AID FOR THE ARAB WORLD AND ISRAEL

Senator HICKENLOOPER. There is one other element in this bill I would like to ask about. What did you do yesterday afternoon-I wasn't able to be here-about the Arab world and Israel?

Senator GEORGE. We never did settle that, did we?

Mr. WOOD. That was settled, as I recall it.

Senator HUMPHREY. We had an analysis. Senator Langer raised a point on it.

Senator GEORGE. We didn't change those figures.

Mr. WOOD. We did not, sir.

Senator HUMPHREY. Senator Langer told me he was going to offer an amendment to increase the amount to the Arab area.

The CHAIRMAN. As a matter of fact, the Arab world got more money than Israel did, though not percentagewise according to population. I thought there was no further action to be taken. Senator GEORGE. I expect you will have to meet some amendments on that.

Senator HICKENLOOPER. Let me ask you this. You are giving Israel about half as much as you do the rest of the Arab world. The rest of the Arab world in that particular area has about 65 million people, Israel about a million and a quarter people.

Mr. WOOD. Nearer 2 million now, Senator.

Senator HICKENLOOPER. In this whole bill how much money goes into the budgetary balancing business of Israel?

Mr. WOOD. The total, Senator Hickenlooper, in title II with special economic assistance for the Arab States and Israel is a regional figure of $140 million, of which it is presently thought that about half would go to aid Israel and half to aid the Arab States; that, as I explained yesterday when this was being discussed, this may vary somewhat. The attempt is to treat this as a regional fund in order to bring them together.

PURPOSE OF THE ASSISTANCE TO ISRAEL

Senator HICKENLOOPER. What I am talking about is how much of these dollars is going in to help balance the Israeli budget and how much is going in to apply on the Israeli debt? That is the point.

Mr. Wood. None of these dollars are proposed for application to the Israeli debt, Senator Hickenlooper. The total that would be given to Israel out of this fund which is presently thought to be somewhere in the neighborhood of half, or $70 million, the total of that if given to Israel would assist in helping the Israeli to balance both their foreign exchange budget and their internal budget.

Senator HICKENLOOPER. Well, that is the same thing, isn't it?

Mr. WOOD. But not to apply to their debt or pay off their debt or anything of that sort.

Senator HICKENLOOPER. Do we do that with any other countries, give them money to balance their budget?

Mr. WOOD. Well, as a matter of fact, in a number of the cases that we have testified to here, the effect of the aid we give them will be

both to assist them in their foreign exchange problem and to assist them in their internal budgetary problem.

Counterpart when it is applied to military expenditures in France or the United Kingdom does help them when it is spent on their military budget in handling their internal budget. That is inherent in a great many of these operations.

Senator HICKENLOOPER. I understand every time you spend a dollar or ever spend any money, somebody gets benefit from it in taxes and other things that go back, but I have the impression that a part of this $70-some million is going directly to apply in their fiscal operations as dollars.

Mr. WOOD. What will happen is that counterpart will be put up for this 70 million, or whatever it ultimately turns out to be, and that counterpart under the law can be spent in agreement with us for purposes within the country. Any amount of that that is spent for projects within Israel will help them with their internal budget. Senator HICKENLOOPER. I understand that, and that is the theory of the MSA expenditures.

Mr. WOOD. Exactly.

ECONOMIC REHABILITATION OR FISCAL MANIPULATION

Senator HICKENLOOPER. But theoretically that helps develop the economy of the country, that is, that helps build industrial plants. creates wages and jobs, and there is a difference between that and pouring cash into the books of the treasury, just cash credits for the purpose of budget balancing or for the purpose of helping them with their deficiencies in taxes, and so on.

One might argue that by doing that you put them in a little better financial position and maybe they can do a little bit more and be in a little better economic position, but I don't like the theory of it. Mr. WOOD. One of the things we are told by the law to do is to attempt to assist these countries in overcoming inflation.

To the extent that counterpart is applied to expenditures within the country and thus relieves them from having to increase their borrowings or print currency, to that extent it assists in the maintenance of stability or the development of recovery.

Senator HICKENLOOPER. We have had this question come up from time to time in the past. I remember we had it up with the British. There was a time when the British were worse off.

They have been able apparently to balance their budget and reduce their taxes a little bit over there, but there was a time when we suspected that part of this money we were giving was going into the British fiscal operation purely, and there was a lot of resentment and objection to that.

Also the question with the French, whether or not they were using some of the dollar credits which we gave them not for economic rehabilitation but for fiscal manipulation in their budgetary operations.

