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July 1, 1947
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Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002:4 CONFIDENTIAL - FOREIGN NEEDS FOR UNITED STATES ECONOMIC ASSISTANCE DURING THE NEXT THREE TO FIVE YEARS Report of the Economic 'Working Group on Economic Aid to the Special Ad Hoc Committee of the State-War-Navy Coordinating Committee Reference: SWN-5280 July 1, 1947 TIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Table of Contents Page Summary and Conclusions (i) Conclusions (i) Summary (v) I. Introduction _Objedtives.of.U. S. Economic Assistance Policy 1 II. World Financial Needs 6 III. 7orld Situation for Critical Commodities 24 IV. Relation between Regional and 1.:orld Approaches to Economic Assistance Policy 44 Table I. "P.TORLD CAPITAL IMPORT REQUIREENTS, BY COUNTRY, 1947-1949" Table II. "PROJECTION OF UNITED STATES BALANCE OF PAY- LWTS UNDER PRESENT FINANCIAL POLICIES, AUTHORIZATIONS AND PROGRAS, BY AREAS, 1947-1949" Table III. "ANNUAL DOLLAR AVAILABILITTES UNDER PRESENT POLICIES, BY COUNTRY, 1947-1949" Appendices A. Calculation of Country Net Capital Import Requirements B. Utilization of Gold and Dollar Reserves C. Breadgrains and Feedgrains D. Fats and Oils E. Coal F. Dry Cargo Shipping G. Steel CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL FOREIGN NEEDS FOR UNITED STATES ECONOMIC ASSISTANCE DURING THE NEXT THREE TO FIVE YEARS Report of the Working Group on Economic Aid to the Special Ad Hoc Committee of the State - War - Navy Coordinating Committee Reference; OWN- 5280 Summary_and Conclusions Conclusions Foreign needs for economic assistance have been re-examined by the 7orking Group on Economic Aid. While in some particulars the outlook now differs from that given in the previous Interim Report of 2 May 1947, the major conclusions of that study have been re-affirmed. Two of the conclusions were: a. that under present programs and policies the world will not be able to continue buying U. S. exports at the 1946-47 rate and b. that the current volume of V. S. foreign financing is not ade- quate to secure either world economic stability and a desirable world trading system or our political objectives in critical coun- tries. Requirements of the world for economic assistance based upon the rising levels of consumption and capital formation necessary to the realization of U. S. political objectives are far in excess of the amounts the U. S. is prepared to supply under present policies, authorizations, and pro- grams. Requirements unsatisfied in 1947-1949 are estimated to total 0.1 billion; of the sixteen countries participating in the Paris Confer- ence on European Recovery the eight considered to confront unsatisfied re- quirements account for 6.6 billion, and four of the eight--the U.K., France, Italy, and Hi-zonal Germany--account for $5.6 billion. In the CONFIDENT IAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL ii In the measure that the cooperative program of recovery being formu- lated in Paris by Western European countries provides for meeting their requirements and is supported by the U. S., a large part of the total prob- lem will be met. In addition to carrying forward with thetMarshall Plant members of the working group consider that the following financial measures are required to secure U. S. foreign policy objectives in other areas than Western Europe. 1. Present U. S. government policies and programs of rendering fi- nancial assistance to other countries than those participating in the Marshall Plan should be continued and carried forward in the measure anticipated in this Report, including a. realization of $1.1 billion of International Bank lending in the three years 1947-1949 to non-Marshall Plan Countries, b.. the appropriation in Fiscal Year 1949 of funds for con- tinued civilian relief in Japan, and c. appropriation of a grant-in-aid for Korea. 2. The U. S. Government should scrutinize the projects of non-Marshall Plan countries noted as unfinanced in this report to determine which of them might under a more liberal loan policy than is now employed, be appropriately financed by the International Bank. 3. To the extent not required to aid in implementing the Marshall Plan the uncommitted lending power of the Export-Import Bank, amount- ing on July 31 to 800 million, should be employed to finance the most productive of the requirements of non-Marshall Plan countries remain- ing unsatisfied under present policies, authorizations, and programs. 4. The ship sales act should be amended and renewed and the disposi- tion of ships should be pursued with vigor to the end of putting into service under foreign flags U. S. government owned merchant vessels that are CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL iii that are now, and in view of present policies will likely continue, idle. The Working Group also reaffirms the view expressed in its Interim Report as to the necessity for giving authority to the Maritime Commission to operate government owned vessels and to apply revenues from operation of ships for government account to meet expenses of operation. The cost of realizing our political objectives cannot wholly be measured in money. Reaching the objectives will require overcoming world- wide shortages of commodities--particularly grains, fats and oils, coal, and steel. Solution of the problem posed by such commodity shortages de., ponds on the continuation or imposition and the strengthening of controls in the U.S. over exports and domestic consumption. Such controls should be used to divert supplies, subject to considertItions of international equity, to their most important uses as measured by their effect in relax- ing political tensions in the non-Soviet world and promoting positive po- litical attitudes toward the U.S. In its Interim Report the Working Group noted certain specific mea- sures required to deal with commodity shortages then anticipated. It was held necessary:. a. to commit ourselves firmly to the export goal of 15 million tons of grain, to direct this amount of grain into export channels by tak- ing measures for control outlined in the Report, and to continue col- laborating ,with IEFC in programming the allocation of exports, b. to continue U.S. coal exports to Europe at a maximum during 1947 and for n. considerable period thereafter, to give highest priority to a coordinated program for increasing European coal production, and to continuo supporting the principle of international allocation in ac- cordance with need in the distribution of available coal, c, to direct, by governmental action, nitrogenous fertilizer, steel, and certain capital equipment items into export channels, and d. to extend governmental powers expiring June 30, 1947 (i) to al- locate and assign priorities to export of a limited list of critical commodities CONFIDZIITIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/11PJTCIANRDP67-00059A000400130002-1 iv commodities, (ii) to control exports, and (iii) to assign priorities to transport of exports. The 7orking Group in this report has examined the outlook for grains, fats and oils, coal, and steel. The world grain situation has deteriorated markedly since the Interim Report was prepared. It is no longer in prospect that the U. S. Could make available for export in 1947-48 approximately 15 million metric t tots of grain without curtailing domestic consumption.; 12 million tons only are now in Bight for export; and foreign import requirements have increased because of crop failures abroad. The deficit in prospect has increased from 9 million tons to 16 million tons. To achieve U. S. political objectives it willbe essential to take maximum efforts to step-up U. S. grain exports. Maxiaum efforts include 1. restoring 1946 controls., particularly provisions for higher flour extraction rates, 2. shipping a larger proportion of U. S. wheat as wheat rather than as flour to take advantage of .higher extraction rates abroad and provide foreign countries a larger supply Of by-products for feed, and 3. the efforts noted above in (a) which the Working Group re-affirms. It also re-affirms the necessity of measures noted above in (b) and (c) for dealing with the prospective shortages of coal and steel. In this connection the Working Group wishes to stress the importance to easing the critical world steel situation of renewing the Ships Sales Act anft pressing the disposition of ships with vigor. Approximately 12 million d.w.t. of U.S. Government-owned shipping, currently inactive, could be put into service under foreign flags to minimize the need for constructing new vessels abroad. The working group also believes continuation of world allocation of -fats and oils necessary to prevent bidding up of world prices and to insure as equitable distribution as is possi- ble. The Powers to direct and regulate the export of critical materials and to allocate transportation equipment, noted above in (d), have been renewed until March 1, 1948*. *Estimates in this report were prepared ? early in the summer and, in varying degreesvhave been superseded. However, it is believed that if appropriate revisions were made, they would serve to strengthen the conclusions of the report since they would raise European unsatisfied dollar requirements and requirements for critical commodities, particularly grains, fats and oils, and coal, while lowering prospective exportsalfpliea. Even though the estimates are not, in detail, the best that could now be-made, it is felt that the over-all analysis and a)nclusions- are substantially correct and a useful purpose will be served by presenting the report at this time. (9/18/47) CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONIFIDEI4TI AL ? Summary Oblectives of U. S. Economic Assistance Economic assistance to foreign countries by the United States follows logically from a major tenet of United States foreign policy: that U. S. security will be served by support from the peoples and governments of Western Europe, the Near East, the Far East, and Latin America and the strengthening of economic-military potential of friendly areas not likely to be over-run by hostile powers in the event of war. To this end, and equally to the end of peace, U. S. policy seeks the elimination of political tension and violence within and among countries in the non-Soviet world (a) as a means of avoiding the occasion for competitive intervention by the U. S. and USSR, (b) to establish conditions for the peaceful political evolution and cooperative unification of the non- Soviet world, with the United States in a leading role, and (o) to demonstrate to the Soviet world the necessity of revising a foreign policy grounded in the prognosis of the inevitability of economic rivalry and political strife among capitalistic countries culminating in war. Political tension within and among countries of the non- Soviet world arises from disappointed hopes for economic betterment cherished by a country or by classes in a country. In the case of the more advanced war devastated European countries, hopes of urban lower-income groups for a quick return to CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 coi\TFIFIENTIAL vi return to living standards enjoyed before the war have been disappointed despite marked improvement in their condition. Disappointment and loss of hope for rapid realization of economic aspirations have given birth to, and in the next few years will nourish, hostility and aggression toward the more favored classes in their awn country, toward national authorities, and toward the U. S., the principal country able to provide means for improvement. In the case of under? developed countries not suffering devastation, internal class ? tensions and xenophobia arise with the emergence of new social and economic classes conscious of the favored position and wealth of native ruling groups, colonials, and foreign con? ? cessionaires. Hostility toward rich countries and toward the metropolitan powers, civil war and colonial rebellion are the potential or actual results in many areas. U. S. economic assistance in adequate amounts to war devastated and underdeveloped areas is indispensible to eradicating these causes of political conflict within and among countries of the non?Soviet world and to promoting their peaceful political evolution and cooperative unification. It will, by making possible a more rapid increase in urban living standards and by terminating the seemingly endless procession of economic crises, restore hope and morale and strengthen moderate, democratic governments in the more ad? vanced war devastated European countries; in underdeveloped countries it will accelerate the process of capital formation necessary CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL VII necessary to an increase in mass living standards and the relaxation of dangerous political tensions but only if stripped by all appearance of foreign exploitation and if accompanied by radical social and political reforms. Such assistance will help ispell hostility toward the U. S. engendered by envy and desperation and will promote more positive attitudes. International cooperation and planning will also be promoted by such aid, and U. S. political leadership will be increased because it will be identified with the common objective of standards throughout the world. Measurement of Financial Requirements Measurement of the economic assistance particular country of the world to maintain raising living needed by any or create the political, economic, and social conditions of high morale, peaceful development, and support of U. S. political leader? ship is necessarily a difficult question of judgment which must take account of existing political circumstances and recent economic experience. The neede of the world for the Years 1947-1949 for "capital imports", the extent to which they will probably be met out of existing resources or from financial assistance advanced under existing policies and programs of the U. S. Government, other governments, and the 'Jorld Bank 41' The phrase "capital import requirements" is used in this report to denote the difference between (i) a country's total needs for imports of goods and services and for repaying obliga? tions.and (ii) the sum of (a) its current account resources (its exports of goods and services, its sale of new gold and its net receipt of private remittances) and (b) prospectAve loans by other countries than the U. 5, CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL TABLE I C41 TCRLD CAPITAL IMPORT REQUIREMENTS 1947-1949: SUMARY P7 AFIA* CD rbillions of dollars at prices prevailing in the last half co 1946) CD CD CD C4 141 CD C? CAD CL 0 All Areas Europe Western Europe Eastern Eucope Near East & Africa Far East & Oceania -Western Hemisphere Unallocable 1947 Total "Required" Net Dollar Capi- tal Imports Total Allowance for prob- able financing** Ttal N47 1947 1,3 7n3aisfied. Capital import F.equirements 1948 1949 1947 1948 1949 3.2 1,4 10)Q 1949 Tztal 11.3 6.9 8.9 6.3 6.9 4.6 27.1 17.8 10.0 6.1 5.1 3.0 18,3 1047 3.7 3,2 8.8 7.2 5:8 1.1 5.1 1.2 4.0 .6 14.8 2.9 ---7:3 .6 27 .4 1.2 .2 9.1 1.2 ,4 .5 - r ,8 2.7 .4 1.7 .6 1.8 1.9 71 .7 1.2 .6 .1 -.T 1.2 .5 .2 1.7 4.2 3.1 .3 .5 1.5 1.8 / .2 .9 .5 .1 .3 1.0 .4 .2 1.3 3.5 2.8 .3 .1 .3 .1 .2 .3 .1 .1 .2 . .1 L . 4 .8 .3 Discrepancies in the last decimal of totals are due to rounding. ** Out of United States Government credits and aid, International Bank credits, private investment, and the 8 liquidation of gold holdings and. dollar assets. 73 > 2 CL CONFIDENTIAL CL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL ix World Bank, and the extent to which they are likely to remain unsatisfied are given in Table 1. A summary by areas of this table is given on page viii. Capital import requirements of non-Soviet war devastated countries provide (a) for a sufficiently rapid improvement in levels of consumption to make probable the survival of moder- ate democracy and (b) for the restoration of war damage and a moderate improvement in capital plant to ensure (i) rapid achievement of self-support and (ii) in some cases capacity to carry a share of responsibility for maintaining world peace and security. Capital import requirements for Soviet satellites have been based on loss favorable consumption and capital improvement standards. They have been included for the sake of giving a complete picture and not necessarily bo-. cause their satisfaction in full is essential to attainment of U. S. objectives. Estimated requirements of Europe tend to be understated for a number of reasons. Capital iMport requireMents of underdeveloped areas of the world permit a moderate rate of agricultural and industrial capital formation and include some allowance for financing internal costs (by currency stabilization credits) where deemed necessary. it is believed that the postulated rates of -develop- ment for such areas in general are up to the limits established by rates of domestic saving and rates at which necessary new institutions can be established and new workers trained. A larger program would tend to be dissipated in inflation and wasted CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL L;: wasted in graft. In general, requirements estimates do not include the,foreign exchange cost of military assistance. The net capital import requirements of all areas are ex? pected to decline from 11.3-billion in 1947 to 7.1 billion in 1949 as the tempo of world recovery and expansion accelerates and the flow of exports from the devastated areas increases. Requirements of Near East and Africa are expected to increase in 1948 and be larger in 1949 than 1947; requirements in Western Europe are expected to fall by about 1./3 in the course of the two years; those of the Far East and Oceania are like? wise expected to 'all' about 1/3; but requirements in the Western Hemisphere are expected to fall precipitously to Slightly more than 1/4 of the 1947 level by 1949. The pre,. cipitous decline in Western Hemisphere capital import require? ments reflets a lack of provision for the continuation of the present high rate of U. S., exports to that area. The present rate is made possible by the liquidation of dollar assets and the transfer-of funds from Europe to Western Hemi? sphere countries in satisfaction of current trade balances and blocked sterling accounts. It is expected that in some measure the high level of Western Hemisphere demand exhibited in 1947 is temporary and reflects a war?time accumulation of deferred demands. To a considerable extent, however, these demands can be expected to continue, and the hope is that, as the dollar holdings of the Western Hemisphere decline and the ability of European countries to pay in dollnrs dimishes, Furopels, CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xi Europe's ability to supply Latin American and Canadian needs will increase se that the net dollar capital import require- , ments of Western Hemisphere countries will, properly, decline. Financing Now Available or in Sight A substantial part of all net capital import require- monts of the world 1947-49 will be satisfied if present finan- cial policies and programs (including 12.4 billions of national Bank loans) are realized, if certain foreign coun- tries carry out present programs for liquidating dollar gold assets in excess of the bare minimum, and if favorably situ- ated countries succeed in securing private financing. A relatively small proportion of the total financial require- ments estimated for the Near East and Africa, Far East and Oceania, and the Western Hemisphere will remain unsatisfied. However, for a handful of countries financing now available or in sight will fall far short .of requirements; the unsatis- fied needs will be particularly serious in four western European countries; the United Kingdom, France, Italy, and Bizonal Germany. The United States balance of payments has been prOjected on the assumption that present financial policies, authoriza- tions, and programs are not changed and on certain assumptions regarding the future course of prices and national income in the United States. It indicates that United States exports and the United States trade balance may be expected to decline sharply in 1948 and further in 1949 from the 1947 level as shown in the following summary table: Prospective CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xii 'Prospective United States Exports of Goods and - Services and Trade Balance, 1947-1949, Under Present Financial Policies, ro rams and Authorizations billions of dollars at then current prices 1947 1948 1949 Total Exports of Goods and Services 19,02 13.67 12.37 45.06 Trade Balance on Goods and Services Account 10,68 6.01 _3.96 20,55 It is believed that the decline in United States exports ie will contribute to a minor buslness recession in the United States, reaching its deepest point toward the end of 1948, and to a fall in United 'States prices continuing into 1949. On this prognosis slack will appear in the American economy, slack which could be employed in part at least in meeting the unsatisfied capital import requirements of the rest of the world. The decline in the exports and trade balance of the United States has been projected in Table II for major areas of the world. Under present aid policies and programs, the - Most marked declines in prospective capital imports from the United States will be experienced by Western European and Western Hemisphere countries. Eastern European countries will experience a relatively large decline in total and net imports from the United States, United States trade with the Near East, Africa, the Far -East and Oceania will by comparison remain relatively steady. - A striking feature of the balance of payments projection is the allowance that has been necessary for the inter?area transfer of funds (gold and dollars) from Europe to other areas, particulprly the Western Hemisphere. An explanation of this CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xiii of this phenomenon is to be found in the changed character of world trade induced by the war--more specifically, by the in? ability of European countries to increase exports, by their liquidation of foreign investments in underdeveloped areas, and by the change in terms of trade between the processing countries of Europe and their sources of raw materials. Unsatisfied Financial Needs It may be seen from Table I (See the Summary by Areas, al)ovel page viii) that net unsatisfied capital import require? , ments for the years 1947-49 may be expected on the basis of present financing policies, authorizations, and programs to total $8.8 billions at fixed prices (i.e., prices prevailing in the last half of 1946). This residual figure is not, how, ever, an entirely satisfactory measure of the dollars that would be. required to fulfill the objectives of the United States as reflected in the real capital import requirements of the world because, since the last half of 1946, prices have increased markedly. A price increase affects not only the value of goods represented by the $8,8 billion deficit; it affects also the whole volume of goods required by a country. It is possible to compute the sums which at as? sumed prices in 1947, 1948 and 1949 would be required to satisfy the real requirements measured in the first column of Table I*. The following table gives the results of that computation: Dollars *The assumption has been made that prices will take the following course: - Last half 1946 equals 100%, 1947 equals 110%, 1948 equals 99%, and 1949 equals 97%. CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xiv Dollars Required to Finance the Unsatisfied Capital Imiport Reauirements at Current Prices: By Area (billions of dollars at then current prices) 1947 1948 1949 Total All Areas 2.3 3.4 3.4 9;1 Europe 1 3 2.9 3.0 7.2 Western Europe .8 2,2 2,6 5,6 Eastern Europe .5 .4 1.6 Near East and Africa .2 -.7 7 .1 .4 Far East 465 13 .2 1.0 Western Hemisphere .3 .1 .1 .5 If the assumed decline in prices during 1947-49 does not in fact materialize or if it is less than 'assumed, substantially larger amounts will be needed to meet the unsatisfied real requirements. On a somewhat different .assumption vit., that prices remain at the level assumed for 1947 (real national in- come of the United States conforming to the pattern assumed it the balance of payments projection) - it is estimated that unsatisfied world capital import requirements would be increased by $2.1 billions in the two years 1948 and 1949 to a total of $11.2 billions for the three years. These estimates of the Unsatisfied net capital import re- quirements of the areas of the world are useful as a benchmark and as a guide to analysis. They must not be employed dogmatic- ally since they are based on a number of very uncertain factors. Beyond 1949 the prospects are more obscure. It is to be hoped that a well coordinated three-year assistance program of this magnitude would bring Western Europe at least within sight of becoming self-supporting. Some further assistance will undoubtedly be required after 1949. Unless their unsatisfied capital import requirements are met, U. S. political objectives in respect of strengthen- ing the more important Western European countries UK, France, Italy CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xv. 06,077.77' Italy and Bizonal Germany -- and of holding out a beckoning hand to the Russian satellites, will not be achieved. As noted above, unless further aid is forthcoming to Italy and France, it may reasonably be expected that their existing moderate governments will give way to governments partially or wholly controlled by the communists. The prospect for the UK, while less dramatic, is nevertheless serious; the immediate result of relying wholly on present programs and Policies of financial aid will be to force a reduction in British gold holdings and dollar balances below the minimum considered by the U. K. Government necessary to meet the uncertainties of the next few years, to force a sharp reduc? tion in living standards, and greatly to retard economic development. The UK has already found it necessary to re? quest freedom from the commitments under the British Loan Agreement, and it would probably have recourse to more stringent bilateral trading arrangements, more exclusive preferences, and more comprehensive state trading. The U. K. 