Mr. WIGGLESWORTH. An increase from the present of how many? From 233,000 to 282,000, or 49,000?

Mr. TUTHILL. That is correct. We provided for 30,000 of imports, because in our estimation we felt that during the next 9 months they could increase the number of cars repaired over and above the number scrapped by a net of about 16,000 or 17,000. General Clay and the bizone people have not agreed with us and have asked for a higher figure. If in fact this net increase in repair occurs, as we have estimated, we will reach a target of 282,000 by the first of the year.

Mr. WIGGLESWORTH. That is a pretty vital factor in Germany in the movement of coal.

Colonel BLUMENFELD. Yes. As a matter of fact, since this suggestion Mr. Tuthill has referred to, they have made plans for the allocation of more steel and the allocation of more timber, and they hope to actually increase by their own repair operations some 21,000 freight cars in the year. This is about 5,000 more than they originally planned, and they expect to import roughly 30,000 freight cars which should give them a revised figure of 277,000-just about the figure you gave, Mr. Tuthill. But there has been a considerable impetus placed upon this car program, and as Mr. Tuthill has indicated if it continues, will help relieve the situation. They are in negotiations now with the French to try to relieve some of the items in question which might result in giving them a substantial increase in the bizone. Mr. WIGGLESWORTH. They cannot get the coal out without cars. Colonel BLUMENFELD. That is the one bottleneck in the movement of coal.

TUESDAY, MAY 4, 1948.

STEEL EQUIPMENT

STATEMENTS OF W. J. N. PALMER, COMMODITIES DIVISION; OFFICE OF INTERNATIONAL TRADE, DEPARTMENT OF COMMERCE; ISAIAH FRANK, INTERNATIONAL RESOURCES DIVISION, DEPARTMENT OF STATE

The CHAIRMAN. The next item is steel equipment, which is under other machinery. Who has that?

Mr. PALMFR. I do, Mr. Chairman.

The CHAIRMAN. All right. This seems to be quite a large item, and it seems to be a general item which is not broken down at all as to the requirements. What can you tell us about that in general?

Mr. PALMER. The ECA program, as originally developed in Paris, called for the expenditure of 2.2 billion dollars in steel plant expansion. However, all of that with the exception of $400,000,000 they expect to provide themselves or get from sources other than the United States. The CHAIRMAN. All of that except what?

Mr. PALMER. Except $400,000,000 worth; that was their program to raise all of it except $400,000,000.

The CHAIRMAN. Yes.

Mr. PALMER. That was the total request of this country for a variety of products, particularly machinery, but also such things as locomotives, cranes, and scientific instruments of various sorts re

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quired to supplement their domestic production of these same items in their steel expansion programs.

The CHAIRMAN. Locomotives and what?

Mr. PALMER. Cranes and various auxiliary equipment such as scientific measuring devices.

Mr. FRANK. That is in addition to the very specialized steel equipment like rolling mill equipment, and so forth.

The CHAIRMAN. What else would they want covered?

Mr. FRANK. That is about in general terms what is included there. The biggest part of it is steel plant rolling mill equipment, but we have these auxiliary items which the industries in Europe were not in a position to produce themselves.

The CHAIRMAN. Does not England, France, and Germany have capacity for those things?

Mr. PALMER. They do, and they were going to make between them $1,800,000,000 worth of equipment or provide facilities in the form of plants.

STEEL EQUIPMENT IN GERMANY SCHEDULED FOR REPARATIONS DELIVERY

The CHAIRMAN. Is the steel equipment in Germany being utilized?
Mr. PALMER. It is scheduled for reparations delivery.

The CHAIRMAN. You say scheduled for reparations delivery?
Mr. PALMER. Yes, sir, some of it has been so delivered.

Mr. FRANK. I think I can explain that, Mr. Chairman. In reviewing these requirements of $400,000,000 for steel equipment from the United States we took into account the fact that some of this equipment could be made available from the surplus steel-making capacity which exists in the bizonal area of Germany. That was one of the reasons for our very substantially reducing this quantity of $400,000,000 in our tentative estimates as to how much would be justified.

