Now, no one can ever be certain in any conference that you have successful excluded all enemy agents.

Senator LANGER. In reply to Senator Hickenlooper, you discussed this matter of the Communists back in Paris gaining in Paris and losing you say in the smaller communities.

Mr. STASSEN. Yes.

Senator LANGER. As a matter of fact, they gained very substantially in Paris, they got 41.2 percent of the votes, didn't they? Mr. STASSEN. Not the last report that I saw.

Senator HICKENLOOPER. It was 2712.

Mr. STASSEN. It went from 24 to 27, an increase of 3 percent. Senator LANGER. What is puzzling me is, how can you tell that these folks, for example, from France haven't someone in the delegation that is representing the Soviet, just like Alger Hiss represented Russia over in San Francisco.

Mr. STASSEN. Well, as I say, you never can be positive. All of your delegations and all of the governments have to be alert to the fact that it would be serious for their own security if they had anyone like that in their foreign office, on their defense office.

Senator LANGER. Carrying a step further, supposing they had a change of government in Italy, had a Communist government and in the NATO Council, Communists would be sitting there representing the Italian Government, would they not?

Mr. STASSEN. No, they would not.

Senator LANGER. Who would be representing them?

Mr. STASSEN. No one.

Yugoslavia, for example, is not even in this group, even though they are now indicating they are moving toward the West. They have not been taken into membership. It was not even discussed that they should be, and you keep a different relationship there.

Senator LANGER. Do you honestly believe that Russia is not informed of everything that you do over there at that meeting?

Mr. STASSEN. I would say there is no way of knowing for a certainty.

Senator LANGER. That is all, Mr. Chairman.

The CHAIRMAN. Senator Gillette.

A COUNTER-OFFENSIVE WAS MEANT

Senator GILLETTE. Mr. Chairman-Governor: There are a number of questions that I want to ask, because I am seriously disturbed over this European situation, but I think they should better be addressed to Secretary Dulles tomorrow.

There is just one question:

In view of the undoubted change in emphasis from European areas to the Far East, which we have been informed on several occasions here, I was at a loss to understand your statement, if I understood you correctly, that considerable thought had been given to an offensive in Europe predicated on guided missiles and atomic warfare, in view of that change of emphasis in the strength-on what could an offensive

Mr. STASSEN. What I meant was the defense, with a defense posture that is fairly solid, with a reasonable number of good active on-the-front divisions if the opposition started to attack, they first have to build up such a concentration of forward strength of their divisions, that when they attack, they would be vulnerable to an atomic counter-attack. That is what I meant.

Senator GILLETTE. Then, your statement was based on an offensive

Mr. STASSEN. A counter-offensive.

Senator GILLETTE. To be launched against an attack.

Mr. STASSEN. That is right, a counter-offensive.

Senator GILLETTE. That is all. I misunderstood him, I'm sorry. That is all, Mr. Chairman.

The CHAIRMAN. Senator Ferguson.

UNOBLIGATED BALANCES

Senator FERGUSON. You had an answer there about the $9 billion being carried over in funds, and, how much of that was unobligated? Mr. STASSEN. Of that amount, it is not possible to project right now how much would be unobligated on June 30.

Senator FERGUSON. How much is unobligated now?

Mr. STASSEN. Now, between 22 and 3 billion, I would say.
Senator FERGUSON. And all the other

Mr. STASSEN. Perhaps a little less, but part of April, depending on how the April obligations are running, and we don't get them until the end of the month.

Senator FERGUSON. Then, the carryover, all but about $2 or $22 billion is obligated.

Mr. STASSEN. That is right, right now; and most of the remainder, at least, what we are trying to do is save as much, with not obligating it by June 30, as we can.

WHAT IS THE DEFINITION OF "OBLIGATED"?

Senator FERGUSON. What is your definition, in your agency, as to when it is obligated?

