Mr. BENTLEY. Do you think our program should operate in countries whose economic climate is hostile to private enterprise under our own system of free enterprise and capitalism?

Mr. CULBERTSON. This statement I just mentioned would seem to answer that question, and the Yugoslav case. I don't know whether you consider the Indian economy as a free enterprise economy or not. It is certainly not a Soviet economy.

Mr. BENTLEY. Do you think we have done all we could in the past to encourage governments of recipient countries to develop within those countries a business climate more favorable to private investment and enterprise than we could have done or should have done?

Mr. CULBERTSON. The obstacles to the development of free enterprise in a country like India are very great, but I think one of the most important free enterprise companies in the world is the TATA Steel Co. in India. It has carried on its business on a strictly capitalistic free enterprise system and it is encouraging-perhaps in the line of your question-to think that that sort of thing might spread in that great country.

I certainly don't think we should permit our funds to be used directly to develop the Soviet system of economics in a country.

Mr. BENTLEY. Would you make any recommendations with regard to possibly putting more of our economic aid programs on a multilateral rather than a bilateral basis?

Mr. CULBERTSON. We have favored a contribution to the United Nations for technical assistance. I am afraid I will have to express my own opinion on that subject. I would hesitate to extend on a multilateral basis the kind of program which the development loan fund is pursuing.

I don't quite see how we could function at that level in a multilateral way.

Mr. BENTLEY. One more question, Mr. Culbertson. Do you think that our programs, our foreign aid programs have over the past years tended to promote in countries abroad economic competition, which is directly competitive with our own manufacturers?

Mr. CULBERTSON. I think there have been cases of that kind. At the same time there is somthing to be said for the other side: namely, that our aid programs-let's take Europe for example-and money which we spent in the so-called Marshall plan that have created markets for American goods far beyond any losses which we might have had in competition with those industries.

Mr. BENTLEY. In other words, our loss of markets has been due to factors other than the foreign aid plan.

Mr. CULBERTSON. Yes, or they have been more than offset by the gains which the economic development of Europe has produced.

Take West Germany, for example. It has been remarkable, the business which our industries have been doing with West Germany. There has been a mutually developing advantage on both sides.

Mr. BENTLEY. Coming from an automobile State, I might have some reservations on that, but thank you very much.

Mrs. BOLTON. If they hadn't built such big automobiles maybe they might have sold more.

Chairman MORGAN. Are you through, Mr. Bentley?

Mr. BENTLEY. I am through.

Chairman MORGAN. Mr. Fulton.

Mr. FULTON. The question comes up of the further use of business methods in the U.S. foreign aid programs and mutual security programs. That brings up the question of the investment guaranty fund.

Do you strongly favor the continuation and expansion of the investment guaranty program that was really worked out and instituted by many of us members on this House Foreign Affairs Committee, and it is pretty much our own program?

Mr. CULBERTSON. Frankly, Mr. Fulton, the chamber has no adopted policy on that program. Personally-I am speaking personally-I think it is a very effective instrument for extending American enterprise abroad.

Mr. FULTON. I will put the figures on that program in the record here without taking the time now to refer to them.

(The figures referred to are as follows:)

Investment guaranty program

PROGRAM SUMMARY

1 Represents estimated obligations to cover "probable ultimate net cost to the U.S." of guaranties issued or estimated to be issued as authorized under sec. 413(f) of Mutual Security Act of 1954, as amended. 2 Includes anticipated additional issuing authority to be authorized by Congress.

Convertibility, $223,966,922; expropriation, $175,940,108; grand $399,907,030.

Total, underdeveloped areas, $147,952,044; all other areas, $251,954,986.

total

In this last year alone, new applications with an aggregate value of $939 million have been received. Contracts of guaranty were written for over $212 million, of which $193 million were issued during the last 6 months. In 1958 $113 million, or 53 percent, of the investment was for projects in the underdeveloped countries.

