As public interest in reverse lend-lease increased during subsequent months, and because of the desire of the Congress and interested Government agencies to obtain, if possible, some monetary measurement of the volume and scope of reciprocal aid, it became apparent that some attempt would have to be made to arrive at a reasonable compromise. Therefore, in June and August 1943, the Army and Navy issued instructions to their overseas commanders requiring that reciprocal aid be reported in the following manner:

1. Values would be requested from responsible foreign government representatives, the values so received representing unilateral estimates by the foreign governments to which the United States Government does not necessarily agree;

2. Any values received from foreign government representatives would not be disputed, but would be reviewed by United States military and naval personnel; and if they were not in agreement with the valuations furnished by foreign governments, they were to submit their own estimate of value for the information of the United States Government; and

3. In the absence of any values furnished by foreign governments, United States military and naval personnel were to arrive at their own estimate of value based upon local cost, market value, or any other reasonable basis.

Simultaneously, negotiations were entered into with the British Government with a view to inducing it to alter its policy on the reporting of reverse lend-lease aid which it has supplied. As a result of these negotiations, the British issued on November 11, 1943, a white paper indicating an estimate (stated to be incomplete) of their out-of-pocket expenditures up to June 30, 1943, in furnishing reciprocal aid to the United States forces. The British Government agreed further that it would thereafter provide quarterly statements of its expenditures for reciprocal aid rendered to United States forces in the United Kingdom. These statements were to reflect approximately 50 major categories and more than 300 subcategories of goods and services. This statement was not to be based in each case on individual prices, which it was stated were not available, but was to be prepared from the figures currently available under the British accounting system and was to represent the best estimates possible by the British Government of the reciprocal aid extended by them to United States forces.

It has been agreed that the reports described will be accepted as unilateral estimates of the British Government, and that the American Government will not be deemed either to agree to them or to be committed by them. While it has been agreed that itemized pricing of individual items may represent an unwarranted expenditure of manpower at this time, the United States Government has reserved the right to request that the British Government supply itemized prices at a later date when the required expenditure of manpower would not interfere with the war effort.

Except for shipping services, the British Government's statements apply only to supplies furnished and services rendered within the United Kingdom. In addition, the United Kingdom is extending aid to American forces from its colonies in various parts of the world. Full and complete records of the value of the aid transferred in these areas may never be available, particularly for transfers which have

occurred during combat. Insofar as the records are available, reports containing monetary expenditures are now being prepared by the British Government. In the meantime, reports are being made by United States forces in those areas.

The Governments of Australia and New Zealand are also periodically making available statements of the cost to them of providing reverse lend-lease assistance. The problems of reporting encountered in these areas are not so great as in the United Kingdom. For example, in New Zealand all United States supply functions have been centralized in a joint purchasing board on which the Army, Navy, and Marine Corps are represented. When goods or services are obtained, the armed forces certify their receipt and pass the vouchers back to the appropriate New Zealand Government department for payment, and such records then provide a statement of expenditures made. the case of works projects constructed for us by the New Zealand Government, however, there are the difficulties encountered in assessing post-war values and in allocating expenditures for works jointly constructed by American and foreign forces.

In all other areas records of reverse lend-lease received are obtained from the armed forces. Until July 1943, these reports usually were confined to physical descriptions in quantities of goods and services received, to provide a basis for subsequent valuation if such should be necessary. Since July 1943, however, our forces have been endeavoring to obtain estimates of expenditures for all aid received. While these estimates will be of considerable assistance in the future determination of lend-lease benefits, they do not represent a statement by the foreign government of its costs, and provide only a unilateral estimate by United States military or naval personnel operating under difficult conditions.

The need for uniformity in the reporting and valuation of reciprocal aid has been recognized by the armed forces. Because of the complexities of the problem, particularly in combat areas, it has not yet been possible to arrive at a system which is entirely uniform or acceptable. Efforts are constantly being made, however, to improve both the system used and the reports submitted.

