GOVERNMENT GUARANTEES OF CREDIT TO

COMMUNIST COUNTRIES

THURSDAY, NOVEMBER 21, 1963

U.S. SENATE,

COMMITTEE ON BANKING AND CURRENCY,
Washington, D.C.

The committee met at 10:05 a.m., in room 5302, New Senate Office Building, Hon. A. Willis Robertson (chairman of the committee) presiding.

Members present: Senators Robertson, Douglas, Sparkman, Clark, Proxmire, Neuberger, McIntyre, Bennett, Tower, Javits, and Dominick.

The CHAIRMAN. The commmittee will please come to order.

We are continuing today the testimony on the Mundt bill and we are pleased and honored to have as the first witness our distinguished colleague from Arkansas, Senator Fulbright, who is chairman of the Senate Foreign Relations Committee, and in that capacity handled on the floor the authorization for the continuation of foreign aid. If you will recall, during the consideration of that bill, the Senator from South Dakota offered an amendment which would prohibit the Export-Import Bank from guaranteeing sales of certain commodities to Communist countries. That amendment was withdrawn and put into the form of a bill and that will is before us today.

Senator Fulbright, the committee will be pleased to hear you.

STATEMENT OF HON. J. W. FULBRIGHT, U.S. SENATOR FROM THE STATE OF ARKANSAS

Senator FULBRIGHT. Thank you very much, Mr. Chairman.

I appreciate very much this opportunity to appear before you and discuss the bill which has been introduced by Senator Mundt to prohibit any credits or insurance of credits in carrying on trade with Com

munist countries.

I am sure that your witnesses from the executive branch will give the committee full information regarding the technical operations of the Export-Import Bank and other credit agencies of the Government. Instead of going over this ground, I should like to discuss with you briefly the relationship of the Mundt bill to our foreign policy and to our position and role in the world.

Although I strongly oppose the bill, I believe that the Senator from South Dakota has performed a service in bringing it forward, because he has thereby illuminated a basic issue which it is incumbent upon the people of this country to resolve. While this is presented in a financial and economic content, I believe it is equally

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if not more important in its political connotations. In other words, while the way we decide this issue will undoubtedly have an important effect upon our vast horde of wheat and feed grains and upon our balance of payments, of even more significance may be its effect upon the course of the cold war and security of the free world. It is primarily to these latter aspects that I shall direct my remarks.

This basic issue goes to the heart of how we view the cold war. The proponents of the Mundt bill apparently view the cold war as an ideological struggle, which is to say as a religious crusade, comparable to the conflict between Christianity and Islam of 1,000 years ago. If the cold war is approached from this point of view, there can be no compromise, no accommodation, no substitute for victory, to recall a famous phrase from the not-too-distant past. There can be only total victory or unconditional surrender. In this view, the essence of the cold war is a conflict between the opposing ideologies of communism and democracy.

My opposition to the Mundt bill, Mr. Chairman, is based on a quite different view of the cold war. There is, to be sure, an ideological conflict between communism and democracy. But this, in fact, has little relevance in the East-West confrontation. What is relevant is the power of the two principal antagonists-the Soviet Union and the United States. They and we have fundamental national interests which conflict at many points in the world. But this conflict, I submit, is based upon their, and our, conceptions of our basic national interests to a much greater extent than it is based on their Communist ideology or on our democratic ideology.

I refuse to admit that Communist dogma per se is a threat to the United States. To make this admission is to confess a fatal weakness in our own ideology of democracy. One of the basic tenets of democracy is that people are capable of making rational choices after full and free debate. If we really think that democracy is a better method than communism for organizing a society, why are we afraid of communism as an ideology.

The reason, I suggest, is that we confuse communism with the power and policy of the Soviet state. There will be those who will say that the two are identical or that, at best, I make a distinction without a difference. Yet I insist that the distinction is a most important one. It is not communism as a doctrine that threatens us: it is the power and the resources of the Soviet Union mobilized for aggressive purposes. Does anybody think for a minute that we would be so worked un over communism if the principal Communist power were, let us say, Albania instead of the Soviet Union? If the world Communist movement were centered in Albania, Karl Marx would be no more important than, say, Henry George. Both Marx and George advanced ideas which we reject. The difference is that Marx's ideas have behind them the power and resources of the Soviet Union, while George's ideas are actively promoted, so far as I know, only by a single political party in the small, friendly, and peaceful state of Denmark.

