methods. From 1949 through August 1954, 67 teams with a total membership of 924 Britons representing a cross section of British industry drawn from the supervisory, technical and workshop levels visited this country for an average period of 6 weeks. Their visits to United States manufacturing plants and exchanges of information concerning United States production techniques were carried out under guidance of the Anglo-American Council on Productivity at the invitation of the council. Most of the principal British industries sent at least one team. There were 47 industrial teams; 20 specialist teams were also sent to the United States to study questions which were of interest to a number of different industries. The following, among other subjects, were studied by specialist teams: freight handling, materials handling in industry, packaging, retailing, training of operatives and supervisors. In all, nearly 2,000 United States industrial plants were visited.

After completing the United States visit, each team prepared a report on its observations and findings, together with recommendations for improvements in British production and operating methods and suggestions, for adopting such American techniques as might be helpful in increasing British productivity. More than 650,000 copies of these team reports were printed and distributed throughout British industry constituting in effect a storehouse of information on which thousands of firms in the U. K. are now drawing. Summarizing its program in 1952, the Anglo-American Council said: "this experience in international, industrial and human relations will result in tangible and intangible benefits for years to come," and called it, "an entirely new form of international public relations and adult education." The costs of this program in 1949-52 were approximately $2,364,000 of which the U. K. section of the council on productivity and the British industries concerned contributed in sterling the equivalent of $897,012 and the United States section, $1,467,480, provided by ECA, later MSA. By August 1954, the American contribution, from MSA, later FOA, had increased to $5,187,100.

5

Another type of project provided for the purchase with foreign aid dollars of scientific and laboratory equipment and instruments to be used in scientific testing and research work-in some cases under Government auspices, in others in laboratories created and maintained by industrial associations. In all cases the equipment was only approved for purchase with dollars if not obtainable from a nondollar source. Counterpart funds were deposited by the recipients of the material. It should be noted that there is a marked difference in emphasis between the technical exchange programs in the developed countries of Europe (the U. K. in particular, where the emphasis is on industry and labor), and the technical cooperation programs in underdeveloped

The final report of the Anglo-American Council on Productivity-September 1952.

countries where more of the activity is in the fields of agriculture, health, and education.

Counterpart

The sale in Great Britain of goods and commodities purchased with ECA dollars and resold for pounds sterling produced a large amount of local currency-so-called counterpart funds-which were used, with the approval of the ECA and MSA for British debt retirement in the period from 1948-1952. After the outbreak of the Korean war, the need for increased military production became so urgent that the remaining and new counterpart funds were devoted primarily to that purpose.

The following relating to the use of counterpart funds is taken in large part from a "Report on Review of Certain Activities of European Missions Foreign Operations Administration" made by the United States General Accounting Office, division of audits, dated October 1954.

In approving the British application for the withdrawal of counterpart funds for the retirement of public debt, the National Advisory Council was influenced principally by the fact that this program would combat the inflationary impact of the recovery program in England. Document number 88, dated December 15, 1950, issued by the National Advisory Council, stated that the decision was consistent with the purposes of the bilateral agreement because it permitted:

(1) An equivalent reduction in the Treasury securities held by commercial banks.

(2) Commercial banks to replace the Treasury securities with industrial and commercial investments without increasing the total of deposit money outstanding. The moneys so released were used to support the recovery program.

The intent of Congress did not preclude the use of counterpart funds for public debt retirement, as indicated by the Senate Committee on Foreign Relations in reporting on the bill (S. 2202 and H. R. 4840, 80th Cong., 2d sess.) which subsequently became the Economic Cooperation Act of 1948.

After the release of counterpart funds for debt retirement, the ECA Mission controller's office verified by serial number, the cancellation of each U. K. Treasury note.

For the fiscal years 1953 and 1954, about $84 million of counterpart funds were programed for use as defense budget support, which is about 7 percent of the total English defense budget for these 2 fiscal years.

The Mission controller's office does not have access to the accounts of the military services; therefore, no direct verification can be made as to the actual use of these funds. An attempt is made, however, to reconcile the amount of expenditures with the quarterly NATO report and with the annual statement of expenditures certified to by the U. K. Auditor General.

By agreement, FOA released counterpart funds in the amount of $12.6 million for use in connection with programs for the development of dependent overseas territories of the United Kingdom. As a condition of this aid, it was agreed that the counterpart funds will, in the case of each individual project, represent not more than 50 percent of the total cost of the project. Quarterly reports, as submitted by the British Government, are reviewed by the Mission. Occasional spot checks are made at the project sites by mission officials and periodic reports are received also from the local United States consulates.

Industrial Projects

A description of some of the industrial projects in the United Kingdom financed in part with ECA/MSA dollars is contained in Appendix A of this report. The total value of all projects was in dollar equivalent $415.7 million; MSA approved dollar financing was $50.4 or approximately 12 percent.

