and ship them into the satellite countries and thus accomplish by indirection what the Congress has specifically tried to prohibit. Is that right or wrong?

Mr. HOOVER. No, sir; I do not believe that is the way it is intended. Mr. KEEFE. Well, it may not be the way it is intended, but that is the way I interpreted your statement.

Mr. HOOVER. That certainly, sir, is not the intention of the statement I made. First, let me say this: I certainly personally-and I think it is always dangerous to speak for anybody else, but I certainly think it is true of the administrator-personally I was in the strongest possible sympathy with the action taken to cut off exports to Soviet Russia. I just happen to feel that deeply and strongly and have done so for years, and the record will show it. Now, there is a problem, of course, in the business of building up those countries of western Europe so that they can stand on their own feet. They formerly had trade with eastern Europe, and unless that trade can be restored, it will be exceedingly difficult to ever get them off the backs of the American taxpayers. Consequently, it is very difficult to see how that restoration could take place unless there is some kind of trade between the countries of western Europe and the countries of eastern Europe.

I would say we would have to take every care we possibly could to see that as little went to those satellite countries which would assist them in any possible way in building up to the danger of the United States, which I personally think actually exists at the present moment. I could not emphasize too strongly my feeling on this.

Mr. KEEFE. You may feel strongly about it, but that does not give expression to anything except a pious hope that you will be able to do something about it. What I would like to know is the realities of this situation as the actual operation takes place.

Mr. HOOVER. To answer it the best way I can, I think there will unquestionably take place trade from these western European countries to the eastern European countries.

Mr. KEEFE. All right. We ship to England, and England has a trade agreement with the Soviet countries, so that we are going to ship materials over there to build up her agricultural business to feed her own people in order that they may work and produce dynamos, motors, excavators, and what have you-industrial equipment— which, in turn, they propose to ship to the Union of Soviet Republics. Is not that true?

Mr. HOOVER. If we export goods to them, I think probably it is. That seems to be taking place.

Mr. KEEFE. Then, as a matter of fact, we ship steel and steel products and all other types of products to Great Britain to enable her to fabricate them and get her industry moving and to raise the general level of her industry, and she, in turn, ships those products to nations which the manufacturers in the United States could not ship to directly. Is not that true?

Mr. HOOVER. I should say when that happens and takes place, we would very seriously have to consider whether or not that would have to be taken up.

Mr. KEEFE. Well, I think the time to start is now. This committee ought to know and the people are entitled to know what the situation is now, before we get into that situation, it seems to me.

Mr. HOOVER. I think it should be considered now.

with you.

I will agree

DISCUSSION OF POSSIBILITY OF PLACING PARTICIPATING COUNTRIES IN TRADE COMPETITION WITH UNITED STATES

Mr. KEEFE. Now, I realize the difficulties in this situation, and I realize Mr. Hoffman's statement that this is an over-all picture that you must deal with. You are dealing with a sovereignty over there, Great Britain; you are dealing with a sovereignty over there, France; and you are dealing with a sovereignty, Sweden, Norway, and so forth. But you are taking American taxpayers' dollars in this picture, and all the time you are charged with the responsibility under the basic law of seeing to it that the economy of the United States is not adversely affected as a result of this over-all picture.

Mr. HOOVER. Yes, sir.

Mr. KEEFE. Now, then, you are going to build up this economy in France, Italy, England, and so forth, and I expect in Germany, and they have to sell those products to somebody.

Mr. HOOVER. Yes, sir.

Mr. KEEFE. And you have indicated they are going to sell them to the eastern countries; they are going to sell them to the Latin-American countries; they are going to sell them in the United States, and thus they become competitors with the producers in the United States immediately, do they not?

Mr. HOOVER. Yes, sir.

Mr. KEEFE. And if they build up to the levels anticipated, they will be prospective competitors in the field of world trade.

Mr. CASE. If the gentleman will yield there, I discussed this situation with a man who was in the British military government when I was in Europe last fall. He was a historian and a man of considerable perspective. He made the observation to me that when this goal is reached and I quote his term-"prices will be cut to ribbons."

