ceive all of your answers. I will ask a few questions and hope that you will submit the answers to me as soon as possible.

On the department amendment, section 505: How much is involved in the total loans that would be affected by this amendment?

Mr. DILLON. I will give you the exact figure. The loans that were made for the period of 1954 to date by the ICA under the Mutual Security Act total $823.9 million. In addition, the proposed amendment to section 505 would effect one military loan of $15.7 million and three loans administered by the Export-Import Bank totaling $65 million.

Mrs. KELLY. Do you mean of all the loans, including previous loans?

Mr. DILLION. Yes; that is all this refers to, the loans that were made from the period of 1954 to date by the ICA under the mutual security bill.

Mrs. KELLY. Under $1 billion, is that right?

Mr. DILLON. Yes.

Mrs. KELLY. We will lose control of this in Congress, will we not, if this amendment is accepted and the money is returned to the Treasury? Is that right?

Mr. DILLON. No, "Miscellaneous receipts of the Treasury" just means it goes into the income side of the Government and then cannot be used except as appropriated. It is just like tax income.

Mrs. KELLY. Will we have the right to authorize it again, where it should go, or who will?

Mr. DILLON. Congress will have to authorize and appropriate it again.

Mrs. KELLY. Only the dollars?

Mr. DILLON. That is correct, only the dollars, and as far as the funds that go to the Development Loan Fund are concerned, the local currencies, the excess local currencies, those will go to the Development Loan Fund to be used for its purposes-in other words in conjunction with the dollars that you appropriate for it.

(The following information was subsequently submitted for the record :)

MUTUAL SECURITY

ICA-financed loans repayable in foreign currencies1

[In thousands of dollar equivalent, at agreement rates]

Value of original loan agreement: Actual and estimated through
June 30, 1959_-

$758, 680

Estimated collections of principal and interest to liquidate above loans by period:

1 Some loans provide the option of making repayment in dollars or local currencies. Where the option appears in a loan agreement it has been assumed that repayment will be in foreign currency in lieu of dollars.

In view of the many imponderables which can arise during any of the specified collection periods it is not possible to predict requirements of foreign currencies by the U.S. Treasury for sales to U.S. Government agencies for payment of obli

gations abroad. In the absence of such figures no reasonable prediction can be made of the value of the remaining balance which is recommended for deposit as a credit to the Development Loan Fund in section 401 (a) of the proposed Mutual Security Act of 1959.

Mrs. KELLY. Under 516, I would like a further explanation sometime; has local currency been waived or canceled by the President under that section? How much and in how many countries-local currencies?

I mean you can give me these answers if you will, please.

Mr. DILLON. We will verify exactly what you have in mind there. Mrs. KELLY. Furthermore, I am overwhelmed by the request for countries in the Middle East. Jordan, Pakistan, and Saudi-Arabia. You have practically nothing for Israel; a little old 1.6. And then returning to Europe-glancing at them quickly-I see a big increase. I do not object to anything for Turkey and I do not object to anything for Greece, but in reference to, say, France, is this for missiles and so forth which you haven't agreed upon yet?

Mr. DILLON. No; there are no figures in there for military assistance for items that have not been agreed on yet; no. [Security deletion.]

Mrs. KELLY. I will have to check those later on.

Mr. DILLON. The military people can give you full information on that.

Mrs. KELLY. Then I would like to know if we have done anythingI suppose that is military, too-to increase the construction of and the distribution of the G-91 program.

Mr. DILLON. We have.

Mrs. KELLY. Has any of this plan been completed for NATO? Mr. DILLON. No; they are not off the line but we have authorized funds and we are going ahead on a combined program to build the G-91.

Mrs. KELLY. In this program.

Mr. DILLON. In the 1959 program.

Mrs. KELLY. As of last year they could have produced some. It was already in production.

Mr. DILLON. I am not familiar with the detailed times when they come off the production line, but the Defense witnesses will give you that information.

Mrs. KELLY. All right.

Chairman MORGAN. Mr. Dillon will be back in open session again on Tuesday. The second bells have now rung and the committee stands adjourned until 10 o'clock tomorrow morning.

There is a joint session of Congress tomorrow and we will have to adjourn at 10 minutes of 12. Therefore we are going to begin our hearing at 10 o'clock.

Mr. FULTON. I want to welcome Secretary Dillon. I think he is doing an excellent job as Under Secretary for Economic Affairs and hope he will continue.