When international rivalries are conducted in terms of ideology and doctrine, nations lose sight of their own national interests and become drawn into a vortex of unlimited conflict.

If you want war

Wrote William Graham Sumner

nourish a doctrine. Doctrines are the most frightful tyrants to which men are ever subject, because doctrines get inside of man's own reason and betray him against himself. Civilized men have done their fiercest fighting for doctrines.

Or as our own John Adams put it, I think he put it extremely well,

and I quote:

Power always thinks it has a great soul and vast views beyond the comprehension of the weak and that it is doing God's service when it is violating all His laws. Our passions, ambitions, avarice, love, and resentment, etc., possess so much metaphysical subtlety and so much overpowering eloquence that they insinuate themselves into the understanding and the conscience and convert both to their party.

Mr. Chairman, the cold war is a major fact of life in the age in which we live. We do have to deal with the clashing interests of the Soviet Union and of the United States. We will do so far more effectively if we deal with these clashing interests in terms of our own national interest, which is the security of the United States and the free world, and not in terms of a struggle to the death between crusading ideologies.

The logic of the Mundt bill is that sooner or later either our type of society or the Soviet Union's type of society must be utterly destroyed either through warfare, subversion, or internal collapse. This logic allows no room for the possibility of change through a long process of evolution. Yet it is precisely this possibility which I see as the hope, perhaps the only hope, of avoiding the irreparable catastrophe of thermonuclear war.

In the pursuit of its ambitions, whether by militant or peaceful means, the Soviet Union, like any other nation, is subject to the unending pressures for change imposed by time and circumstance. "Man," it has been said, "is a revisionist by nature." Those who attribute to the Soviet leaders a permanent and unalterable determination to destroy the free societies of the West are crediting the Soviet Union with an unshakable constancy of will that, so far as I know, no nation throughout history has ever before achieved.

There have been evolutionary changes in the Soviet Union, Mr. Chairman. We are uncertain as to their exact extent and significance, but we know that they have occurred and that they continue. Changes are also occurring in the Soviet satellites in Eastern Europe, and we are all familiar with the ideological split between the Soviet Union and Communist China. It seems to me clearly in the interests of the United States to encourage, as best we can, these changes. We need to be pragmatic rather than dogmatic. From our point of view, Khrushchev is a lesser evil than Stalin; Tito is less objectionable than Mao Tse-tung.

The Senator from South Dakota and those who share his views maintain that these distinctions are invalid; I maintain that they are of great importance. The logic of the position of the Senator from South Dakota is that we should avoid all contact with communists because they are Communists. The logic of my position is that it is not communism as an ideology but Communist imperialism that threatens us and that we should deal with the Soviet Union as a great power, quite apart from the differences of ideology. This does

not mean that we approve of communism; it only means we look past communism as an ideology to the real threat we face in the world, which is not Communist dogma but Communist imperialism backed by the power of the Soviet state.

Now, it may be argued that even if this is admitted, we still should not trade with Soviet bloc countries or do anything else to strengthen them. Here we encounter a difference of opinion over what strengthens them. There are quite a number of things which are in the mutual interests of the Soviets and ourselves. The nuclear test ban treaty is on example, recently approved by the Senate. The sale of wheat is another. The Soviets benefit, but so do we, and there is no net advantage one way or the other. It is advantageous to both of us. If we adopt the policy embodied in the bill we will be moving against the trend in every other important free world country. Our NATO allies are conducting a growing trade in peaceful goods with the Soviet bloc. This is not necessarily a reason for us to do likewise, but it is entitled to considerable weight. Trade between Western Europe and the Soviet bloc has tripled over the past decade. It is clear that our virtual embargo on nonstrategic trade with Communist countries has become self-defeating. It does not deny the Communist countries the goods which they wish to buy but only assures that they will buy them from sources other than the United States. Our insistence on an unrealistic boycott has made it impossible for us to coordinate the trade policies of the Western nations and has thus enabled the Soviet Union to use bilateral trade as a political weapon to divide the free nations and advance its own ambitions.

If we follow the policy suggested by the Senator from South Dakota, we are going to find ourselves increasingly isolated, not from the Russians but from our own friends and our own allies. We may, indeed, find ourselves in the same position in the free world in which the Chinese find themselves in the Communist world. We and the Chinese will be outcasts, splendid in our isolated devotion to pure dogma.