'a war potential would suffer; it would be probably forced to relinquish most of the load it has been carrying in occupied areas; and its ability to perform as a full, fledged partner in a worldwide program of collective security would disappear. ' Some part of the unsatisfied dollar requirement's may con? ceivably be met out of lending by the International Monetary Fund but such loans should be considered short term since they must be otherwise refinanced within a short time. Export? Import Bank financing out of its remaining lending power may be possible for a number of development projects in under? developed areas, and it is possible that a few projects in Europe CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xvi Europe could be so financed once other unsatisfied European requirements had been met. The allowance made for lending by the International Bank is excessively modest in comparison with the Banils authority under its charter. iless conserva- tive policy than has been assumed for the Bank Might provide the means of financing some of the reconstruction and develop- ment projects remaining unsatisfied. While'and foreign awned dollar assets in the world- are are not held by the most needy countries in amounts greatly exceeding minimum reserve requirements. World Commodity Problems Even though funds were made available to meet the un- satisfied capital import requirements of the world, the pro- spective world supply of some commodities would be Inadequate to cover demands thereby made effective. World demand for pertain critical commodities and services is so great, even under present financial policies, authorizations, and programs, that within the context of the U. S. balance of payments pro- jection referred to above,. deficits may be expected and diffidulty will be encountered in covering the most urgent world needs without resort to export controls An the U. S. and curtailment of domestic U. S. consumption. Broad and Feed Grains:- Deficits aggregating 14 million tons in 1947/48 and 10 million tons in 1948/49 are in prospect for the net grain importing countries of the world, which are mostly in Europe. Requirements are expected to be balanced by the increased supplies anticipated in 1949/50. The grain requirements of the importing countries of the World have been calculated on the basis of calorie levels somewhat higher than those attained in 1946/47. Local CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xvii ? Local production in deficit countries and world export availabilities are expected to increase over the next three years. U. S. objectives require that the politically most critical countries (in Western Europe) enjoy a continual ? improvement in urban food supply. TO accomplish this, it will be necessary (1) to increase grain exports from the U. Ss by restricting U. S. consumption and by increasing U. S. extrac- tion ratios and (2) to favor these countries in the allocation of available supplies to the maximum extent consistent with considerations of international equity. Fats and Oils: World export availabilities of fats and oils are expected to be 54% of the pre-war level during 1947 rising to 77% in 1949. If import requirements of European countries except Germany are calculated as those needed to meet :prewar consumption standards and of non-European coun- tries ,(including the U. S.) as pre-war imports, the annual world deficit in 1947 is expected to be as much as 1,600 thousand tons, oil equivalent. With the U. S., a net importer of fats and oils, maintaining its per capita consumption at pre-war levels, competition on the buying side has been, and will continue to be keen and prices very high. The dollar - poor importing countries of Europe have suffered a dispropor- tionate reduction in consumption leels, in part because international allocation has not 'been very equitable. The relation between achievement of U. S. objectives and the level of consumption of fats and oils in critical countries is not as close as in the case of grains. With world export availabilities in 1949 of no more than 77% of pre-war and with the U. S. maintaining its pre-war consump- tion, it is clear that there is no hope of European importing countries reaching pre-war consumption levels during this period CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA,RDP67-00059A000400130002-1 CONFIDENTIAL x/iii period. At most it might be hoped that Europe would partici- pate somewhat more than proportionately in increased supplies in 1946 and 1949. This would permit a very considerable improvement of consumption in Europe during this period. To realize this improvement it will be essential to continue and improve world allocations of fats and oils to prevent the still unsatisfied U. S. demand from absorbing all the increases, Coal; Europe is the critical coal deficiency area al- though the Far East also has unsatisfied requirements and Latin America is a net importer on a small scale. Europe is unlikely to attain self-sufficiency in coal until 1951. In- cluding the deficiency in Germany and the U. K., production in Europe during 1947 will fall short of requirements by 115 to 130 million tons, Excluding Germany and the U, K., the 1947 deficit of European not importing countries is between 70 and 60 million tons. A part (36 million tons) of the deficit can be mot from the U. S. and another part (estimated at 20 million tons) will be met, from Poland and Germany in 1947. The net unsatisfied deficit of coal importing coun- tries of Europe is therefore set at 15 to 25 million tons in 1947. U. S. coal exports to Europe could probably be increased above the 36 million ton level. Poland anr1 Germany are expected to export 35 million tons in 1946, and 50 mall ion tons in 1949 U. S, exports can thus make up approximately '1-10 full requirements of the normal importing countries in tho,5e years, An adequate supply of coal for Western European countries is essential to restoring their, production and exports and to raising )..iving standards. The problem of coalr like that of grain CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xix grvt,?e? grain, lies at the heart of the problem of achievizw U. S. the objectives. It can be solved within/time horizon of this report, but at a Cost that becomes manifest in a need for dollar assistance. It is almost certain that under present financial policies and programs the world shortage of dollars would make it impossible for European countries to continue importing coal from the U. S. at the rateS projected above. Dry?Cargo Ocean Shipping,: The world supply Of ocean? going dry?cargo shipping is sufficient in real terms to move the goods implied by the capital import requirements estimated in Table I above. However, the ownership distribution of the tonnage available imposes a financial burden upon European countries accustomed before the War to earn a good part of their living by rendering shipping services. The efforts of European countries to build new fleets imposes an additional burden on their limited resources, Both this physical burden and the financial burden of the present dollar cost of shipping services Would be eased to the extent U. S. vessels were made available on reasonable terms to foreign countries. U, S. Government awned dry?cargo tonnage now idle totals about 12 million tons deadweight. Steel: World steel production is expected to increase by more than 18 million ingot tons between 1947 and 1949. Nevertheless, production will be short of requirements by 28.7 million tons in 1947, by 21.9 million tons in 19480 and by 13.3 million tons in 1949. The combined deficits of the USSR, CONFIDENTIAL. Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL xx USSR, Germany, and Japan account for 12.5 million tons of the total in 1949. Outside these countries, therefore, it may be expected that approximate balance can be. reached in 1949 (subject to an important qualification regarding the extent to which unsatisfied deficits in, previous years will carry over). With U. S. steel exports for this period estimated at only 7 million tons annually, their careful allocation among countries in the light of our objectives will obviously be necessary. CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 July 1, 1947 CONFIDENTIAL FOREIGN NEEDS FOR UNITED STATES ECONOMIC ASSISTANCE DURING THE NEXT TOM] TO FlITE YEARS Report o? Norking_21E2u_a_Esonomic Aid to the Social Ad Hoc Committee of the tatearNa Reference: SINN-5280 I. Introduction: Objectives of U.S. Economic Assistance Policy United States economic assistance policy derives from three tenets of United States foreign policy: 1. The support or friendly neutrality of the peoples of 'Western Europe, the Near East, the Far East and Latin America Would be of incalculable valuc. in maintaining and furthering the security of the United States. The Economico- military potential of areas of the globe not likely to be overrun by hostile powers in the event of war -is of military concern to the United States. 2. The political stability, peaceful political evolution and cooperative unification of the countries and peoples of the non-Soviet world will strongly influence our own political moraleand economic well being, and with them the favorable or unfavorable evolution of our domestic political institutions. Furthermore, and of equal or greater importance, high Morale and peaceful and prosperouS development of the *non-Soviet world will Strongly influence the attitudes and confidence of Soviet and satellite-Communist leadership because it will directly contradict the Communist prognosisfor the future of the non- Soviet world. A sharp contradiction of Soviet theory by world facts (including loss of ground by Communist parties abroad) may not unreasonably be expected, in time, to. bring about important modifications in Soviet foreign policy, which is squarely based upon this prognosis. On: such a modification the worldls hope for peace depends._ 3. Political instability, the strengthening of extreme political parties and the outbreak of violence within or among the countries of the non-Soviet world will increase U.S.-U.S.S.R. tension and the likelihood of conflict, because they will invite competitive political and military intervention by the . United States CONFIDENTIAL - 1 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL United States and the U.S.S.R. The validity of this proposition may be judged Rrt7111 thr4 dpt.erioration in U.S.-U.S.S.R. relations growing directly and indirectly out of the Greek civil war. The cases of Iran and China are also pertinent. It follows from these tenets that the day-to-day operations of United States foreign policy are or should be based upon a politico-economic strategy whose objective is to weaken and if possible, eradicate the causes of political conflict within the non-Soviet world and thus to promote its peaceful political evolution, and to find common purposes for and to build -the cooperative unity, both intra- and internationally, of 'the non-Soviet world, with the United States in a leading role. In the realization of this objective United States economic assistance has a major part to play. The importance of this role arises -out of the close causal nexus, the reciprocal relations between -political stability and economic welfare and, similarly, between economic stagnation or retrogression and political conflict. This is, of course, a gross oversimplification; the relationship between economic change and political conflict is a very complex one. more precise general statement of this relationship might run somewhat as follows: (1) serious frustration of the aspirations of classes or countries for improvement (real or apparent) in their living standard is apt to turn into hostility and aggression toward other classes, or the "powers that be", or toward other countries; (2) such frustration arises out of a wide and con- tinuing discrepancy between, on the one hand, people's economic aspirations and, on the other, their current economic situation and/or their short-run- expectations; (3) people's economic aspirations result from what they .have known in the recent past, from what they are conscious that others enjoy, and from their collective judgment of their own capabilities for raising their economic level if given the opportunity. With reference- to the situation of the war-devastated countries and of some of the underdevelopedareas of the world, economic assistance can make the following CONFIDZNTIkL - 2 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16cOGIZRDR67-00059A000400130002-1 the following contributions to the realization of the above objective: ? 1. In the non-Soviet war-devastated areas, particularly France and Italy, class conflict is now eXacerbated by the low level and maldistribution of real income, and is accompanied by growing hostility toward the United States. The urban lower-income groups) because their living standard is far below pre-war, because they see other classes and other countries enjoying -a living standard as high or higher than pre-war and because they fool, that "given a chance" (i.e? different price and wage policies by their government, more foreign aid, etc.) they could do much better, have aspired since liberation to a rapid recovery of living standards. There is a wide gap between their present economic condition and their aspiration.; and, much more serious, their short- run expectation of rapid improvement is dwindling as they lose hope. Their ,consequent frustration is expressed in hostility, more or' less intense, , against_ more favorably situated classes, the national authorities, and against -the United States (as the convenient symbol for countries which are better off and should be helping them more). This hostility further expresses itself in a tendency to support the more extreme political parties. The resulting polarization of politics and intensification of political struggle further A impairs the effectiveness of the government in dealing with the economic difficulties which are at the root of the whole process. This over-simplified statement helps explain the apparent paradox that economic conditions in France and Italy (including the living standards of the urban lower income groups) have improved markedly since liberation, and yet so has the membershiP and voting strength of the Italian and French Communist parties. The reason, of course, lies in part in the fact that the French and Italian urban lower income groups had, at liberation, high hopes - of rapid recovery. Two years later their actual condition has improved, .but much more slowly than they had hoped; as a result, their hope and morale have seriously deteriorated; and their sense of frustrated aspirations has been _correspondingly intensified. In this , CONFIDENTIAL 7 3 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL .In this kind of situation, United States economic assistance. in adequate amounts can obviously make an important contribution by permitting urban living , standards to rise more rapidly and by dissipating the atmosphere of government by crisis and improvisation, thus restoring hope and Morale and at the same time tending, both directly and indirectly, to call forth more positive attitudes toward the United States. 2. In many of the underdeveloped areas of the non-Soviet world, internal (class) tensions are rising and hostility toward the metropolitan powers and toward the ?richu countries generally is growing. In a number of cases since the war, it has already resulted in civil war and/or colonial rebellion - for example in China, Indonesia, Indochina, Burma, Madagasear, Palestine,, Syria and French North Africa. In others, for example in several Latin American countries, in India and in other Arab states, large-scale political violence apparently lurks just below the troubled surface. The general statement above of the relationship between economic change and political conflict can also be helpful in these cases: Gradual economic development and urbanization of these areas have given birth to. new social and econofIlic classes which have become increasingly aware both of the enormous gap between their living standards and that of the numerically small, wealthy native ruling groups, of the occidental colonists, and of other countries and of their own capacity to rise in the economic scale if given a chance. Their advance is, however, frustrated by the entrenched position and normally unenlightened attitudes of the native ruling groups, by static and anachronistic economic institutions (e.g., feudalistic land tenure) by the interests and power of colonists, the colonial authorities, foreign business interests, and so on. Under these circumstance's, acute political tensions are bound to accumulate and to find expression in intense Xenophobia, in a conviction that the advanced countries are indifferent or hostile to development of the area except for purposes of exploitation, and in civil war, colonial CONFIDENTIAL - 4 Approved Ior Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL colonial rebellion and the like. CommUnist organizations find such conditions favorable for their operations, United States economic assistance to such underdeveloped areas will be indispensible to the prevention or relaxation of such dangerous political tensions because it is a necessary condition of their economic advance. However, United States economic assistance will have to be stripped of the appearance of exploitation and be accompanied by radical social, political, colonial administration reform if it is to have the desired effect, For, in the absence of 'such reform, an increase in the rate of economic development is likely merely to step up the rate at which social and political tensions accumulate. 3. As evidenced by the reaction to Secretary Marshall's Harvard -speech (June 5, 1947), United States economic assistance can be a powerful lever for promoting the unity of. non-Soviet Europe.; United States economic assistance can aid should also be used to promote cooperative international planning and action over wider areas. 4. United States economic assistance can be used to maintain and increase United States political leadership in the nen-Soviet world. This is not only, or even primarily, due to the direct influence and bargaining power which may accrue to the United States as a result of economic aid. It is much more because, as the source of economic assistance, we may promote and identify ourselves with the common objective of rising living standards. The idea of rising living standards and of economic justice, expressed concretely in a cooperative international policy of rapid reconstruction and economic development, is a common purpose around which the non-Soviet world can rally and under whose symbols the United States can effectively assume the desired role of political leadership. United State p political leadership cannot be obtained by asking for it as the price of economic assistance; it will come only as the by-product of an intensification of cooperative relations based upon economic assistance. CONFIDENTIAL -5-. The following Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16coritS51M7-00059A000400130002-1 The following sections are devoted to an over-all View of the most immediate major world economic problems and to the extent to which the United States can contribute to their solution and thus to the attainment of the objectives indicated above. Section II deals with world financial needs. Section III deals with world needs for and Supplies of certain commodities now? in world short supply. Section IV deals with the relation between regional and world approaches to economic assistance policy. . II. World Financial Needs A. Financial Implications of United States Objectives 1. The Measurement of Requirements Measurement of the needs of the world for capital imports* in the light of the foregoing objective requires the establishment of specific consumption, reconstruction, and economic development. goals.. These must be designed to maintain or create in foreign countries the political, economic, and social conditions of high morale, peaceful development, and support of United States political leadership..- The formulation of such goals, country by country, is necessarily a difficult question of analysis and judgment which must take into account the existing political circumstances and recent economic experience of each country. In estimating world capital import requirements, it is necessary to differentiate between (a) war devastated countries those production, Consumption, and exports are substantially below .pre-war levels and (b) backward or under- developed areas of the world. In the former category a further subdivision between countries of the non-Soviet world and Soviet satellites is required. Capital import requirements of the non-Soviet war devastated countries may be roughly defined by the need for (1) an improvement in levels of con- sumption Sufficiently rapid to make probable the survival of moderate democracy * The phrase "capital import requirements" is used in this report to denote the difference between (i) a country's total needs for imports of goods and services and for repaying obligations and (ii) the sup of (a) its current account resources--exports of goods and services, sale of new gold, and net private remittances--and (b) prospective loans by other hard currency countries than the United States. CONFIDENTIAL - 6 -- Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved CoNFIDM I'L For Release 1999/09/167-e - "WRWIP. 7 - 0 0 0 5 9 AO 0 0 4 0 0 1 3 0 0 0 2 -1 democracy and (2) the restoration of war damage and a moderate improvement in capital ensure rapid achievement of self-Support and in some cases of capacity to carry an appropriate share of responsibility for maintaining world peace and security. United States economic aid policy toward Soviet satellites has not, as of this date, been fully clarified. Capital import requirements for countries, based on somewhat arbitrary standards explained below, been calculated for the sake of giving a complete picture. Their these have, however, inclusion is not meant to imply that satisfaction of those requirements in full is necessary to the attainment of the general objectives delineated in Part I. The estimated capital import requirements of the underdeveloped areas of the world likely to be net importers of capital permit a moderate rate of agricultural and industrial capital formation. They include some allowancefor financing the internal costs of such development by currency stabilization credits, where such were deemed necessary,. The estimates provide also for a rate of development of 'backward areas which can be defended as consistent with "economic justice" (although it may not in all instances meet the ambitions of the people of some areas). Such a rate must be primarily determined by the rate of domestic saving and the rate at whichsturdy institutions (e.g., new firms, new markets) educational facilities, and effective and honest government) can be; established and new workers trained. Considerable time and major political and social changes will be required for such growth, and the rate of capital import must accordingly be adjusted thereto. he- quirements estimates used in this report for backward areas are within limits set by these concepts. In view of these serious obstacles to a more rapid development of such areas, it is doubtful whether the often grandiose economic aspirations of their peoples could be realized even if considerably larger capital imports than shown herein were forthcoming from the United-States. be dissipated in inflation and wasted in graft. 6ONFIDENTIAL _ 7 _ A larger program would tend to The quantitative definiteness of this Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL of this conclusion must, however, be tempered by the extremely rough and tentative nature of the estimates themselves. In general, requirements as estimated in this report do not include the foreign exchange cost of any military assistance; to the extent that United States policy may require such assistance during the next three years, some adjustment of the estimates herein would be required. 2. World Capital Import Requirements The requirements given in Table I, column 1, express the informed judgment of experts close to .the conditions in each country as to the net capital imports required to accomplish the objectives indicated above.. Nec- essarily, different criteria have been employed in different countries. The economic goals for and capital requirements of each country are described in detail in Appendix. A,* Measured against the objectives they are to achieve, the dollar require- ment S given in Table I for the war-devastated areas of Europe tend to be under- stated for several reasons: (a) It is * Estimates of unsatisfied requirements given in Table I do not entirely agree with similar estimates carried in the country studies submitted to the Ad Hoc Committee of ?MCC. The differences arise from the necessity of introducing into Table I estimates made early in the summer when most of the country studies were Still in preparation. In the case of several of the critical countries for which special studies were made, notably Afghanistan, Spain, Portugal, North Africa, Korea,- Indonesia, NEI, India, the Philippines, and Siam no unfinanced requirements (after allowing for requirements to be met under present policies and programs) were then known to exist. On the.basis of. Appendix the estimate's employed in Table Thy be comphred with those carried in the country studieshile'discrepanciep il be seen to exist;,the tenct'to cancel. and in aggregate, it-iLbelievedithe principal findings of this report would not be greatly _affected by revi4oh, on the bas3A of the estimates submitted to.th6 Ad Hoc Committee, of table-fand tables depending on Table I, CONFiDENTIii.L - - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL (a) It is assumed that each country's total exportable surplus can (with certain obvious exceptions) be sold for currencies convertible into those needed to buy essential imports; (b) It is assumed that existing barriers to inter-European trade would be removed; and (c)? It is assumed that production and trade in Eastern Europe would revive pari passu production in Western Europe so that all countries in Europe would benefit from mutually advantageous exchanges; however, to the extent that revival in Eastern Europe is retarded by political circumstances or that trade remains confined to the present narrow bilateral channels, net capital import requirements to be financed from the outside will be larger; (d) Financial-requirements are likely to be the larger to the extent that shortages of essential commodities develop, which are not already allowed for in the estimates; however, even though shortages will prevent or render impossible import of these items, immediate savings in foreign exchange are likely to be more than offset as a result of the longer time taken to reach the postulated consumption, reconstruction, and development goals. (e) It has been further assumed that a high level of income will be maintained in the United States. From this it is inferred that United States imports will continue increasing. However, any major United States recession would reduce imports and would seriously impair the foreign exchange position of many foreign countries. (f) The capital import needs of each European country have been estimated independently, except for the assumption noted above that all would improve; however, somewhat different estimates might result if the Western European countries effect a more efficient intra-European allocation of scarce resources. Such allocation would tend somewhat to reduce the capital imports required to reach the postulated goals. (g)' The requirements of Table I, column 1, are computed at prices pre- vailing in the last half of 1946. A substantial price increase has occurred since CONFIDENT IAL - 9 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16d07-00059A000400130002-1 since that time, and country requirements in current dollars are, therefore, larger than the figures shown in Table I, column 1. An adjustment for such price changes as they affect total area requirements is given on page #18 below. 