Are you in accord with that statement?

Mr. BALL. I would suppose that Senator Fulbright was addressing himself to what he assumed to be the motivation and the underlying inspiration behind S. 2310 rather than to the bill itself.

Senator CLARK. I make the same assumption. I suggest you make it for the purpose of answering the question.

Mr. BALL. That assumption is that we should avoid trade with the Soviet Union, that we should try to persuade our allies to join with us in a boycott of the Soviet Union, and that we should try to impose on the Soviet Union a kind of isolation from the world, or at least an isolation from the free world.

Now, let me say that underlying this are some assumptions about the Soviet economy which I think need serious examination.

What very often tends to be overlooked in this country, when one is discussing this issue, is how effective even an absolute boycott could be. I think that we must realize that the Soviet Union is basically an autarchic society, and also that the United States is an autarchic society; to some degree more so. We have not consciously started out that way. We have an enormous continent and we have developed it with vast resources and by and large we can make and produce, with some difficulties, the things we need.

The Soviet Union is in very much the same situation. We talk about the trade which it conducts with the outside world. Well, looking at its nonbloc trade in 1962 its imports were only $1.8 billion; its exports were only $2.1 billion; which makes a total of roughly $4 billion. Now, $4 billion out of an economy with a gross national product of something over $250 billion is extremely marginal.

From the point of view of the Soviet Union, if it were denied all trade with the nonbloc, it would be inconvenienced, it would have to make do with some materials as against other materials. It would have to go through some adjustments within its economy. It might be somewhat slowed down in certain sectors. It would be denied the possibility of obtaining Western technology which enables it to cut some corners, save some time, and not duplicate research. But by and large, we wouldn't bring the Soviet economy to its knees or anything like that. I think we should recognize that.

But again, let's consider the other aspect of the problem. If we impose these stringencies on the Soviet Union, if we say in this particular case to the Soviet Union, don't use your foreign exchange to buy wheat, and if the Soviet Union has a real stringency at the moment—I would suspect it is in gold and foreign exchange because its reserves are substantially limited.

Senator CLARK. The Soviet's reserves are substantially limited? Mr. BALL. They are really quite small. I can't give the figure to the committee in open session. I will be glad to supply it to the committee for its private information.

If we say to them, "Don't use your foreign exchange for wheat," then what are we doing? We are denying them wheat. If they use their foreign exchange elsewhere in the world for something else because we have persuaded them that maybe a little self-denial in wheat might be a good thing, they may very well use it for much more strategic goods which will affect the buildup of the military sector.

The problem that Mr. Khrushchev faces at the moment, which I think is one of his two principal preoccupations the second being the internal conflict within the bloc-is the allocation of his resources, to what extent is he going to allocate resources to the military sector, and to what extent will he allocate resources to the civilian sector.

One of the things which the Soviet system manifestly needs is consumer goods, simply to provide the incentives to make the system work. I think this has been demonstrated, as a matter of fact, to some extent in the agricultural failure, although there are many other reasons for that.

So there is this discussion going on within the Soviet Union. To the extent that the Soviets are denied the possibility of bringing in incentives in the consumer sector, this creates a greater sense of tension. We say that we don't gain much in the way of Soviet approbation or the approbation of the Soviet people by selling them wheat. We certainly provide the Soviet Union with a propaganda weapon against us with the Soviet people if we deny them the right or possibility of purchasing wheat. I think it really works one way rather than the other.

Now, if the Soviet Union is denied the possibility of using its foreign exchange for wheat, it may use it for something else and subject the people to a little more stringent discipline so far as food is concerned. People aren't going to starve. They might not eat quite as well, but that margin isn't going to be the wheat involved in the purchase from the United States. We are talking about 2.5 million tons of wheat. And the total economy of the Soviet Union, I think, as far as wheat and other feed grains are concerned, is well over 100 million, so that again, this is marginal.

We have to face very squarely the magnitudes with which we are working in relation to the total problem which the Soviet Union faces, and recognize that while we can talk quite blithely about the_possibility of seriously impairing the Soviet economy by a boycott, I don't think that the possibility exists to anything like the same extent that we talked about.

Even if we ourselves were persuaded that a boycott were possible, we are faced with the very hard fact that the rest of the free world industrialized nations don't agree with us. They pursue a different philosophy. Maybe they should agree with us, but they don't. This is a fact of life. They have their own view. I think it is very difficult for us to be absolutely categorical about any of these things, because we are in an area where judgment is a very big factor.

