The Senate Committee on Foreign Relations plans to convene tomorrow in this room to question Mr. Harriman. That, however, is subject to change if conditions arise that seem to warrant it.

The legislation being considered is vitally important to the security of the United States.

Before inviting the first witness to make his statement, I wish to ask Mr. Richards from our House Foreign Affairs Committee and Senator Russell, Chairman of the Senate Armed Service Committee, whether they have any comments to make at this time. Is Senator Russell present? He does not seem to be present.

Senator Richards.

Mr. JAMES P. RICHARDS. I appreciate your calling me Senator. I have no statement to make except to announce that the House Foreign Affairs Committee will begin its hearings next Tuesday on this proposal.

The CHAIRMAN. All right, the first witness is W. Averell Harriman. We are glad to have you, Mr. Harriman. Proceed.

STATEMENT OF HON. W. AVERELL HARRIMAN, DIRECTOR FOR MUTUAL SECURITY

Mr. HARRIMAN. Mr. Chairman and members of the committees, last year, the Congress authorized the appointment by the President of a Director for Mutual Security. The Director is responsible for supervising the Mutual Security Program so that it will be, and I use the language of the act, "effectively integrated both at home and abroad, and administered so as to assure that the defensive strength of the free nations of the world shall be built as quickly as possible on the basis of continuous and effective self-help and mutual aid." The Director also has primary responsibility for preparing and presenting to the Congress such military, economic, and technical assistance programs as may be required in the interests of the security of the United States.

I am here this morning to begin presentation of the Mutual Security Program for the coming fiscal year.

MAIN FEATURES OF THE MUTUAL SECURITY PROGRAM

The program submitted to the Congress by the President, recommending the authorization of $7,900,000,000, has been developed with the full participation and cooperation of all the departments and agencies involved. It has been a team job. Testimony will be presented this morning by the Secretary of State, the Secretary of Defense, the Chairman of the Joint Chiefs of Staff, and later by other officials directly concerned with each part of the program.

Everyone recognizes the grave dangers which confront our Nation. None of us disputes the existence of the Communist threat to our security, or the need to meet it. The questions which arise among us are over how to meet the threat, in what directions, and to what extent our efforts should be applied.

It is my firm conviction that the Mutual Security Program is a hard-headed, statesmanlike way to build the collective strength we need for our security. We will give you facts and figures to show that, for a fraction of the amount we are spending for our own Military

Establishment, we are assisting in the development of military forces with more men under arms-in Europe alone-than are in our own services. We will demonstrate how relatively small sums invested in the underdeveloped areas will strengthen the security of the entire free world.

The Mutual Security Program is one part of our total security effort. The funds requested represent about 121⁄2 percent of that portion of the budget devoted to our security. The President has recommended about $64 billions for our major security programs, nearly $8 billions of which are to help build the strength of our friends and allies around the world. That strength is essential to our own security and without it, it is difficult to see how the rest of our own defense efforts could be effective.

The program continues contributions of various kinds to help strengthen Europe, the Near East and Africa, the Far East, and Latin America. These contributions are of three types: finished military items and military training; raw materials and other commodities to support the defense programs of friendly nations; and economic and technical assistance to underdeveloped countries. Each of these categories is designed to meet in the most effective way the threat as it exists in each area.

DEFENSE BUILD-UP IN EUROPE

Bar far the greater part of the funds requested is to help the defense build-up in Europe. We have long recognized that the defense of Europe is vital to us. Western European resources in skilled manpower and industrial capacity could determine the balance of power in the present global struggle.

Our joint effort under the North Atlantic Treaty-ratified only 21⁄2 years ago has already gathered momentum. In the past year, there has been a steady increase in the number and effectiveness of trained forces, integrated under General Eisenhower's command.

Last autumn the Temporary Council Committee, of which I was the United States member and chairman, analyzed the NATO defense program in relation to the political and economic capabilities of the member countries. Each country, freely and without reserve, laid before the Committee the details of its military program and its financial and economic situation.