3, Critical Countries As shown in Table I, four important Western European countries confront large unsatisfied net capital import requirements. Those countries are the United Kingdom, France, Italy and Germany. They constitute the "problem" of Western Europe. It is particularly essential, therefore, to understand how requirements were estimated for those countries. The estimates for China albo call for special comment. ? CONFIDENTIAL -- 10 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16aNe1k1RDE67-00059A000400130002-1 (a) United Kingclom It is ehimated that the United Kingdom requires net dollar capital imports in the amount of $6,550 million from 1947-1949. This figure pro- vides (a) for maintaining the carrent austere British standard of living, (b) a substantial increase in the rate of investment (even assuming that the pre-war rate of domestic saving is realized), (c) the liquidation of $400 million annually of the blocked sterling balances and 61) interest payments at 0.5 percent p.a. on the remaining sterling balances. Account has been taken in the estimate of existing credits by other countries than the United States and of a moderate retrenchment in the foreign commitments of the United Kingdom. It is expected that Great Britain will achieve equilibrium balance of payments at adequate levels by 1950 if these capital import requirements are met. Such a goal is essential to restoring the United Kingdom to a satisfactory role in world economic affairs. Unless equilibrium in the British balance of payments can be achieved, At a high level, the Anglo- American economic, political and military partnership must necessarily re- main essentially one sided. (b) France Net dollar capital import requirements totalling $3,800 million are estimated for France for the period 1947-1949. The figure is based on the goals of the Monnet Plan, but allowance has been made for reaching these goals over a longer period than the Monnet Plan envisages. It provides (a) an average level of consumption rising from 75-80 percent of 1938 level in 1947 to the 1938 level in 1949, (b) for capital formation in 1947 equaling 15 percent of the total of goods and services available during 1947, and rising during 1948 and 1949, and (c) a 40 percent increase in industrial production by 1949 over the low 1938 level expected for 1947. Account has been taken of credits available to France from Canada, Brazil and the Argentine. Failure to CONFIDENTIAL ? 11 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-R0P67-00059A000400130002-1 ONEUENTILL Failure to meet this program for France would aggravate popular dis- satisfactions, strengthen the factions on the right and left advocating extreme solutions, and render impossible continued moderate left-center government. (c) Italy The estimate of total net capital import requirements of $1.3 billions for Italy in 1947-1949 allows (a) approximately the pre-war average per capita caloric intake, (b) consumption of other consumer non-durable goods rising from 85 percent of pre-war in 1947 to 115 percent in 1949 and (2) a considerable expansion of canital formation rendering unemployed Italian labor productive and providing the economic base for a permanent rise in the Italian standard of living above pre-war levels. The political situation in Italy is the most critical in Western Europe. It can be expected that Italy, in the absence of such capital imports, will be torn by political and economic dissension from which could emerge a to- talitarian regime securely entrenched in power. Such a regime probably opposed to United States European policy in all aspects, would menance United States security interests in the Mediterranean and would seriously affect the political orientation of the rest of Western Europe. (i) Germany The 1 1/2 billion net capital imports required for Germany would pro- vide (a) for raising the level of industrial capacity in the bi,-zonal area to about 70 percent of the 1938 level by 1949; this contrasts with the ori- ginal "level of industry plan, which contemplated achieving a 50-55 per- cent level by 1949. (b) Complementary with this increase in industrinl capacity it provides for retention of increased amounts of industrial goods as incentives for German workers and for increasing urban food consumption from the present theoritical level of 2,000 calories in 1947 and 2,300 in 1948 to 2,500 in both 1948 and 1949. Such a program would require a total net capital import of about $2 billion of which $1 1/2 billion would be contributed calE.W.F4LItia. Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Approved For Release 1999/09/T6TCIA:RDP67-00059A000400130002-1 contributed by the United States, the remainder by the United langdom. If the United States should take over the United Kingdom's obligation, this would reduce pm tanto the United Kingdom's own capital import needs. An increase in German production and trade with Europe will tend to reduce Europe's dollar needs, though in the short run this will be offset by smaller German coal exports and, therefore, larger European imports of expensive United States coal: German exports will be substituted for United States exports, and increased imports from Germany can in a measure be paid for out of increased exports to Germany; the terms of trade of European countries will improve by at least the amount of the large difference in transportation costs; and some economies may result from a more even dis- tribution of world demand for manufactured goods, since steeply increasing costs resulting from uneconomically high rates of operation will be avoided. Germany previously provided the outlet for some exports of European coun- tries not now marketable (e.g., fruits and vegetables from Italy, tobacco from Greece, transit services through the low countries, iron ore from France and Scandinavia, non-ferrous metals from the Balkans). Failure to provide for recovery in Germany will consequently have the effect of increasing net capital import requirements needed to achieve ob- jectives in other European countries. (e) Chia A range of estimates from $150 million to $1,600 million for the three- year period 1947-1949 of the net capital import requirements for China has been prepared, The smallest figure allowing'?50 million per year would provide for only small-scale relief during the indefinite continuation of hostilities. The somewhat larger figure of 400 million given in Table I would provide, in addition to relief, capital imports that can be effective- ly utilized under conditions of civil war, but it would exclude the financ- ing of domestic costs and the importation of goods for inflationary controli, It is CONFIDENTIAL - 13 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/164167-00059A000400130002-1 It is envisaged that such aid would be predicated upon military retrench- ment and fiscal and political reform and would be timed according to po- litical progress. A larger figure totaling $1,300 million would cover full scale peacetime reconstruction including internal financing and the impor- tation of goods to control inflation. A still larger figure of ,,114.00 million would supply military support sufficient only to promote an armed stalemate. Finally, 'p1,600 million in three years would be the sost of full military support to the nationalist government in full scale hosti- lities against the Communists. The selection for Trible I of figures based upon the aid that can be effectively utilized under conditions of civil war reflects the arbitrary judgment, in the absence of a firm United States position, that it is the course most likely to be adopted. The general standards used for Eastern European countries (except for They would provide some aid above post-UNRRA relief standards. Greece) are less favorable than for the rest of Europe./ In general, allow- ance is made fora rise in industrial production and domestic consumption from about pro-war levels in 1947 to somewhat above pre-war levels in 1948 and 1949. The standards employed for backward areas have been dismissed above. CONFIDENTIAL - 14 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL B. Present Financial Assistance Policies, Programs and Authorizations Table III presents an estimate program by program, including the International Bank, of the dollars now likely to be made available to each foreign country from United States Government financial assistance. These estimates have been entered in Table I, column 2. As indicated in columns 2, 3 and 5 of Table I, it is? expected that a substantial part of all net import capital require- ments will be satisfied if present financial policies and programs (including t2,4 billions of International Bank loans) arc realized, If certain foreign countries carry out present programs for liquidat- ing gold reserves and dollar assets in excess of the bare minimum, and if favQrably situated countries succeed in securing private financing. The present program will go far toward meeting the objectives of the United States in most areas but it will fall short in a handful of countries and the failure will be particularly serious in the four Western European countries mentioned above. In Table II the United States balance of payments under present , financial policies, authorizations and programs is projected. Together, Tables I and II indicate that United States' exports and the United States trade balance may be expected to decline sharply in 1948 and further in 1949 from the 1947-level, as shown in the. following summary table. CONFIDENTIAL - 15 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Prospective United States Exports of Goods and Services and Trade Balance, 1947-1949, under present financial policies, programs and authorizations. (billions of dollars at. then current prices) 1947 . 1948 1949 Total Exports of Goods & Services - 19.02 13.67 12.37 45.06 Trade Balance on Goods & Services Account 10.68 6,01 .96 20.65 It is believed that the decline in United States exports will contribute to a minor business recession in the United States, reaching its deepest point toward the end of 1948, and to a fall in United States prices continuing into 1949. On this calculation, slack will appear in the American economy, slack which could be employed in part at least in meeting the unsatisfied capital import requirements of the rest of the -world.. The decline in the exports and trade balance of the United States has been projected in Table IT for major areas of. the world. The most marked declines in prospective capital imports from the United States, it is expected, will be experienced by .Western European and Western Hemisphere countries, Eastern European countries will experience a relatively large decline in total and net imports from United States. United States trade with the Near East, Africa, the Far East and Oceania will remain relatively steady /by comparison. The geographical analysis of the prospective balance Of payments of the United States is based largely upon the pattern observed in the first quarter of 1947 when it appeared that exports of goods and services were going out in sub- stantially greater measure to non-European countries and in CONFIDENTIAL - 16 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 -CONFIDENTIAL substantially lesser measure to European countries than could be expected from dollar resources immediately available. It appeared that this flow of goods and services could only be explained by a sizeable inter-area transfer of dollars from European countries (notably the United Kingdom) to other areas in payment for net imports of goods and services received by Europe from thoseareas. An allowance for such interarea -transfers of funds has accordingly been made in Table II. Included in this interarea transfer item are both capital movements and the funds which the British are compelled, either on grounds of equity or legal obligation, to make available to countries of the Sterling Area for conversion into dollars of blocked sterling balances and balances accumu- lating on current account. The magnitude of this interarea transfer of fundsappears to be one of the factors responsible for the unexpectedly high rate at which the United Kingdom loan has been utilized. An explanation for this dollar drain on Europe is found in the changed pattern and term - of wirld trade induced_ by the war. The delayed revival of European exports, the volatility of raw material prices in relation to prices of manufactured- poductS and the liquidation of Europe's over- seas investments to finance the war and reconstruction have upset the pre-war, world-wide system of multilateral balancing. In the 1920's and 1930's tropical countries on balance sold goods to the United States .and used the proceeds to pay returns on European investments and to buy goods and services, particularly non-durable goods and shipping services from CONFIDENTIAL - 17 - Approved For Release 1999/09/16: CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Europe, especially the U. K. And Europe paid for a balance of imports from the United- States largely out of the returns on investments in tropical and newly settled countries. Temporarily creditors on current account vis-a-vis Europe and unable to secure goods and services from their former sources in volume commensurate with their demands, .the non-European areas have turned to the United States as the only remaining, albeit high cost, source of goods, and have sought to obtain dollars for their export surplus to Europe to pay for U.. S. goods, The result is a drain upon Europe, especially the U. K., for dollars with which to finance exports from the U. $. to non-European countries, as well as the rapid depletion of dollar reserves of non-European countries. C. Unsatisfied Capital Import Requirements. It should be observed that the requirements estimates given in Table I and the balance of payments projection in Table II are not directly comparable since the latter is computed in current prices while the former is in fixed prices. The balance of payments projection is based on the assumption that the level of real income in the United States will decline 10% from the level reached in the third quarter of 1947 to the fourth quarter of 1948. Accompaying the of real income, it is assumed, prices will fall from 110% of the level prevailing in the last half of 1946, in 1947- to 99% in 1948, and 97% in 1949. The lower level of prices is expected to sot the stage for a subsequent rise in real income during 1949. No change in the U. S. terms of trade over the period is assumed. CONFI DEN TIAL - 18 ? Approved For Release 1999/09/16-: CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL It is possible to compute the additional sums which at the assumed current prices would be required te satisfy the real requirements measured in Table I. The following table gives the results of that computation. Dollars Required to Finance the Unsatisfied Czpital Import Requirements at Current Prices: By Area --(billions of dollars at then current prices) 1947 1948 1949 Total All Areas 2.3 3.4 3.4 9.1 Europe 1.3 2.9 3.0 7,2 Western Europe .8 2.2 2.6 5,6 Eastern Europe .5 .7 .4 1.6 Near East & Africa .2 .1 .1 .4 Far East .5 .3 ,2 1.0 Western Hemi sphere .3 .1 .1 .5 ? CONFIDEUTIAL ? 19 -- Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL If the decline in prices during 19477-49 does not in fact materialize or if it .is less than herein assumed., substantially larger amounts would be needed to meet the unsatisfied require- ments.* It is .not possible, of course, to turn back the clock and meet the-requirements that have gone unsatisfied thus far in 1947. Speedy action ill the last few months of 1947 resulting in a firm- indication that new aid would be forthcoming might make it possible for foreign countries to secure a limited amount of .short-term financing (for example, from the Inter- national Yonetary Fund) or to draw somewhat upon funds ear- marked. for future years in order to cover some of the other- wise unfinanced 1947 deficit. To some extent, moreover, reconstruction and development scheduled in Table I for 1947 could be pushed forward into 1948 and 1949 with an accelera- tion of the reconstruction programs in those years; while some projects scheduled for 1948 and 1949 would have to be deferred because of failure to meet objectives in 1947, meeting. consumption objectives in 1948 and 1949 in the face of the lower level of production ciet.fl L947 roa1izations may be more costly. * If it is assumed (I) that ;:i_e 2L1 1947 level, (2) that nevertheless real nat.lonai OC of the 1;% U. conforms to the pattern msumou in eotln,P loule II, and (3) that the higher prices :,):fct on.14 the costs of exporting and importing goods and ser\-iee items (1,e,. items remain unchanged), the recemputc(:1 world require- ments should be increased by W,n1 billion in the two years 1948 and 1949. They become: (billions of dollars) 1947 1948 1949 Total All Areas 2.3 4.5 4.4 11.2 Europe 1.3 3.5 3.6 8 4 Western Europe .8 2.6 3.1 6.5 Eastern Europe .5 .9 .5 1.9 Near East and Afriec, .2 .3 .1 .6 Far East and Oceania .5 .5 ,4 1.4 Western Hemisphere .3 .2 .3 .8 CONFIDENTIAL - 20 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL It must .also be borne in mind that the estimated unsatis- ficd requirements are based upon assumed price an national income patterns that would be affected by the effort to meet these requirements. Prices would undoubtedly be higher and, since U. S. imports from devastated areas are limited by physical supply conditions, a higher U. S. income level would not likely raise imports from Europe sufficiently to affect appreciably the higher costs of meeting U. S. objectives re- sulting from higher prices. Although it is impossible to estimate quantitatively the net result of these effects, the amounts needed through 1949 to secure the indicated objectives of American foreign policy, in addition to amounts already committed and prospective from the World Bank, might be of the order of. 09 billions. Beyond 1949 the picture is obscure. It is to be hoped. that a well coordinated threc-year assistance program in these magnitudes would bring Western Europe, at least, within sight of becoming self-supporting. Some further assistance, however, will undoubtedly be required after 1949, particularly if the requirements given in Table I prove to be substantially underestimated. Unless their unsatisfied capital import requirements are met, U. S. political objectives in respect of strengthening the three important Western European countries -- UK, France, and Italy -- and of holaing out a beckoning hand .to the Russian satellites, will not be achieved. As noted above, unless further aid is forthcoming to Italy and France, it may reason- ably be expected that the existing m:)deT'at govenments will, give way to governments partially or :4Liol1y conUrolled by C,WIDENTIAL. - 21 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Communists. The prospect for the UK, while less dramatic, is nevertheless serious;. the immediate result of relying wholly on present programs and policies of financial aid will be to force a-reduction in British gold holdings and dollar balances below the minimum considered by the U. K. Government necessary to meet the uncertainties of the next few years,. to force a sharp reduction in'living standards, and greatly to retard economic development; The UK would find it necessary to request freedom from the commitments of the British Loan Agreement and weuld probably have recourse to More stringent lei-lateral trading arrangements, more exclusive-preferences, and more comprehensive state trading. The U. K.'s war potential would suffer; it would be probably forced to relinquish most .of th@ load it has been carrying in occupied . areas; .and it would no longer be able to perform as a full- fledged partner in a worldwide program of collective security. D. Financing the Unsatisfied Requirements It is not within the scope.of this study to consider in detail alternative methods of financing the unsatisfied capital import requirements of the world. Some general observations ? 4, may, however, be made. No allowance has been made in Table I and only a small allowance has boon made in the calculations of unsatisfied requirements above for lending by the international Monetary Fund. Some part of the unsatisfied requirements may con- ceivably be met from this source, but such loans should be considered short-term. While total loans of the International Monetary Fund outstanding at any time may be expected to be fairly large, the Fund cannot be relied upon to provtdo long term capital for the purposes represented by th r.Dot.l.r2ments estimates in Table I. Requirements met COT C:1oai from the Fund must, within a short ttm.3, T-%a cAle:raise re-financed. COFID1T.TIAL - 22- Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL No allowance has been made in Table .I for new lending by the Export-Import Bank. It is to be expected that a number of the development projects in underdeveloped areas of the Western Hemisphere, the Near East, Africa, and the Far East, unfinanced under present programs and polcies, would become appropriate candidates for Export-Import Bank loans. It is possible that a few projects in Europe could be .so financed once it, had been determined that other unsatiefled European requirements would be met in other ways. It is not, however,. possible in advance to estimate for .individual countries or areas the extent to which the Export-Import. Bank might finance otherwise unsatisfied requirements out of its uncommitted lending power, which stood at 8OO millions at the end of July 1947. Allowance has been made for a sizeable program of lending by the International Bank. However, the program is modest - indeed excessively modest - in comparison with the lending authority of the Bank under its charter. The estimate of unsatisfied requirement given in this report assumes continua- tion by the Bank of a conservative policy both as regards the nature of its loans and the volume of its securities to be floated. The question may fairly be put as to the possibility that countries confronting unsatisfied capital import requirements might use gold holdings or liquidate dollar assets, public or private, in meeting their deficits. The examination in Appendix B of this possibility for the countries confronting the lagest deficits indicates tentatively that little contribution to the problem of Western Europe can be expected from this source beyond the allowance in Table I. Some contribution might be made to meeting deficits elsewhere, but before any reliance is placed upon it a detailed examination should be made to determine the extent to which each country's reserves are com- mitted or otherwise encumbered. Some of the requirements shown as unsatisfied for the Near East, Fa]. CrICL -7.7,qtern Hemisphere also may be met by the inter-area trar?fer ,e-1 funds from Europe allowed for in Table I.. - 23- Approved For Release 1999/09/16 : CIA-IRDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL III. World Sitgation for Critical Commodities Of equal importance with the problem of financing essential world trade to achieving U. S. objectives is the problem of allocating scarce resources -? of insuring that maximum supplies of critical commodities are made available for export and are properly distributed. The persistence of shortages of a number of vital commodities is a basic factor impeding recovery in the post-war world. Under these conditions, availability of funds does not automatically guarantee that importing countries will ' be able to satisfy their essential requirements. Analysis of the situation, commodity by commodity, and world commodity pro- grams to insure distribution in accordance with agreed ob- jectives are also essential. A logibal approaCh to analyzing the commodity problems in- volved in realizing U. S. economic assistance objectives would be: (1) estimate requirements fo-r individual commodities im- plied by the dollar requirements of Table I and (2) the supply- requirements balances for individual commodities implied in the U, S. balance of payments ,projection based on present fi- nancial policies and programs; from these estimates a de- termination could then be made of (3) the corollary realloca- tion of t: S. and world resources and manpower required to meet the unsatisfied needs of the world. It has not been possible to proceed in this fashion. The commodity-by-com- modity balancing of supPly and demand implicit in the U. S. balance of payMents projection of Table II has not been worked out, and the requirements for commodities implicit in the basic standards of consumption and investment employed in calculating CONFIDENTIAL 24 -? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/0Ani:RA-alr67-00059A000400130002-1 calculating Table I are not known. However, world demand for certain critical conmodities and services is so great that even within the context of the U. S. balance of payments projection of Table II, deficits may be expected and difficulty encountered in covering the most urgent world needs without resort to ex- port controls in the U. S. and curtailment of domestle U. S. consumption of sem? of them. A. Situation for Critical Commodities 1. Breadgrains and Feedgrains In 1947/48, total world grain export avallabilities (in food and feed) will reach 31 to 34.5 (median 33) million metric tons; but they will still fall short of total requirements of 47 million tons by about 14 million tons. The corresponding deficit figure for 1948/49 will be approximately 10 million tons. These deficit figures are based on requirements estimates using consumption goals somewhat higher than the low levels realized in 1946/47.* It is thus apparent that the acute post-war world grain shortage will continue for at least two more years. In 1949/50, however, world exportable supplies and import needs are now expected to balance, though with total ex- . ports at a level of 27 million tons, as compared with 16 million tons pre-war. Two For 1946/47, requirements used in this report are 3,000,000 tons lower than the preliminary total re- quirements stated by the claimant countries to IEFC. CONFIDENTIAL - 25- Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Two factors have been primarily responsible for the post-war world grain shortage: (1) in Europe, the dis- location of grain production and its distribution to urban areas (2) in the Far East, decline in rice production, These two factors coupled with the increase in popu- lation have increased world grain import requirements in 1947/48 by 31 million tons above the pre-war world grain import level. In Europe alone (including Germany and the U. K.), grain import requirements have increased from 9.4 million tons pre-war to about 19 million tons in 1947/48. France and Italy account for 4 million tons Of this increase, even if they are allowed only 90 percent of their pre-war grain consumption. The grain import needs of Bi-zonal Germany, resulting from its separation from the eastern, grain-producing laender and from general economic dis- location, account for another 2.4 million tons of in- crease of the 1947/48 European requirements over pre-war. Europe's additional grain imports, excluding freight, will cost Europe in 1947/48 above $1.2 billion* more than pre- war almost entirely in dollars or other scarce currencies. Additional freight charges add about another100 million to the bill, At Estimated in terms of f.o,b. wheat prices, 1938 and 1947, of 1.78 and 4,2.20 per bushel, respectively, at 60 pounds per bushel. 19 million tons in 1947 is esti- mated to cost 1.5 billion; 9.4 million tons Pre-war esti- mated to cost $269 million, in terms of wheat and ex- cluding freight. CONFIDENTIAL - 26- Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL At least through 1948/49, the United States and Canada must be the major suppliers for grain deficit areas of the world. It is estimated that the United States bumper wheat crop will make available f:Dp export in 1947/48 12.5 to 13.5 million tons of wheat compared with 10.5 million tons in 1946/47. With 6.5 V:: million tons from Canada of wheat and rye, about 2 to 2.5 million from Argentina, 1.5 to 2 million from Australia, 2 million tons of wheat and rye from all other suppliers (including USSR), world export availability of Wheat and rye is expected to be 24,5 to 27,5 million tons in total. Course grains, now used in higher proportions for human consumption, add 6.5 to 7.0 million tons to total world export supplies, of which 1.5 to 2.0 million tons are expected from the United States. Thus, total world grain export availability for food and feed will reach 31 to 34.5 (median 33) million tons, but as noted above., will still fall short of total requirements of 47 million, by about 14 million tons. U. S. production of wheat has Increased from 20.6 million tons pre-war to 38.1 million estimated in 1947/48, while exports are expected to increase from 1,1 million to between 12.3 and 13.6 million tons. Thus, of the 17.5 million increase in U. S. output over pre-war, 11..2 to 12,5 million tons are intended for export, only 1,4 million tons for increased domestic consumption as wheat and 1 to 1.6 million for increased consumption as feed, the re- mainder for carry-over and other uses. The CONFIDENTIAL - 27 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL In view of the magnitude of the world grain deficit for the next two years, it is clear that a U. S. foreign aid program should include maximum efforts to sten up grain exports. This conclusion is reinforced the , prospect that the only other possible source dditional suPplies of grains in 1947/48 is the U.S.S.R. w'_ich alone among important European suppliers has a good narvest in sight and which may be counted upon to turn surpluses squeezed from domestic consumption to telling political account. In 1949/50 as noted above, restoration of production in the Far East and in some European countries is expected to balance world exportable supplies and requirements of breadgrains, though at a considerably higher level of world exports. This increase in exports is necessary mainly because of failure of production in importing countries to keelp pace with anticipated population in- crease. Continental Europe, excluding Germany, is ex- pected to require at least 1 to 2 million tons more grain from abroad, Western Germany 3.9 million tons more, and Italy, 400,000 tons more than pre-war. In addition, no 1949/50 exports to Western Europe are estimated from Eastern Europe including the Soviet zone of Germany and former Gorman territory now under Polish control. Normal population increase is taken into account, but practically no allowance is made for improvement over pre-war con- sumption levels or a decrease in uneconomical grain production in Europe. For details of the world grain balances 1947/48 - 1949/50, see Appendix C. CONFIDENTIAL 29 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Fats and Oils. During the calendar years 1947-49, the annual world deficit of fats and oils is expected to range between 450 and 575 thousand tons (oil equivalent) and may be as much as 1,600,000, if 1949 world import requirements are pro- jected as the sum of (1) imports required to meet pre-war consumption standards (European countries except Germany) and (2) pre-war imports (non-European countries). World requirements of fats and oils are, in fact, expected to exceed available supplies so long as Far Eastern sources of vegetable oils remain below pre-war levels of production. Because of dislocated production and normal population increase, countries of continental Europe, excluding Germany and the United Kingdom., are expected to require almost 300,000 tons additional imports of fats and oils in 1949 as compared with the pre-war figure, merely to equal by that year a pre-war level of cOnsumption. German consumption in 1949 is estimated herein at 425,000 tons below pre-war. European countries as a whole will depend on imports for 62% of fats consumed as compared with 56% pre-war. For European countries, which are the most important fats and oils im- porters, the major problem will be one of securing a fair share of world availabilities to meet increased requirements insofar as possible during a period of seriously deficient world supplies. Continuing world allocation, therefore, will be essential to insure as equitable distribution as possible of scarce fats and oils. It is estimated that world export availabilities of fats and oils will be only 54% of the pre-war level during 1947. Even with moderately optimistic assumptions on re- covery of oil production, world production in 1949 will have CONFIDENTIAL - 30 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL recovered to only 77% of pre-imr. If European countries obtain a fair or perhaps more than fair share of world export supplies, it may be possible for them to attain on the average 75% of their pre-war consumption level in 1947, 90% in 1948 and 100% in 1949. The physical scarcity of fats and oils is sufficiently marked perhaps to relegate the problem of financing essen- tial imports to a secondary position. Since theUnited States is an importer and not a supplier of fats and oils, financing is not necessarily a dollar problem, although dollar financing may be needed for countries with deficit trade balances or inconvertible currencies. The current high level of fats and oils prices, however, Intensifies the problem of financing such imports. For example, it is estimated that European importers must pay $661 million more in 1947 (excluding additional freight) to obtain less than 3/4 the pre-war volume of imports of fats and oils. If prices remain more than three times the pre- war level, estimated requirements for 1949 (or even a pre- war volume of imports) would cost European countries ap- proximately $1 billion more than the same volume of imports at 1938 prices, excluding changes in transportation cost. Removal of fats and oils from world allocation undoubtedly would lead to even more marked price increases. Without allocation, the financially weaker claimants, including many European countries, would probably not receive a "fair" share of world supply in the ensuing international bidding-up of fats and oils prices. Coal Europe is the critical coal deficiency area. Pre-war (1937) it consumed about 550 million tons of coal and requires CONFIDENTIAL - 31- Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL about 575 to 590 million tons in the post-war period. Pro- duction in 1947 is estimated at 460 million tons, which is 115 to 130 million tong short of post-war requirements and 90 million tons short of pre-war consumption. The United States is expected to _export some 36 million tons of coal to Europe in 1947 as a consequence of which the deficit will be reduced to between 80 and 95 million tons. Europe is unlikely to attain self-sufficiency in coal until 1951. Germany and Britain, which are normally ex-- porters of coal are now short of coal themselves. Despite this shortage, they are not to be considered coal importing countries in the traditional sense. Most countries of Europe have been and will continue to be net coal importers. Prior to the war, they imported 70 million tons of coal. Their current and post-war import requirements are estimated to be between 70 and 80 million tons. This deficit figure does not, of course, include the German and U.K. deficits, since neither Germany nor the U.K. are expected to import substantial quantities of coal over the next four years. (This omission explains the difference between the 70-80 million ton figure and the 115-130 million ton figure men- tioned above.) It is not anticipated that European countries will be able to obtain all their coal import requirements from European sources unti1.1951. In 1947 they will obtain only 20 million tons from other European sources, namely, Poland and Germany. They might import about 36 million tons in 1947 from the United States., leaving an unsatisfied deficit, after imports from Poland and Germany, of 15 to 25 million tons. In 1948 these countries might be able to import 35 million tons from Poland and Germany, in 1949. 50 million tons in 1950, CONFIDENTIA1 - 32 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL 65 million tons and in 1951, 70?to 75 million tons. At this rate of import from European export sources, and considering the demand upon the U.S. as residual, the demand upon the U.S. is likely to decrease progressively as follows: Millions of Tons 1948 35-45 1949 20-30 1950 5-15 1951 0-10. The anticipated cost of U.S. coal c.if. European ports at the stated levels of demand follows: 'Millions of Dollars 1947 $675 1948 600-760 1949 305-455 1950 40-160 1951 0-80 It is significant that by 1948 the European coal im- porting countries might be able to close the gap between supply and requirements for coal conditional upon the avail- ability of dollars with which to pay the charges, not only for U.S. coal, but for German and for part of Polish coal as well. The attainment of a rising level of coal production in Europe depends upon the availability of labor mine sup- plies and equipment, adequate transport facilities, an ad- equate standard of living for miners, and the export of equipment from the U.S. to rehabilitate both the mining and transportation industries. The ability of the U.S. to maximize coal exports and assure their equitable distribution depends upon the con- tinuation of export controls under the Export Control Act, adequate transport facilities, both inland and waterborne, CONFIDENTIAL - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL and continued participation in the European coal Organization, whose functions are now being transferred to the Economic Commission for Europe. Latin America is traditionally a coal importing area. Practically all of its coal imports are now secured from the U.S. The net import requirement of South America is only 2 1/2 million tons per year, and this is met in full from U.S. sources. Although the Far East is experiencing a short- age of coal, it is not anticipated that that area will draw upon the U.S. for significant quantities of coal. 22.2212_021221DE Shifts in the ownership of and freight rates charged by the world's ocean going dry cargo fleet as a result of war- time sinkings, the unprecendented U.S. shipbuilding program and large volume of traffic have deprived a number of European countries of an important source of foreign exchange income and have greatly increased Europe's dollar expenditures on current international account. Financing this cost and the cost of rebuilding European fleets, by purchase and perhaps to' some extent by new construction, will necessarily be an Integral part of the U.S. contribution to a European re- covery program. Shipping as income. Of the world's total ocean going dry cargo fleet, the United States now operates 50 percent (in terms of deadweight tonnage) as compared with 11.6 percent pre-war: Since the world's active fleet is actually somewhat smaller than in 1939, European shipping has declined drastically, in absolute as well as relative terms. The loss of shipping as a source of income and foreign exchange are of special importaxIce to CONFIDENTIAL - 34 - Approved For Release 1999/09/16 z CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Norway, for which pre-war shipping earnings were 36.5 per- cent of the value of merchandise exports, for Greece (24.1%), for the United Kingdom (13.4%), for the Netherlands (9.2%), for Denmark (7.1%), and for It6l1 (an undetermined but sig- nificant amount in comparison with merchandise exports). Shipping as cost. Europe's need to import critical bulk commodities re- gardless of cost or shipping distance from the source of their availability and to find dollars to finance United States shipping services have intensified the balance of pay- ments difficulties of all European countries. The necessity to import more goods over longer distances arises from world commodity scarcities that force countries to import coal, wheat, etc. from wherever they can be found. The increased burden of dollar shipping costs on Europe's limited dollar resources reflects, of course, the predominance of United States vessels in world shipping and the corresponding de- cline in Europe's merchant fleet. The increase in maritime rates over pre-war is directly related to the continuing shortage of dry cargo shipping, measured (1) in terms of active tonnage (which is now somewhat less than the 60 mil- lion d.w.t. pre-war) vs. shipping traffic (somewhat more than the 200 million tons per-war) and (2) in terms of the decrease by comparison with pre-war in tonnage carried an- nually per d.w.t. of vessels in operation due to longer average hauls and decreased operating efficiency, again by comparison with pre-war, as a result of war dislocations, such as port damage, inefficient stevedoring, etc.). Prospects for 1949 The United Kingdom, Norway, France, Netherlands, Sweden, CONFIDENTIAL - 35 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Denmark and Belgium have developed plans for rebuilding fleets lnrger than pre-war, but the prospects for Greece and Italy appear much less favorable. The United States active fleet, moreover, is expected to decline by about 10 million tons to a total of 25.2 million or 32% of the world total. These factors plus eventual improvement in the operating efficiency of European ports should increase the share of European fleets in the world total, although not to their pre-war level of maritime importLnce. Since world sea-borne trade in 1949 is estimated at 240 million tons, a level necessitating substantial United States flag participation, world maritime rates are expected to remain above pre-war in order to cover the high cost of American operations. The increased shipment of European goods in European l'ottems, the restoration of international trade to more normal commodity patterns (e.g., coal from Europe, grain from European sources) should operate to decrease the absolute end the dollar cost of ocean transportation for European countries, and to restore, in whole or in part, the shipping income of Europe's maritime powers. Immediate steps in this direction are the efforts of European countries to: (1) implement an ambitious program for new ship coz.).- structiong 1,521,000 d.w.t. are now under construction in European yards. (2) acquire D share of the currently inactive United States Government-owned fleet. Applicatiom already has been mode for 3.7 million of the total 12 million d.w.t. now in- active. With world steel supply now one of the chief factors limiting reconstruction, building of new ships while United CONFIDENTIAL - 36- Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL States war-built vessels remain inactive is apparently uneconomic. Although many of the United States surplus of war-built vessels are not considered efficient in terms of competitive cost, such ships can well be used ad interim, if sold or chartered now to European countries, and the program for building new and more efficient ships thus deferred to n period of less critical steel scarcity. CONFIDENTIAL - 37 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL N. World steel production is expected to increase by more than 18 million ingot tons between 1947 and 1949. Nevertheless, world steel production is expected to fall short of world steel requirements by 28.7 million tons in 1947, by 21.9 million tons in. 1948 and by 13.3 million tons in 1949, in terms of ingot equivalent. These requirements estimates are rather arbitrary and may substantially underestimate in the case of the war devastated areas the quantities which could be effectively used. It should be noted that Germany is estimated to account for 7 million tons of the world steel deficit in 1949 (production 8 million; requirements 15), with coal supply rather than Level of Industry restrictions as the principal limiting factor. (Germany's steel needs for rapid reconstruction probably exceed 15 million tons per year). Japan accounts for 1 million tons of the world deficit in 1949, and the USSR for another 4.5 million tons. If it is assumed that USSR steel imports from Europe will be mainly machinery and manufactures and will be a relatively small tonnage in terms of the world deficit, and that German and Japanese steel deficits will not constitute an effective demand for steel on world markets, the 1949 situation can be considered almost in balance, with requirements only 800,000 tons more than steel production. This conclusion is, however, subject to the important qualification noted above concerning the requirements figures and no allowance is made in these estimates for carry-over into future periods of needs not filled in 1947, 1948 or 1949. Abnormally high reconstruction needs and abnormally low production in most countries of continental Europe are chiefly responsible for these deficits. It should be noted, also, that the world steel balance is computed entirely in overall terms. Within the totals ofewailabilities and requirements may be included serious shortages of steel in the particular forms desired by importing countries (e.g., shortages of castings or sheets preferred to imports of finished products). In the same way, requirements estimates CONFIDENTIAL ? 38 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL do not take into account the extraordinary demands for steel that may arise in connection with extensive programs of industrialization, and in any case are highly dependent on a wide range of possible assumptions as to levels of steel consumption. The United States is the principal producer of steel available for export; U.S. exports in the amount of 7 million ingot tons per year in the form of semi-finished or steel products are herein assumed. Europe, including the UK and Turkey but excluding the USSR, is now expected to produce only 33.4 to 44.5 million tons while European requirements will be 53 millions (the gap mainly represents a 7 to 11.5 million ton German deficit). Thus, Europe can absorb entirely whatever steel surpluses are available in Europe, from Belgium (3 to 4.5 million tons) and from Poland and the UK (relatively small amounts). No part of the USSR production of 16.5 to 20 million tons can presumably be regarded as available fOr export. Claimants for US surplus production therefore, will be: Euro m (with a 6:9 to 1.5 million ton deficit, 1947 to 1949 excluding the German deficit and an 18.4 to 8,5 million deficit in the same period when Germany is included in the total); South America, (a deficit area of approximately 2.5 million tons), and the Far East (a deficit area of 2.9 to 1,5 million tons, 1947-49, excluding Japan, and a deficit area of 4.9 to 2.5 million tons if Japan is included). Thus claims totalling 25.8 million tons In 1947 and declining to 13.5 million tons in 1949 (including Germany and Japan) will be presented against U.S. exports of 7 million tons. This will make necessary the allocation of U.S. steel exports according to a priority pattern which reflects considerationsof foreign policy and equity. CONFIDENTIAL ? 39 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL B. Stops Required to Deal with Critical Commodity Problems It is clear, from the foregoing analysis of the major scarce commodities that the following ateps are essential if the problem is to be handled satisfactorily: 1. There must be a determination of agreed world-wide requirements and availabilities. In the past the fact that total requirements, as stated by individual importing countries, have been in excess of total availabilities has crdated a haphazard allocation pattern which has failed to produce maximum benefits from such supplies as have been forthcoming. It is necessary to bring requirements and supplies more closely into line with each other in such a way that both claimants and exporters are satisfied that the results are equitable and economic. This involves a consideration of goals and standa ds used by importing countries in determining requirements and also by Xporting countries in determining availabilities. It also involves the establishment of priorities by area - in the case of steel, for example, placing the reconstruction of Europe ahead of new development in Latin America. See Part IV.) These are extremely difficult problems but they cannot be avoided. Failure to deal with them will simply produce a result achieved without careful consideration, the political repercussions of which will probably be disadvantageous to United States aims. 2. Once agreed requirements and availabilities which are reasonably in balance have been established, the task of insuring that current shipments conform to allocations and that allocations are adjusted equitably to unforeseen changes in supply must be undertaken. Consideration should also be given in determining allocations to incentives to world recovery. For example, food allocations might be increased above a basic minimum depending upon the recipient country's performance with respect to such matters as extraction rates, collection of indigenous supplies, control of black markets, etc. CONFIDENTIAL - 40 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL 3. international machinery is required to implement these proGrams. The international emergency rood Council is an example of the typo of agency which is useful in this field. however, such agencies have heretofore always included amon?, their membership some soviet-uominated countries. If we unrertake to insure a priority in allocetion of scarce commodities to countries outside the soviet sphere, eo may force the withdrawal of the satellite countries. Such a priority seems, nevertheless, to be necessary, thouLh it should be tempered te the extent thet Soviet satellites may be able to participate at the working level in a buropean aecovery ran. Trade on the basis of mutual benefit would still be poesible between the Soviet eerld and the non-Soviet world providing the soviets do eot undertake to initiate full-scale ecelyomic warfare. 