be paid in cash, and the remaining 75 percent would be paid within 18 months under installments at 6-month intervals.

Many of us are deeply concerned over the fact that 75 percent of the purchase price of the wheat sold to Russia, in the form of credit extended by private business firms, would be completely guaranteed by the Export-Import Bank.

The Export-Import Bank memorandum inserted in the Record by the Senator from Arkansas (Mr. Fulbright) on November 12, stated:

"The Export-Import Bank stresses that there is nothing new in these arrangements, aside from the fact that a short-term credit risk is being covered with respect to a Soviet bloc country."

The quoted language reveals something that is very important to us in our consideration of the wheat deal. Something additional is being undertaken; namely, the extension of substantial credit to Russia.

Frankly, I have no confidence in the capability or the willingness of Russia to repay the credit that would be extended under the wheat deal. I could imagine a score of reasons, all of them without basis in fact, which might be advanced by the Russians in support of their refusal to pay the balance due on the wheat. They would have no hesitation in asserting falsely that the wheat was below standard, was unfit for human consumption, or was not of the kind or quality ordered. In the Communist mind, such excuses, though unfounded, would justify a refusal to pay, and the American taxpayers, not the sellers of the wheat, would be the losers.

True, we are demanding a downpayment of 25 percent of the wheat purchase price from the Russians to be paid in cash. The Export-Import Bank will stand for the unpaid balance of the Russians' debt. In effect, therefore, the taxpayers of the United States would be saddled with this subsidy arrangement on wheat sold to Russia.

The original idea, or so it was thought, was that the wheat sale would exhibit private American capitalism in action. If the wheat sale is completed under the presently proposed plan, some capitalists such as Cargill, Inc., of Minneapolis, the largest grain dealer in the country, will undoubtedly profit.

And who takes the financial risk? Not Cargill, Inc., or other wheat shippers. Their risk is guaranteed by the Export-Import Bank. And the Bank itself can always borrow on its own obligations from the U.S. Treasury.

The Congress and the American people still mistrust Russia, even taking into account the changing attitude of the Soviets. This is evident in our pronouncements, in the communications media's editorializing, in the various public laws passed and in the numerous bills introduced in Congress.

How can we give the Russians comparable treatment in trade-treatment such as the United States gives to Austria, Japan, and Hong Kong? We have a long history of trade with Hong Kong, Japan, and Austria. There are no political arguments between America and these buyers. Political consideration is part of every trade agreement in which the Export-Import Bank is involved, for the State Department must approve such transactions with regard to all political aspects.

The distinquished majority leader has said that the Mundt bill "creates a situation which could be used to undermine the pinnings of the Executive." With all due respect, I say that the Mundt bill would simply apply guidelines for the Executive. This is completely within the constitutional power of Congress and also is designed, as a practical matter, to maintain and foster U.S. foreign policy.

Many in Congress have voiced objection to trading in strategic materials with the Communist bloc or extending aid to these nations. There seems to be some semantic difficulty with the word "aid." When the Export-Import Bank extends credit to the Soviets by guaranteeing the private credit risk, are we not giving some sort of aid? The U.S. Government, in effect, can be described as indirectly lending the Soviets money to buy our wheat. Economists might argue over the nature of this transaction, but what it amounts to under the machinations of the Executive, the Export-Import Bank, and the State Department, is foreign aid.

In the past it was generally felt that in the cold war with the Communist bloc the United States would employ economic weapons. This policy has been effectively circumvented by our allies, who transship American agricultural products to the Communist bloc. Our allies have even traded with this bloc in many items which we deem strategic goods.

The main point of the Mundt bill is not to prohibit trade with Communist nations. Its central point is that in sales involving private credit, which are considered legal under the Johnson Act, the American taxpayer should not be the eventual bearer of the financial risk. This would seem to be only fair and equitable, considering present Soviet-American relations.

The CHAIRMAN. We are pleased and honored to have before us today the distinguished son and namesake of a great American. I was privileged to have been a delegate to a Democratic convention in Chicago when a Governor of New York named Franklin Delano Roosevelt was the nominee. I was nominated for the House that same year and so President Franklin D. Roosevelt and I took over in Washington at the same time. I enjoyed that relationship, although there were some issues on which we did not fully agree. But we did have a personal friendship, which I appreciated.

I was pleased when his son and namesake went to the University of Virginia to study law. While he was there, I took him grouse hunting in Bath County, Va. He had never done any grouse hunting before, and it happened to be a sort of a warm day and he was wearing half rubber boots that came nearly up to his knees and I knew they were going to burn his feet up before the day was over.

