of shipping available for the wheat, and would have made it a very difficult job to administer. So we have as a result of this projection, determined that 50 percent of the wheat shall be carried in American ships, but there will be no available shipping for the other sales.

Senator PROXMIRE. Now we have consummated an agreement with Hungary, is that correct, on the sale of corn from CCC stocks?

Mr. ROOSEVELT. We have issued two licenses, I believe, to Hungary for the shipment of corn. I can give you the figures on that. And we have also issued two licenses to Hungary for 100,000 tons each of wheat.

Senator PROXMIRE. Now I understand those will be carried entirely in foreign-flag ships?

Mr. ROOSEVELT. No, they will not. On the wheat, 50 percent is required

Senator PROXMIRE. I am talking about the corn.

Mr. ROOSEVELT. The corn? There is no requirement as to how it will be carried. And in the license we do not require any information. Senator PROXMIRE. And from your explanation, I take it the reason for it is because the wheat will require all of the American bottoms, all American ships will be tied up delivering the wheat and therefore they can't be made available for delivering corn. Is that right? Mr. ROOSEVELT. That is the basic projection.

Senator PROXMIRE. Now in view of the fact that Secretary Dillon and Secretary Ball said yesterday, as I recall, and I am sure you would concur, we may never consummate this deal with the Soviet Union, they haven't agreed yet, they may not want our terms and if the Mundt bill passes, and they can't get credit, there is an even better chance perhaps that they won't make the deal, how can you make a finding that ships won't be available, because of a Russian wheat deal, that hasn't been consummated yet, hasn't been developed? We don't know whether it will or not.

It would seem to me there must be ships available for carrying corn to Hungary, at least we can't very well argue they aren't available, because they have to carry wheat to Russia; inasmuch as there is no deal yet with Russia.

Mr. ROOSEVELT. Well, at some point you have to make some basic assumptions, Senator, and you can't just say we will keep on changing our policies as we go along. The grain trade, the shipping trade, nobody would know where they stood. Now I also want to point out this requirement laid down by the President is the first time to my knowledge that we have ever required the sale of a commercial transaction, resulting from a commercial transaction, to be carried in American ships. And we have done it because we consider this to be a one-shot transaction, and therefore the President felt he was correct and proper in making some specific and special conditions to this sale.

But we would be departing from everything that we have done in the past, if we were to expand that to all sales of corn, and other commodities, agricultural and nonagricultural, just because of it being sold to a Communist country.

Senator PROXMIRE. Isn't there a legal requirement that a subsidized agricultural commodity, when it is being sold below the domestic price, 50 percent has to be carried American?

Mr. ROOSEVELT. No, there is not.

Senator PROXMIRE. No such requirement?

Mr. ROOSEVELT. No.

Senator PROXMIRE. Is that correct?

Mr. ROOSEVELT. That is correct.

Senator CLARK. It occurs to me, Mr. Roosevelt, that this business about 50 percent being carried in American shipping is sort of a political gimmick to make the deal look better. I wish the President had never made the condition. I agree with you quite thoroughly it would be unwise to push it any harder than you are pushing it. I think this deal should go through without any question as to whether American bottoms are carrying the wheat or not. I can't see any point at all in that, insisting on that condition, which merely increases the cost of the deal and doesn't do any good to our shipping, as you point out, because it is already occupied pretty well with other cargo. Mr. ROOSEVELT. I would not particularly comment on your statement, Senator, and particularly I don't like to call it a political gimmick, but there is a great deal of merit in what you do say.

Senator CLARK. I can say it easier than you can.

Senator PROXMIRE. Apparently what I was thinking of, was that we have a provision, I believe, affecting our foreign aid, with regard to shipment in American bottoms.

Mr. ROOSEVELT. Senator Proxmire, that is the requirement with regard to foreign aid-financed shipping, cargoes, and Public Law 480. Senator PROXMIRE. Yes, that is what I had in mind, Public Law 480 and foreign aid.

Mr. ROOSEVELT. Right.

Senator PROXMIRE. I suppose it is the fact that this seems pretty close to a Public Law 480 deal, inasmuch as we are selling at a subsidized price. It is true we aren't selling for soft currency, we are selling it for gold, and that makes it quite different; legally I am sure you are absolutely correct. But I think that may be one of the reasons why there may be some justification for saying that there should be American ships used.