4. Within the United States there is 4 need to strengthen the machinery available for dealing with this problem. The Second Decontrol Act of 1947, which provides limited priorities and allocations powers, expires on February291 1948. (.)eo iote follvAng.) If Con'Tess should appropriate subetanti .1 funds for Ad to urope or other deficit areas, it would be necessary not only to extend the powers of the Second Decontrol e.ct but also to strengthen them, it is also necessary to strengthen the administrative m, chinery for supervising exports. e,t present, this function is divided between the Departments of Commerce and -griculture. Personnel are not available to these agencies to do an ade-uate job of determining the 'United States position eith respect to requirements and supply of scarce commodities and implementin these decisions as outlined in the foregoing parar:rwhs. zither a no. aeoncy should be established to iprform this funcAon or an existing agency or agencies should be adeeuately staffed to do the job. Ce171D1; TIAL - 41 - Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 CIA-RDP67-00059A000400130902-1 CteFIDeeITIaL 5. In planning. for tho implementation of United States aupport 07 a European Recovery Plan, we must bear in mind the fact that the commodities which are critical to Europe are also critical to the world and must be handled on a uorld-vide basis. iota on The Second DitumlasgstUILIMAZ The Second Decontrol Act of 1947 (Pub. L. 3iX 80th Cong.) which became law on July 15, 1947.extenda certain emergency powers over allocations and priorities as well as controls over exports, from July 16, 1947 to February 29, 1948. These powers are continued in order to complete reconversion, to protect the health, safety and welfare of the American people, and to support the foreign policy 'of the United States, with respect to specified materials and facilities which continue in short supply at home and abroad as a result of the war. Their retention is declared necessary, (1) to protect the domestic economy from the injury which would result from adverse distribution of the materials which continue in short world supply; (2) to promote production in the United States by assisting in the expansion and maintenance _of production in foreign countries of materials critically needed in the United States; (3) to make available to countries in need, consistent with the foreign policy of the United States, those commodities whose unrestricted export to all destinations would not be appropriate and (4) to aid in carrying out the foreign policy of the United States. Authority Extended until February 29, 1948 by the amendment of Title III of the Second lax. Powers Act are the powers, authority, and discretion conferred on the President, (with respect to allocations, priorities, etc.) over the following: "(1) The materials (and facilities suitable for the manufacture of such materials), as follows: "(A) Tin and tin products, except for the purpose of exercising import control of tin ores and tin cbncentrates; "'(B) Antimony: "(C) Cinchona bark, euinine, and quinidine, when held by any Government agency or after acquisition (whether prior to, on, or after July 16, 1947) from any Government agency, either directly or through intermediate distributors, processors, or other channels of distribution, or when made from any of such materials so acquired; "1(D) Materials for export required to expand or maintain the production in foreign countries of materials critically needed in the United States, for the purpose of establishing priority in production and delivery for export, and materials necessary for manufacture and delivery of the materials recuired for such export; "(F) Materials (except foods and food products, manila (abaca) fiber and cordage, agave fiber and cordage, and fertilizer materials, including petroleum and petroleum products, required for export, but only upon certification by the Secretary of State that the prompt export of such materials is of high public importance and essential to the successful carrying out of the foreign policy of the United States, for the purpose of establishing priority in production and delivery for export, and CONFIDENTIAL ? 42 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CO,F7IDENZIAL materials necessary for the manufacture and delivery of the materials required for such export: Provid21, That no such priority based on a certification by the Secretary of State shall be effective unless and until the Secretary of Commerce shall have satisfied himself that the proposed action will not have an unduly adverse effect on the domestic economy of the United States; and "'(2) The use of transportation equipment and facilities by rail carriers.' "Congress by concurrent resolution or the President may designate an earlier time for the termination of any power, authority or discretion under such title III. "The authority to negotiate contracts with or without advertising or competitive bidding under the Act of June 28, 1940, as amended, ended on July 15, 1947. The Act of March 29, 1947 (Pub. L.24) protecting the domestic rubber producing industry, and the Act of March 31, 1947 (Pub. L. 30) entitled the Sugar Control Extension Act of 1947 are continued in force. ,'The control over the export of articles, technical data, materials, or supplies established by the Export Control Act of July 2, 1940, as amended, is extended until February 29, 1948. "Sections 3 and 10 of the Administrative Procedure Act (60 Stat. 237) regulating publication of procedures, and judicial review, apply to this Act. "Authority is given to the Secretary of Commerce to administer the Act. A quarterly report is required from him. It is to be noted that under paragraph (F) above certificates of the Secretary of State ce required on certain products needed for export to carry out foreign CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Iv: Relation between Regional and World Approaches to Economic Assistance Policy The problem of economic assistance is world-wide. The fundamental problem of the post-war world arises from the high productivity of the Western Hemisphere, particularly the United States, on the one hand and, on the other, the relative failure of productivity to recover in the Eastern Hemisphere. Practically all areas of Europe and Asia, with the exception of the U.S.S.R., are having difficulties in attaining a self-sustaining pattern of trade. Even a number of countries in the Western Hemisphere are confronted with a dollar problem. Although the problem is world-wide it is necessary to approach its solution by giving attention to regional differences. vestern Europe is the area where the Soviet-Western conflict is most critical. It is also the area where economic assistance can produce the most immediately significant r sults in reviving world economy. Consequently the decision has been taken to give principal attention to this area for the immediate future. Present plans for implementing Secretary Marshall's suggestion at Harvard call for: 1. The formulation of a program for European Recovery by the 16 participating nations which will involve the maximum possible degree of self-help and effective regional coordination and the presentation of this prbgram to the United States in September. 2. Study of the program and the role of the United States in assisting to carry it out by the public and by Congressional committees, looking toward legislation early next year. 3. Authorizations and appropriations calling for extraordinary assistance to the participating countries in large sums over a period of 4 to 5 years, and possibly longer. CONFIDENTIAL ? 44 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL 4. Special organizations in Europe and in Washington to insure the successful functioning of the program. At the present time it is contemplated that a regional program of this nature involving United States aid and a regional integration of national economies should be limited to Europe for the following reasons: 1. The degree of economic interdependence and community of interest is greater for Europe than for any other region. 2. Progress in solving the problem of European recovery will go far toward eliminating the needs for special assistance elsewhere in the world. As indicated in Part II, above, many non-European countries have increased their imports from the United States because their traditional suppliers in Europe cannot meet their needs. Or, like Canada, they financed a pre-war deficit with the United States through a surplus with Europe which they cannot now convert to dollars. European recovery will permit a revival of these patterns and a resulting improvement in the dollar position of many non-European countries. 3. Non-European countries other than devastated areas may be able to rely to a large extent upon existing agencies such as the International Bank, Export-Import Bank and private capital for necessary financing; the validity of this conclusion, however, will depend upon a considerably more ambitious lending program by the International Bank. It will, however, be necessary to provide special financial assistance in implementing the "crank-up" program for reviving Japan's production to render that country self-supporting. Southern Korea will also require special aid, and as indicated in Part II, a special assistance program for China may be required, CONFIDENTIAL 45 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL *Mt aNtli....??????,. 4. The short-run aspects of the European problem can be distinguished from the problem in other areas as primarily one of recovery and reconstruc- tion rather than development. The task of developing backward areas requires different techniques from those being developed under the European Recovery Program. Much heavier emphasis should be placed on the role of private investment. Techniques for stimulating such investment in Asia, Latin America and the Middle East must' be formulated. Reliance upon the UN should be emphasized where possible particularly with respect to plans for regional development. Much additional analytical work on the magnitude and nature of long-term capital requirements Of underdeveloped areas in the light of the objectives and considerations outlined in Part I is needed. When such analysis is available, it will be possible to judge whether or not new national and international financial and development institutions and assistance programs may be required to achieve the objectives of United States policy in these areas. The possible gains to the economy of the Far East through a program of regional economic integration buttressed by a coordinate United States aid program are now being explored in the State Department. CONFIDENTIAL ? 46 ? Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Area and Country Western Europe United Kingdom Francs ItelY No the rl ands Belgium Nortal Sweden Denmark I celand Blame Germany Triente Eastern Europe Finland. Auntria Onachoslovacia Poland Emma Yugoslavia Albania Rumania Sulpria Greece linrope Total Europe 2/ Near East & Africa EgYnf Iran Lebanon &Syria Liberia Saudi Arabia Turkey Palestine Iraq e/ Far East and Oceania - Bursa Chins French Indo China Japan Western Be.dephare 2/ Unallocable Total Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Total "IlequIrett" Nat Dollar Capi- tal. Import. TABLE I WORLD COITAL INPCRT REQUIREMENTS, BY COUNTRY, 1947-1949 (millions of dollars at pricec prevailing in the last half of 1946) U.S. Gov't Credit Use at Unsatisfied Net Capital Dollar Meets e.54 Import Requirements Be- fore Orme Private Capital Net Unsatisfied Capital Orme Jr 1947 a/ 1948 1949 Total 1947 14,239 1948 1,806 1949 561 Tot eL 6,60w 1947 1,010 1948 700 1949 420 Iota 2,130 1n41 518 2,218 2607 1949 2.974 Tot4 6.099 1947 76 1948 rips zeta 155 185 416 1947 1442 194s 0J492 ,94a ....--, 2.759 5.659 5,767 5,113 3,955 14,8 2,450 2300 2,000 6.5 2.450 700 ? 3,150 - zoo zoo 400 - 1.200 1,800 3,000 - _ - - - 1,200 1,800 3,000 1,500 1,400 800 3,7 735 475 195 1,405 700 300 loo 1,100 65 625 505 1.195 - - - - 65 625 505 1,15 640 415 260 1,31 365 132 50 547 - - - - 275 263 210 768 - - - ? 275 263 210 768 400 350 250 1,00 241 137 75 453 150 150 100 400 9 63 75 147 9 63 75 147 - - - - loo 75 75 25 48 43 - 91 . - - - 52 32 75 159 52 32 75 159 - - _ _ 146 SO 50 27 51 20 15 86 .., - - 80 15 60 35 110 15 60 35 110 - - - - 40 40 20 1 - - - - 40 40 20 3.20 - - ------ _ - - - 62 43 - 10 32 33 - 65 30 10 - 140 - - - - - - - - - - - - 20 10 - 10 10 10 - 20 - - - - 10 10 - 20 400 600 500 1,500 308 266 226 goo - - - - 92 334 274 700 - - - - 92 334 274 700 9 9 - - 9 - - - - - - 1,144 1,180 615 2.939 676 373 187 1,236 5 - - 5 463 807 42a 1,698 - - _ _ 463 807 428 1.698 40 40 33 110 32 20 52 1044 5 - - 5i 3 20 22 1 - - 20 22 1 210 250 175 635 117 15 - 132 - - -J 93 235 175 503 - - - - 93 235 175 503 40 50 50 140 34 55 40 129 - - - 6 -5 10 11 - - - - 6 -5 10 11 250 200 - 450 130 113 95 338 _ _ _ 120 87 .95 112 - - 87 -95 112 100 100 100 300 9 _ _9 5. loo 100 291 - - - - 91 loo 100 291 118 100 100 318 36 - - 36 - - - 60 100 100 280 - - - -- 80 100 100 280 6 6 - -6 - _ - - - -- - - - - - 50 50 50 150 -------- 50 50 50 150 - - - - 50 50 50 150 20 20 10 50 -------- 20 20 10 50 - - 20 20 10 50 280 370 100 750 280 170 - 450 - - - - 200 100 300 - - - - 200 100 300 30 - - 30 50 - - 30 ' ^ - - _ _ - .. - - - - - - . 69 70 - 139 - - - - 69. -70 - -139 - - -69 -70 -119 6,911 6.293 4,570 17,771414,9814 2,849 748 72401 1,015 700 420 2,135 93,2 3.344 3,40e 7,658 96 155 185 416 836 3189 3217 7,24S 550 68' 440 1,673, 82 212 110 404 270 70 0 350198 406 320 924 100 200 200 500 98 206 120 424 34 69 34 137 30 30 60 28 29 9 66 2 3 5 N 0 5 AVAILABLE 5 4 4 13 50 25 75 7 6 6 19 24 16 9 49 1821 1,187 1,213 4,221 990 692 805 2,487 390 180 110 700 441 315 275 1.03, 120 40 40 200 321 275 238 834 50 30 20 100 100 150 150 400 N 0 T A V A LABL E 35 25 15 75 3.30 70 53 259 1930 620 549 3,10, 151 186 183 $20 1,4411 92 -30 1,500 339 352 395 1.087 250 230 260 740 89 122 136 347 39 85 175 299 39 85 175 299 11251_5am. a 947 27,075 6.246 1.424 2.091 11.691 3,115 1,040 530 4,625 a890 4.1,31 4396 10 703 546 625 _666,4856 41, 1.792 1.711 8,847 On the definition of capital import requiremento used in this report, excludes needs met from the proceeds of (i) exports of goods and services, (ii) the rale of new gold, (iii) private remittances, and (iv) loans by hard currenoy countrim other than the United States; includes dollars requiredto unblock sterling and funds required to provide for return flow of capital to the United States. h/ On a disbursement haulm includes, (1) Export-Import Bank Credits, (2) Foreign liquidation Camission and Maritime Ocemmielion Credits, (3) Special country loam & grants (U.K. loan, Civilian Relief for Occupied &el Liberated Countries, empected U.S. contribution to IRO, etc.), (4) 1947 Balance of UNRRA program, (5) Probable Internatiorml Break lendirog (including loans financed by International Bank debentures). Scorner "Annual Dollar AvailabilitLes Under Presort Policies, by Country, 1947-1949, dated June 17, 1947 (Revises). 2/ Based on present policies of tke foreign governments herring plane for liquidating publip and private foreign invereamte of their nationals (as in the case of Franca and the Netherlands), and on an analysis (a) of mold reserves and public dollar balances ani (b) of the rate at which these were evidently liquidated in the first quarter, 1947. 1/ It is teemed that Netherlands, Belgium, amd Norway can meet uneatiafied capital requirements in the order indicated by resort to private capital markets. The total of groin; private capital outflow to Western Europe so indicated is only alightly larger than is allowed for in Table II, the "Projection of United State. Balance el* Payment. under Present financial Policia. and Programs, by Areas, 1947-1949.. 2/ Unzatieficel capital import requirmente ware cosputed for countriee in these areas on the asemption that the nemr development program could not employ funds beaming available through private inveetmtt, tits liquidation of gold holding and dollar balance., or the conversion of sterling and other eurrenoy holdings into dollars. This assumption may not Reid for countries in the Near. and Per East receiving or holding sizeable starlit:. balance.. and the unsatisfied requirements of those countries mrqr be overstated on that account. The country breakdown for these areas applies only to tie owlam giving unsatisfied capital import requirements{ the totals for other colurone inch 65 all countries in the areas jan question including, for example, the critical countries for which country studies have been prepared but which were not, at the time this table was prepared, known to have requirements unfinanced after account was taken of resources prospective under present policies mod programs as ahem in Table III, namely, Afghanistan, Portugal, Spain, French Northwest Africa, Korea, Indonesia, India, MI, the Philippines, and MM. N.B. Estimates of unsatisfied requirements given Lithe last mime do not entirely agreesith aisdlar eetimatee parried lathe country studies submittedtothe Ad Boo Comittee. The differences &ries from the necessity of using estimates made early in the summer whim most of the country studies were still in preparatiot CONFIDENTIAL Approved For Release . - DP67-00059A000400 1. S. Exports of Goods & Services CD 2. @7S. Imports of Goody & Services 3. Eg.,. Trade Balance: 9inenced by: 4. .1.168. Gov't Loans & Aid CD 5. (her Sources of Dollars ........Private Remittances (:) CC/Private Cepital 01port 0.)Less Return Flows of: Gov't long & short-term creCit 0 Private long. & short term cred )11.0 Gov't unilaterol transfers ,iiPPrivato unilateral transfers g6. uidatIon of Gold & Dollar Asse Illd Reserves & Long 4 Short cm Assets gmles of New Gold 7. emotional konetary Fund 8. 1,g1pr-Area Transfers Cablocking of Sterling Caher Transfers of Gold And Dollars CD CD CA) CD CD CD CONFIDENTIAL TABL1_ II PnOJLCTION OF UITED STATES BALAI.CE CC PAY13To FINA.0C14 POLICIES, ArThORIZATIONS AND PROGRAMS, 7Jf AREAS, 1947-1949 (Millions of dollars at then current prices)* All Areas '.:111-ope Western Europe Eastern Europe Pear East & Africa Far Lest & 0ceenie Western Hemisphere Undistributed M C) 'S 1212121,1s 19,020 13,670 lila 12,370 Total ,L4'.1 7,360 1913 1549 3,450 Total 19,-,7 1943 194; Total j,..4 1948 870 7749 zglia 2,730 1047 13hi 1,320 2.949, 1,200 Total 1047 1,..)43. 1949 Total. 1947 1948 1943 Total 1947 1998 ,1949 190 Total ;A:1 45,060 4,940 15,750 1,170 4,070 2,780 13,020 1,190 670 1,350 3,910 3,340 2,890 3,420 9,650 6,350 4,410 4,113 15,370 70 120 CD 330 CD 8,340 7,660 8,410 214,613 1,970 2,100 2,350 6,420 1,670 1,790 2,000 5,460 300 310 350 960 690 530 540 1,760 1,160 1,660 2,130 5,450 4,020 3,370 3.390 10,780 OD OD 10,6so 6,olo 3,960 20,650 9,390 2,340 1,100 9.330 4,505 2,230 780 7,560 390 560 320 1,770 700 790 660 2,150 1,630 1,230 1,290 4,210 2,330 1,040 720 4,590 70 120 190 380 CD 6,246 3,424 2,022 11.691 4,984 2,249 748 7,531 4,303 1,476 961 6,745 676 373 187 1,236 32 212 110 404 ? 950 692 305 2,437 151 186 133 520 39 85 175 299 C.0 C.0 530 620 600 1.750 260 130 110 500 loo 10 10 120 160 120 100 330 200 210 410 60 110 90 260 180 150 170 500 30 30 20 ta....2 600 0 840 500 1,940 500 350 300 1,150 340 230 200 770 110 120 100 330 50 50 50 150 130 140 100 370 130 30 30 150 30 30 20 SO (D ....... 570 570 600 1,740 100 100 100 300 100 100 100 500 100 200 200 500 120 4o 10 200 250 230 260 740 al , -150 -210 -200 -56o -130 -191 -130 -500 -130 -190 -130 -500 -20 -20 -20 -60 0 ts-310 -130 -200 -690 -60 -60 -30 -200 -60 -60 -30 -200 -20 -20 -20 -60 -90 -20 -20 -130 -140 -30 ?30 -300 )211 -230 -70 -350 -110 -10 -150 -110 -10 -150 '..100. -100 -70 -30 -100 -40 -10 -20 -70 1 X -140 -90 -100 -330 -40 -30 -30 -100 -43 -30 -30 -140 -30 -30 -20 -80 -30 -20 -30 -SO C 71:1 .8.1700 1,640 1,150 6,490 1,345 1,030 760 3,135 1,360 1,030 760 3,130 5 250_ 150 loo 60o 400 200 150 750 1,600 260 140 2.000 CP ..... 3.120 1,040 530 4,690 1,015 700 420 2,135 1,010 700 420 2,130 5 5 270 70 LC 350 390 130 130 700 1,440 90 ...30 1,500 6 C: 580 600 620 1,800 330 330 340 1,000 330 330 340 1,000 SC 30 90 250 10 20 . 20 50 160 170 170 500 C: Cr 200 330 190 720 200 300 120 120 150 230 90 470 50 70 30 150 30 70 100 CC )1111- 1 400 -370 -640 -2,910-1,600 -370 -640 -2,910 270 200 170 640 230 270 240 '00 900 440 23a 1.570 c: . c: -360 -370 -390 -1,120 120 120 130 370 250 210 240 700 10 20 20 50 c: .D C -1,010 -500 -250 -1,790 150 SO 40 270 890 420 210 1,520 C: C..: C: C: C: IN 1 *Current prices are prices expected to prevail in the future, reppectively 1947 = 119% 1948 = 99%, and 1949 a 99% of prices prevailing in the last half of 1942. TABLE III Approved For Area and Country Export-Import Bank Releile.-M.9/.04,Fit-- Total PLC Credits Total S 8 C. Special Country Lome and : 1947 191o8 1949 0059A00040.0.1.30002 Total ....._ 1q07 1947 1948 1949 ToteS 1947 1908 1949 1947 1946 1907 Other Unilateral Traneferl 1947 1946 1.949 Total All Areas 9941 293.7 135.7 1,423.5 199.8163.0 362.8 198.4 4,086.1,902.871. 6,859. 355. 1,065.1,015.2,05 412.6 6,245.9 3.423.7 2.021.7 11.691.3 Enrols . 803.7 175.0 67.4 1,045.1 95.3 103.0 198.3 168.3 3,331. 1,189. 226. 4,746 335, 780. 455. 1,570 -2-5;.Tgr:,9,A.--249.0 746,4_ 49815 _ Albania 5.8 5.5 5.8 Austria .6 .2 .8 8.1 6.1 86. 15. 101 22.7 117.4 15.2 132.6 Belgium and Losemburg 18.1 3.0 21.1 30. 40. 70. 48.1 43.0 91.1 Gsechoslovakia 7.7 .2 44.9 5. 55. 40. 100. 20.8 33.5 55.2 40. 128,1 Denmark 2.1 2.9 5.0 10.0 10.0 30. 20. 50. 32.1 32.9 65.0 Dodecanese Island.. .1 .1 Finland 31.9 9.5 2.4 43.8 .1 10.0 10.1 50. 50. .1 32.1 19.5 52.4 101.0 Trance 504.0 70.0 574.0 50. 50. 30.8 200. 355. 195. 750. 734.8 475.0 195.0 1,404.8 Germany 303. 206. 226. 800 308.0 266. 226. 600. Greece 6.9 4.7 11.6 21.2 10. 31.2 52.5 185. 155. 300. 14.0 279.6 169.7 449.3 HungarY 2.0 2.0 6. 6. .9 5.9 8.9 Italy 25.4 37.0 50.0 115.4 10. 10. 05.8 209, 209. 15. 85, 100. 67.1 365.3 132.0 50.0 547.3 Netherlands 163.0 2.0 165.0 17.2 10. 27.2 11.2 50. 125. 75, 250. 241.4 137.0 75.0 453.4 Norway. 15.0 20.0 15.0 50.0 8.1 8.1 28.0 51.1 20.0 15.0 86.1 Poland 20.1 13.5 33.6 19.6 19.6 33, 33. 5. 100. 95. 200, 52.0 129.7 113.5 95. 335.2 Trieste 9. 9. 9, 9. United Kingdom 2,450. 700. 3,150. 2450, 700. 3150. .9 29.3 30.2 30.2 Yugoelavia 38.0 38.0 36.0 Mier. Evros, 24.0 17.0 41.0 45. 53. 98. 69. 70. 139.0 Near Fast and Africa 2L1_ 19.8 5.0 51.1 1,. 33.0 44.5 44, 64, 108 .je5 200. 82.1 500.5 110. 403.9 LC/Pt 50. 50. 50. 50. Ethiopia 1.8 1.2 3.0 .6 .6 .3 2.7 1.2 3.9 1.646466 2.5 2.5 2.5 2.5 Liberia 4, 4. 8. Saudi Arabi. 6.4 8.6 5.0 20.0 .5 6.9 8.6 5.0 20.5 Turkey 18.1 10.0 28.1 4 6.8 6.8 00. 50. 100, 20. SO. 100. 60.9 90.0 80.0 254.9 Union of South Africa I 2,0 2.0 2.0 2.0 Yemen 1.0 1.0 1.0 1.0 Iran 1.1 30.0 31.1 25. 25, 50, 1.4 55. 25. 41.1 Far Baet and 0 a ia 42.3 12,3 54.6 13.9 27.0 517.9 22,0 681. 603, 605. 1.899. 50. 200, 250. 156 0 990.2 692.3 805.0 2/93 5 Australia .6 .6 .6 .6 Burma 5.0 5.0 5.0 5.0 China 42.3 12'3 54.6 4.0 4.0 22.0 27. 27. 154.0 249.3 124 261,6 French Indo-China 45,0 11.0 11.9 11.9 India 150. 150, 150. 150. Calms 13.6 6. 19.6 327. 267. 257. 851. 340.6 273. 257. 670.6 Korea 18.9 18.9 169. 194. 172. 535. .7 168.6 194. 172. 554.6 Netherlands East ladien 31.7 31.7 50. 50. 100, 31.7 59. 50. 131.7 New Zealand ?, .8 .8 Philiffine Islands Sian 5.4 10.0 154 Misc. Far East and Oceania Western Hemisphere 121 L_14.6 63.3 269.6 1,0 6.2__4.o 8.1 20, 95. 120. 235. 150.6 185.6 180.3 919.7 Argentina .1 .1 Bolivia 4.8 6.5 11.3 4,6 6.5 11.3 Brasil 39.3 21.9 61.2 4. 4. 6.8 50, 50. 46.1 25.9 50. 107.0 Chile 25.6 23.7 49.5 20. 20. 25.6 53,7 69,5 Colombia 12.3 3.7 16.0 8 14 2.5 13.1 5.4 12.5 Costa Rica .3 .3 .3 .3 Ecuador 3.3 3.8 3.3 10.4 3.3 3.8 3.3 10.4 Mexico 33.1 19.2 40.0 92.3 50. 50. 100, 33.1 69.2 90. 3920 Peru 1.3 1.3 1.3 0r4,8n8Y 2.0 1.7 3.7 .2 2.2 1.7 3.9 Venezuela Mier, West. Hem. 1.0 4.0 20.0 25.0 20. 25. 20. 65. 21.0 29. 40. 92. UnaOeaift,U .1 1 9.1 5.1 30 40. 40 no. 45. 135. 180. p.,, ma 85. 175. 298.7 Approved For___-__Release ? ? ? S. Pe_ CON -- 111_? AIllall 1 02-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Report of Economic Working Group to Special Ad Hoc Committee APPENDIX CALCULATION OF COUNTRY NET CAPITAL IMPORT REQUIREMENTS A. European Countries Requirements estimates for United Kingdom, France, Italy and Germany have been discussed above in the Text. This appendix will be confined to an analysis of the methods employed in estimating requirements for other European countries. Reference is made below to the Post?UNRRA relief standards. These standards are briefly defined as allowing; 2,200 calories per day for the urban population of a country, 70 percent of its pre?war supplies of non?durable consumption goods other than food, and sufficient imports to maintain the current level of industrial production. 1. The Netherlands The capital import requirements of the Netherlands are based upon the assumption of a general consumption level rising from roughly 80 percent of pre?war in 1947 to reach the pre?war level by 1951 or 1952. A high rate of investment, which is planned by the Government, is also assumed. It is estimated that at the assUmed rates of consumption and investment and with the financing of the required imports the Dutch balance of? payments will be in equilibrium by 1950. Netherlands nationals hold approximately $840 million of dollar investments. It is estimated that the Government will probably attempt to liquidate $400 million of these.assets, but that any further liquidation would meet with considerable re? sistance both in Government and private circles. ? It seems probable that the Netherlands will be able to round. out its dollar capital needs from non?United States Government sources. - 1 - Appendix "A)1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CoNFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL 2. Belgium The dollar capital needs of Belgium are estimated at $250 million for 1947-49 in line with the Government's tentative 10 year investment program of $8.4 billion. This program will be used to raise the standard of living which is at present roughly equal to 90 percent of pre-war and which is threatened by a continued disequilibrium in the balance of payments now being financed largely by funds accumulated during the war. It is estimated that most of the crrdits which the investment proLram will probably require from abroad will come primarily from non-United States Government sources. No further liquid- ation of the Belgian foreign exchange holdings or gold reserves is anticipated. 3. Norway Norway has experienced a steady economic recovery. Its food position which is at present quite good is steadily improving. Its moderate foreign exchange requirements since the end of the war have been larr,ely met from accumulated hard currency reserves. These are being supplemented by the sale of securities in the Swedish and American money markets. Total additional dollar capital requirements during the period 194?