Mr. STASSEN. In this instance, it is military funds, when the Defense Department notifies us that they have obligated it.

Senator FERGUSON. Well now, is it when you obligate it to the Defense Department?

Mr. STASSEN. No.

Senator FERGUSON. Or, when they give you a notice?

Mr. STASSEN. No. We turn it over to the Defense Department, we allocate it on the basis of an approved program and when they notify us that they obligated under that approved program, then we list it as obligated.

Senator FERGUSON. Does that mean that they have contracted it? Mr. STASSEN. When we say "obligated," it means either they have contracted for it or that out of their supplies they have earmarked certain of their supplies for shipment to our NATO forces.

Senator FERGUSON. When they earmark, isn't it true that that can be changed and it is not really an obligation at all, when they want to change that?

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Mr. STASSEN. I believe that the Comptroller General, and the Defense Department are discussing that situation at the present time.

Senator FERGUSON. In the past, it is has been rather lax, has it not, and they have considered money obligated when they merely set it up on the books as being for articles they intended to furnish or purchase

Mr. STASSEN. I would not like to describe the past practice unless I have looked into it personally, and I have not looked into that past situation.

PURCHASES OF RAW MATERIALS

Senator FERGUSON. You said that you doubted that we would be able to have a balance of payments between Europe and America for sometime to come, and one of the reasons was that if they kept a high production of war materials, it required them to buy raw materials and so forth.

Do you know whether or not when they buy this raw material, they pay dollars for it rather than sterling, and for that reason they are unable to have enough dollars?

Mr. STASSEN. They try to buy the maximum in the areas where they can pay sterling, but some of the raw materials they cannot obtain in sufficient quantity in the sterling areas, and therefore, they must buy it in the dollar area.

Senator FERGUSON. Do we check to see whether or not where they are buying is a dollar or a sterling area?

Mr. STASSEN. Yes, we have the records of their trade flow, and their purchases.

Aluminum is one thing, for example, where there are not sufficient supplies anywhere in the sterling area to supply their defense needs in the NATO area.

Senator FERGUSON. Is it one of our requirements that they do buy in the sterling area as much as possible for their production?

Mr. STASSEN. I would not say it is a requirement, but we closely follow what it is that they are doing.

Senator FERGUSON. Have you any control over it when you follow it?

WITHHOLDING AID TO ENFORCE SOUND ECONOMIC POLICY

Mr. STASSEN. Our control would be what we do on our aid payments. In other words, if they were not following what we considered a sound economic policy, we could hold back on aid payments.

Senator FERGUSON. Do you know of any occasion where we did hold back because of some act or some expenditure?

Mr. STASSEN. We have frequently declined to approve a purchase order, in relationship to our aid for something we felt was not proper in the subject of acquisition within the dollar area.

Senator FERGUSON. Could you give a list of those items?

Mr. STASSEN. Surely.

MSA ECONOMIES

Senator FERGUSON. Could you state how our new policy, if we have one, of mutual aid is framed to economize and to spend less money?

Mr. STASSEN. One of the first things that it has tried to do is to have less U.S. personnel overseas, because we feel that a smaller number of competent people will tend to continually result in less spending.

Senator FERGUSON. Do you have any idea how much that can be cut?

Mr. STASSEN. I know that it can be cut a substantial amount. Senator FERGUSON. Have you read the recent article in the Readers' Digest about the billion dollar bureaucracy overseas?

Mr. STASSEN. No, I haven't.

Senator FERGUSON. Have you any idea what that can be cut to? Mr. STASSEN. I know that an order has been put into effect that is cutting our Paris office to less than half in personnel.

Senator FULBRIGHT. Less than half?

Mr. STASSEN. Less than half in numbers, yes. And I know that orders are now out that will cut all the European offices at least 15 per cent, and further cuts are on the way.