Not all of the countries, however, included within this European recovery program are claimants on German reparations. For example, Italy is ineligible to receive reparations from Germany, and so forth, but the fact of the availability of surplus steel-making capacity in Germany was taken into account in reviewing this requirement from the United States.

The CHAIRMAN. That means that, indirectly, we are paying the German reparations, does it not? That is, to the extent that we are supplying this material so that the other countries may take out of Germany, we are paying the reparations?

Mr. FRANK. No, sir; I think it is quite the reverse.

The CHAIRMAN. Oh, no.

Mr. PALMER. No steel equipment is going into Germany under this program, Mr. Chairman.

Mr. FRANK. No, sir. No steel equipment is going into Germany under the program. It is recognized that they have more than they can possibly use, or even possibly use ultimately under the new level of industry which has been established in Germany. So, all of this equipment is destined for countries other than Germany, and to the extent that surplus equipment would be made available to these other countries the demands on the United States would be reduced. The CHAIRMAN. Where will these reparations go?

Mr. PALMER. There has not been any allocation as yet of these materials as reparations. In tentatively reviewing these things we

have assumed that those countries which are claimants under the Paris agreement on German reparations, would receive in general half of their requirements for equipment from Germany. This was the working assumption which we made.

In certain cases, such as in the case of United Kingdom the demands for equipment from the United States were largely confined to types of equipment which were unavailable from surplus equipment in Germany, the strip mills and that kind of thing. In other cases there was an assumption that half of the equipment would come from Germany. For example, in the case of Belgium, Denmark, Luxemburg, and the Netherlands that assumption was made.

The CHAIRMAN. How much of that steel equipment goes to Russia?

Mr. FRANK. Of which, the $400,000,000, sir?

The CHAIRMAN. No.

Mr. FRANK. The German reparations equipment?
The CHAIRMAN. Yes.

Mr. FRANK. Apart from this one mill that Mr. Palmer mentioned yesterday, which went to Russia shortly after the termination of hostilities, I am not at the moment aware of any steel equipment that has gone to Russia; are you, Mr. Palmer?

Mr. PALMER. No. They laid claim to the one and the only continuous strip mill operating on the Continent and took that away shortly after the collapse of Germany. As far as I know they have not gotten anything of any consequence since that time, that is steel mill equipment. The balance would remain, as far as it could be adapted to use by the participating countries, for transfer to them-would remain available for transfer to them.

TOTAL VALUE OF STEEL EQUIPMENT EXPORTS FROM WESTERN

HEMISPHERE

The CHAIRMAN. How much are we supposed to send under this program to these 16 countries?

Mr. PALMER. During the first 15 months the total shipments from the Western Hemisphere would amount to $48,000,000 worth. Mr. STEFAN. That is the total from the Western Hemisphere? Mr. PALMER. Yes.

Mr. STEFAN. It is 48.1 million dollars.

Mr. PALMER. Yes, sir.

The CHAIRMAN. That includes the United States?

Mr. PALMER. Yes, sir; that includes the United States.

The CHAIRMAN. It all comes from the United States, does it not? Mr. FRANK. Yes, all of the $48,000,000 comes from the United States.

The CHAIRMAN. Where does it go?

Mr. PALMER. It goes largely to England, Belgium, Luxembourg and France.

Mr. FRANK. That is right.

The CHAIRMAN. Of what would it consist?

Mr. PALMER. The greater part of it is continuous sheet or strip rolling mills.

MATERIAL ON ORDER IN THIS COUNTRY

Mr. FRANK. I might mention, sir, that much of it is material which is already on order with firms in this country.

Mr. PALMER. Almost entirely so.

Mr. FRANK. Yes, almost entirely.

The CHAIRMAN. It is already on order?
Mr. FRANK. Yes, sir.

The CHAIRMAN. Orders from whom?

Mr. FRANK. Well, there are orders from the United Kingdom, from France and from Belgium, I know on the books.

Mr. PALMER. Yes, those three make up the greater part of the total. The CHAIRMAN. And we are taking over the obligation in this way to pay for those orders, is that it?

Mr. PALMER. Part of them, sir. You see, there have been dollar payments made to the extent of $11,000,000 against deliveries to be made this year. These mills are built specially to order and usually, in fact in every instance, there is a requirement that a substantial down payment be made and a series of progress payments be forthcoming as the production of the mill proceeds.