A comment by the Navy Department on reciprocal aid would be of interest to the committee:

The Navy Department reports to the Foreign Economic Administration (formerly the Lend-Lease Administration) monthly all reverse lend-lease or reciprocal aid which has been reported. Reports of such reciprocal aid to the Navy Department are admittedly deficient for various reasons. Vigorous steps have been and are being taken to correct this deficiency and these steps are showing results. Some of the reasons why such reports have not been adequate are as follows: Much of the reciprocal aid has been received on the active fighting fronts where the commanding officers have neither the time nor the facilities to maintain the necessary records and to render the corresponding reports. Reciprocal aid has never been distinctly defined and conceptions of what constitutes reciprocal aid and what constitutes joint military operations vary considerably. Some reciprocal aid is difficult if not impossible to evaluate in terms of dollars. The United Kingdom has been very reluctant to place a price on any reciprocal aid, although the aid has been offered freely. In cases where no value or cost is assigned by the foreign government, but quantities and the nature of services have been reported, it is impossible for the Navy Department to assign any significant valuation. Not only do questions of exchange arise, but it is impossible for our officers to estimate the real cost to the foreign government. Furthermore, even if the approximate cost to the foreign government were known, the question arises as to whether that is the real value, or whether it should be the corresponding

value of a similar article or service in this country, or if supplied from this country. Because of these difficulties the instructions have been changed several times.

At present the instructions require our officers to demand a price figure from the foreign government and to submit that figure, together with his own comment, if any. If no price can be obtained from the foreign government our officers are instructed to submit their own best estimate, together with information as to upon what the estimate was based and the rate of exchange used. Obviously, none of these methods of evaluation is entirely satisfactory, but the method by which the foreign government states the cost to it of the aid rendered appears to be the most desirable and is comparable to our own method of evaluating direct lend-lease. Reports on this basis are now being regularly received from Australia and New Zealand and the British Admiralty is being urged to adopt a similar policy.

There is much to be done to develop adequate information on reverse lend-lease. The final story, however, will not be possible until after the cessation of hostilities.

BOARD OF ECONOMIC WARFARE

The Economic Defense Board was established by Executive Order 8839 under date of July 30, 1941, for the purpose of developing and coordinating policies, plans, and programs designed to protect and strengthen the international economic relations of the United States in the interest of national defense. The name was changed to the Board of Economic Warfare by Executive Order 8982 dated December 17, 1941. Executive Order 9361 of July 15, 1943, established within the Office for Emergency Management an Office of Economic Warfare, and the Director assumed the functions, powers, and duties of the Board of Economic Warfare, which was terminated by the same order. By Executive Order 9380 of September 25, 1943, the Office of Economic Warfare was consolidated into the Foreign Economic Administration, established by the same order.

The Board of Economic Warfare as such made no purchases. However, upon directives from the War Production Board for the procurement of strategic materials it conducted preliminary negotiations and issued directives to subsidiary corporations of the Reconstruction Finance Corporation to execute contracts that would provide the necessary materials and supplies.

As a result of Executive Orders 9361 and 9385, all foreign procurement contracts then in existence were transferred to the Foreign Economic, Administration, and are being processed through the United States Commercial Company. Likewise, all new foreign procurement contracts are being negotiated in the name of that company.

The purchases are made through the subsidiary corporations of the Reconstruction Finance Corporation, and are incorporated in the figures reported for those organizations.

COORDINATOR OF INTER-AMERICAN AFFAIRS

The Office of the Coordinator of Inter-American Affairs was set up by order of the Council of National Defense on August 16, 1940, and by Executive Order 8840 of July 30, 1941, was established within the Office for Emergency Management, for the purpose, among others, of furthering the national defense and strengthening the bonds between the nations of the Western Hemisphere. Expenditures are made from direct appropriations and transfers or allocations from the

Office for Emergency Management and the Emergency Fund for the President. No lend-lease funds are involved.

Expenditures made in Latin-American countries to December 31, 1943, amounted to $24,038,243, as follows. (See statement attached as exhibit V.)

Emergency operations.

Technical and other assistance (including administrative expenses) -

Total___.

$363, 818 31, 985 9, 535, 605

2, 407, 797 3, 739, 986 1, 500, 536 428, 383 1, 379, 162 4, 650, 971

24, 038, 243

A brief statement on each of the larger items follows: Loans.-There have been only two loan agreements, both of which involve financing of the purchase of equipment. The amounts of the agreements total $649,187 and $360,803, respectively. Advances have totaled $102,522 and $261,296, respectively. Repayments totaling $18,959.02 have been made under the first agreement.

