restrictions is not yet shown in our last trade returns which have reached London, but I am told that the provisional figures for April show a very large drop in volume compared with earlier months.

A great deal of publicity has been given to statements said to have been made by General MacArthur about Hong Kong's trade with China. I cannot think his statement has been fully reported. At all events I am sure he would wish the full facts to be known. First of all, I should point out that the document from which General MacArthur was quoting was, apparently, a secret document, specially furnished at fortnightly intervals by the Hong Kong Government to the United States authorities as part of the system of keeping a careful watch and statistical check upon exports to China.

It would be difficult to find better evidence of our desire to cooperate closely with the United States authorities in the application of these controls and in supplying them fully with information of what was going on than the production of that document which fortnight by fortnight was handed by our authorities to the authorities of the Supreme Commander in that theatre of war. I do not find this fact referred to in the reports published over here of General MacArthur's statements to the Senate Committee.

General MacArthur, if correctly reported, seems perhaps not to have fully appreciated the nature of some of the information in the document itself. He referred by name to a number of items on this so-called strategic list, as I think it was called, but he did not mention the smallness of the quantities of many of the items involved. Thus he referred to petroleum, diesel oils, fuel oils, gasoline, kerosene, and lubricants. Certainly they were on the list. His recital of the fact caused very naturally great anxiety. What he does not seem to have pointed out at any rate, so far as the reports over here are concerned, is that the list showed nil quantities as having been exported to China. In fact, all exports of that kind had been prohibited as long ago as July 1950.

Other items he quoted had been prohibited, as he might perhaps have been able to ascertain before he made his statement. Others again, although on the list, are not ordinarily regarded as being of strategic importance, such, for instance, as fertilisers, hand tools, and insecticides. These are the things to which he has specifically referred. Of the remaining items to which he specially referred, many were not-I do not say all-being exported in quantities which can be regarded as strategically significant. I do not want to reduce the thing to an absurdity, but in the list for the period 19th February to 4th March from which the General was apparently quoting, he chose to select cameras. The list showed one camera exported to China over that period.

Having said that, let me agree that the total figures for Hong Kong exports to China have been high in the first quarter of this year as compared with last year as a whole-£43 million as compared with £91 million for the previous year. It does not follow, as I have been pointing out, that in those exports was anything in sufficient quantity to have any strategic importance but, looking at the list as a whole, I am not prepared to say there were not a few items which it would have been better to restrict more stringently. That has now been done.

But while it is very easy for people to say: "Impose still more restrictions," I do beg them to have in mind these considerations: first, the need to refrain from measures which would cause serious economic hardship and consequent political difficulties in Hong Kong. Second, the need to ensure by way of trade the supply of foodstuffs and raw materials to maintain Hong Kong's economy and which can only be obtained from China, exactly the kind of consideration which no doubt led General MacArthur himself to allow Japan's exports to China in 1950 to build up from a monthly average of just over half a million dollars in the first half of the year to a monthly average of nearly 31⁄2 million in the last quarter of last year. Third, there is the need to refrain from action which might cause a widening of the field of conflict in Asia.

Subject to all these considerations and in spite of all those difficulties-and they are very real and cogent difficulties which do not arise for the United States but which do for us-we intend, as I have said, not only to support the proposals which the United States are putting before the Additional Measures Committee of the United Nations and to march along with the rest of the United Nations in this matter-indeed, we are far ahead of all of them apart from the United States-not only that, but we have been reviewing with the Governor of Hong Kong what further steps can be taken without waiting for the United Nations to make sure that no Hong Kong exports are sent to China which might assist

China in any way at all to build up the strength or military potential of her country.

Mr. HAROLD DAVIES. I am sorry to interrupt my Right Honourable and learned friend. The figures of Japanese exports to Hong Kong are of importance, but according to the "Oriental Economist" the exports direct from Japan to China have increased from 5,600 million yen to 13,000 million yen this year, and they were a quid pro quo insofar as we could also see the secret strategic list of exports in that direction.

*

Sir H. SHAWCROSS. It is very difficult to get out all these figures, and I am not in a position to confirm that one. I can only give the figures for last year. My own impression does not agree with that of my Honourable friend, but I am not pretending to be in a position to give accurate figures for the last three months of Japan's China trade, or say whether they have gone up or down. I am giving figures up to the time when the United States imposed an embargo, as from America, in regard to exports to China, and I am not in a position to go beyond it.

I finish what I fear has been an overlong speech on a subject of some great importance, not only to this country but elsewhere, by expressing the hope that the statement I am now concluding will not only clear up misunderstandings here, but will fully allay the anxieties in the United States of America-anxieties which we very readily understand, but which we think were largely based on a lack of adequate information. We in this country have never been backward in supporting the cause of freedom and in protecting the reign of law and democracy, and we are not backward now.

(Discussion off the record, pursuant to which, at 4:45 p. m., the executive session adjourned.)