United Kingdom Aircraft Program

In the early part of April 1953, a contract was made between the United States Government and the British Ministry of Supply for the purchase of 465 Hawker Hunter fighters to be manufactured in the U. K. and delivered under allocation to the air forces of various NATO countries. This was charged to fiscal year 1953 funds. Later in the same 2-year period (fiscal year 1954 and 1955) an informal Executive agreement was reached between the United States Government and the British Government, under which the former agreed to finance under various formulae a large number of three different types of British fighters and several types of bombers some of which were already under procurement by the Ministry of Supply. The financing

was to be provided partly through offshore purchase contracts made between the Department of Defense and the Ministry of Supply, partly through the counterpart of commodities furnished under the economic assistance program, and partly with funds provided by the special aircraft program administered by FOA. Later, due to the reduction of requested appropriations by the Congress for fiscal year 1954, surplus agricultural commodities to the value of approximately $60 million were allocated to the U. K. to be sold for pound sterling and the proceeds released as grant aid to the British defense budget. The total of the surplus agricultural commodities thus allocated equalled approximately the amount of the reduction effected by Congress in the appropriation request.

In fiscal year 1955, Congress again reduced the appropriation request intended to support this program, and limited assistance to the special aircraft project to $35 million in the form of surplus agricultural commodities, to be sold for pounds sterling. However, the Executive agreement of April 1953 contemplated $75 million for the special aircraft project in fiscal year 1955 and again the difference seems to have been made up through the allocation by FOA of additional surplus agricultural commodities.

This program, as can be seen, is exceedingly complex and has many ramifications. It does not lend itself to any short description or outline. Some of its complexities can be perceived by the following summary of the major program components:

1. The OSP contract of April 1953, financed by fiscal year 1953 funds for 465 Hawker Hunter fighters amounting to approximately

2. An OSP contract of June 1954 for additional Hawker Hunter fighters amounting to approximately.

3. A conditional OSP contract of June 1954 for a large number of Javelin fighters amounting to about $65 million. (This contract was subject to an evaluation and acceptance of the Javelin as a combat-worthy military aircraft by the United States Air Force. This evaluation has not yet been made, due to delays on the part of the manufacturers in providing a satisfactory production model for the tests.) The funds obligated under this contract remain dormant and unavailable for other purposes---

$141, 000, 000

22, 000, 000

65, 000, 000

4. Appropriated fiscal year 1955 funds earmarked for the purchase of a large number of additional Javelins and subsidiary material under the informal Executive agreement of April 1953, assuming that evaluation is satisfactory, approximately----- 100, 000, 000 5. The special aircraft program in its 2 annual slices as described above amounting to approximately $120 million ($85 million appropriated in fiscal year 1954 and $35 million of surplus agricultural commodities to be sold for pound sterling appropriated in fiscal year 1955) –.

120, 000, 000

6. Surplus agricultural products to be sold for sterling in fiscal year 1954 and amounting to approximately $60 million or the general equivalent of the reduction made by Congress in the U. K. appropriation request for fiscal year 1954__.

7. Commodity assistance provided in fiscal year 1954 out of appropriated funds under the informal Executive agreement reached between the United States and United Kingdom governments in April 1953, for the support of the British military aircraft program, the counterpart being released to the British defense budget. The amount of this aid totaled___.

$60, 000, 000

55, 000, 000

463, 000, 000

The grand total of these items being the amount of our support of the British military aircraft program during fiscal years 1953, 1954, and 1955 is approximately__. The aircraft program has not been free from serious difficulties. The three fighter planes, the Hawker Hunter, Javelin, and Swift, have been so long in development and found to have so many limitations and deficiencies that, by the time they are fully acceptable, deliveries cannot be made in full before the planes have become obsolescent and unsuited for first line duty in competition with truly supersonic fighters of the latest United States and reported Russian designs. This fact is widely accepted by aviation experts in the United States and the United Kingdom.

(NOTE. For further discussion of this program see Report of the Investigation Division of the Senate Appropriations Committee, July 1954, entitled "United States Aid to British Aircraft Program." For later comment on the status of the program, seen Appendix B of the present report.)

General Objectives of Aid to United Kingdom

Aid to the United Kingdom under ECA was directed primarily to stimulate the economic recovery of Great Britain and more specifically to provide the dollars necessary to meet a large and persistent, even chronic, dollar deficit and so to permit needed imports of food and raw materials which were essential for British recovery, if not for survival. The closing of the "dollar gap" was a prime objective of the early programs, which included the importation of large quantities of foodstuffs, raw materials, and capital goods financed with ECA dollar grants. After the outbreak of the war in Korea and during the progress thereof, the early objectives were in large measure accomplished, and the emphasis was shifted to the building up of rearmament and military strength.

The size of the normal current and prospective "dollar gap" is no longer of immediate importance in planning programs for the United Kingdom, so long as substantial extraordinary contributions toward covering the gap continue to be made by such items (fiscal year 1954) as: military expenditures of (United States troops in Great Britain)