These programs were reviewed and concrete measures recommended for the rapid build-up of combat-ready forces on a combined, balanced, collective basis. As a result of this joint work, the NATO governments agreed at Lisbon last month to provide, by the end of 1952, 50 divisions, over 4,000 combat aircraft, and substantial naval forces, and to lay the groundwork for further build-up next year and beyond. This program, in the words of General Eisenhower, will provide, and I quote, "a real deterrent to aggression."

The Lisbon plan also set up a system of priorities under which equipment will be made available only to forces which require it to become combat ready and to meet training needs. General Eisenhower's command has the key role in this system. This will make sure that the equipment we send to Europe will go where it will do the most good.

At Lisbon, the NATO Council endorsed the plans for the European defense community which, together with the Schuman plan, constitute major steps toward closer European integration. These are momentous undertakings. We will continue to give active support to further progress in this direction. As the Congress has long recognized, the best assurance of a stable and secure Europe would come from the breaking down of national barriers and the pooling of national efforts and resources.

Over $5 billions of the funds under the Mutual Security Program is to help implement the Lisbon plan of action. These funds are directly geared to the requirements of that plan.

UNITED STATES CONTRIBUTION TO DEFENSE BUILD-UP THROUGH MILITARY ASSISTANCE PROGRAM

The military assistance funds, together with those previously appropriated, will provide the United States contribution towards the initial equipment for the European 1952 forces agreed at Lisbon. They will also cover partial combat reserves and some initial equipment for additional forces, including German contingents in the European defense community, to be brought into being during 1953. The President has directed that the deliveries to our NATO partners be given very high priority.

To meet the Lisbon plan and the requirements in other areas, $12 billions of expenditures against past and requested authorizations have been projected for military assistance during fiscal years 1952 and 1953. The military assistance funds requested are needed to finance the flow of necessary equipment.

The major portion of the military assistance will be in form of end items produced in this country. We also expect to place about $1 billion of contracts in Western Europe during fiscal year 1953 for the production of military equipment, including items such as ammunition, electronics, spare parts and small naval craft. This is called. offshore procurement. It serves several purposes. It produces needed equipment. It is a source of needed dollar earnings. It enables our partners to develop their capacity for arms production by utilizing available labor and facilities. It brings closer the time when they will be able to carry the production load themselves.

Apart from end-item assistance, our European allies need defense support in the form of imported raw materials, fuel, certain other essential commodities, and technical help in order to make their contribution to the joint military effort. A major military build-up can only be successfully undertaken, as we in the United States well know, on the basis of expanded production. The Europeans have undertaken measures to expand production, measures we are supporting through an intensified productivity drive which brings American know-how to European management and labor. Under the Lisbon plan of action, the expansion of each country's total production will make possible increased defense efforts.

ECONOMIC SUPPORT FOR EUROPE'S DEFENSE EFFORT

The increasing European defense effort requires supplies of imported raw materials. These supplies cannot be fully paid for by

present European earnings, when the European economy has not yet been adjusted to the diversion of substantial resources for military use. For these reasons, the Mutual Security Program includes about $1.8 billion to provide the critical margin of imported commodities as defense support for Europe as a whole. Of this amount, $1.4 billion is for the countries in the Lisbon plan of action.

This is not the same thing we were doing under the Marshall plan. The Marshall plan was designed to help Europe rebuild its civilian economy from the disastrous consequences of the war. Defense support is also a form of economic assistance, but it is for an entirely different purpose. It is to make it possible for our friends in Europe to expand their defense efforts for our common security.

Defense support is not designed to provide our European partners with the means to live in comfort while we shoulder the burden of rearmament. They have embarked upon large-scale military efforts which mean real sacrifices to their people. They are providing the manpower for their force build-up. Every NATO country in Eruope has universal military service. Our allies pay, clothe, and maintain their forces. They are providing most of the necessary military facilities and a considerable part of the equipment. This coming year their military budgets including Germany's will be about $14 billions, more than double the pre-Korean level. This represents about 10 percent of their gross national product.