Senator GEORGE. We had those questions up, Bourke, and my recollection is that we didn't do what some wanted to do, write an express prohibition against it into the act, and we did it on this theory: That is you go back to the original Economic Recovery Act,

you find one of the purposes there set out was to stabilize the currency of the country and expand their trade, and so forth, and we declined to put in the express prohibition at that time because we felt that maybe by the use of some of this money they could stabilize their currency.

Mr. Wood. And it wasn't only a suspicion. Actually it was set right out before the committees that we did use in the early days some of the counterpart of aid to Britain, for example, to assist the British in holding down inflation by reducing the size of their debt, which was threatening an explosive inflation.

The CHAIRMAN. In Italy, we did the same thing.

Mr. WOOD. It was one of the things that saved the British economic situation, so that she could proceed with this defense program. Senator GEORGE. We had quite a debate here, but we didn't put in a prohibition because we reached the conclusion that it was sensible to aid them in stabilizing their currency.

FORM OF THE BILL

The CHAIRMAN. Can I get your decision, gentlemen, as to having the form printed, the new bill as we have passed it but using the form that the House is using, so we will not run into conflict?

Senator HUMPHREY. I so move.

The CHAIRMAN. All right, it is so ordered. I want to say that that will be printed and we can meet Friday morning and have the complete bill in the new print and everything to go over it, and then send it to the calendar.

Senator HUMPHREY. May I ask this question. Why doesn't the House change, since we have acted on this one? It just dawned on me. We have done ours. Why don't they change?

The CHAIRMAN. That is fine. My point is we don't want to get into any disagreement.

Senator GEORGE. It is better to have the same bill in conference. Senator HUMPHREY. We have completed our bill. I am just wondering unless there is something that the Agency feels awfully strong about

Dr. WILCOX. Mr. Chairman, if the committee wishes I would be glad to take the matter up with the House to see if the committee does report out this bill, the House would be willing to make that change.

The CHAIRMAN. That is all right.

Senator SMITII. Does the House have this revised draft?

Dr. WILCOX. Copies have been sent to the House.

Dr. KALIJARVI. The committee does know about it and they have deliberately voted to proceed on the original bill.

The CHAIRMAN. The original bill then will be corrected according to our corrections here in committee and be ready for final action on Friday.

I want to state that next Wednesday at 10 a.m. we will meet to go ahead and make arrangements for hearings in relation to German debt settlement. The full committee will meet on the St. Lawrence on Tuesday.

We have a note here that the Subcommittee on Economic and Social Policy, of which Langer is chairman, is supposed to have a

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meeting at 4:30 here. I don't see Senator Lager. Has anyone contacted him?

Gentlemen, you have been very patient. I adjourn the meeting, and say thank you.

INVESTMENT GUARANTEES

Mr. WOOD. Mr. Chairman, I was asked a question this morning, just one fact that I would like to get into the record as to what we charge on these guaranties.

On our convertible guaranties, we charge a fee ranging from a 14 to 14 percent per year. The average is about a half of 1 percent per year. On expropriation we charge 1 percent per year.

The CHAIRMAN. All right. I want the record to show, Colonel Wood, that the chairman of this committee, and I am sure the committee personnel as well as the braintrusters of this committee, all appreciate your very fine and efficient work.

You have certainly put your teeth into this and hung onto it through weeks and weeks, and I am sure that no one is unappreciative of your sweat, and I almost said blood and tears, in getting the thing through.

Mr. WOOD. I am very, very grateful for that statement and for the kindness and consideration of the committee. Thank you very much.

[Whereupon, at 4:45 p.m. the committee adjourned.]

MINUTES

THURSDAY, JUNE 11, 1953

UNITED STATES SENATE,
COMMITTEE ON FOREIGN RELATIONS,

Washington, D.C.

The committee met in executive session at 2:35 p.m. in the Foreign Relations Committee room, U.S. Capitol, Senator Alexander Wiley presiding.

Present: Senators Wiley (chairman), Langer, and George.

Also present: C. Tyler Wood, Deputy to the Director for Mutual Security; R. E. Lippincott, Mutual Security Agency; D. F. Margolies and George Warren, Department of State; Dr. Wilcox of the committee staff.

The meeting was devoted to discussing with Louis Marhoefer, a private citizen, his proposal to promote the use of private U.S. capital to meet an acute housing shortage in West Germany.

For record of the proceedings, see official transcript.
The committee adjourned at 4:00 p.m.

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