Health and sanitation.-The objectives of these programs are: (a) To improve health conditions in strategic areas particularly with relation to the requirements of our armed forces and those of our other American allies; (b) to make possible increased production of strategic materials in areas where bad health conditions exist; (c) to raise the general standard of public health practices; and (d) to demonstrate, by carrying out an action program beneficial to all classes of people, that this Government is vitally interested in the welfare of the peoples of the other American republics, thereby helping to obtain an effective realization of this Government's program of hemisphere solidarity. The programs include malaria control, environmental sanitation, improvement of water supply, construction of sewerage systems, construction and equipping of hospitals and health centers, control of plague, leprosy and communicable diseases, medical care of migrants and workers engaged in the production of strategic materials, and the training of doctors, sanitary engineers, hospital administrators, nurses, and other national personnel.

Food supply. The objectives are (a) to stimulate the production of foodstuffs in areas where the demand for food has been increased because of large concentrations of troops and war vessels; (b) to provide sufficient quantities of foodstuffs for workers engaged in the procurement of strategic materials; and (c) to produce foodstuffs in areas which could no longer be supplied by shipments from other areas because of the absence of sufficient shipping. These programs. involve technical assistance for the increase and improvement of production of foodstuffs, and fiber products; procurement and distribution of supplies and equipment, such as hand tools, insecticides, and fungicides, seed and plants; improvement of storage and processing facilities; development of irrigation, and training in practical agricultural methods.

Coordination committees.-The expenditures under this head represent funds made available to committees located in the other American republics which have been organized by United States citizens of

LEND-LEASE AID

long residence in those countries. They work in close relationship with the office of the Coordinator and the United States embassies and consulates in carrying out an information program the purpose of which is to spread a wider knowledge of this country in the other Americas. They arrange for the distribution of visual and press materials, for local radio programs, for the distribution of nontheatrical motion picture films, and for small projects in the educational field. Transportation. The expenditures reported under this category relate to the obligations assumed under notes exchanged on November 18, 1942, between the Government of the United States and the Government of Mexico, whereby it was agreed that both nations would collaborate in the rehabilitation of certain key lines of the Mexican National Railways. United States Government agencies had chased in Mexico large quantities of strategic materials needed for direct war use. purConditions had so affected offshore shipping that the Mexican National Railways were called upon to transport all of these vitally needed materials, as well as supplies and equipment shipped from the United States to war installations south of Mexico. The resulting traffic burden greatly exceeded peacetime traffic loads and many changes and improvements were essential to continued operation of the railways. Each Government agreed to furnish a proportionate part of the material and equipment required, the Mexican Government and the Mexican National Railways agreed to direct their operating facilities toward the fullest realization of the rehabilitation program, while the United States Government further agreed to furnish necessary technical assistance (trained mechanical, track, and transportation technicians).

The United States Railway Mission in Mexico was created to implement this agreement. Although both Governments agreed to contribute material and equipment, the major contribution by the United States has been in technical assistance. Continued contribution by the Mission will consist largely of technical advice and supervision of various educational programs designed to impart knowledge and understanding of modern practices in railroad operation and maintenance to the Mexican officials and employees.

Newsprint shipping subsidy. These expenditures apply to payments made to carriers for the difference between the established rate for newsprint and the rate at which the carriers would agree to ship newsprint to the other American republics. The ocean-freight rate was reduced in 1940 to $9.84 per ton by the United States Government. With the outbreak of war and the consequent scarcity of shipping space, the available space was naturally utilized for commodities carrying higher rates. and South America is only about 2 percent of United States consumpWhile the requirement for Central tion, the situation, due to the lack of shipping, was relatively much more serious. It was to the interest of this country to help keep friendly newspapers in business. The most satisfactory method seemed to be the payment of a shipping subsidy to bring newsprint up on a level with other commodities. This method was chosen, rather than an increase in the shipping rate, because of the economic condition of the newspapers, which had already been severely hit by the drop in advertising revenue due to the war.

Emergency operations.-Expenditures under this category relate to the following: