculture is more productive even though most of the arable land is in the hands of collectives, cooperatives, and state farms. Its industrial base is broader, more diversified, technologically more advanced. If the burdensome shackles of the overcentralized bureaucracy are removed a change which the Government is trying to bring about Czechoslovakia may move much faster than Poland in the direction of an improved level of living for its people. Third, on such issues as Vietnam, the Czechs are more restrained than their Polish colleagues. They repeat the line handed down by Moscow. But they do not overdo it. TRADE WITH THE UNITED STATES Of primary interest to the Czechs at the present time is the question of expanding their trade with the United States. Their current exports to the United States ($12.8 million in 1964) account for less than one-half of 1 percent of their exports. The prospects of increasing their trade with the United States are small, unless the Czechs can obtain "most favored treatment" for their goods. Poland and Yugoslavia currently enjoy such treatment. The Czechs would like to be included in that company. In return, they are willing to discuss imports from the United States, cultural and other exchanges, and various other matters. The time appears ripe for "building bridges." CLAIMS SETTLEMENT One of the troublesome issues outstanding between the United States and Czechoslovakia is the settlement of claims of American nationals. The agreement on this subject was negotiated over a period of some 6 years. Finally, an understanding was arrived at and apparently initialed by both sides. The terms, admittedly. were not the most favorable to the private interests in the United States: between 10 and 20 percent of the purported (not verified or adjudicated) value of claims. Still, the executive branch was ready to sign and then, because of complaints from certain U.S. firms, it backed off. The matter has been in suspension ever since, and has obstructed progress in the settlement of other outstanding questions The Czechs are inclined to consider the United States guilty of bad faith, while the State Department continues to sit on its hands. This matter, in my opinion, should be brought to some conclusion withou: much more delay. THE BRNO FAIR For the past 3 years, the United States has participated in the annual international trade fair held at Brno in Czechoslovakia. This year, in spite of the strong recommendations of our Ambassador to Prague and his staff, our participation in that fair has not bee approved to date "for budgetary reasons." Having observed the conditions in Poland and Czechoslovakia, I believe that decision to be wrong-penny wise but pound foolish. The United States is participating this year in the Poznan Fair in Poland, and in the International Fair in Budapest. Either of those exhibits or parts of both of them-could be adapted for use in Brno. The Department of Commerce, the USIA, and the State Department should give this matter further consideration. AUSTRIA During our very brief stay in Austria, I pursued three lines of inquiry: a followup on the counterpart fund "phaseout" agreement of 1962; the question of Title IV, Public Law 480, diversions to the Soviet bloc; and the status of the oil pipeline. COUNTERPART FUND Unlike the Soviet Union, which demanded heavy reparations for withdrawing from the occupation of Austria, the United States provided that country with considerable economic assistance. One of the offshoots of this assistance program was the counterpart fund which, at its peak, contained the equivalent of some $450 million. Beginning in 1957, the United States negotiated a "phaseout"-or the relinquishing of administrative authority over this fund. The final agreement was signed in 1962. One of the provisions of this agreement and the one which was of particular interest to me as the author of the Zablocki amendment relating to counterpart funds-was a provision in which Austria agreed, in return for obtaining complete control of the fund, to "substantially" increase her foreign aid to the developing nations of the free world. The report submitted by the Kelly mission in 1963 (H. Rept. 32, 88th Cong., 1st sess.) expressed concern over Austria's apparent reluctance to use any substantial portion of the counterpart fund to provide economic aid to the needy nations of the free world. This report provided the jumping-off point for my followup inquiry. I regret to report that Austria has made very little progress in the last 2 years in living up to its part of the counterpart fund phaseout" agreement. According to the information which I received in Vienna, Austria's principal foreign aid outlay which can be directly attributed to the counterpart fund, consists of approximately $8 to $10 million a year. This is the equivalent of the interest generated annually by various investments of counterpart funds in Austria's domestic economy. In addition, Austria counts as "foreign aid" various other overseas outlays