Mr. HOFFMAN. Mr. Case, may I inject a thought there? If I at this moment found myself in the position where I was back in the automobile business and was the only manufacturer of automobiles, if I wanted to have a good business, I would start up some competitors. In other words, the whole American philosophy is based upon the theory that competition is a good idea. Now, why I should favor competition internally and should become frightened about competition externally I have never understood. In other words, I say on the over-all the United States of America has so much to gain materially by having a prosperous England, by having a prosperous France, by having a prosperous Italy, and a prosperous Germany, and if that concept is not sound, if we are going to be concerned about stepping up the automobile business in Great Britain to a point where it will compete with us, which we are not, then I think the whole idea is unsound.

Mr. CASE. That would be true if you were dealing with a prospective condition, but if those countries are getting back to what they were on a per capita basis immediately before the war, I wonder if the analogy would hold of the automobile business, if your competitors were up to what they were immediately before the war on a per capita basis. Would you then feel you could take your stockholders' money and finance the deficits of some of your competitors?

Mr. HOFFMAN. I was assuming I did not have to get the stockholders' consent, to start with.

Mr. CASE. But we do have to get our taxpayers' consent.

Mr. HOFFMAN. That is right. I appreciate the analogy does not fit perfectly, but I feel very strongly we have to get down here what is a good definition of prosperity. Now, I think in this article, which we do not know whether it is correct or not

Mr. CASE. No; but I have been handed, since I brought up the discussion, a committee print of this report of the Committee on Foreign Affairs entitled "A survey of the economic situation and prospects of Europe. Prepared by Research and Planning Division, the Economic Commission for Europe, March 30, 1948, United Nations Economic and Social Council." That is the report to which the article alludes, a report of 216 pages, and copies of which are now available for members of the committee.

NEED FOR ASSISTANCE TO COUNTRIES SHOWING PROGRESS ABOVE 1938

LEVEL

Mr. HOFFMAN. Certainly, the report should be read and studied, and I am in process of doing that. But just assuming for the moment you do have in Ireland a condition where Ireland has today the same productive consumption that it had in 1938, what was that consumption, and can we take away that consumption on the basis that Ireland would be a good customer of ours? I do not think so. And the same thing is true as to France, and the same thing is trueMr. CASE. Is it true as to Sweden?

Mr. HOFFMAN. Not as to Sweden.

Mr. CASE. Well, Sweden is one of those nations.

Mr. HOFFMAN. But Sweden is not one of those countries we expect to give money to, so far as I am concerned, to countries that are prosperous such as Switzerland, such as Portugal, and such as Sweden; no. Mr. CASE. What about Norway and Belgium?

Mr. HOFFMAN. If that report shows that Norway today is at that level, I would be surprised.

Mr. CASE. It shows Norway reached 110 percent of its 1938 level by the fourth quarter of 1946 and averaged about 112 percent through the first three quarters of 1947. What about Belgium?

Mr. HOFFMAN. I think Belgium probably is very close to 1938.

Mr. CASE. Somebody told me when I was over in Europe last fall that Belgium was about in the best position of any country except Sweden.

Mr. HOFFMAN. I would think so, from my observation.

Mr. STEFAN. What is there in here; is there $28,000,000 in here for Sweden?

Mr. WIGGLESWORTH. $28,400,000.

Mr. HOFFMAN. The question is whether that would be a grant or a loan.

The CHAIRMAN. Mr. Hoffman, when a country is showing progress above its 1938 level, there would be some question as to what extent we should interfere with progress in the normal approach to that kind of problem. It would be the countries that were progressing backward, if we were going to apply medicine, that we should pay the most attention to. That would be the normal approach-not to interfere

too much with countries that themselves have been able to show progress.

Mr. HOFFMAN. I will agree completely with that.

The CHAIRMAN. I myself would hesitate very much to go into the picture where a country indicated an index of industrial and agricultural production considerably above its prewar basis.

Mr. HOFFMAN. So would Ï.

The CHAIRMAN. You need the doctor only where the fellow is going the wrong way; you do not need the doctor when the fellow is going the right way.