I don't think this is to their discredit that they don't agree with us. They happen to see the problem differently. And it isn't simply because they have mercenary motivations. It is because they have a different appreciation of the situation. I have discussed this with many of them. I just came from Europe last night so I know something about their views on this matter. And they have a somewhat different point of view with respect to the developing situation of the Soviet Union. And they would be quite unprepared to join with us. in a boycott. So that we are talking about something very narrow, it

seems to me.

Should we undertake such an act of self-denial which in the nature of things can have only a relatively small effect? It is very difficult to

demonstrate that it would be in any event a useful effect-after all it might further the propaganda elements in the Soviet which are most opposed to us. In addition, we would impose this on ourselves at some cost to ourselves in terms of gold and foreign exchange we might obtain and the prosperity of our farmers and our grain dealers and our ship owners and operators and laborers and so on for a purpose which doesn't seem to me to be justified by the facts.

Senator CLARK. Thank you.

The CHAIRMAN. The Chair recognizes the distinguished Senator from Utah, Mr. Bennett.

Senator BENNETT. Mr. Ball, I think you said yourself, since I came in, that the point at issue is not whether or not the wheat should be sold to Russia, but whether or not the Export-Import Bank should guarantee the payment of the account. Senator Mundt's proposal does not in effect deny the sale of wheat to Russia. Isn't that so? Mr. BALL. On the face of it that is the case. But so far the discussion in the committee this morning with Senator Fulbright, and even earlier, largely assumes that what the committee is interested in is whether we should pass this legislation as an aid toward the frustration of the wheat deal. Now, I will be glad to discuss it with the committee on either assumption.

Senator BENNETT. I make the assumption that the Mundt bill stands on its own bottom and that the problem we face is the question of whether or not we should deny the Export-Import Bank the right to guarantee this particular transaction and other transactions that might follow it involving this sale of merchandise to Russia.

I would like to read into the record from two stories that appeared in the Washington Star last night, which are very interesting in light of the present situation, I ask unanimous consent that they be inserted at this point.

The CHAIRMAN. Without objection, it is so ordered. (The material referred to follows:)

BAN U.S. CREDIT IN SALE OF GRAIN, MUNDT URGES

Senator Mundt, Republican, of South Dakota, urged today that grain shippers and private bankers take all the risk of the proposed sale of $250 million of surplus U.S. wheat to Soviet Russia.

He asked the Senate Banking Committee to give speedy approval to his bill to ban credit by any Federal agencies—including the Government's ExportImport Bank-for sales or deals with any Communist nation unless Congress first approves.

The committee is under instructions from the Senate to make a report on the bill by Monday.

Senator Mundt said any Government guarantee of such repayment "is the road to national suicide and to inevitable bankruptcy."

He argued that use of the Export-Import Bank for the wheat sales would reverse all U.S. cold war efforts and policies under which there has been an outlay of $100 billion of foreign aid.

Senator Mundt urged that President Kennedy call a conference of all free world nations to consider trade policies with the Communist bloc.

With Canada and other free world allies selling wheat and other goods to the Communist nations, Senator Mundt said "It is unfair to our American businessmen and farmers to insist that they-alone-forgo trading with the Communist world."

But, he said, Congress at least should insist that such deals "not be made at the expense or at the risk of American taxpayers" through the Export-Import Bank.

Senator Mundt argued that Soviet offers to buy wheat and food prove that "Russia has spread herself too thin. Her cumbersome Communist system of involuntary collectivism is breaking down."

He said that the wheat is needed to carry out extravagant Soviet aid promises to Cuba, Egypt, Communist overlords in Asia, and new African nations.

Senator Mundt said he was not trying to prevent the wheat sales because that decision already had been made. All he wanted to do, he said, was to stop underwriting of such sales by the U.S. taxpayers.

At the State Department, an informant said the question of a wheat deal now is and should remain an issue between Soviet purchasing representatives and American private exporters.

"We (the State Department) are out of it and hope to stay out," he said. The informant said it was incorrect to draw any inference that a conference between Soviet and U.S. diplomats yesterday indicated that the wheat issue had been brought back to the governmental level.

Sergei A. Borisov, Soviet Deputy Foreign Trade Minister, and Ambassador Anatoly F. Dobrynin, called on Ambassador at Large Llewellyn Thompson yesterday. The State Department's only comment was that the 1-hour conference was on wheat.

In New York last night, Secretary of Agriculture Freeman predicted it will be at least several months before negotiations are completed for a United StatesSoviet wheat deal.

Senator Mundt's effort to hook his proposal onto the foreign aid authorization bill touched off a fight last week which threatened to stall and maybe torpedo that measure.

