of the Cuban people for a government to give more freedom and stability than was the case heretofore.

I think it is difficult to prophesy on the future because, as I say, is untested.

[Security deletion].

it

Mr. FOUNTAIN. Did I or did I not read in the newspaper a statement by you to the effect that we had already been requested to withdraw military forces from Cuba?

Secretary DULLES. Yes.

Mr. FOUNTAIN. We have been requested?

Secretary DULLES. Our mission. I don't know that it went quite as far as that. We got information that they thought they could get along without it, so we decided to withdraw it.

Mr. FOUNTAIN. Thank you.

Chairman MORGAN. This afternoon we have the Secretary of Defense, Mr. McElroy, and General Twining.

If there are no further questions, the committee stands adjourned until 2:30.

(Whereupon, at 12:45 p.m., the committee adjourned.)

BRIEFING ON CURRENT WORLD SITUATION

THURSDAY, JANUARY 29, 1959

COMMITTEE ON FOREIGN AFFAIRS,
HOUSE OF REPRESENTATIVES,
Washington, D.C.

The committee met in executive session at 10:45 a.m., in room G-3, U.S. Capitol, Hon. Thomas E. Morgan (chairman), presiding. Chairman MORGAN. The committee will come to order.

We will have a continuation of our briefing sessions. Today we have with us the Honorable C. Douglas Dillon, Under Secretary of State for Economic Affairs.

Mr. Dillon, please go right ahead.

STATEMENT OF HON. C. DOUGLAS DILLON, UNDER SECRETARY FOR ECONOMIC AFFAIRS, DEPARTMENT OF STATE

Mr. DILLON. Mr. Chairman and members of the committee, I have been asked to come up and brief the committee on problems of interest in my field, foreign economic policy.

In the past, as you know, foreign economic policy was basically concerned only with strengthening of the U.S. economy and preserving our trading rights abroad preserving our investments, preserving opportunities for the United States and their trade relations with the rest of the world.

Since the war, since the development of the Soviet Union and the total challenge our way of life is facing, our responsibilities are greatly broadened and include efforts of all kinds to strengthen both individual nations in the free world to maintain their freedom and also to strengthen the cohesion of the whole free world.

It is often thought that the mutual security program is the only thing we use for this. That is not true at all although it is a very important item. Our trade relations based on the Reciprocal Trade Agreements Act, which was successfully renewed last year, are vitally important in that connection. Efforts through many of the international institutions that help in both trade and development are also very important.

Last year marked a turning point, if you will, in Europe. The European economies have been strengthening over the years since the war. By the end of last year when they announced their convertibility move, they really reached quite a new level. That is of great importance to us in many ways. It means that their currencies are more useful in the world generally. Their contributions in their own currencies to such institutions as the International Monetary Fund and the World Bank are far more useful than they used to be in helping the development of other countries. This development was also accompanied by a recognition, probably because now they

were able to do something effective, a rather broad recognition of their obligation and of their interest in contributing to economic stability and development in the less developed areas of the world.

For the first time the Western German Government accepted as an integral part of their policy the need to join in this effort and they began by making really substantial credits available to India, to Turkey, and to Greece. They have underway projects to continue this activity in the coming years.

The British made considerably larger credits available, particularly in the case of India, where they joined in the last World Bank credit this past August to provide funds for the Indian 5-year plan. The British contribution was considerably larger than our own at that time.

The Canadians have also joined in this effort by announcing that they would increase their contributions to the Colombo plan grant aid for the Commonwealth countries to a 50 percent higher level than in the past. All this is very helpful practically. It also gives us a great deal of encouragement to know that we have this source of help in the effort to help the less developed areas progress. It also is an indication that some other hardheaded people, countries, have concluded that this is the proper policy.

I should not fail to mention the fact either that the Italians are beginning to get active in this area now, in the Middle East.

I thought that it might interest you if I commented briefly on what the other side has been doing during the past year.

You will remember the discussions we had a year ago about the overall Sino-Soviet economic offensive. I thought it would be useful to bring this up to date.

Last year they continued and expanded this effort and made it. more aggressive. That is certainly the case in the trade field. The Soviet Union used trade to bring pressure on the Government in Finland [security deletion] and the whole bloc has been very vigorous in underdeveloped areas in seeking new opportunities. An East German trade delegation arrived in French Guinea within a week after the independence of Guinea and in the case of Iraq, within 5 months after the revolution had taken place there last July they had either completed or were in the final stage of completing negotiations for trade agreements with not only the Soviet Union and Communist China, but also all of the satellite countries individually.