Mr. HOFFMAN. That is right. I think the only slight modification I would make to that would be if the patient had been anemic in 1938 and was still anemic, I might say perhaps a blood transfusion would be helpful. But I just hold to my contention that we have a great deal to gain from having prosperity in Europe, and that is a matter of doing a highly selective job when it comes to what is given to Europe and what is loaned to Europe, but that is not what we are here for. In other words, that is why I said in the very beginning I felt this job had to be done on a national level, and when it came to recovery, that is where we knew the least and had to get the most in the way of facts. And you find no requisitions yet approved for this part of the program that deals with recovery, because we do not know enough about it. But we are going to try to find out as soon as we can, and certainly we are not going to just take a country and pour money into it.

POWER OF ADMINISTRATOR TO REFUSE AID TO PARTICIPATING COUNTRIES IN INTEREST OF NATIONAL SECURITY

I think, also, perhaps, Mr. Keefe, I did not make myself clear. One of my first sentences was we had to take a look at the whole program, not just simply the question of whether England has developed to the point where they produce the steel they use that goes into the type of exports to Europe that we do not think should be made, but I think we have to look at the whole program. And if we find England is taking our money, food, or grains in substantial amount and taking the money released thereby and spending that for the shipment of the wrong type of merchandise and products into Russia, that is our business.

Mr. KEEFE. It may be your business, Mr. Hoffman, but what do you propose to do about it?

Mr. HOFFMAN. We just propose to see, as far as we are concerned, that the aid we would give to Great Britain would not be forthcoming if Britain continued on a program which, as a whole, we disapproved. We cannot pick up some one item; we would have to be in a position to do some trading to get the result.

Mr. KEEFE. I understand.

Mr. HOFFMAN. In England, for example, you might pick out one situation on which there might be an honest disagreement, but certainly if England was using her own money or merchandise to make munitions of war and shipping them to Russia, I say that is our business ard we should not pour money into England.

Mr. KEEFE. The print in this is just so small that I can hardly read it, even with my glasses, but it is indicated that the United Kingdom and United Kingdom dependencies anticipate shipments aggregating

$4,273,400,000 from April 1, 1948, to June 30, 1949-that is total exports of which they are going to pay for $2,067,800,000 out of their own dollar earnings, $407,000,000 loans and crops, and $1,798,600,000 under this specific program. I assume under the normal practices of trade we would have no right to say to Great Britain "This material which you produce with your dollar income or which you purchase with loan money-we are going to tell you how you shall use that raw material."

Mr. HOFFMAN. I think I would like to read, as the chairman suggests, from this section, because it bears directly on this point. This is on page 20 of the enabling act, subsection (d) of section 117. It reads:

The Administrator is directed to refuse delivery insofar as practicable to participating countries of commodities which go into the production of any commodity for delivery to any nonparticipating European country which commodity would be refused export licenses to those countries by the United States in the interest of national security. Whenever the Administrator believes that the issuance of a license for the export of any commodity to any country wholly or partly in Europe which is not a participating country is inconsistent with the purposes and provisions of this title, he shall so advise the Department, agency, or officer in the executive branch of the Government exercising the authority with respect to such commodity granted to the President by section 6 of the act of July 2, 1940, as amended, and, if differences of view are not adjusted by consultation, the matter shall be referred to the President for final decision.

So the Administrator has the clear power, if that is going on, to say "Well, there it is. We are going to have to stop our aid program." Mr. KEEFE. But you won't stop the deal.

Mr. HOFFMAN. We won't stop the deal.

The CHAIRMAN. Do you intend to exercise that power?

Mr. HOFFMAN. Yes, sir.

Mr. STEFAN. Would that be applicable to the question Mr. Keefe asked-if they are trading with their own money?

Mr. HOFFMAN. Surely; definitely.

LEVEL OF INDUSTRIAL PRODUCTION IN EUROPEAN COUNTRIES

Mr. CASE. Mr. Chairman, I should like to ask permission at this point to place in the record table 1 entitled "The Level of Industrial Production in European Countries," as given on page 1 of this economic report.

The CHAIRMAN. Well, there are a lot of countries in there that are behind the "iron curtain," and I do not know whether you would want those in or not. You may put them in if you want to.

Mr. CASE. Suppose we take the participating countries and select them from this table.

The CHAIRMAN. Yes. I think it would be just as well if we would eliminate Bulgaria, Czechoslovakia, Finland, and Poland, which are not participating.

Mr. CASE. That is all right, but it seems to me that the level of production reached in the participating countries is directly involved here in this discussion.