But this figure tells only part of the story. Their military costs are lower in many ways than ours. For example, their standards of pay and maintenance of troops are on a much more austere basis. Therefore, comparing the percentages of gross national product devoted to military budgets is not an accurate reflection of the relative efforts of the United States and the European countries. Furthermore, with a per capita output less than one-third ours, this 10 percent creates a serious strain on their economy. Everybody knows it is harder for people with such small incomes to put up 10 percent than it is for people with larger incomes to put up the 18 percent which we are spending for our own security programs.

IMPORTANCE OF DEFENSE SUPPORT FOR EUROPE

Other witnesses will explain to you in detail precisely how defense support will enlarge the military effort of our European partners. I want to emphasize one thing. On a conservative calculation of economic factors alone, defense support results in military expenditure amounting to two or three times its cost, but in reality, failure to provide defense support would have far wider consequences than the direct loss in military expenditures. There would have to be a sharp reduction in European-financed defense production and in European forces.

A major cut in the defense programs of the prospective partners in the European defense community would place in jeopardy that most important move toward European unity. The whole NATO plan for building up an effective force under General Eisenhower would be undermined. It is difficult to foresee what could be salvaged in the form of an integrated defense program, geographically and strategically sound and capable of being an effective deterrent to aggression.

Commitments of our European allies in other parts of the world, in which we as well as they have vital interests, would inevitably have to be reviewed and expenditures curtailed to a degree which neither we nor they would like to contemplate. One has only to think of the effort which France is making in Indochina, or of the world-wide strategic responsibilities of the United Kingdom, to appreciate what grave problems would be presented to the free world if a withdrawing of United States defense support were to throw all these efforts into question. In terms of world politics, this disruption of established plans would represent a major victory for the Soviet leaders in the Kremlin.

SIZE OF FUTURE UNITED STATES CONTRIBUTIONS IS UNPREDICTABLE

Thus both military assistance and defense support are required to carry out the Lisbon plan of action. It is impossible to predict with precision the size of the United States contribution beyond the coming year or how long it should be continued. The North Atlantic Council recognized that, in a cold war, planning for the future must be kept flexible that requirements will be affected by changes in international tensions, the development of new weapons and military techniques, and by other factors. For this reason, firm force plans were made only for clendar year 1952, with provisional plans for 1953 and planning guides beyond. There will be a complete review in NATO next autumn when plans for 1953 are firmed up and the planning cycle moved forward a year.

The outlook as we now see it is that next year will also be one of large-scale capital build-up. Thereafter, subject to the factors I have previously mentioned, requirements for the further capital build-up should taper off. When the capital build-up is completed, an expanded European economy, and especially an expanded European munitions production, should make it possible for the European countries themselves substantially to maintain their own defense forces at an adequate level.

FUNDS FOR OTHER EUROPEAN COUNTRIES

In addition to support for the Lisbon plan of action, the Mutual Security Program includes funds for military assistance and defense support for the two new North Atlantic Treaty partners, Greece and Turkey. These two countries will add sizable and effective military forces to those called for under the Lisbon plan of action and will strengthen the southern flank of European defense. Similar assistance is also provided for Yugoslavia, whose defection in 1948 represented a major set-back to Kremlin designs. Assistance is also provided for Austria, where continued economic assistance is necessary to maintain stability in the face of occupation of part of the country by Soviet forces. A program for Spain is being developed and would be carried out with funds already appropriated by the Congress.

MILITARY FUNDS FOR SOUTHEAST ASIA AND LATIN AMERICA

We are engaged in a collective defense effort in Europe to deter aggression, but on the other side of the globe, in Korea and Indochina, the Kremlin has already induced its satellites to wage open aggression.