COMMITTEE ON FOREIGN AFFAIRS THOMAS E. MORGAN, Pennsylvania, Chairman CLEMENT J. ZABLOCKI, Wisconsin ARMISTEAD I. SELDEN, JR., Alabama L. H. FOUNTAIN, North Carolina CORNELIUS E. GALLAGHER, New Jersey JOHN C. CULVER, Iowa LEE H. HAMILTON, Indiana ROY H. McVICKER, Colorado FRANCES P. BOLTON, Ohio E. ROSS ADAIR, Indiana WILLIAM S. MAILLIARD, California H. R. GROSS, Iowa E. Y. BERRY, South Dakota BOYD CRAWFORD, Staff Administrator ALBERT C. F. WESTPHAL, Staff Consultant MELVIN O. BENSON, Staff ConsuljuASE WAJ HELEN C. MATTAS, Staff Assistant HELEN L. HASHAGEN, Staf Assistant 30 YTIZAZVINU SUBCOMMITTEE ON FOREIGN ECONOMIC POLICY CLEMENT J. ZABLOCKI, Wisconsin EDWARD J. DERWINSKI, Illinois FRANKLIN J. SCHUPP, Staff Consultant CONTENTS LIST OF WITNESSES Tuesday, July 20, 1965: Gaud, Hon. William S., Deputy Administrator, Agency for Inter- Page 1 Wednesday, July 21, 1965: Hummel, Arthur W., Jr., Acting Assistant Secretary of State for 42 Tuesday, July 27, 1965: Jacobson, Mrs. Dorothy, Assistant Secretary of Agriculture for International Affairs. Street, Thomas E., Director, Program Development Division, Foreign བྱབ 67 70 Wednesday, July 28, 1965: Austin, Gilbert F., Deputy Assistant Director (Near East and South Wheeler, Joseph C., Acting Assistant Director (Administration), Stephens, Mrs. Nancy G., Agency Budget Officer, U.S. Information Skora, Eugene J., Assistant General Counsel, U.S. Information 90 96 93 87 Wednesday, August 4, 1965: Diehl, William W., Director of the Office of International Economic 108 Hirschtritt, Ralph, Deputy to the Assistant Secretary for International Affairs, Department of the Treasury 111 Trued, Hon. Merlyn N., Assistant Secretary for International Affairs, 103 Thursday, August 5, 1965: Van Beek, Dr. Gus, archeologist (Old World), Division of Cultural 138 Warner, William W., Special Assistant to the Secretary for International Activities, Smithsonian Institution_.. 135 Thursday, August 19, 1965: Coughran, Tom B., executive vice president, Bank of America, New 145 Tuesday, August 24, 1965: Adkinson, Dr. Burton W., Head of the Office of Science Information 159 Wednesday, September 1, 1965: Crockett, Hon. William J., Deputy Under Secretary for Administration, Department of State_ 183 Reuss, Hon. Henry S., a Representative in Congress from the State of 200 Roberts, Ralph, Deputy Assistant Secretary for Budget, Department of State 197 Whitener, Russell P., Director, Foreign Currencies Staff, Department of State.. 194 Tuesday, October 19, 1965: Lubell, Arthur, attorney at law, New York City, N.Y.. 209 III STATEMENTS AND MEMORANDUMS SUBMITTED Agricultural Commodities Agreement between the Government of the Memorandum of sales of local currencies to U.S. citizens, businesses, and Memorandum submitted by AID of uses of country use and U.S. use local Memorandum submitted by AID on U.S. holdings of Italian currency. Memorandum submitted by Department of State on attitudes of "excess" Memorandum submitted by Department of State on Department's as- Memorandum submitted by Department of the Treasury regarding pur- Memorandum submitted by Department of the Treasury re military expenditures in local currencies in India and Pakistan ...... Tables submitted by Department of the Treasury showing annuitant payments to recipients in Eastern European countries and annuitant payments being made in local currency. Memorandum submitted by the National Science Foundation on the proposed expansion of its foreign currency science information program (including table I and table II).. Page 10 17 20 26 36 39 45 50 78 95 111 116 128 128 176 Table submitted by Department of State showing costs of and proceeds 191 196 APPENDIXES Appendix A. Utilization of U.S. Government foreign currency balances.. Appendix B. Memorandum from Hadassah re use of excess U.S.-owned foreign currencies__ 223 230 UTILIZATION OF EXCESS U.S.-OWNED FOREIGN CURRENCIES IN CERTAIN COUNTRIES TUESDAY, JULY 20, 1965 HOUSE OF REPRESENTATIVES, COMMITTEE ON FOREIGN AFFAIRS, SUBCOMMITTEE ON FOREIGN ECONOMIC POLICY, Washington, D.C. The subcommittee met at 10:10 a.m., in room 2172, Rayburn Building, Hon. Leonard Farbstein (chairman of the subcommittee) presiding. Mr. FARBSTEIN. The meeting will come to order. This is the first meeting of the Subcommittee on Foreign Economic Policy. The purpose of the meeting this morning is to determine the ultilization of excess U.S.