-49 will probably approximate $100 million and will be used primarily for investment purposes. The facility with which Norwegian bonds recently have been sold indicates that Norway should have no serious difficulty in raising these funds on the United States money market. Norwegian dollar require., ments include $36 million to allow for purchase of Maritime ? ComFtis-ion vessels and surplus property on credit. Credits in that amount have already been arranged 4. Sweden While Sweden is now quite prosperous, it is experiencing balance of payments difficulties due to relatively high internal prices, to overbuying of dollar imports and to - 2 - Appendix "A" Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL inconvertibility of other European currencies. For that reason it is estimated that Sweden will draw down dollar reserves by about $100 million during the period under con? sideration. The imposition of more restrictive import and ? foreign exchange controls has met considerable resistance in Sweden, but will nevertheless be necessary. 5. Denmark Denmark is having balance rf payments difficulties because the world?wide shortage of fodder and fertilizer has restricted Its agricultural production for export and forced limitation of domestic consumption. To prevent further lowering of living standards (among the highest in Europe) Denmark will probably liquidate $40 million of dollar assets in the period 1947-49. A probable International Bank loan of $50 million in 1948 will provide for a moderate amount of capital improvement, primarily in the transportation system. 6. Finland The Finnish standard of living is substantially below pre?war. The reparations burden and the resettlement of the population from the territories ceded to the Soviet Union have strained the economy. It is estimated that in order to raise the Finnish standard of living to something less than pre?war levels by 1949 and to increase Finnish industrial production to pre?war levels by 1948 primarily through the accumulation of working supplies of raw materials, Finland will need slightly more than 110 million in the periOd under considera? tion. Towards this end it will probably liquidate $5 million of its dollar assets and the recent 25 million Export?Import Dank credit. The additional $80 million which will be required can probably be obtained from the International Bank aid United States private investors. Appendix HAll CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 AmrpivfgEF2tEelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 7. Iceland Iceland probably needs help from abroad to cushion the shock of the forthcoming sharp reduction in its standard of living even though it is, however, considerably above ore? war. The current fall in the price of fish, Icelandls 1)rincibal exoort, is turning the terms of trade against Iceland. In addition, the foreign exchange revenues received from the American garrison in Iceland during the war are no longer available. Since considerable investment was made just befcre and during the war, it is doubtful whether new investment can increase productivity sufficiently to prevent the drastic de? cline in its standard of living from present levels to roughly pre?war levels. It is likely that $30 million in the form of credits or in the form of supporting high prics of the Icelandic fish catch would be adequate to cushion the shock Of a suddenly lowered standard of living, This may be necessary since Iceland is considered to be politidally a 11oritical" country. 8. Austria The Austrian estimates provide for an average urban diet of 2,400 to 2,500 calories in 1948 and 1949 and for sufficient imliorts of raw materials and capital equipment for the level of industrial production to reach 100 percent of 1938 by 1948. The present program for Austria is much more restricted. It provides for an average urban diet of 2,000 calCries per day which may be increased to 2:300 in the fall of 1947. The present minimum estimates call for new credits in 1947 r'f $45 millions (in addition to Post?UNRRA grant of about $ll5,000,000, and existing grants (UNRRA and U.S. Army) equal to $50 million) in 1948 of $150 million, and in 1949 of $75 million for a total of $405 million, as compared with the more liberal program of 635 million for the same period used in this report. 9. _Czechoslovakia por repair and expansion of plant, including industrializa? tion projects for Slovakia, and tp finance a small current ? 4 ? Appendix "A? Approved For Release 1999/09/ttsuCMERRIA7-00059A000400130002-1 Apdp?rWerdgikcellease11611.11a667:06.8i9AVOY4001400?6-11Ti11 be required by Czechoslovakia during 1947-49. In addition, Czechoslovakia will require about $20 million of goods in 1947 already financed by the United Staten contribution to UNRRA and by the unused portion of an Export?Import Bank cotton credit. If the necessary credit is provided, the country should be able to maintain an export balance sufficient to meet its dollar obligations (including payments for nationalizati9n compensation, transit chnrr'es in Germany, and repayment of principal and interest on outstanding loans) which will total at least $50 million pveri the next three years, It is estimated that Czechoslovakia will probably receive an International Bank loan of $100 million leaving $20 million of its requirements as yet unfinanced. 10. Poland Under strict Post?UNRRA relief standards it has been estimated that Poland needed $130 million of financial assis? tance in 1947. In addition, to assist in its domestic invest? ment program which includes the improved mechanization of the coal mines and the transport system, it is estimated that $300 million will be required from abroad during the period 1947-49. This would allow Polish coal exports to increase from 14 million tons in 1946 to perhaps 35 Million tons in 1949. 11, Hungary, yq.goslavia.,,. iLourno.nia?, and. Bulgaria It is estimated that the total required net dollar oapital imports of Hungary, Yugoslavia, Roumania and Bularia will amount to about 800 million in the three?year period under ? crnsideration. These estimates are based on the assumption that in 1947 industrial production no'l domestic food consumption will approximate pre?war levels, that in 1948 and 1949 theyyill be somewhat above pre?war levels, and that there will he a-con? siderable expansion of capital formation, Yugoslavials capital requirements will be reduced to the extent that it receives reparations, ? 5 Appendix rtA" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 ApployulEfsuftelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Under the Post-UNRRA relief standards these countries would require $160 million of goods in 1947 as follows: Hungary S60 million Roumania S35 million Yugoslavia $65 million Bulgaria 0 It is. estimated that none of these countries will liquidate the meagre dollar assets and gold which they have available. 12. Greece It is assumed rather arbitrarily that $200 million in 1948 and $100 million in 1949 will be required tn round. out the Greek Aid Program begun in 1947 with an appropriation of $300 million divided roughly equally between civilian and military programs. B. Eear_East and Africa. Estimates for the Near Eastern countries are based on known and intimated desires and on the over-all cost of certain development projects. At the present time it does not appear that any substantial portion of such total costs would represent a demand on the United States for credit in view of local and other foreign credits available to the Near Eastern countrioQ_ There appears to. be some value, however, to presenting these figures as over-all outside possibilities and then defining the forseeable demand on the United States in the light of the whole In considering possible over-all credit needs of the Near Eastern countries the following factors have been considered: (a) currency stabilization, (b) agricultural development plans including irriution development to increase living stand- ards, and (c) industrial and other financial requirements necessary for a more balanced economy, including possible balance of payments deficits. - 6 - Appendix "A" CONFTDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Apf:trOilOinkiiiRrelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 A. Currency Stabilization The following countries have indicated currency stabiliza- tion needs: Egypt $80,000,000 to $90,000,000 ? Levant States $40,000,000 . Iraq $10,000,000 to $20,000,000 Total. $130,000,000 to $150,000,000 It seems unlikely at the present time that any of this amount would be considered as a credit requirement against United States resources, although the United State S has been approached in this connection. B. Agricultural Development credit needs for $240,000,000 to 400,000,000 The following estimates of possible agricultural development have been made: Egypt and Sudan .Palestine and Treinsjordan 50,000,000 to 70,000, 000 Syria and Lebanon 100,000,000 Traq 100,000,000 to 120,000,000 Saudi Arabia 35,000,000 Total $525,000,000 to $725,000,000 These figures include estimated costs of various river irrigation projects inthe various countries as well as improve? ment.of agricultural production designed to provide improved living standards. At the present time it would appear that there would be only a limited demand for immediate United States credit facilities in-connection with these projects. Egyptian sterling credits are more than ample to cover the cost of initiating its schemes, Saudi Arabia can probably cover the immediate cost of agricultural development. Syria and Lebanon on the other hand are expected to require outside credit assis? tance, probably in the form of bank credits. ? 7 ? Appendix AtT CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 ApprAcTEAERriRlease 1999/09/16 : CIA-RDP67-00059A000400130002-1 C. Industrial Develolomer;it Possible credit needs for industrial development are diffi- cult to determine in the absence of specific knowledge of industrial development programs. The recent war stimulated the industrialization process in the Near East but there is - some question as to how much of the war-time industrialization can survive post-war world-wide competition and as to how far toward industrialization these countries can during the next few decades, inasmuch as these countries are largely agricultural in character it, has been assumed for the purposes of this paper . that 10 percent to 20 percent of the need, for agricultural development would represent a fair guess as to the cost requirement for industrial development. This formula would result in the following credit needs: Egypt $50,000,000 to 080,000,0001/ Palestine and Transjordan 10,000,000 to -15,000,0001/ Syria and Lebanon 20,000,000W 2/ Iraq 3000o,00 Saudi Arabia 30,000:000 to -60,000,00W It is believed that the above figures would represent a relatively low demand for United States credit assistance, The following country analysis are based on a compilation of the above figures. 1/ Egypt ?and Palestine tend to be more highly industrialized and the 20 percent base was used in obtaining these figures. ? 2/ Syria, Lebanon, and Iraq are less highly industrialized and the 10 percent base was used in obtaining these figures. The Saudi Arabia estimate is based. on a probable cost of some $30,000,000 for the proposed railway from the Persian Gulf to the Capital, and proposed east coast harbor works. - 8 - Appendix uAll CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Ap lease 1999/09/16 : CIA-RDP67-00059A000400130002-1 1. Egylyl. The possible total local and foreign financial requirements of Egypt and the Sudan are estimated as follows: a. Currency stabilization $ 80,000,000 to 90,000,000 b. Agricultural development 240000,000 to 400,000,000 c. Industrial and financial 50,000,000 to 80,000,000 Total $370,000,000 to 570,000,000 -Egypt has requested a currency stabilization loan to permit her to establiSh an independent currency free of the pound sterling. This would envisage a 10 to 15 year loan to become available in the first year. The agricultural program envisages a 20 year comprehensive development of the Nile, to include irrigation, flood controls to improve culture methods pre- requisite to raising the standard of living of the Egyptian fellahim - the majority of the Egyptian population. This would envisage an outlay of approximately 2/3 of, the funds in the first ten years of the program, and an estimated outlay Of S64 to $104 million in the first four years. The Five-Year Industrial, Program is assumed. to require $50 to $80 million, approximately 20 percent of the AFricultural Program, for the:approximate ration of the value of Egyptian industrial output to total . output. It is assumed that the average annual financial re- quirement will be approximately the same throughout the five years - "D?JD to $16 million. Thus, the breakdown by years, for the next four years is estimated, to be approximately as follows: Currency In Millions-U.S, Dollars 1950-51 Total 4 Years 1947-48 1948-49 1949,50 stabilization 80-90 80-90 Agricultural development 16-26 16-26 16-26 - 16-26 64-104 Industrial developmett 1g-16 10-16 10-16 10-16 40-64 Total 106-132 26-42 26-42 26-42 104,258 - 9 - Appendix "A" COFILENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 App(r)getplEorrIl2lease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Of the above needs it is estimated that Egypt would require United States sources only relatively small amounts for industrial development. The foreseeable demand at the moment inCludes some $5,000,000 to cover the cost of initiating the Delta fertilizer project and the possibility that some credits will be required in connection with the Aswan Hydro- electrication scheme. The measure of requirements in connection with the latter will depend largely on the proportion of United States participation, if any, which has not yet been determined. 2. Palestine and Tranglordan The possible local and foreign financial requirements of Palestine and Transjordan are estimated as follows: a. Agricultural development b. Industrial development Total $ 50,000,000 to 70,000,000 10,000,000 to 15,000,000 $ 60,000,000 to $85,000,000 These estimates assume no change in the political and economic status Quo, in Palestine and Transjordan. Assuming the relative annual requirements to be similar to the relative requirements in Egypt, the estimated breakdown by years, for the next four years is estimated to be approximately as fol1ows:2/ In Millions U.S. Dollars ,1947-48 1948749 1949-50 1950-51 Tota2, Agricultural development 3.2-4,6 3.2-4.6 3.2-4.0 3.2-4.6 12.6-18.4 Industrial development 2,0-3.0 2.07310 2.0-3.0 .2.0-3,0 8.0-12.0 Total 5.2-7.6 5.2-7.6 5..2-7.6 5.2-7.6 20.8-30.4 1/ The combined Anglo-American study group which investigated the cost of implementing the recommendation of the Anglo- ? American Committee of Inquiry to admit 100,000 Jews to Palestine estimEited the cost of a 10-year Arab .program to be $180,000,000. One-fourth of this, $45,000,000 was ? considered essential in the first year, and of this $23,000,000 was considered non-suitable for a self- liquidating loan, - 10 - Appendix "A" CONFII2ENTIA4 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Appgpyptilease 1999/09/16 : CIA-RDP67-00059A000400130002-1 and 3. Syria and Lebanon The possible local and foreign financial needs of Syria Lebanon are estimated as follows: 1. Currency stabilization 440,000,000 2. Agricultural development 3. a. Syria 704000,000 b. Lebanon 30,000,000 Industrial development 10,000,000 $150 000,000 A currency stabilization loan would permit Syria and Lebanon to establish an independent currency free of the French franc. This would envisage a 10 to 15-year loan to - become available in the first year. Assuming that the relative annual requirements for the funds to be similar to the relative requirements in Egypt. Tile eStimated breakdown by years, for the first four years of the program 'would be approximately as Currency stabili- zation In Millions U.S. Dollars Total_ 40.0 1947-48 1948-49 1949-50 '1950-51 40.0 Agricultural development 6.6 6.6 6.6 6.6 26.4 Industrial development 2.0 2.0 2.0 2.0 0.0 - Total 48.6 8.6 8.6 8.6 74.4 Syria and Lebanon will probably require the assistance of United States financing in connection with any large-scale agricultural development. ? Present requirements to initiate the program are estimated at believed that reasonable credit sources. approximately S20,000,000 and it is aid may be secured from United dtates 4. Iraq The possible local and foreign financial needs of Iraq are estimated as follows: - 11 - Appendix CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Apfolease 1999/09/16 : CIA-RDP67-00059A000400130002-1 1. Currency stabilization 10,000,000 $ 20,000,000 2. Agricultural development 100 000,000 - 120,000,000 3. Industrial development 10)000t_000 - Total $120,000,000 - 6150,000,000 Iraq has requested a loan which would permit her to establish an independent currency. This would envisage a 10 to 15-3rear loan to become available at once. Assuming that the relative annual requirements for other funds would be similar to that of Egiypt, the estimated breakdown bY years, for the next four years would be approximately as follows: Currency stabili- zation In Millions U.S. Dollars Total 1947-48 1948-49 ^ 1949-50 1950-51 10/-20 10-20 Agricultural de- velopment 6-8 6-8 6-8 6-8 24-32 Industrial de- velopment 22 2 2 ? Total 4.4 4.4 4,4 4.4 17,6 It is believed that the largest portion of Saudi- Arabian financial needs will be met locally or from-oil royalties or loans arranged through banking channels with the assistance of the oil or of development companies, However, it is possible ' that the EXport-Import Bank may be asked to finance as much as 5,000000 in connection, with the estimated $30,000,000 railway and labor development in the east. -Other projected railway plans are not expected to develop credit demands within the next few years. Public utilities and airport developments in which the ruler is extrememly interested may result in subsequent credit requests of the Export-Import Bank. 5, Iran. World dollar to be 1947 -- None capital needs of Iran for 1947-49 are estimated 1948,-- $30,000,000 Partial payment on a loan of for a five-year period. - $150,000,000 1.949 030,000,000 Partial payment on a loan Of150,000,000 for a five-year period. - 12 - Appendix ffAn Approved For Release 1999/00 Fial-LbligffiN167-00059A000400130002-1 App69r5EFHIF.Rlease 1999/09/16 : CIA-RDP67-00059A000400130002-1 6. Turkey In the absence of firm estimates, it has been assumed arbitrarily that the present Turkish Aid Program will be in- adequate and that $50'million in 1948 and-$25 million in 1949 will be required to carry out United States obligations in Turkey. 7. Liberia A small allowance of $5 million has been made for new development programs in Liberia. This amount has been determined by capitalizing, over a long period of time and at a low rate of interest, the ability of the Liberian Government to carry a development loan an deomonstrated by the rate at which the Firestone obligation has been retired. A Portion of such a development loan might be used to help finance the much-talked- of railroad Project and part might be employed for projects worked up by the United States Government Economic Mis ion in Liberia. The costs of (a) the Mission, (b) port construction, (c) the U.S. Public Health Mission, (d) the Programs of the Office of International Intelligence and Cultural Affairs, (e) Roberts Field maintenance, and (f) the Centennial celebration are already financed and are included in the figure on total net capital import requirements on the Near East and Africa. C. Far_East and Oceania Requirements for China have been discussed above in the text. From the point of view of their needs for and ability to utilize a loan the slight information available indicates that Burma might usefully employ about 100 million and French Indo China might make good use of $75 million. The estimated capital import requirements for Japan are based on the assumption of a "cranking-up? program. They are dollar deficits only and do not take account of export surpluses in sterling in currencies of other areas, such as might, on the assumption of - 13 - Appendix ,,A" CoNFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 AftitbibelliEdaRelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 convertibility, provide a part of the funds needed to balance Japan's foreign trade. ? Examination of the prospects for Siam: Korea and India has not reveale?j any firm capital import requirements beyond those that would be satisfied under present financial policies and programs. D. Western Hemisphere The unsatisfied capital import requirements allowed for western hemisphere countries may well be too low. By comParison with the three?year total of 347 million c;iven in Ta5le I, implied figure of $632 million has been developed in a more detailed analysis by the Latin American Area Subcommittee. an ? 14 ? Appendix flAff CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059Ab00400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Economic Working to Special Ad Hoc Committee Appendix B UTILIZATION OF GOLD AND DOLLAR RESERVES Western Europe The Scandinavian countries in Western Europe are expected to solve their import problem by drawing upon known reserves of gold and dollars. Of the four important Weotern European countrieo facing an unsatisfied deficit Bizonal Germany hao no significant dollar reserve, the United Kingdom and France are expected to liquidate sizeable amounts of dollar and gold holdings, but Italy is not. The United K14Igdom United Kingdom gold holdings and short-term dollar balances amounted to an eotimated 2,587 million on December, 31, 1946. It is expected that these holdings will be drawn upon to the extent of $400 in meeting anticipated dollar re- quirements in 1947-1949. While this is by no means a maximum program, it would provide for reducing reserves to near the figure ($2 billion) considered by the British necessary to meet the uncertainties of the next few years. Thus, a further reduction might be effected in United Kingdom, gold and dollar reserves in meeting the unsatisfied deficit; if no new aid is forthcoming from the United Stateo, it io likely that reserves will be drawn down to the minimum in the course of the period 1947-1949. During the war the United Kingdom liquidated about $4.5 billion of private British assets in the United States; in consequence, remaining private holdings either are difficult to liquidate or are encumbered (ao, for example, by being pledged against the RFC loan). France Gold holdings and official dollar assets of France on - 1 - CONFIDENTIAL Appendix "Bu Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Aeem5is4I9release 1999/09/16 : CIA-RDP67-00059A000400130002-1 December 31, 1946 came to $943 million. It is expected that $460 million of these will be liquidated early in the period 1947-1949 reducing reserves by the end of 1947 to an all-time low despite assurances to the French public that they would be maintained at one billion. In addition, France has under- taken a program of marshalling private French assets. A survey of private foreign French holdings was made, and the present _plan of the French Government provides for liquidating about 680 million of private securities and other assets which can be converted into dollar exchange. This program on top of past liquidations amounting to about 300 million will leave intact only those private assets which are difficult to liquidate. Italy Except for holdings of the Vatioan and those under Allied control, Italian gold holdings and dollar balances amounted to 192 million on December 31, 1946, including 4)183 of short- term dollar balances, These balances are. substantially larger than Wa,s maintained pre-war. Unless they are in some way en- cumbered, they might be drawn upon, perhaps, to the extent of $150 million in helping to meet the unfinanced Italian import deficit amounting to $768 (this would partioularly be the case if the net realization of '43 million for Italy from the lgold pot' held in Germany were employed as a foreign oxbhange reserve rather than as a local currency reserve); even so, a sizeable dollar deficit would remain unsatisfied, Eastern Europe The seven Eastern European countries facing an unsatisfied import,deficit, Austria and Greece have gold holdings and dollar exchange balances too small to offer any significant sources Of dollars to finance the deficit as indicated in the following comparison between the deficit and gold and official dollar ex- change resources of Eastern European countries, - 2 - Appendix "B" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 N:FftyffiNelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 dollar deficit unsatisfied 1947-1949 gold holdings and official dollar exchange balances Dec. 311 1946 , (millions ,of dollars) Austria 503. 10 Czechoslovakia 11 20 Poland 112 66 Hungary. 