I have been following this practice, and in that instance, to be rather careful and certain that the essential work could go forward before I gave an order to cut, because when you have a program that involves so many other governments, and such a sensitive defense picture, I feel that if I cut too suddenly before I am very sure, I might upset something that I would not want to see upset, and neither would the Congress or anyone.

Senator FERGUSON. Have you placed in charge of the determination as to whether there would be cuts or not, people that had already reviewed the cost, or are you putting new men in to survey whether cuts can be made? What is your practice there?

Mr. STASSEN. In the first place I am reserving those final decisions to myself and my principal deputy is a new man, Mr. William Rand who, I feel, is one of the most competent industrial executives in the country, and is showing a very rapid grasp of the business and organizational aspect of this whole problem. Then, I am contemplating changes in my central European organization. It is moving what you might call a bit slowly because I am insisting on a complete FBI field check before I bring in anyone, even though I know them personally, because I want to be very sure that my new personnel are not only competent, but there is no uncertain facts involved that an FBI field check would show up.

Senator FERGUSON. How many people went with the part that went to NATO, from here-how many aids?

Mr. STASSEN. I do not know the total number. I know that in my own situation I took two men and one secretary from here, and called one man in from London. That was my total.

SECURITY CLEARANCES

Senator FERGUSON. Do you know whether or not all persons, Senator Langer covered this, all persons admitted to access to the information, had full clearance?

Mr. STASSEN. So far as I was concerned, I knew they all had full clearance, from my people, you understand.

Senator FERGUSON. Yes.

Mr. STASSEN. I could not guarantee the other countries.
Senator FERGUSON. As to the other countries, no.

OTHER ECONOMIES

Is there any other policy for cutting down the foreign aid rather than in personnel?

Mr. STASSEN. Yes. This whole matter of the combined production program, that is, in this Hunter-Hawker deal, we save $19 million

bringing those transactions together. In the whole production approach, we are clearly going to save very substantial amounts of money. I would hesitate to predict the total amount until we can demonstrate it.

Likewise, as you know, as the Secretary of State will describe to you more fully tomorrow, he informs the countries of the new approach of phasing out of the budget aid side, and contemplating only the defense aspects as rapidly as possible, particularly in Europe.

Senator FERGUSON. When we acquire what is known as offshore purchases, for instance, these planes that you have here, they would be considered offshore purchases?

Mr. STASSEN. That is right.

Senator FERGUSON. Now, in doing that, do we amortize the machinery for instance in 1 year, or the length of the contract? The length of the contract, as I understood it in this case, is 3 years.

Or, do we do it as here in America, on a long-term basis, that the machines could be used for something else?

Mr. STASSEN. That is one of the ways we are making a savings. Instead of having them look to their complete amortization of machinery and tolls on one short contract, to spread it for a long time, and that is the way we save money.

Senator FERGUSON. Wasn't that one of the rules that was in effect, if they had a 1-year contract, it was all amortized off or charged off! Mr. STASSEN. It was not a rule, it was the contracting company, that is what they did, they could only be sure of a 1-year contract, and did not know what would happen afterward, so they had to charge them off during the first year.

Senator FERGUSON. Didn't we allow that procedure to take place? Mr. STASSEN. Whether allow would be the correct word or not, or whether you would say we paid the bill.

Senator FERGUSON. We paid the bill.

Mr. STASSEN. Yes, in some instances.

Senator FERGUSON. Do you know of any other changes we may make that would save money?

OTHER SAVINGS

Mr. STASSEN. Yes, the matter of purchasing supplies. We are trying to combine the purchase in such a way that we can take a more favorable advantage of the world materials and commodities market so that we pick up commodities when they are running down to the lower ebb, and buy them on a slow pull, instead of hitting the market too hard at one time with a huge order. In other words, we are trying to phase out our buying so that we, on the one hand, pick up a commodity when it is going down very low, and when it is really undesirable to have it go down too low for anybody's consideration, and then we do not buy too suddenly, so we don't shoot it up too high, and