-owned foreign currencies in certain countries. These hearings are more in the nature of exploratory hearings to find ways and means of effectively utilizing these local currencies in the various countries in the interest of the United States and for the benefit of the people in these countries. After hearing from Government witnesses, the subcommittee plans to hear from American businessmen who are operating abroad, private organizations, and private witnesses who have an interest in these countries. Our first witness this morning is the Honorable William S. Gaud, Deputy Administrator for the Agency for International Development, who is accompanied by Alfred D. White, Director, Office of Development Planning (NESA), AID; and Paul Resnik, Staff Coordinator, AID. You may proceed, Mr. Gaud. STATEMENT OF HON. WILLIAM S. GAUD, DEPUTY ADMINISTRATOR, AID Mr. GAUD. Mr. Chairman and members of the committee, I am happy to appear before you this morning to discuss the status of the Government's holdings of foreign currency. These holdings have been acquired in the course of carrying out our economic assistance programs. They are substantial, and they will increase considerably in the years ahead. I will first outline briefly the sources of these foreign currency holdings, and then discuss their uses and the problems arising out of their existence with special reference to the so-called excess currency countries. U.S. holdings of local currencies derive from two principal sources: Proceeds of sales of U.S. surplus agricultural commodities under title I of Public Law 480 (food for peace); and Principal and interest payments in local currencies on dollar loans made by AID's predecessor agencies and local currency loans made. with currencies generated under title I of Public Law 480. The first of these two is now, and is likely to remain for some years, the larger source of local currencies. Most of our sales of agricultural surpluses are made to less developed countries whose food requirements are critical but which do not have sufficient foreign exchange to pay dollars for imports. Until they are able to meet their food needs through local production, or have improved their foreign exchange position to the point where they can finance food imports without outside assistance, the United States will presumably continue its present practice of selling them food for local currency under title I of Public Law 480. Interest and loan repayments constitute a growing source of U.S.held local currencies. In fiscal year 1963, for example, repayments totaled $162 million. In 1964 the comparable figure was $191 million. It will grow still further in the future. I wish to call to your attention the fact that U.S.-owned local currency as we use the term does not include counterpart funds generated by U.S. economic assistance programs. Counterpart funds are not U.S. owned. They are the property of the country receiving the commodities from the sale of which the counterpart funds are derived. They are subject to U.S. audit and agreement on their use. Also, section 609 of the Foreign Assistance Act provides that under certain circumstances portions of these counterpart funds may be turned over to the United States for its use. Except to the extent that this limited authority is exercised, however, counterpart funds are not U.S. owned, and they are, therefore, not within the scope of our present discussion. On December 31, 1964, U.S. holdings of foreign currencies totaled $2.9 billion. A breakdown of this amount by the principal countries involved appears in appendix A of my statement. As it shows, this gross amount consists of the following three categories of funds: $1.319 billion for country uses; $236 million for Cooley loans; and $1.382 billion for U.S. uses. Let me say a few words about each of these three categories of funds, beginning with country use funds. The usual Public Law 480 sale agreement prescribes what portion of the proceeds of sale is to be used for country uses, what portion is to be used for Cooley loans, and what portion is to be used for U.S. uses. The percentages vary from case to case. Normally the agreement will provide that 60 to 80 percent of the proceeds will be devoted to country use. These moneys are then either granted or loanedusually the latter-to the recipient country pursuant to section 104 of Public Law 480. The total amount of country-use funds on hand at any given moment is always substantial. On December 31, 1964, for example, on-hand balances of these funds totaled $1.319 billion. But annual disbursements are also substantial. During fiscal year 1964 they amounted to $1.088 billion. Appendix B of my statement 2 shows these disburse 1 See p. 8. 2 See p. 9. |