291 39 Rumania 150 274 Bulgaria 50 26 Greece 300 34 The other five countries might cover at least a part of their deficits by drawing down gold holdings or dollar balances. The extent to which this might be possible, however, would require a detailed examination of the situation in each case, exploring such questions as the need of the country for reserves and en- cumberances against which they Inust apply (for example, nearly one-quarter of the Rumanian reserves are regarded as "loot" re- ceived from Germany and some part of this may have to be returned). Other Areas Allowance has been made in Tables I and II for reduction Of gold holdings and dollar assets of non-European countries as follows: Official gold Anticipated holdings & dollar Liquidations balances in the 1947-1949 U.S. (12/31/46) (millions of dollars) Near East and Africa 1,513 350 Far East and Oceania 1,933 700 Western Hemisphere 4229 l50 Canada 1,225 500 Latin America 3,004 1,000 It has not been possible to relate the anticipated liquida- tion of gold and dollar assets, which has been estimated for these broad geographical areas, to the development programs Of particular countries. It has been assumed in the prepara- tion of Table I that the capital import programs. of non-European - 3 - Appendix "B" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 AfiiiitidlilWraelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 cduntries, for which no specific financing was-known to be available were over and above the capital imports to be financed either by private foreign investment, by funds received on inter-area transfer or by the liquidation of gold holdings and dollar assets. There is a distinct possibility that tnI0 assumption is erroneous. Where the "Unsatisfied Capital import requirements" of a country have been estimated from its over-all trade balance (as was the case with Japan) the liquidation of gold and dollar holdings in the measure already allowed for or the use of sterling and other currency balances may suffice to meat some part of the deficit. Even assuming that the unsatisfied capital import require- ments shown for non-European areas are additional to requirements satisfied out of the available dollar supplies shown in Table I, it is possible that these unsatisfied requirements might, to some extent be met out of the gold and dollar holdings remain- ing to non-European countries, particularly Japan, China, Tur- key, Iran, and Brazil. A careful study should be mPc1,: o-P each country's position to determine the extent to which these possibilities exist. - 4_ CONFIDENTIAL Appendix "B" Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 AmpiaAF?fEelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 e ort of Workin G-rup n Economic Aid To Special Ad Hoc, Committee Preliminary APPENDIX ESTIMATED WORLD GRAIN BALANCE, 1947/48 THROUGH 1949 po Estimates of world exPortable supplies of all grains (apart from rice) and import requirements of these grains for use as breadgreins for the consumption years 1947/48 through 1949/50 can be summaried as follows: 1. The year 1947/48 is expected to be the record period for world import requirements, 45 million long tons ns com? pared with 37 million in 1946/47. World exports Of all grains ,may reach 29 million tons, one million tons more than 1946/47, leaving a deficit for breadgrains alone of 16 million tons, This cOmpares with a shortage of 9 million during the 1946/47 consumption year ending June 30, 1947. 2. In 1948/49, world exportable grain supplies are estimated at about 29 million tons while requirements are expected to drop sharply to about 33.5 million tons, thereby reducing the deficit between supply and breadgrain require? ments to approximately 4,5 million tons. 3. During 1949/50 a further increase in exportable supplies to a level of 30.5 million tons is expected, while requirements will continue to decline to about 32.5 million tons, thereby reducing the gap between supply and requirements to almost 2. million tons. 4. When account is taken of grain import requirements .for feed use, the gap between supply and requirements in 1947/48 can be increased by 6 million tons -- the additional stated requirements for feed use. In 1948/49 ahd 1949/50: import requirements for feed are expected to be higher than ? 1 ? Appendix "C" CONFIDENT IL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Alwv-pckf9flaielease 1999/09/16 : CIA-RDP67-00059A000400130002-1 six million tons, but since exportable supplies will not meet breadgrains needs of importing countries, these additional import requirements of grains for feed must be almost entirely disregarded, ? 2 ? Append4x iron ,C(NFIT)ENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 ? CONFIDENTIAL CZ' Table 1. WORLD GRAIN TRADE BALANCE: ACTUAL PREWAR AND 1946/47; ;71 c) 13 ESTIMATED 1947/48 THROUGH 1949/50 c) c) (000 long tons) CD el Tm V CD C) cc)) 0) In C) c) c? N. CAD 0- C) 0 ci ' (.) CAD cc cPrewar 'cc'cc Imports or Requirements Exportable Suoplies. Wheat, Rye, Flour Coarse Grains Total Deficit (1935-3s) ' 28,964 15,610 13,35)4 2g,964 1946/47 37,000a 20,000a 8,000a 28;000a 9,000 1947/4g 45,0008 22,050 6,950 29,000 16,000 s 19 /49 33,650 21,000 8,800 29,080 4;570 ' 199/50 32,350 19,700 11,600 30,580 1,770 01 01 01 01 Tm a) a) as NOTE: Actual prewar and 1946/47 and estimated 1947/48 data obtained from Tnternati nal Emergency Food Council. aS u) u) 75 75 1948/49 and, 1949/50, IFI estimates. a) a) LI.o L_ 8 a. Rounded. 0 Um Um 73 73 W W > > 2 2 pm 0. . pm Apm,ygltiffERelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Table 2. WORLD EXPORTS OF GRAINS: ACTUAL PREWAR AET 1946/47, PROPOSED By IEFC FOR 1947/48 AliT ESTIMATED FOR 1948[49-1949/50 (000 long tons) Country Prewar Average 0-935/38 1946/47 1947/4s 1948/49 1949[50 United States Wheat, flour, rye 512.2 10,734.0 12,000 8,000 6,700 Coarqe grains 76.9 4,166.0 1,500 1,400 2,700 Total 5s9.1 14,900.0 13,500 9,400 9,400 Canada ? Wheat, flour, rye 4,656.1 5,900.0 5,65o 6,000 6,000 Coarse grains 5o.s 505.8 oo 100 100 Total 4,706,9 6,4o5.s 5,650 6,100 6,10o Argentina Wheat, Flour, rye 3,009.9 1,662.0 2,000 2,500 2,500 Coarse grains 7,29o.s 2,55s.5 3,500 4,000 4,500 Total 10,300.7 4,220.5 5,500 6,500 7,000 Australia Wheat, flour, rye 2,s04.1 1,314,7 1,900 2,500 ? 2,500 Coarse grains 39.5 50 80 80 Total 2,885.2 1,354.2 1,950 2,580 2,580 Other Countries Wheat, flour, rye 4,627,5 425.3* 500 2,000 2,000 Coarse grains 5,s54.9 493.0.!J/1,900 2,500 3,000 Total 10,482.4 918.32J 2,400 4,500 5,000 Total -- World Wheat, flour, rye 15,609,8 20,036,02/, 22,0.50 21,000 19,700 Coarse grains 13,354.5 7,762,824 6,950 8,080 10,880 Total 28,964.3 27,798.82J 29,000 29,080 30,580 Note; Prewar, 1946[47, 1947[48 data obtained from IEFC: 1948[49, . 1949/50, IFI estimates. Data incomplete for the last two months of 19146/147. - 4 - CONFIDENTIAL Appendix Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 ApfteklidgeilRelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Table 3. WORLD GRAIN TRADE OF SPECIFIED IMPORTING COUNTRIES: ACTUAL PREWAR AND 1946/47, PROPOSED BY IEFC FOR 1947/48, AND ESTIMATED FOR 1948/49 AND 1949/50 - (000 long tons) 'Prewar ' 1946/47 ' 1947/48 t '1935- ' Stated ' I Stated 'ProposedI1948/49 1949/50 Country or Area '1938 ' Import I 'Require- I I Imports' Import 1 IEFC : Estimated IRequire-IAlloca- Import I ments ' I ments Itions 'Requirements Albania 15 9 o 0 o o 0 Austria 746 467 474 872 540 750 750 Belgium 2,355 1,308 1,021 1,183 810 1,250 1,350 Bolivia 40 71 40 50 45 50 50 Brazil 945 1,200 948 1,200 720 1,000 1,000 China 272 800 378 1,200 540 1,000 1,000 Cuba 122 250 247 300 225 300 250 Czechoslovakia 44 203 135 774 360 250 200 Denmark 704 0 0 361 135 50 50 Egypt & Red Sea Area 1.1.9 100 127 350 135 250 100 Finland 232 359 327 353 300 350 300 France 1,036 1,444 1,321) 2,598 1,890 1,500 1,250 French North Africa -552 542 ) 800 450 300 100 French Colonies _624 221 113 211 110 0 -200 Germany (UK-US) 2,227) 3,438 2,992 5,300 3,600 4,250 4,250 Germany (French) ) 470 235 594 315 550 Goo Greece 550 441 414 851 495 500 500 Hungary -510 116 23 0 0 -200 -300 India 298 3,610 2,096 5,315 2,700 4,000 3,500 Ireland 704 183 256 455 225 250 200 Italy (US Zone) ) 111 115 125 90 100 100 Italy 833) 1,731 1,759 3,261 2,070 1,750 1,750 Japan, Korea & Ryukyu I. 123 2,719 1,539 3,011 1,710 3,000 3,000 Mexico 15 548 392 425 360 400 300 Netherlands 1,765 1,147 989 1,288 990 1,000 1,000 Neth. East Indies -37 80 74 150 90 100 100 New Zealana 56 144 137 160 135 150 100 Norway 499 363 352 400 300 350 350 Peru 127 152 110 200 110 200 150 Philippine Is1ands 109 294 265 300 135 200 150 Poland -741 913 416 1,197 225 0 -100 Portugal 40 275 309 480 300 300 300 Rumania -1,594 720 86 75 70 -loo -250 Spain 52 300 391 350 315 350 300 Sweden 96 130 61 477 315 0 0 Switzerland 890 453 519 656 1450 450 450 Union of So. Africa 349 93:8 527 350 180 350 350 United Kingdom 9,560 5,714 5,732 6,261 5,130 5,500 6,000 United Kingdom Areas . 0 2,236 1,455 2,067 1,260 1,750 1,250 Uruguay -66 125 165 150 135 loo 50 Yugoslavia -616 1,610 12 0 0 -100 -200 Miscall, or other 10,144 1,400 1,241 1,100 990 1,000 1,000 Total World 29,000 37,000 28,000 45,000 29,000 33,650 32,350 Note: PrOwar, 1946/47, 1947/48 data obtained from INFO; 1948/49, 1949/50 IFI estimates. Prewar includes over 13 million tons of coarse grains, most of which was used for feed by importing countries. Requirements for 19)46/147 through 1949/50 do not include feed. - 5 - Appendix 'IC" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Awyr..M.p/Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 II. THE WORLD SUPPLY OF AED DEMAND FOR DRY-CARGO OCEAN SHIPPING 1N192+7 The worldls ocean-going dry-cargo fleet in January 1947 approximated 71:9 million deadweight tons (0.w.t.),1 an increase of 12.7 percent over the 63.8 million 0.11,t. in 1939. (See Table 1)-. At present, however, the large number of vessels laid- * up and in repairs reduces reduces the fleet in active operation to somewhat below the 6o million d:w.t. in service in 1939. In addition to changes in the size of the fleet, its total capacity is affected by several factors which render the existing merchant marine less able to handle annually the same amount of cargo per unit of active shipping space than in 1939. These factors are: (1) Longer hauls (primarily US to Europe) arising: from the movement of large quantities of bulk commodities under relief, reconstruction, and rehabilitation programs. (2) Congestion and consequent delays at piers resulting from war destruction of port facilities, failure to replace outmoded loading and unloading equipment, shortages of skUled port labor, and the decreased efficiency of unskilled labor required to perform heavy work on limited food allowances. (3) Lower efficiency of vessels as a result primarily of a higher percentage of war-built tonnage, i.e;, 70 percent in 1947 as contrasted with 20 percent in 1939. The volume and pattern of world demand for the services of the 1947 fleet cannot beprecisely determined. The US Maritime Commission has estimated, that all types of ocean-borne-freight approximated 245 million tons in 1937,3 and the volume is some- what higher today. In dry-cargo terms this is estimated to be about 200 million tons in 1937 and possibly 10 percent higher in 1947. 1. Deadweight tonnage is the weight in long tons required to depress a vessel from light water line to load line. It is therefore the weight of the cargo, fuel, and stores which a vessel can carry safely. 2. The US alone has about 12 million cY.w.t. laid-up and there is substantial tonnage undergoing repairs in Europe. 3. W.W. Smith, Chairman US Maritime Commission, Journal Of Com- merce (N.Y.) May 22, 1947, p. 6A.,- The effects of possible. large scale US aid to foreign countries do not appear to have been given consideration in the development of these estimates, ? 6 - Appendix "F" C0M DE IAL? Approved For Release 1999/0 ? . 7-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL aexar:L2fengo Gpoup on conomic Aid to Special Ad E7oc Committee Preliminary Appendix D Estimate of World Exportable Supply and Import Requirements of Fats and Oils, 1947-1949 I, SUMMARY 1. World exports of visible fats and oils for edible and industrial purposes during the calendar year 1947 are estimated at 3.2 million metric tons as compared with 2.6 million tons in 1946 and 5.9 million tons average during the ? 1935-39 period. (See Table 1). World import requirements, calbulated here on the basis of 75 percent of prewar per caput consumption for 8 selected European countries Austria, Belgium, ? Czechoslovakia, France, Italy, Netherlands, Poland, Lold Portu- gal and on the basis of expected import demand in the rest of the world, total 3.75 million tons, leaving a world deficit of 575 . thousand tons. Of the one million tons of imports needed to meet such goals in the countries named, 750 thousand tons actual imports are expected. 2. In 1948, world exportable supplies are estimated at 4 million metrid tons, 68 percent of prewar, Import require- ments, based on about90 percent of prewar per oaput consump- tion for these named countries 1.d minimum demand for the rest of, the world, are estimated at 4,45 million tons, 19 percent higher than in 1947, the gap of 450 thousand tons between estimated exportable supplies and requirements will have to be met either by lower imports into these countries or decreased effective demand in other parts of the world, 3. World exportable supplies are expected to total about 4.6 million metric tons in 1949, 78 percent of prewar. Import requirements to provide approximately prewar per caput con- sumption in the countries listed above, and to meet the import demands of other countries, are.estimated to be 5.15 million metric tons, let'ving a deficit of 550 thousand metric tons. 1 - Appendix "D" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 II. FATS AND OILS Exportable Supplies. World exports of visible fats and oils (including butter and olive oil) in the calendar year 1947 may total 3.18 million metric tons in terms of oil, which is 21 percent greater than the 1946 exports of 2.63 million tons but only 54 percent of the prewar level of 5.9 million metric Although exports in 1947 show increases over 1946 for most types Of fats and oils, the improvement is attributable mainly to the rapid rehabilitation'of the Philippine copra industry and to the increase in the world marine nil supply. Assumptions have been made of cNntinued low exports from Manchuria and the N.E.I., higher consumption in the major pro- ducing areas, maintenance of the present export-price p.:lioies in Argentina, and continuation nf international agreements limiting the whale catch to a maximum of 16,000 blue-whale units (one half the 1938 level). With continuing recovery of copra and coconut nil exports which in the prewar period accounted for 20 percent of total world fats and ?-11s exports, and with small increases in other oils, total world exports for 1948 are ex- pected to reach 4 million metric tons, 20 greater than in 1947. By 1949, even though exports of copra are expected considerably to exceed prewar levels, total exports of fats and oils are likely to be only 4.6 million metric tons, 77 percent of prewar, but 45 percent greater than in 1947. Import Requirements. For the 8 countries, Austria, Belgium, Czechoslovakia, France, Italy, Netherlands, Poland, and Portugal, imports of fats and oils totalling ,ne million tons would be necessary in 1947 to provide, fnr each of these countries when added to indigenous production, per caput supplies 75 percent of prewar (see Table 3.) The volume of imports -.e.quired to reach this consumption goal corresponds to tonnage requirements used in the provisional fats and oils allocation schedules for 1947 prepared by the International Emergency Food Council, to provide an estimated 70 percent of prewar per capita consumption. - 2 - CONFIDENTIAL ? _ Appendix "D" Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 AppnyEgifsfelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 The difference of 5 percent is dub to higher IEFC estimates of prewar per capita consumption and to lower IEFC estimates of 1947 production. Import requirements of one million'tons for the group of countries would be 86 percent of their prewar imports However, actual imports by these Countries in 1947 are expected to total about 750,000 tons, (65 percent of prewar imports), which will provide about 67 percent of prewar per caput supplies when added to indigenous production. Allocations and import requirements to other selected countries (Turkey, Iran, Bolivia, Brazil, Chile, Ecuador, Haiti, China, Netherlands East Indies, Philippines), most of which are net exporters, are neg? ligible. Expected exports under allocation to the rest of the world amounted to 2.75 million metric tris, about 60 percent of prewar imports by these areas. Of this 2.75 million tons, the 'United Kingdom accounts for 920 thousand tons and the United States for about 100 thousand of net imports; Estimates of import requirements for the calendar tear 1948 and 1949 for the 8 continental European countries named are based on consumption goals of 90 percent and 100 percent of prewar per caput supplies (except for Italy 90 and 105 percent and Portugal 100 and 105 percent), Such standards give import needs reaching 1.2 and 1.4 million metric tons in 1948 and 1949 respectively, after allowing for the gradual increase in these countries of indigenous supplies as estimated in Table 3, Only France, Czechoslovakia, and Portugal are expected to reach prewar levels of fats and oils production by 1949.1 Population growth is also taken into account. For the rest of the world, 1948 and 1949 estimates of import requirements are minimum demand based on the expected actual imports in 1947 of 2.75 million metric tons and gradual 1, National average prewar total caloric intake for the selected continental European countries ranged from 2461 for Portugal to 3012 for France (including wine). Calories from fats and Oils for the same period for these countries varied from 192 ? or 7 percent of total calories in Poland to 573 or over 19 ' - percent of total calories in the Netherlands. 3 CONFIDE,NTIA4 Appendix "D" Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 NpcppygINFRJARelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 annual increases to reach levels of 3,25 million metric tons in 1948 and 3.75 million metric tons in 1949.1 Imports of 3,75 million metric tons, representing only BO percent of prewar imports for the rest of the world, are not based on any fixed standard of per caput consumption in these countries. Larger fat supplies from increased indigenous production in some count- ries and from greater retention of domestic supplies formerly exported will be offset by the demands of substantially larger populations. Estimated world exportable supplies of 4 million metric tons in 1948 and 4.6 million metric tons in 1949 leave prospective gaps of 450 and 550 thousand metric tons. Closing these gaps can of course be done either by restricting increases in Imports and consumption of the importing countries Or by further increas- ing world production and export supplies, or both. After. 1949 increasing production can be expected to decrease the world deficit somewhat, even with maintenance of consumption standards in all countries and some, However, unless export prospects in such important areas as Manchuria and the Netherlands East Indies improve more than now appears probable, there is little possibility that world export supplies' will equal import requirements for several years beyond 1949. The estimates presented above are based on the assumption that allocations continue through June 30, 1948. The discontin- uance of alloCations will probably result in some increases both in production and exports due to the price stimulus resulting from competitive bidding especially in colonial and primary producing areas. However, this larger world trade will be accompanied by a less equitable distribution than now exists, perhaps even at the expense of soMe of the European countries specifically considered in this report. 1. This trend of imports, if projected, into 1950-55, would fall between the high and low estimates made by the Food and Agriculture Organization of the UN. - 4 - Appendix HD" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 AkaigiLgGAR-release 1999/09/16 : CIA-RDP67-00059A000400130002-1 The estimates of requirements and demand are not based on any particular price relationship between different types of fats and oils or between fats and other commodities. General financial and economic developments over the next few years will largely determine the price prospects for all commodities, in? cluding fats and oils and will directly affect potential demand for them. The extent to which importine countries will use their limited foreign exchange resources for purchases of oilseeds, fats and oils will also help to determine the general price levels and price relationships between fats. Since the United States, a net importer of fats, is a major exporter only of lard, the shortage of dollar exchange is not as critical a problem for fat importing countries as for certain other important products for which the United States is the sole or principal source of supply. Unless there is a severe economic recession, there is little dOubt that world exportable supplies will be short of potential demand in the next few years. Even such a depression, which will adversely affect demand for fats and oils, may not reverse the trend of increased consumption of both edible and industrial fats. and oils. ? 5 ? Appendix "Dm CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Table 1. FATS AND OILS1 WORLD TRADE BALANCE, PREWAR, ANNUAL ESTIMATES1947 THROUGH 1949 Import Requirementn Prewar 1947 1948 1949 (1,000 metric tons of oil) Selected Countries2 1,155 1,000 1,200 1,400 Rest of Wor1d3 4 775 2t750 3,250 3,750 World 5,930 3,750 4,450 5,150 Exportable Supplies 5,930 3,175 4,000 4,600 Deficit 575 450 550 1.. Visible fats and oils for both edible and industrial purposes. 2. Austria, Belgium, Netherlands, France, Italy, Poland, Czechoslovakia, Greece, Portugal, and Hungary. Import requirements for other countries under special considera- tion are negligible, -Import requirements for these selected European countries are based on the following total per caput supplies of fats and oils for all purposes as a percent of prewar for each country; 1947 75%; 1948 - 90%; 1949 100%, except for Italy (at 105 percent In 1949) and Portugal (at 100 and 105 percent in 1948 and 1949). 3. Estimated demand in 1947 with gradual annual increases. - 6 - ,APPendix CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 AattRWACRe_ lease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Table 2.. FATS AND OILS:. WORLD EXPORTS,, PREWAR AVERAGE, ESTIMATED ANNUAL 1946-1949-` Commodity Prewar 1946 1947 1948 1949 Edible Oils (1,000 metio tons oil or fat equivalent) Cottonseed 173 40 _36 45 45 Peanut 775 286 300 375 450 Soybean 400 61 65 75 150 Sunflower 29 62 64 100 100 Olive oil -158 11 23 40 65 Sesame 59 5 5 40 60 Total 1,594 465 493 675 870 Palm Oils Coconut 1,170 539 875 1,150 1,250 Palm kernel 318 233 225 250 270 Palm 495 211 230 ' 270 300 Babassu 18 . 16 9 25 Total 2,001 17566 1,340 1,695 _25 1,845 Industrial Oils Linseed 648 295 286 325 400 Castor 92 75 77 100 100 Rapeseed 41 6 9 35 40 Oiticica 4 15 9 10 10 Tung 81 3? 41 50 50 Perilla 36 0 0 5 10 Total 902 428 422 525 610 Animal Fats Butter 417 240 250 400 450 Lard 173 227 191 200 225 Tallow 177 100 116 130 150 Total 767 567 557 730 825 Marine Oils Whale 530 145 320 325 350 Fish 136 27 45 50 100 Total 666 172 365 375 450 Grand Total 5,930 2,630 3,175 4,000 4,600 1. Preliminary estimates for 1946 and 194? and revised estimates for 1935-39 average from the Office of Foreign Agricultural Relations, US Department of Agriculture, Preliminary esti- mates for 1948 and 1949 made in the Office of Intelligence Research, State Department, ? Appendix "D" CONFIDENTIAL, Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 C0771-77'TILTh Table 3. EATS= OILS: ESTIMATES OF AHTuAL PRODUCTIOY, CONSUIIPTION GOALS Aun IMPORT REQUIREMENTS1 FOR CZ' SELECTED EUROPEAN COUNTRIES, 1947, 1948 and 1949, WITH PRT:AR COMPARISONS CV c) c) (1,000 metric tons oil content) - c) c) elC) ?- 01 C) a_ X C) Prewar 1947 1948 1549 ? c) ,1 2 .1 Con- Net Import z c) Pro- Con- ret Selected Pro- Con- Net Import Pro- Con- Yet Import Pro- o 0 g auction sumption Imports Countries2 auction sumption Reomt. auction samption Reamt. auction sumption Reamt. Pi C) Pi a -4 4c 414 in 4C ?Cr) 141 C) c) 9 r. to al_ c) ?k P to .%- ar3 CDC) .... CY) 01 0) 63 94 135 365 478 14o 267 114 215 269 901 605 263 303 113 51 121 134 536 127 123 36 27 .1.1.stria Belgium Czechoslovakia France Italy Netherlands -Poland Portugal 37 56 101 305 319 70 89 80 89 . 171 165 660 490 222 154 102 52 115 64 355 171 152 65 22 43 65 115 325 430 85 120 82 97 191 200 795 595 270 184 142 54 126 85 47o 165 185 64 6o 47 75 125 345 455 100 145 84 117 218 222 875 695 306 207 150 70 a43 97 530 240 206 62 66 W M M U) 1,628 2,783 1,155 1,057 2,053 996 1,265 2,474 1,209 1,376 2,790 1,414 I-4 E- 1.-74 fl 0 a a 9 (13 ar3 Cr) Cr) Cr) W m m w -15 15 L. Import requirements for selected European countries are based on following total per capita supplies of fats and oils for all purposes as percent 0 O of prewar for e.--ch country: 1947 - 75; 1948 - 90; 1949 - loo, except for Italy at 75-90-105, and Portugal at 70-100-105 percent. 8 LI72. FunTary and Greece not includea in Euromean group because they are expected to be self sufficient. Other selected countries in the Middle East, LII- 7, 77 W Africa, Latin America and the Far East are not included because they are either net exporters or have negligible import reauirements. These W > countries are: Turkey, Iran, Bolivia, Brazil, Chile, Ecuador, Haiti, China, Yetherlanas East Indies, Philippines. > 2 2 m m m m PompixttelifpOelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 APPENDIX "E" Ruort of Working Group on Economic Aid to -Special Ad Hoc Committee Probable Supply-Requirements Position of Coal in Europe, 1947-51, Probable Demand for U. S. Coal, and Estimated Dollar Requirements for Coal from U.S?-,Poland. and Germany Production 1/ Table 1, attached, 2/ shows actual hard coal production in Europe in 1937 and 1976 and gives estimates of production for the years 1947 to 1951, inclusive. In 1937, 582-million tons of coal were produced in Europe; in 1946 production was ,406 million tons or 176 million' tons below 1937. Production in 1947 is expected to reach 454 tons, 128 million tons below the level of output in 1937. :Hard coal production in Europe is expected to attain the 1937 level of Output by 1951. 3/ ? Comparison of the magnitude of production between current and prewar levels does not fully reveal the deterioration in European coal production, for the quality of coal and the efficiency of consuming plants have deteriorated. It has been estimated that the quality of coal is now 5 to 7% below pre-war. The decline in quality has been caused by poor grading and segregation of different classes of coal. As the supply of coal increases, the grading and quality may be expected to improve. The country breakdown of coal production shown in Table 1 indicates that Britain, which accounts for about 40% of total European coal production, will not have attained her 1937 level of output by 1951. A number of reasons are likely to prevent England from attaining her pre-War level of coal pro- duction. The principal restraining influence is likely to be the shortage Of manpower. Given the shortage of Manpower and the need of the British to increase exports in order to overcome 1/ All data on production and consumption given herein refer To hard coal only. Brown coal has been omitted because it does not move in international trade to any ektent and because its inclusion would not materially affect the analysis. Note that broWn coal production is now not as far below pre-war rates as hardcoal production and that brown coal productic5n problems for the reason that brown coal is usually mined by open cast methods, are not as refractory as hard coal production probleMs; Germany produces very large quantities of brown coal; Austria and Czechoslovakia also produce significant quantities measured in relation to their needs. 