83762-51-pt. 1-25

DEFENSE PRODUCTION ACT AMENDMENTS OF 1951

MONDAY, MAY 14, 1951

UNITED STATES SENATE, COMMITTEE ON BANKING AND CURRENCY, Washington, D. C.

The committee met, pursuant to recess, at 10:35 a. m., in room 301, Senate Office Building, Senator Burnet R. Maybank (chairman) presiding.

Present: Senators Maybank, Benton, Moody, Capehart, Bricker, Schoeppel, and Dirksen.

The CHAIRMAN. I will ask the committee to come to order.

Mr. Small, would you come up, please? Mr. Small, I was going to give you this letter, with which you are probably familiar, because I know you were interested in the procurement of the armed services of strategic materials and things of that kind, and that has to do with what Secretary Marshall wrote me. He called me up, I think it was on Friday and again on Saturday, stating that he would like to go down to Virginia this afternoon when he gets through with the hearing before Senator Russell's Armed Services Committee. So, of course, I was pleased to say for the committee that that was all right, and I trust it is all right with the other committee members.

Mr. Lovett also said he was going with the general. So I called Mr. Lovett and told him that I felt certain the committee would understand his doing that. If we want Secretary Marshall and Mr. Lovett, we can call them later, as we had you this morning, and Secretary Chapman scheduled for this afternoon, and we had a full day anyhow. Mr. Lovett or Secretary Marshall-I do not remember which-said that you would be here to represent them insofar as you could. They sent me the letter I handed you, which I was going to ask you to read. Any details concerning the military that we would possibly ask we shall ask when the Secretary finds it convenient to be here.

I would like you to read this letter because it shows we need a great deal of preparedness in this country, and, after all, that is what we are here for. If it were not for the necessity of preparedness, there would be no need for controls, and there would have been no supplemental appropriation passed last week.

I

was surprised on reading the paper yesterday to find on the front page of the Washington Post that the country was so well prepared. All the information I have or have received as a member of the Appropriations Committee is that we are on the way toward preparedness, but there is still a lot to do. We will have to spend a lot of the taxpayers' money for preparedness.

This committee is only considering this bill as an essential measure for priorities and in order to keep down inflation. I wanted to make

that statement because, as far as I am concerned—and I trust the committee agrees with me-we should have Secretary Marshall and Mr. Lovett at some later date.

Senator CAPEHART. How soon will you have Secretary Marshall? The CHAIRMAN. I have not set that date because we have such a tremendous schedule in front of us that I thought we could work it out.

Senator CAPEHART. You mean possibly this week?

The CHAIRMAN. I do not know about this week. I would think we could get around to them soon.

Senator CAPEHART. The only thing I want to say is I think the necessity for controls is based on how big or how small the needs of the armed services are.

The CHAIRMAN. That is the only reason we want them to appear. Senator CAPEHART. Secondly, what we are preparing against, and how long we are going to prepare. It would seem to me as though the only one who could give us that information would be Secretary Marshall.

The CHAIRMAN. I do believe it would be the proper thing to have the Secretary here, but I thought in view of the fact that he was testifying all last week before the Armed Services Committee, and all of this morning, that we should give him a little time to rest.

Senator CAPEHART. I think we should give him a little time to rest up from that ordeal, but we ought to have him come here.

The CHAIRMAN. He will be glad to come here. Mr. Lovett also will be glad to come here, but we will have them at whatever time is most convenient in our schedule. That is why we are here, in order to facilitate military preparedness.

Mr. Small, I will not question you on the letter, because I am aware of the fact that you would not know the detailed answers to some of the things he mentions. Will you go ahead, sir?

STATEMENT OF JOHN D. SMALL, CHAIRMAN OF THE MUNITIONS BOARD, ACCOMPANIED BY LEONARD NIEDERLEHNER, COUNSEL, AND ALFRED SCANLAN, ASSISTANT COUNSEL

Mr. SMALL. All right, Mr. Chairman. Then with your permission I will read the letter from the Secretary of Defense, dated May 12, It reads as follows:

1951.

THE SECRETARY OF DEFENSE,
Washington, May 12, 1951.

DEAR SENATOR MAYBANK: As I told you on the telephone last week end, I have commitments of long stnading outside of Washington on Monday and Tuesday, May 14 and 15, and would find it extremely difficult to withdraw from them at this late date. Nevertheless, I do wish to take this opportunity to state to you and to the committee that the Deparment of Defense strongly urges the enactment of S. 1397, the amendments to the Defense Production Act of 1950.

The Chairman of the Munitions Board will appear before your committee in person and will present the views of the Department of Defense in greater detail than it is possible for me to do through this letter.

The CHAIRMAN. That is the procurement part.

Mr. SMALL. It continues as follows:

However, I wish to state some of the compelling reasons why I feel that this legislation should be enacted.