So knowing about grouse hunting, when we started up a hollow, I stayed on the stream where the walking was good, and I said, "You get up a little farther on the ridge." I wanted to see what he was made out of, because if he took that, I knew he was bound to be good, with those rubber shoes on, and he took it and he never complained.

I can always remember when a man has-of course, I was a little older, but I thought I was tough enough to take it-if a man went out in the mountains with me on a hot day with rubber shoes on and I put him up where it was rough and he stayed with me, he is bound to have something in him.

I am pleased to have the son of a distinguished President, Franklin D. Roosevelt, Jr., now Under Secretary of Commerce, and today Acting Secretary of Commerce, as a witness before us today. Mr. Secretary, we will be pleased to hear from you.

STATEMENT OF HON. FRANKLIN D. ROOSEVELT, JR., ACTING SECRETARY OF COMMERCE; ACCOMPANIED BY FORREST D. HOCKERSMITH, DIRECTOR, OFFICE OF EXPORT CONTROL; DEAN B. LEWIS, ASSISTANT GENERAL COUNSEL, DEPARTMENT OF COMMERCE; AND ERNEST RUBIN, DIRECTOR, SINO-SOVIET DIVISION

Mr. ROOSEVELT. Thank you very much, Mr. Chairman and members of the committee. I might say that I am not so sure I could keep up with you today, Senator, but I am glad to know you are still hunting

grouse.

I am happy to have this opportunity, Mr. Chairman, to appear in connection with your consideration of Senator Mundt's bill, S. 2310. The bill would prohibit the Export-Import Bank, and other agencies of the Government, from guaranteeing the payment of any obligation of any Communist country (including both members of the Soviet bloc and Yugoslavia) or any agency or national thereof, or from in any way participating in the extension of credit to them in connection with their purchase of any product.

In other words, it would bar Government credit or any guarantee of any private commercial credits which might be extended in the normal course of commercial trade, whether in connection with the presently pending grain sales or any other commercial transactions.

I do not believe this bill is in the national interest. I understand that previous witnesses have discussed at some length the possible impact of the bill on the proposed wheat sales. Let me just say emphatically for the record that I think the wheat sales are in the national interest, and that it is unwise to jeopardize them by legislation such as this.

They will aid us with our balance-of-payments problem; they will aid us in disposing of a farm surplus which is presently costing us money to store; they will stimulate our shipping industry, our inland transportation, and other service industries; and they will direct Russian resources to food rather than in directions which might be detrimental to Western security.

But this proposed legislation has significance which goes beyond the immediate prospect of substantial sales of surplus agricultural commodities to Communist countries, and I would like to look at it in this broader perspective.

Let me emphasize that I believe it is in our national interest to maintain a flexible position with regard to trade with the European Communist countries. And let me review for you the current factual situation with regard to trade between the European Communist countries and the free world, and the conditions under which this trade is now being carried on.

In 1962 this trade amounted to approximately $4 billion, of which the U.S. share was $125 million, or approximately 32 percent. Much of the $125 million is accounted for in Public Law 480 sales to Poland, and the balance was primarily on a cash basis.

Recently, the Attorney General has made a ruling, which Senator Mundt's amendment to this bill would confirm, to the effect tha! normal commercial credit transactions do not fall within the prohibitions on loans set forth in the Johnson Act.

Of the almost $4 billion worth of trade carried on by Western European countries, Japan, and other free world nations, we believe that approximately $350 million involve sales in which credit terms of up to 5 years were extended; and we believe that most of this was guaranteed by the governments of the exporting free countries. Under their assumption that the Johnson Act precludes credit terms, our businessmen in the past have not sought Eximbank guarantees. However, now that the application of the Johnson Act has been clarified, if they are going to compete on terms of equality with the businessmen of the free world, a percentage of their future sales will have to include credit terms and will require Eximbank guar

anos.

The wheat sales to the Soviet Union and other Eastern European. countries are a graphic situation in which normal commercial credit terms may be required, though of course we would hope that sales to the Soviet Union would be for cash. The banks have informed the private sellers of this wheat and other agricultural commodities that they will not issue credits without Eximbank guarantees. It is my opinion that if this bill is passed, there will be very few sales, particu

larly to the satellite nations. There may sales to the Soviet Union.

be a limited amount of cash

The Eastern European countries are now buying nonstrategic and peaceful goods from the free world under the financial conditions which I have described. This bill, if adopted, would effectively prevent American businessmen from competing under terms of equality for the share of this trade which is financed on credit terms.

If, in the future, it is determined that it is in our national interest to encourage American businessmen to compete for this trade, we would be precluded by this bill from benefiting from our present position of flexibility, and under its terms the hands of the U.S. businessmen would be tied.