and investments, many of them apparently associated with private trade ventures, which bring the total to about $30 million annually. I tried to impress upon our Embassy staff my conviction that the U.S. Congress and the American people would hardly consider $8 million a "substantial" outlay on foreign aid when compared with the total counterpart fund of some $450 million. While the gentlemen present at the meeting appeared to appreciate my viewpoint, I have the distinct impression that the question of bringing about an increase in Austria's outlay for foreign aid is receiving perfunctory attention. I hope, therefore, that this subject will receive further consideration from the appropriate subcommittee when the [next study mission visits Vienna. PUBLIC LAW 480 BARTER SALES Under title IV of Public Law 480, the United States has traded quantities of agricultural commodities to Austrian brokers in exchange for strategic materials. These "barter" deals are not as frequent as outright sales under title I and they seem to cause certain difficulties. In the Austrian case, it was discovered that some of the U.S. farm commodities were transshipped to other countries--including East Germany in violation of the terms of the agreements. The U.S. Government subsequently initiated action against the brokers, trying to recover penalties specified in the agreements. These actions, as I understand the matter, are still in process. It was my impression, after our discussions in Vienna, that our Embassy maintains only a loose oversight over these types of transactions. There is no systematic procedure for assuring that the commodities involved in barter arrangements actually reach and are consumed at their declared destinations. I also learned that U.S. Government inspectors were in Vienna during the time of my visit, checking up on the strategic materials that were supposed to be delivered to our Government in exchange for the Public Law 480 farm commodities. It may be informative for the committee to have the staff check with the appropriate executive agency to ascertain their findings in this matter. OIL PIPELINE For the last 2 or 3 years, there has been considerable speculation about the construction of an oil pipeline from the Adriatic to a location near Vienna. Since the Western terminal of the Soviet "friendship pipeline" is located in Bratislava, less than 100 miles away from Vienna, it occurred to some that the Adriatic-Vienna pipeline, if carried through to Bratislava, could provide the means for the transportation of Soviet crude oil to a warm-water port on the Adriatic. This possibility, alluded to in the Kelly mission report of 1963, was of interest to those concerned about the Soviet oil offensive in Western Europe. While in Vienna, I was given to understand that the plans for the Adriatic-Vienna pipeline have been dropped in favor of the transAlpine pipeline from Trieste to Ingolstadt in southern Bavaria. The latter line appears to be in an advanced stage of development. A number of American oil companies, together with several West European petroleum firms and some German financial establishments, have reportedly reached agreement on the financing of this project. The present planned participation by individual companies in the Trieste-Ingolstadt line is reported to be as follows: Esso AG Deutsche Shell AG. BP Bensin und Petroleum AG. Agip AG Deutsche Marathon Petroleum GmbH. Sopi Mineralprodukte GmbH- Total___ Percent 20.4 15.4 14. 11.4 10.4 7.0 6.0 3.0 3.0 3.0 3.0 3.0 100.0 The total cost of the project is estimated at about $160 million. In view of our current position on balance of payments, financing of the American participation will largely be done through loans from European banks and from resources these companies presently have available in Europe. The pipeline will follow the following route: Trieste-Ploeken pass (through a 6-kilometer-long tunnel) to Lienz (in the Austrian Province of Osttirol), to Felber Tauern (here the line reaches an altitude of 1,550 meters), to Kitzbuehel (under the Hahnenkamm mountain, a 4.5-kilometerlong tunnel), to Kufstein (on the Austrian-Bavarian border), to Ingolstadt. A question has been raised about the possibility of constructing a spur from the Trieste-Ingolstadt line, which would terminate near Vienna. I could not obtain any firm reports on this proposal. I was given to understand, however, that such a spur would not be designed to accommodate Soviet oil moving westward. ITALY While in Rome, I attended three separate meetings at our Embassy. During those discussions, I endeavored to ascertain Italy's current attitude toward NATO, her possible reaction to the multilateral nuclear force (MLF) project, and the chances for governmental stability and progress within the framework of the "Opening to the Because of the sensitive nature of these subjects and the manner in which the briefings were presented, I expect to report my findings to the full Committee on Foreign Affairs at the earliest opportunity. |