(Whereupon, at 12: 15 p.m., the committee adjourned to reconvene at 10 a. m., Wednesday, March 18, 1959.)

!

MUTUAL SECURITY ACT OF 1959

WEDNESDAY, MARCH 18, 1959

HOUSE OF REPRESENTATIVES,
COMMITTEE ON FOREIGN AFFAIRS,

Washington, D.C.

The committee met, pursuant to adjournment, at 10 a.m., in room 362, House Office Building, Hon. Thomas E. Morgan (chairman) presiding.

Chairman MORGAN. The committee will come to order.

We open our third day of hearings on the mutual security program for 1960.

We have tried to start a little earlier this morning because it is going to be necessary for us to adjourn at 11:50 on account of the joint session honoring the President of Ireland.

The Secretary must be in the Speaker's office at 11:55, so we would like to move along as rapidly as possible.

Our witnesses this morning will be the Secretary of Defense, the Honorable Neil McElroy and, following his statement in open session, we will have the statement of Gen. Nathan F. Twining, Chairman of the Joint Chiefs of Staff.

Mr. Secretary, if you are ready, you may proceed first.

STATEMENT OF HON. NEIL MCELROY, SECRETARY OF DEFENSE Secretary MCELROY. Thank you, Mr. Chairman and members of the committee. I would hope that in the questions that follow there might be consideration of the fact that General Twining and I will be followed by members of the Department of Defense who have the specific responsibility for the administration of this area of the work of the Department, and that it would be understood that the more detailed questions that might be in the minds of the committee members could be better answered by those witnesses, who I understand will appear before you later this week.

We will accept any questions, of course, that you want to ask, but I have said this simply because I think that your time can be better used in questioning General Twining and me on some of the broader aspects of this program.

I have been given a number of opportunities to appear before committees of Congress to express my views pertaining to the national defense. None of them have I welcomed more than this because of my strong feelings regarding the importance of the subject this committee now has under consideration.

The Acting Secretary of State has already testified with respect to the important contribution the mutual security program makes to

the furtherance of United States foreign policy objectives. My own remarks will, therefore, be directed to the military assistance program, and specifically to its essentiality as an integral part of our own national defense. As you know, the executive branch is requesting new obligational authority in the amount of $1.6 billion for this program in fiscal year 1960.

There can be no question about the objective of our defense program. It is to maintain a military position of such strength that first, no nation will attack us because he will know that we can inflict unacceptable damage on him in return; and second, local situations of tension can be prevented from breaking into war or can be contained if military conflict does begin.

This means that we must have military strength not only on this continent, but in the whole periphery of the free world where aggression is apt to occur. It has been many years since we could regard our frontier as the coastline of this country. We have long recognized that the advance of international communism anywhere weakens the security not only of the free world, but of the United States itself. Aggression must be stopped. Our defense is tied inevitably to the defense of the far-flung frontiers of the free world. We can expect one probing action after another in which the Soviets or the Communist Chinese test our willingness and ability to resist. If the free world cannot stand up firmly to these probes when they are initiated, we may well be faced with a major conflict as the Communists, pressing ahead with their win-by-threat policy, make it imperative that at some point we meet the issue squarely.

It is most unlikely that the United States alone could hold all these varied fronts dispersed widely around the world. The concept of a strength created and maintained by joining the capabilities of ourselves and our allies is thus basic to our whole security program. If our allies do not remain strong, our whole security concept will need radical revision and the burden placed on our own resources will be immeasurably greater.

We are most fortunate in the fact that in most of the areas where international communism might seek expansion, there are countries which are friendly to us and look to us for leadership. These nations have the will to resist, and they have the manpower. In many cases they do not have the resources. Without assistance they cannot support military establishments adequate to defend themselves. If we do not buttress them with the resources they need, and help them with the training necessary to prepare them for modern warfare, they will succumb to communism either through military action or through the kind of civil disorder and deterioration on which communism thrives.

We cannot let this happen. Each Communist success is a new discouragement to those who would cast their lot our way, and a new source of vitality and momentum for the aggressors.

In my judgment it would be shortsighted indeed if this Nation spent over $40 billion on its own Military Establishment and then declined to spend the much smaller sums needed to maintain and modernize the forces of our allies which are essential to our whole defensive concept, and without which our own military expenditures would have to be enormously increased.