Mr. ROOSEVELT. Well, Senator, I should point out we are selling at world prices, first of all. We are selling also at the same price base, world price, to our friends in Western Europe, without any requirements as to shipping. This is really a commercial transaction, it is in no way related to Public Law 480. And I would be most anxious to clarify any misconception that this is even a first cousin to a Public Law 480 sale. This is a commercial transaction, handled by the trade on a commercial basis and commercial credit terms will be required, in my opinion, primarily for the sales to the satellite countries. And that is why in my statement I indicated that I felt that there would be very, very little sold to the satellite countries if the Mundt amendment prevails.

Senator PROXMIRE. I am almost through, Mr. Chairman.

I just feel that somehow this isn't quite a commercial transaction, and I feel it is not really a commercial transaction when we sell at the world price to our Western allies. This is a sale to our adversary, our great adversary in the world, politically. This is also a sale, as the sale of our surplus agricultural commodities to our friends at a price below the domestic price, at a price which reflects our subsidy to our farmers,

at a price which is a burden on the American taxpayer. Therefore, there is a little bit of additional element, but I think you have answered the questions on the legality, which is the main thrust of my question properly and I appreciate it very much.

Thank you.

The CHAIRMAN. The Chair wishes to say, that he is for this bill, first, last, and always, and whether or not the shipment of 50 percent of the grain in American bottoms is a political gimmick or whether that is a proper protection of our merchant marine is immaterial to the chairman.

There is another shortage the chairman feels might be pertinent to mention in Russia, and that is vodka. While our distinguished colleague from Pennsylvania hasn't referred to it recently, I am sure he hasn't forgotten what the historians, even if they came from the Ivy League area, refer to in our history books as the Pennsylvania Whisky Rebellion.

In those days, one of the principal suppliers of rye whisky was the Pennsylvania-Monongahela area of Ohio. And the Congress, being a little short of money, decided to put a tax on whisky. Well, that was before even the horse and buggy days, they didn't even have the buggy. So those farmers up there made rye whisky and they claimed the right to make it, because they said the Government hadn't given them any roads or canals, and a horse couldn't take but 4 bushels of rye to market, but if they made it into whisky, he could take 24 bushels of rye to market in one load.

So they claimed the right to make whisky and George Washington said it is all right to make whisky, but you have to pay the tax on it. And they said they would not.

He called on Light-Horse Harry Lee, the father of Gen. Robert E. Lee, to go up there and explain the facts of life, which he did with the help of the Virginia Militia; they didn't have a Federal army in those days.

Mr. Roosevelt, I want to know, do you favor selling Russia alcohol, with which to relieve the vodka shortage? If not, why not?

Mr. ROOSEVELT. Senator, I think anything that would encourage dissipation in the ranks of our adversary might be certainly in the best interests of our national security. I believe that one of our friends in the House of Representatives has urged an increase of our sales of tobacco in the Iron Curtain countries and the Soviet Union

The CHAIRMAN. Wait a minute, now. That is produced in Virginia and the Carolinas and Georgia, so just forget the tobacco. Mr. ROOSEVELT. We will restrict their dissipation to whisky, Senator, for the purposes of this hearing.

Senator CLARK. Would the Senator yield?

The CHAIRMAN. Yes.

Senator CLARK. I would just like to make the comment that my recollection of history, which may be wrong, is that in those days West Virginia was a part of Virginia, and some of that army of George Washington spilled over the Pennsylvania border and found a good many moonshiners in what was then the Old Dominion. So this was not entirely a heinous sin on the part of the Pennsylvania rugged individualists who were making whisky.

And I also point out for the record that some part of the chairman's question was what the witness' father used to call an "iffy" question and, therefore, better ducked than answered.

The CHAIRMAN. Well, if you listen to my colleague from Texas on the right, he will say that Virginia got George Washington from Texas. They say George Washington's father lived down there and he went out one day in his backyard and somebody had chopped down his cherry tree, and he called George and said, "George, did you chop down my cherry tree?" and George said, "Pop, you know I cannot tell a lie." And his father said, "George, if you can't tell a lie, Texas is no place for us. We will move to Virginia.

Senator TOWER. Mr. Chairman, I don't know that anything I say will carry much validity after that.

We have had, I think, some conflicting testimony; some of the witnesses have indicated this extension of credit to the Soviets to buy wheat would be a one-shot deal, and others have indicated this would be a precedent-setting move and we can expect future extensions of credit for other commercial transactions with the Soviet Union.

What is your view on that, Mr. Secretary?

Mr. ROOSEVELT. With regard to the wheat, it is certainly presently contemplated that this is a one-shot deal. We know of the shortage in the current crop year, due to weather, and in my humble opinion as a farmer, inefficient agricultural practices.