It should be noted that increased exports, no matter where sold, create jobs for our workers; create profits for our businessmen; would put to use some of our present idle plant capacity; and would basically promote the economic growth of this country. They will also further reduce the present imbalance in our international payments.

In summary, this bill would effectively exclude U.S. businessmen from competing for any peaceful, nonstrategic East-West trade which requires the granting of normal credit terms. Therefore, I urge this committee to reject this bill, S. 2310.

The CHAIRMAN. Are there any questions?

Senator PROXMIRE. Yes, I have some questions.

The CHAIRMAN. The Senator from Wisconsin wishes to inquire. He is recognized.

Senator PROXMIRE. Mr. Secretary, on October 9 in a press conference President Kennedy said, and I quote:

An added feature of the grain deals is the provision that the wheat we sell to the Soviet Union will be carried in available American ships, supplemented by ships of other countries as required.

Now on October 15, the Federal Register stated, in setting out the conditions upon which the wheat deals would be based:

The commodities, wheat and wheat flour, will be exported in U.S.-flag ocean carriers, unless such carriers are not available and the commodities will not be loaded for export on a non-U.S.-flag ocean carrier, unless prior authorization is received from the U.S. Department of Commerce.

The same Federal Reg'ster further stated, with respect to exportations of other subsidized or price supported agricultural commodities; that these applications shall include the same certifications and information as set forth in subparagraph 2 of this paragraph, for applications covering exportations of wheat and wheat flour. So this latter paragraph seems to indicate the same shipping rules apply to other commodities as to wheat and wheat flour.

On October 18, a press release from the Department of Commerce, announced:

The requirement for shipments in U.S. bottoms, when available, will be a condition in the granting of export license applications by the Commerce Department, for exports of wheat and wheat flour, but not for other agricultural items.

And then on November 13, the Commerce Department, in a current export bulletin, changed the position in the Federal Register to state that:

With respect to exports of wheat and wheat flour, at least 50 percent of the wheat and wheat flour will be exported in U.S.-flag carriers. If U.S.-flag carriers

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are not available at reasonable rates, the exporter must obtain prior authorization of the Maritime Administration to ship less than 50 percent in U.S.-flag carriers.

This bulletin went on to say that:

With respect to exports of other agricultural commodities, the shipping restrictions apply only on wheat and wheat flour, thus no restrictions apparently exist on shipments of other commodities entirely by foreign bottoms.

It seems to me there are a number of inconsistencies in these policy statements. No. 1, there has been an obvious turnaround in policy of the original statement indicated by the President in his press conference, when he said:

An added feature of the grain deals is the provision that the wheat we sell to the Soviet Union will be carried in available American ships, supplemented by ships of other countries as required.

No. 2, it makes no sense. A 50-percent shipping provision applies to sales of wheat guaranteed by the Eximbank, whereas no such provision exists as to other grain products, receiving identical assistance, as the shipment to Hungary, which I understand goes in foreign-flag ships entirely.

And 3, apparently some sales are now contemplated under the CCC sales program. I wonder if you could help reconcile these apparent inconsistencies, and this apparent turnaround from the President's position?

Mr. ROOSEVELT. I would be delighted to, sir. The President's position allowed a good deal of flexibility but it also created a good deal of confusion because the grain traders, as well as the Russians, were uncertain as to what American shipping would be available. And therefore in their filing of applications for export licenses, what should they specify. In order to clarify that point, the Maritime Administration in the Department of Commerce reviewed the projected requirements for American ships during the coming 6 or 7 months, including the requirements for Public Law 480 shipments.

We did this, incidentally, in cooperation with the Department of Agriculture. As a result of that survey, it became immediately evident that on the assumption of approximately 211⁄2 million tons of wheat to Russia, and approximately a million and a half tons required for the satellite nations, or a total of 4 million tons, we would not have sufficient domestic bottoms to carry more than 50 percent or approximately 50 percent of this traffic. Therefore, all we did was to interpret, or to specify the terms of reference which the President placed upon the sale of this wheat and wheat flour to the Soviet Union and the Eastern European Communist countries.

Now to the second point, as to why we require it for wheat and wheat flour and not for other agricultural commodities, the same basic projection of our requirements for shipping prevailed, and it became obvious if we could only carry 50 percent of the projected wheat sales, then we could not carry any of the additional shipments.

And there is another factor here. These other sales of agricultural commodities included soybean meal, tobacco, and various other commodities, and a number of these shipments are in odd lots. They do not require an entire ship, such as bulk wheat would. And therefore to try to adjust or require that 50 percent of these commodities be carried in American bottoms, first of all, would reduce the total amount