He finally agreed to withdraw the amendment and offer it as a separate bill to stand or fall on its merits, but only under ironclad pledges that the Senate would bring it to a vote next week.

[From the Washington Evening Star, Nov. 20, 1963]/

NATO GROUP OPPOSES AIDING REDS WITH TRADE

(By Crosby S. Noyes, foreign correspondent of the Star)

PARIS, November 20.-A gentlemanly but fundamental difference on the question of trade policies with the Communist bloc has emerged from the economic discussions of the North Atlantic Treaty Organization this week.

American sources today are emphasizing that there has been no row over the disagreement and that no one is mad at anybody. But it is also clear that the "common position" which the United States was hopeful of developing within NATO now appears unlikely.

The British and Italians have persisted in their refusal to accept limitations on trade with the Eastern bloc, in face of strong arguments from other members of the Alliance. In particular they have turned down a proposal that a firstyear limit on guaranteed credits should be observed by all NATO members.

The matter has been turned over to a committee of the NATO Council for further discussion. But in light of attitudes expressed at the ministerial meeting here no formal agreement seems likely.

DIFFER ON STRATEGY

The difference, it seems, arises less from natural tendency of the British and Italians toward liberalism on questions of trade than from a difference on cold war strategy. It is basically a disagreement over how to make the Russians and their East European friends more responsible and congenial members of the international community.

The view held most firmly by Germany and the United States, and shared by a majority of NATO countries, is that this will not be done by excessive generosity on the part of the West.

It is, in a sense, a businessman's approach to the problem. It is not a question of wanting to keep the Russians lean and hungry. It is simply that the competition is in something of a squeeze at the moment. And, for their part, the majority of NATO countries do not propose to help them out of it.

For the Russians it is a problem of allocation of resources. There are increasing pressures for greater imports from the West, including, for the time being at least, large amounts of food.

REDS PAY IN GOLD

There are limited resources to pay for these imports. Russia has few exports which the West can use. For the most part, its imports are paid for in gold. Its gold supply is not overly abundant. The only alternative is long-term credits, and Russian pressure to obtain such credits is expected to grow in the coming months.

In denying such credits the Western nations are not deluding themselves with the idea that Russia's economy will be terribly upset.

It could cause a certain diversion of efforts into working of Russia's relatively unprofitable gold mines, and other marginal reallocation of available resources. But its effect on the Russian economy as a whole, or on the Soviet armament effort, admittedly would be small.

BRITISH-ITALIAN VIEW

Nevertheless, the view is strongly held that withholding of credits is the only sensible course. It is grounded on the idea that even a marginal influence on the Russian decisionmaking process is highly worthwhile. And that nothing was ever won for the West, in the way of concessions, as result of Russian gratitude. The British (and to some extent the Italian) view is that business methods of this sort are not particularly applicable to international politics. They argue that commerce between nations inevitably influences their other policies. And since this influence usually tends to be benign and civilizing, the more trade the merrier should be the policy.

So far as Russia is concerned they believe trade is or could become an element in East-West relations at least as important as exchanges of people, other cultural contacts, summit meetings, disarmament conferences and all other paraphernalia of modern diplomacy.

They see extension of credits on a strictly business basis as a normal way of stimulating such trade. They believe that the resulting influence on the Russian decisionmaking process will be far greater and more favorable in the long run than the influence of arbitrary restrictions imposed for purely political

reasons.

Whatever civilities may be respected within the NATO Council, this is an argument which seems likely to divide the Alliance for some time to come. Failure to find a common policy on the problem-or even a common philosophy-would seem to present an exploitable opportunity for the Kremlin.

Senator BENNETT. The first story is the Associated Press report of these hearings. And I am reading from the report beginning somewhere in the middle of it.

Senator Mundt said he was not trying to prevent the wheat sales because that decision already had been made. All he wanted to do, he said, was to stop underwriting of such sales by the U.S. taxpayers.

At the State Department an informant said the question of a wheat deal now is and should remain an issue between Soviet purchasing representatives and American private exporters.

Then there is this quote:

"We [the State Department] are out of it and hope to stay out," he said. The informant said that it was incorrect to draw any inference that a conference between Soviet and the United States diplomats yesterday indicated that the wheat issue had been brought back to the Government level.

Is this a correct interpretation of the attitude of the State Department, that this is strictly a commercial transaction and you don't want it back at the Government level?

Mr. BALL. The State Department did have some discussions with the Soviet representatives which, as a matter of fact, I headed for the State Department, so I am familiar with them, in which we attempted to set out ground rules under which it would be possible for the U.S. wheat dealers to make offers to the Soviet Union. We explained in considerable detail the nature of the rules, why they were

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