But with regard to future trade in other areas, as my statement emphasized, I believe that we should maintain our present position of flexibility, and this amendment would restrict that flexibility and would make almost impossible any expansion of trade on credit terms in other commodities, because we would not be able to compete with the businessmen of other free nations, who, as I pointed out, are now maintaining a trade of approximately $4 billion a year; some of which-approximately 10 percent-is on credit terms and with a guarantee of the governments of those free nations.

Senator TOWER. Do we in fact have a present position of flexibility? It is my understanding that we have not extended credit to any Communist country with the exception of Yugoslavia.

So doesn't this represent something of a policy reversal or policy change? Isn't that what the great debate is about anyway?

Mr. ROOSEVELT. No; there is no restriction. Again, as I pointed out in my statement, there have been in the past no requests for ExportImport Bank guarantees on sales to Communist countries, perhaps because the American business community was operating under the assumption that the Johnson Act covered any credit extension.

However, in view of the Attorney General's clarifying ruling and as set forth in Senator Mundt's amendment to his own bill, to this bill, credit transactions are not considered to be within the frame of reference of the Johnson Act. It is not a loan to a Communist country. And, of course, the Johnson Act does not refer to Communist countries. It was passed back in 1934, as a result of the default of bonds sold in the United States by various Latin American countries.

It applies now, not to all of the Iron Curtain countries. For example, it does not apply to Bulgaria, because they have no unsettled debts with this country. But it does apply to most of the others.

So I would say that there is nothing in the law today which prevents the sale for cash or for credit terms; if this bill passed, then it would preclude the Export-Import Bank from guaranteeing those credit terms. And, of course, I am now talking only of peaceful and nonstrategic goods.

The present Export Control Act does limit and control the sale of any goods, which affect our national security, and the military power of the Soviet Union and the satellite countries, but I think that we have got to face up to it. If we consider at some future time it would be in our national interest to encourage businessmen, this bill would prevent them from competing on equal terms with the businessmen of the rest of the free world.

Senator TOWER. In your opinion, do the Russians really need this wheat? Is it a pressing need?

Mr. ROOSEVELT. Yes.

Senator TOWER. Then shouldn't we seek the most favorable terms possible, since it would appear then to be a seller's market?

Mr. ROOSEVELT. No; it isn't a seller's market in that sense. I suppose we are being somewhat semantic, but it is a question of how much they need it.

There is, in my opinion, no question that they could do without this wheat. They have tightened their belts in the past, and I would assume they are perfectly capable of tightening their belts in the future. But I think that having this wheat would certainly help them through the coming winter months and until the coming crop. year. Otherwise, they wouldn't be trying to buy.

Senator TOWER. Thank you, Mr. Secretary.

Mr. Chairman, I have to go, but I would like to ask unanimous consent to insert in the hearings a statement by Dr. William R. Kintner, deputy director, Foreign Policy Research Institute, University of Pennsylvania.

The Chairman. Without objection, it will be so ordered.

(The statement follows :)

COMMENTS ON SENATOR MUNDT'S BILL TO PROHIBIT ANY GUARANTEE BY THE EXPORT-IMPORT BANK OR ANY OTHER AGENCY OF THE GOVERNMENT OF PAYMENT OF OBLIGATIONS OF COMMUNIST COUNTRIES

(By Dr. William R. Kintner, deputy director, Foreign Policy Research Institute, University of Pennsylvania)

Under the Export-Import guarantee program, the U.S. Government assumes the credit risk for private credits extended to any nation for purchases of goods within the United States. In the specific case in point, the shipment of wheat to the Soviet Union, the terms of financing have been set at 25 percent cash before delivery of any goods and 75 percent in short-term credits, payable over 18 months. The debate in the Senate revealed that private commercial banks would not undertake financing, even at these terms, without guarantee of the credit by the Export-Import Bank. Thus, without the Export-Import guarantee, there is the distinct possibility that the wheat deal will not be consummated. The arguments favoring the Mundt proposals stem from three considerations:

First, there is the general question of whether we should trade at all with the Soviets. The answer to this question stems on a calculation of the shortrun commercial benefits to be derived from this trade as against the longrun political risks implicit in it. In the case of surplus agricultural commodities, my opinion is that the economic benefits are about equal to the political risks, given normal financial arrangements. This was the administration's position at the time of President Kennedy's public announcement of the wheat deal. Thus, the ExportImport guarantee, indicates a shift in the administration's position concerning