The CHAIRMAN. And when were those orders placed?
Mr. PALMER. Some of them as much as 2 years ago.

The CHAIRMAN. How would they be divided among Belgium, France, and Britain?

Mr. FRANK. I am not sure that we can give you the exact figures on that, Mr. Chairman, but I have here information on the Luxemburg order, for example. It is for $12,500,000 worth of equipment to be delivered by the middle of 1949. On the Belgian order we have information that it is for about $4,000,000 worth of equipment to be delivered about the same time, and the French order is for about $21,000,000 worth of equipment. I might say that these sums. include very special mechanical equipment and certain auxiliary electrical equipment which is ordered from electrical equipment firms.

AVAILABILITY OF MATERIAL FROM OTHER SOURCES THAN UNITED STATES

Mr. CANNON. Is material of that character available for this program from any other source except the United States?

Mr. FRANK. Yes, some of the material in the steel-equipment field is available in the United Kingdom and in France. As a matter of fact, about 90 percent of the British requirements for steel equipment are supplied from her home industries, and the same thing is true for France, but for the most part as to these particular items which are requested here they are not equipped to make them themselves. In some of the small countries like Italy, for example, and in the case of some of the small auxiliaries for Denmark they are not equipped to make any of it.

Mr. STEFAN. Italy is getting some from the Western Hemisphere, $4,500,000 worth.

Mr. Frank. That is correct

The CHAIRMAN. Out of this $48,000,000?

Mr. FRANK. That comes out of the 48.1 million dollars.

The CHAIRMAN. Give us the rest of that.

Mr. FRANK. I might mention that my information here on orders is not complete. Most of these orders were placed at a time when

there was no necessity of checking them with any governmental authority. These countries went direct to the engineering firms and placed their orders.

REQUIREMENTS FOR UNITED KINGDOM

The CHAIRMAN. How much was United Kingdom?

Mr. FRANK. 18.5 is the figure I have for United Kingdom.
Mr. STEFAN. I have 8.5 on United Kingdom.

Mr. PALMER. That is for delivery during 1948 and 1949.

Mr. FRANK. That refers to orders that may be delivered sometime after that.

Mr. PALMER. That is right.

The CHAIRMAN. What is Italy?

Mr. FRANK. I do not have the figure for the Italian orders already placed. In fact, I think the Italian orders are in a state of negotiation, and are not yet placed, is that your impression, Mr. Palmer? Mr. PALMER. Yes.

The CHAIRMAN. These figures you have given us total about $55,000,000, and the Italian figure that Mr. Stefan had was $4,000,000. Mr. STEFAN. $4,000,000 even I think it was.

Mr. FRANK. I would like to say a word about the total figure of 48.1 that appears as the total for steel equipment for all of these countries. Mr. STEFAN. That was $4,500,000, Mr. Chairman.

BASIS OF ESTIMATE FOR SHIPMENTS UNDER PROGRAM

Mr. FRANK. It was impossible to attempt to state exactly what the quantity of these shipments would be in this period, and for that reason the 48.1 million which was put down here, which I believe was on the low side, was taken arbitrarily as one quarter of the total amount of equipment which we estimated would be supplied over this period.

The $400,000,000 was what they asked for, and our tentative estimate which I am sure will be reduced when it is screened, and we estimated that of the $400,000,000 possibly 191.5 million would have to be supplied from the United States if reparation deliveries are made on time, and so forth, and this 48.1 million is just an arbitrary figure which is one quarter of 191.5 million.

In view of the fact that most of these orders are going to be placed, I think, in the early part of the period with the necessity for down payments and progress payments to be made immediately I believe 48.1 million is a low figure, but it was arbitrarily taken as one quarter of the total amount which we estimated would be supplied.

The CHAIRMAN. You mean that we are going to supply over-all approximately $200,000,000?

Mr. FRANK. That is correct.

Mr. NITZE. That is, in a 4-year period.

Mr. FRANK. That is correct.

PRESENT STATUS OF EQUIPMENT

Mr. PALMER. Yes, that is correct. At the moment, according to our best information this equipment is practically all on order and is