The issue involved in this bill is whether we are to regard the Soviet Union as an implacable enemy for all time and for all purposes, or whether we are to regard it as a powerful and dangerous antagonist whom we can and should influence in various ways with a view toward inducing it to abandon its aggressive designs.

If our objective is the former, that is, a policy of permanent and relentless hostility, then the bill offered by the Senator from South Dakota is appropriate. If, on the other hand, our objective is to try through patient and persistent effort to create a safer and more peaceful world, then it is incumbent upon us to seek practical means of reducing the areas of conflict between the United States and the Soviet Union. Trade is one of many ways in which we can reduce animosities and inject an element, however small it may be, of normalcy in our relations with the Communist nations. The bill before the committee would preclude the possibility of any substantial trade. I therefore strongly urge that it be rejected.

I do not wish to take the time of the committee to repeat basic factual information regarding the operations of the Export-Import Bank and the sale of grain to the Soviet Union and other Communist countries.

I do request, however, that a separate statement on these matters and on the policy question of our trade with Communist countries which I herewith submit be appended to my testimony in the commit tee's printed hearings.

The CHAIRMAN. It will be made a part of the record.

(The document follows:)

THE EXPORT-IMPORT BANK AND THE SALE OF WHEAT TO THE SOVIET UNION

The proposed guarantee by the Export-Import Bank of credits extended by U.S. commercial banks to finance the sale of wheat to the Soviet Union and other Communist countries is in no sense, as the Senator from South Dakota has suggested, a form of aid to the Communist countries involved. On the contrary, what is proposed is a normal commercial arrangement similar to many other arrangements which have been made with respect to sales to non-Communist countries. The terms of the guarantee which the Export-Import Bank is prepared to extend are hard commercial terms, no more liberal, and in some respects considerably more stringent, than other guarantees which have been provided. A memorandum dated November 15, 1963, by Mr. Walter C. Sauer, Vice Chairman of the Board of Directors of the Export-Import Bank, explains clearly the guarantee which the Export-Import Bank is prepared to extend. The memorandum reads as follows:

"Memorandum for Senator:

"NOVEMBER 15, 1963.

"The Export-Import Bank has announced it is prepared to guarantee U.S. commercial banks on 'commercial credits' established by these banks to finance the sale of U.S. wheat and other grains to the U.S.S.R. and other countries within the Soviet bloc. The conditions of any such guaranteed credit transaction are to be these: The buying country must pay at least 25 percent cash prior to shipment. The balance of 75 percent can be payable over an 18-month period, with equal payments to be made each 6 months. The credit will carry interest at 5 percent per annum. To date, Export-Import Bank has issued three guarantees aggregating $4.5 million covering sales of corn to Hungary.

"The Export-Import Bank has offered to guarantee these transactions because it has been found that the U.S. commercial banking system is not prepared to grant credit (even for a term shorter than 18 months) in the amounts necessary to finance the proposed grain sales without the intervention of the Export-Import Bank in the form of a guarantee. Thus, although the Export-Import Bank is not in position to judge whether the grain will be sold for spot cash if no credit is available, the Bank is convinced that if any credit (even 30 days) is necessary to effect the sale, the credit will not be available from the commercial banking system without the guarantee of the Export-Import Bank.

"Under these same circumstances, in the case of many non-Communist bloc countries, the Export-Import Bank has frequently given the same full all-risk guarantee to U.S. commercial banks. Newspaper accounts to the effect that the proposed guarantees to the Soviet bloc are a departure from normal more limited Export-Import Bank guarantees are inaccurate.

"Although the Export-Import Bank has never guaranteed or financed a transaction with the U.S.S.R., it has since its creation in 1934 been legally empowered so to do. The Board of Directors of the Bank believes it would be unwise to deny the Bank the authority to guarantee or finance legitimate commercial trade between the United States and the U.S.S.R. whenever the national interest may call for such trade.

"It might be mentioned that the counterpart governmental agencies of the Export-Import Bank in Canada and Great Britain have been guaranteeing exports from their countries to the U.S.S.R. for some time now. In the case of Canada, in fact, credit for sales of wheat is being guaranteed on terms of 3 years for certain of the bloc countries and 18 months for the U.S.S.R. and others. In Great Britain, guarantees are being offered in the case of the export of British-made capital goods and equipment to the U.S.S.R. and other bloc countries on terms at least comparable to those granted on sales to non-Communist countries.

"WALTER C. SAUER,

"Vice Chairman, Board of Directors, Export-Import Bank."