So that shows the pressure that the Russians have kept on this trade field.

Khrushchev's statements, I think, were a little more aggressive too, and I think quite a significant one is his statement to Senator Humphrey that we were probably preparing for the wrong war, with our NATO preparations, although I am not so sure that makes much sense in light of the way they are acting in Berlin. But, nevertheless, that is what he said and that what we ought to look out for is the economic competition and warfare that the Soviets were going to usethat they were going to use such economic means in winning over the world to their system.

[Security deletion.]

Mr. DILLON. Mr. Mikoyan came over here and talked around the country about wanting to increase trade. When he came in to see me, he was very aggressive. To make a long story short, he said that we

were making trade impossible, that they wanted to trade with us peacefully and the only way that could be possible would be if we could get Congress to repeal the ban on most-favored-nation treatment for the Soviet Union, and if we would make available very large credits. He said it was just nonsense to talk about trade if we didn't give the U.S.S.R. credits because obviously the Soviet Union was not in a position to balance its trade right away. So he said if we wanted trade and didn't follow up with big credits we were obviously insincere.

I pointed out that there were many ways that trade could increase and that it had been considerably larger in the past without these big credits. Mr. Mikoyan was not interested in that.

When we brought up the question of lend-lease, he showed no interest in resuming any conversations on that subject and in fact for the first time for any Soviet representative said that as far as he was concerned he didn't think the Soviet Union had any obligation to pay anything under lend-lease accounts. He said this despite the fact when the conversations were broken apart some 7 or 8 years ago, the Soviet had made an offer of $300 million. I didn't press him to the point of saying whether this offer is withdrawn or not and the subject was never raised again. However, he showed no interest and indicated they didn't feel they owed anything.

Now, as far as the Communist bloc aid program is concerned, I do certainly have here a couple of charts that may be of interest.

(A chart entitled "Bloc Economic and Military Credits and Grants to Less-Developed Countries by Year" was shown as follows:)

Mr. DILLON. You will see last year there was a very much larger total. We don't necessarily interpret that as a trend because the Soviet Union is not operating on annual appropriations, but just operates when they find a time to do a job and it goes up and down as you see very dramatically.

It may be noteworthy that since this thing really got underway in 1956, 1957, and 1958, if you average those out, they all average out somewhere close to the 1956 level, the 700 million level, and there is no indication that that will slow down in the next year or two. It is a fact that the largest amount was in 1958.

Now, those figures are somewhat different from the figures that were made public in the past because these are net figures and they exclude the $300 million of credits to Yugoslavia that were canceled by the Soviet Union and other bloc countries when Yugoslavia refused to go along with their foreign policy of cold war with the West.

Also we found out that some of the Soviet military, the bloc military credits that we had information on before were not entirely on a credit basis and that some 20 percent of them were downpayments, actually in cash at the time, so there is about $140 million that we thought were credits at that time that turned out not to be and have been deleted from the total. This net total comes to about $2.4 billion and is an aggregate figure so far as we know.

A chart entitled "Bloc Economic and Military Credits and Grants to Less Developed Countries, January 1954-December 1958, in Millions of U.S. Dollars" was shown as on p. 35.)

Mr. DILLON. This shows the countries to which the credits have gone and how they are divided between economic and military credits. This shows 1954 to 1958 but, practically speaking, almost all of the credits were expended between 1955 and 1958.

Two-thirds is economic and one-third military and the military is largely concentrated in the United Arab Republic, Indonesia, and Iraq. I think the Iraq program is rather interesting because this is all new since the Iraq revolution. In 6 months they moved in very rapidly and are already making very substantial deliveries against that $120 million figure of military aid for Iraq.

The Yugoslav figure is greatly reduced. It represents credits already used up.

(A chart entitled "Bloc Economic Aid to Less Developed Countries With U.S. Comparisons, Mid-1955, December 1958, in Millions of Dollars (U.S. Dollars)" was shown as on p. 36.)

Mr. DILLON. The third chart is merely to show a general comparison of what they have done with what a part of the free world effort has been in the same area. It is not meant to be an accurate total comparison because we have found that is almost impossible to do-to get a complete record of all free world assistance, including private investment, that has gone into these areas.

The chart shows Communist bloc economic aid to each country where they have programs. It also shows a somewhat comparable figure for the United States, a figure which includes technical assistance, and other mutual security aid, our Public Law 480 deals, and Export-Import Bank loans.