Active applications now exceed $1 billion (60 percent in underdeveloped countries) for projects in 34 countries. They include a large variety of investments such as air transportation, dairy processing, pharmaceuticals, pulp and paper, chemicals, oilwell drilling, elevators, power shovels, tire manufacturing, housing, bauxite mining, feed supplements, household appliances, plastics, and many others.

From the beginning of the program to December 31, 1958, guarantees have been issued for $400 million. Since issuing authority is recaptured when the Government's liability is reduced or terminated, only $340 million of the $500 million issuing authority is presently used. Fees have been received of approximately $3.4 million. No claims have been paid under the program and none is pending.

In addition to the fee income, $199,071,521 in note issuing authority was established as reserves or backing for the guaranties to be used for payment of claims. At the end of fiscal year 1958, $94,235,699 has been obligated for all guarantees issued to that date. Of this total, $71,148,505 represented allocations equal to the outstanding face value of the guaranties issued prior to June 30, 1956, and $23,087,194 represented allocations of funds on a fractional reserve basis for guaranties issued subsequent to June 30, 1956.

The only costs of the program to the American taxpayer have been those for salaries and operating expenses. These costs are running below 15 percent of current fee income to the U.S. Treasury. Last year's increased business was accomplished with the addition of one secretarial position to a staff consisting of nine employees. The program continues to operate at a profit to the Government.

Clearly this transfusion of new capital, technology and American management, encouraged and facilitated by the investment guaranty program acting as a catalyst, has helped these underdeveloped countries toward achieving their economic development as well as political stability.

Pending applications for investment guaranties-By area and country, as of Dec. 31, 1958

Country agreements for investment guaranties—By area and type, Dec. 31, 1958

Mr. FULTON. You realize we have had no losses on the program and that the U.S. businessmen, by their own payment of premiums, have made the fund a profitable operation for the United States, and it looks as if the fund is succeeding.

Why shouldn't there be a guarantee by the U.S. Government on proper premiums paid by businessmen when they are investing abroad, to protect them against lack of convertibility of the currency to get their investments out, and against local unrest-civil unrest and strife; against revolution, against expropriation by governments that take over the business of U.S. business properties without compensation?

Why should not the chamber of commerce take an affirmative stand for such a business-guarantee program and recommend it?

Mr. CULBERTSON. Well, I can say this in support of the chamber's action, that in the publication called "Spotlight on Foreign Aid," which was published this year, there is on pages 20 and 21 a full review and statement concerning the investment guaranty program.

Mr. FULTON. Yes, but I am sorry that the chamber has not seen fit to endorse this program because it is of such assistance to the expansion of U.S. business abroad and has been one of the most successful programs.

I am sorry, but I believe they are listening to some people in the other body of Congress who feel that they were not in on the birth of this program. This has caused a consistent effect of dragging of feet among some people in the other body as well as in the business world.

May I finish with this: Where many U.S. businesses are being required by local country law to invest in foreign countries only in conjunction with local capital, such as a 50-50 arrangement, don't you think that the U.S. foreign aid program on its investment guarantee program, should be broadened to include that particular sort of a setup where we bring in the local people as investors?

Mr. CULBERTSON. Personally, I think so very much.

Mr. FULTON. Would you please put in the record at a later date what the chamber might recommend, or any one of its boards, on this problem?

In addition, there is the other question of where the foreign country later gets into trouble that the United States is helping. Often where the business interests of the United States have large investments, then there is the feeling because of the new threat of danger that they have to get out and get what they can, thus pulling the economic props out from under the country and putting it into more trouble with communism when private investors get out.

Don't you think it would be well to have an amendment to provide for that particular kind of a country where danger later arises and where it was declared by the President or some U.S. agency-possibly the Department of State to be an emergency situation where it is likely that U.S. business interests would be endangered by their continuing? It could then be determined that it is in the United States and the free world's interests and security to keep these capital funds there, that we then could have an investment guaranty program with the premiums set according to the type of risks. The U.S. businessman, by paying a premium could be insured and would then be persuaded

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