2/ All tables are annexed hereto, 3/ Provided, of course, the requisite ineasures are taken. - 1 -' -Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL the long-term deterioration in her terms of trade, Britain is likely to restrict her coal production to the level of her internal needs, for owing to the labor shortage, she may be expected to try to maximize the net return on exports by con- centrating on the export of finished goods rather than of raw materials. Britain, of course, can increase her coal output to a greater extent than anticipated in Table 1, even within limita- tions imposed by manpower shortage, if she were able to increase productivity substantially. Over-all output per manshift had declined 10% between 1935. and 1947, from 1.17 to 1.05 tons per manshift. Even if productivity were restored to the pre7war level, (a 10% increase in productivity)1/ to produce. 230 million tons of coal, Britain would need between 125 to 140 _thousand. additional mine workers.2/ Although Britain might be able to raise the output per man abovethe average attained during the third decade she could do so only by introducing revolutionary changes in the conditions and methods of mining as outlined in the Reid Report of March 1945.3/ A glance at Table 1 shows that Poland might produce 77 million tons in 1951 4/, as compared with 66 million tons in 1937, some 91 million-under the Germanloccupation during the World WarII, 47 million in 1946, and an estimated 57 million in 1947. Reserves of Polich coal are extensive, ore occurences lend themselves to extensive mechanization, the systems of mining now in use are conducive to efficient operatien, so that from the technical point of view there is every reason to believe that Poland can attain her stated plan of 77- million tons per year. The Polish and Silesian mines before the war were among . the most productive in Europe. The Reid Report indicates that next to the U.S., Polish coal is most easily won. However, the attainment of the planned target of output depends upon the receipt of generating and other surface andunderground equip- ment. Poland has sought a loan .from the - World Bank to finance imports of required equipment. Although Polish plans call for the attainment of 77 million tons of production by 1949., this 1/ Productivity increased about 5% shortly after the intro- duction of the 5 day week. 2/ On the assumptions that output per man is 1.17, that each employee is Scheduled to work 250 days per annum and that absenteeism averages 10% compared with 15-16% now. Current employment is about 730-740 thousand. The tetal increase required would be lower if surface operations were ration- alized. 3/ "Coal Mining". Report of the Technical Advisory Committee, HMS Office, 1935. This is the official target figure (reduced from 80 mil- lion originally) for 1949. It is believed to be within the realm of attainment by 1991 rather than by 1949. - 2 Appendix "E" CONFIDENTIAL , Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Aw-gyfirgeq3i ?lease 1999/09/16 : CIA-RDP67-00059A000400130002-1 level of output has been deferred in Table 1 to 1951 on the presumption that even if credits were attained, delivery ? of equipment, particularly generating equipment, is likely to delay the attainment of target production. ? Polish ability .to export coal is likewise limited by shortage of rail trans- port facilities and port loading facilities at the Baltic .ports, The ability of Polish exports to keep pace with the rising level of coal production depends upon the installation of adequate'loading facilities at the Baltic ports and also upon sufficient all-rail transport facilities to Western countries .1/ . Table 1 indicates that an annual production of 132 million tons by 1951 is anticipated in the Ruhr-Aachen area. It is assumed that by that time that area will have attained the pro-war rate of daily production which was 440,000 tons. Although the Monnet Plan calls for production of 65- million tons of coal in France by 1950, this level of pro- duction is considered extremely ambitious in view of the shortage of labor and the low level of productivity of the French mines.. Prior to the war, French productivity was about- .85 tons per man-shift over-all, next to the lowest in Europe.2/ At the present time, productivity in French mines is .65 Tons per man-shift, only 75% of pre-war; it still ranks second lowest in Europe. France has been able to exceed her pre-war level of production by employing a total of 100,000 more workers than she did before the war. Almost -50,000 of these are POW's, which are now being returned. Assuming that productivity in Franco is restored to the pre- war level, (which would require a 30% increase in produc- tivity) France would require 285,000 workers to attain an output of 65 million tons or 15,000 workers more than currently employed after deducting 50,000 POW's.3/ After deducting the loss of50,000 POW's she would require 260,000 workers -(or 10,000 fewer than currently employed) to attain the 60 million tons shown in Table 1. Both of the preceding calculations assume continuation of the present six-day week.3/ The miners' union, however, has indicated that it will seek a. five-day weok, and if this is the case, then 345,000 workers (or 75,000 more than currently employed excluding POW's) will be required to produce 65 million tons and 285,000 workers (or 15,000 more than currently empl(!)yed excluding POW's) to produce 6o million tons. These data are -summarized on the following page. Poland may also experience shortage of manpower and technicans. 2/ -Productivity in the Belgian mines was slightly lower than that ?in the French mines. Calculations assume 10%. absenteeism as compared with 16% currently. - 3 - CONFIDENTIAL Appendix "Eri Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Amr-pypAIDEltiRelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Current total Employment Estimated Emplo yment Productivity To produce 65 million tons required at pre-war To produce 60 million tons on 5 day on 6 day on 5 Oay on 6 day week , week week week Total POWls Civilian 320,000 52,000 268,000 345,000 3k5,000 -285;000-- epoommwmpoomo 285,000 285,000 0.11 INN 41.? 285,000 260,000 260,000 ? Note that since calculations are based on output per man-shift of underground and surface workers, the labor requirements may be somewhat over-stated because the surface operations, such as preparation and maintenance, can e)cpand activities with less than proportionate increases in manpower. As for the other countries, Table 1 anticipates production in Belgium by 1951 will have been restored to the 1937 level; that production in Czechoslovakia will have increased by 15% over 1937; and that the Netherlands will produce roughly at the pre-war level. Consumptionl/ Table 3 compares pre-war with estimated post war consump- tion. Total European consumption in 1937 was 550 million tons and estimated total requirements for the period 1950-51 are 506 million tons. Consumption in 1950-51 is estimated to be 35 million tons higher than 1937 and about 100 million tons above the rates of consumption in 1947. An explanation of the estimated increase in requirements between 1937 and 1951 can be had by comparing individual country requirements for the respective years. It is esti- mated that Britain will require a 17% increase in the level of consumption or 30 million tons more than in 1937 owing to a higher level of export of finished goods, a higher standard of living for lower income groups, ,and a level of business activity sustaining full employment. The 225 million ton requirement for 1951 assumes that 5 to 10 million tons would be required for overseas bunkers. By 1951, Britain is expected to have increased her fuel oil consumption by an equivalent of 10 million tons of coal so that she may-av.. available 4o million tons more coal than in 1937, Although the Monnet Plan calls for an annual coal con- sumption of 87 million tons by 1950, this has been reduced by 7 million tons because it is highly probable that -shortage I/ Covers hard coal requfFeEgnts an consumption only. - 4 - CONFIpENTIAL Appendix Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL of labor in France will limit expansion of production. Even the 8o million ton level ofconsumption assumed in Table 3 is 18$ above the 68 million tons consumed in 1937 and may .also be rather high. 1/ It is assumed that the level of industry established for Germany will require a rate of coal consumption 83% of that of 1937. Assuming that German brown coal consumption will have attained pre-war levels by 1951, which is not unlikely . as .it is already over 90% of pre-war in the Western Zones, then Germany is likely to have available for internal con- sUmption1about'.147 million tons of coal, in SKE equivalents,2/ or 87% of pre-war consumption counting both hard and brown coal .3/ Requirements for Poland for 1951 estimated at 4o million tons, slightly lower than 1937 consumption. This would give her a per capita .consumption in 1951 of 1.7 tons. Per capita consumption in Britain is expected to increase from - about 4.1 tons in 1937 to about 14.,7 tons in 1951. The per. capita consumption in France is expected to increase from 1.7 in 1937 to 2 tons in 1951, while that of Germany is expected to be about 1.6 in 1951. The U.K., France, Germany, and Poland consumed 430 million tons of coal prior to the war,- as Compared with anestimated post-war consumption of 450 million tons. The other European countries consumed 120 million tons in 1937 and, according to the calculations in Table 3, are .expected to consume 136 million tons in 1951. These countries are therefore expected to increase their level of consumption by 11%. Assuming, as in ,the ECO report GPC/16, that half their energy requirements will be met by hydro power, so that they would require only about a 5% increase in coal supply, they would require only 6 million additional tons or a total of 126 million tons in 1/ Note, however, that the Monnet. Plan calls for steel production by 1950 which is over 80% above the 1938 level . and a like increase in rail carrying capacity. It aims to ,attain a level of production 25% above that of 1929, when 79 million tons of coal were consumed. If the level of output actually attained by 1950 is equal to but not higher than 1929, then obviously the Consumption of coal would be lower than 1929'8 consumption owing to the long term increase in industrial production relative to given units of coal consumption. 2/ Brown to hard coal ratio of 9 to 2 used herein. 3/ Germany produced about 42 million tons of brown coal prior to the war (in SKE equivalents). Pre-war consump- tion estimated to have been equalto 127 hard coal plus 42 million brown coal or a total of 169 million tons. - 5 .Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL 1951. Total European requirements between 1950 and 1951 are therefore expected to range between 575 and 585 million tons.1/ Note that in estimating requirements account has,not been taken of current inventory needs, which are probably substantial. Supply-Requirements Position Tables 1 and 3 indicate that Europe was self-sufficient in coal in 1937 and, in fact, .had a net exportable surplus of. some 30 million tons, a good deal of which was used for overseas bunkers. The estimates in these tables indicate that by 1951 Europe will probably have become self-suffi- cient in coal once again. At the 1947 rate of production, Europe is 125 million short of. attaining the rate of production necessary to become self-sufficient by 1951. Coal con- sumption in Europe in the years, 1947-1951, inclusive is estimated in Table 3. The estimates indicate that. in 1947 Europe will consume 482 million tons (446 from indigenous production plus 36 million from the U.S.). Consumption in 1948 is estimated at 512 million tons, comprising 472 from indigenous production and from 38 to 43 million from the U.S. Consumption in 1949 is estimated at 552 million tons comprising 524 fr9m indigenous production plus 25 to 30 , million tons from the U.S. The Table indicates that total consumption is expected to increase almost 15% in 1947 as compared with 1946, by 10% in 1948 as compared with 1947, by 3% in compared with 1948, and by 6% in 1950-51 as compared with 1949.- Although the gap between European indigenous production and requirements in 1949 is still expected. to be over 50 million tons, the rate of U.S. exports to Europe is expected to begin declining sometime in 1948 or at the beginning of 1949 owing to the fact that ,the demand for U.S. coal is restricted to the traditional coal importing countries of Europe, whose purchases of U.S. coal will begin declining as the level of exports from Germany and Poland increases.2/ For the reason that Britain is not likely to .11 Note that the extent to which coal will be'displaced by substitution to fuel oil and other forms of non-coal energy by dieselization, -use of oil for heating and so forth, have not been taken into account except in the 'U.K. Other countries, notably Belgium, have ambitious conversion programs. 2/ Demand for U.S. coal is estimated in terms of the supply requirements position of the traditional European coal im- porting countries without reference to their dollar resources for the purchase of U.S. coal. This report also presumes that the UK will not purchase US coal in significant quan,- tities or over considerable length of time and that her current purchases were induced by the need to avoid entering the winter of 1947-48 with a low inventory. - 6 - Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 A444.-W-claRelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 import coal in any substantial. quantities and that Germany, despite her shortage of coal for internal consumption, will be required to export coal for political and economic reasons, these traditional coal export countries will probably be unable to bridge their respective- difference between supply and requirements until 1950-5]. while the traditional coal- - impOrting countries will have bridged the difference by the end of 1947 as a result of the high level of U.S. export. Table 4 indicates the supply requirements .position of the U.K. in the six year period, 1946 to 1951. It indicates that Britain- is unlikely to resume exporting coal before 1950 ,Euld that her exports are likely to be small as compared with her prewar volume of exports of about 50 million tens, of which 35 million was exported to the Continent. ? Table 5 shows the supply requirements position for Germany in the six-year period, 1946 to 1951. Table 6 presents similar figures for Poland. The traditional .coal importing countries imported on a not basis about 72 millidm tons of coal annually in 1935-38. The data in Table 8 show that these countries will probably have an equivalent- net import requirement in 1950-51-. Their current net import requirement is probably higher than 72 million tons owing to deterioration in the quality of coal, deterioration of industrial equipment, and need to increase stocks .1/ The current level of net import demand is, therefore, probably 75 million tons minimum. These countries, as is shown in Table 2, will probably import from other European sources 19 million tons in 1947, 32 million tons in 1948, 45 million tons in 1949, 63 million in 1950, and will have available in 1951 some 74 million tons from other European sources; or enough coal to meet total net import requirement without drawing on U.S. supplies. Residual demand on the U.S., in the respective years, is estimated at about 53, 40, 28, 9 and probably zero million tons. The U.S. exported in the months of April and May of 1947 at the rate of 3.8 million tons per month to Europe. Assuming availability of coal, and adequate inland and ocean freight facilities, the U.S. should be able to export about 45 million tons of coal to Europe per ?year. A comparison of Tables 2 and 7 .indicates that the demand upon and the probable supply of U.S coal will probably be in balance in 1948 and that thereafter U.S, export capacity might be greater than demand. An attempt'. is made in Table 9 to estimate the dollar requirements for U.S. coal in the years 1947-51, inclusivP. .1/ Although stock requirements are not known, they are probably substantial. - 7 - Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 AFPrikWil*WRelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 These estimates, are, of course, subject to wide margins of error for they are based on estimates of the price of export. coal, of ocean freight rates, and of the proportion of estimated exports carried-in U.S. flag vessels over a period of five years. The total dollar cost for the five-year period is estimated at between 1,665,000,000 and two billion dollars , An estimate of the probable dollar cost which the coal importing countries will have to pay for German and Polish coal is shown in Table 10.- It is .assumed therein that the price of Polish and German coal will be determined by the - average price of U.S. coal delivered in Europe as the U.S. coal. at least as long as it exceeds 510 per ton, may properly be considered marginal. In column 8 of Table 9 LP shown the estimated average dollar cost per ton. These estimates are used in Table 10 .(see column 2) for determining the probable ? price of Polish and German coal. It, is assumed in Table 10, however, that as long as a sellers' market for coal obtains, the price will be determined by the export price of the -coal producing country whose costs are highest. This is likely to be Britain. As the cost of producing British coal is probably now in excess of $ the mine, it is assumed that $10 will be the price for European coal as long as British coal is required. The estimates shown in Table 10 .indicate that the dollar cost of German coal, assuming that all German coal ex-Ports will be paid for. in dollars, will be about 51,050,000,000 for the five-year period. It is'assumed, as in ECO/GPC/16, that approximately one-third of Polish coal exports will be paid for in dollars. The estimated total cost of Polish coal for the five-year period is S487,000,000. The total dollar cost for coal from all three sources -- U.S., Germany, and Poland, comes to between $3,200,000 and $3,500,000,000. Note that the dollar requirements for capital goods necessary to raise the capacity of European coal mines have not been included. The-ECO report estimates that $1,565,000,000 are required for maintenance and development and $260,000,000 for new capital equipment; only $50,000,000 worth of equipment are estimated to be requiredfrom the US, although more might be -obtained if more US capacity were . available. The ECO -report presumes that for most of the equipment, dollar expenditures would not be required as most Of the equipment could be produced in Europe. However, the equipment to be imported from Germany, which by.far is the largest supplier of such equipment, will have to be purchased for dollars. The ECO estimate of dollar requirements for equipment is therefOre on the low side. ,A more determinate estimate of dollar requirements for capital equipment will: have to wait upon studies:now in process under the auspi0.09 of ECO and the Paris ecoziomic conference. - 8 - Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 APef/90!lease 1999/09/16 : CIA-RDP67-00059A0.00400130002-1 Comparison between Foregoirla and ECO Report Production Production data as given in Table 1 are compared with ECO/GPC/16 below: . Per Cent Increase This Over Year Report2/Preceding. ECO Report2/ Per Cent Increase Over Year Preceding 1937 .572 56o 1947 454 440 1940 480 6% 490 11% 1949 529 10% 525 7% 1950 573 8% 550 5% 1951 589 3% 570 4% 1. The difference in 1937 is attributable to the exclusion of Spanish production in the ECO report. 2. 1947.. Spanish production about 10 million tons excluded in ECO report. This roport2/ presumes that Ruhr Aachen will produce 70 million, tons, an average for the year of 230,000, per day, .and the Saar 10 million tons, 80 million' in all. The ECO report is low by 8 million tons, This report .also presumes that UK will fall below the 200,000,000 . ton target by 2.million tons. 3. 1948 and Thereafter.. On an overall basis, ECO estimate for 1951 is reconcilable with this reportif Spanish production is are to estimates in farmer. However,. individual-country estimates vary, as follows( for 1951): U.K. Germany Poland France Belgium Netherlands Czechoslovakia Saar Other ECO Report This Report 240 -10 124 / 8 3/ 8o - 3 6o 28 /2 12 0 18 /2 0 /13 8 / 7 (Exclusion of Spanish pro- duction) ? I/ Millions of tons. 2/ "This report" refers to foregoing report as distinct - from ECO report., 3/ There is no reason for presuming, on technical or physical grounds, that the Ruhr - Aachen area cannot attain the pre-war level Of production. - Appendix "E" - CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL It will be noted that the ECO report, as compared with this _report, closes the gap between the current and projected levels of production at a faster rate in the early years and a slower rate in the later years. Consumption The ECO report presents a 1951 requirement for Europe of 560 million tons; ? this report, of 586 million tons At least 10 million tens .of the total difference of .26 million tons is attributable to the exclusion of. Spanish requirements in the former report. The estimates of British requirements .do not differ material1y--225 in this report; 121 in the gco report. This report presumes that Germany will require 83% of pre-war consumption; the ECO report, 75% of pre-war. The former is probably closer to current "level-of-industrythinking. The difference for Germany is 10 million tons. Of the total difference of 26 million tons, 20 have therefore. been explained. The remaining difference can be-explained by French require- ments. The ECO report presumes a 5% increase for all . other countries,.. including France. This allows France post-war- requirement of 71.5 million tons. This is probably too low. An 80 million ton.requirement is allowod in this report. The remaining differences are negligible. Dollar Costs ECO Re ort This Report Billions of Dollars) 1.663-1.982 0.487 1.051-1.066 U.S. Coal Sl.550 Polish Coal o.4-oo German Coal 0 Considering the differences in methoA, the two estimates are fairly close. The ECO report writes off the dollar cost of German coal while this report includes, the cost of German coal. ? - 10 - CONFTDENTI4L Appendix "E Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Appri:Nfeict-f9irlease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Table 1. European Hard Coal Production, 1937, 1946 and estimates for 1947-51, inclusive. Millions of Metric Tons 1937 1946 1947 1948 1949 1950 1951 Belgium 30 23 24 25 27 28 30 Czechoslovakia 17 15 17 18 19 20 20 France 1/ 44 47 53 55 57 58 60 Netherlands 13 8 10 10 11 12 12 Germany 2/ 141 55 70 85 100 125 132 Poland 3/ 66 47 57 62 68 73 77 U.K. 244 189 198 210 220 230 230 Saar 13 8 10 11 12 13 13 Others 14 14 15 15 15 15 ";, 15 Total . 582 406 454 480 529 573 589 I/ Compare Monnet Plan Targets (which includes about 1-2 million Tons of liguite, which is excluded in table above): 1947,55 million; 1948, 59; 1949, 62; 1950, 65. Manpower in France is likely to be too tight and the additional production too marginal to permit an expansion to 65 million tons. The point of optimum returns, in fact, may be exceeded at a level well below 60 million. 2/ Assumes pre-war daily output of 440,000 tons per day in Ruhr- Aachen areh will have been attained by 19514 ? 3/ Includes former German Silesia. - 11 - Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 App.14idARSUFAMease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Table 2. Probable European Demand for U.S. Coal 1947-1951 1/ Year 1000 Metric tons European Export Availability Germany Poland2/ U.K. Saar _ Total? Residual Demand on USA3/ 1947 9 o .. 0 1 19 51 - 56 1948 14 16 0 2 32 38 - 43 1949 16 25 0 4 45 25 - 30 1950 20 33 5 5 63 7 - 12 1951 27 37 5 5 74 0 - 1 1/ Covers traditional coal iinporting Countries only, whose .net import requirements are estimated at 70-75 million tons per annum. They imported about 72 Million tons per annum in the period 1935-38. , 2/ Other than USSR, which is expected to cease importing coal from Poland in 1950, 3/ Demand On USA is considered residual because. of-high transportation costs. USA export availability estimated at 45-50 million tons to Europe assuming favorable supply of coal and of inland and overseas transport. - 12 - Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 CONFIDENTIAL Table _3. Hard estimates Codl,Consumption for 1947, 1950-51. Estimate Actual in Europe: 1929, 1937, .1946 and (millions of metric tons) Estimate for for 1929 1937 1946 1947 1948 1949 1950-51 Ta 1,84 192 1981/ 199 225 Gormany2/ 136 127 433/ 6o 105 France .79 68 - 58 68 8o4/ Saar 7 75/ 65/ 7 8 Belgium- 34 31 27 31 33 Luxembourg Italy 14 13 7 11 14 Netherlands 14 15 11 156/ 16 Czechoslovakia 17 16 15 17 19 Poland7/ _ 51 43 32 408/ 40 Scandinavia/ 13 19 10 13 20 Iberia10/ 10 8 lo 11 11 Balhans11/ ?4 3 . 2 3 5 others12/ lo 8 6 7 10 Totals 573 550 425 48213/ 51214/ 55215/ 586 1/ Includes stock Irawdown. 2/ All data estimated. 3/ Actual consumption probably higher owing to inventory draw down. 4/ Monnet Plan estimated requirement is 87 million tons; this is redueedby 7 million on presumption that Monnet Plan and other European economic plans together create excess indus- trial Capacity, a matter which might ultimately be reconcil by the Conference for European Economic Recovery. . 5/ Estimated. 6/ Netherlands could get an additional 1 million tons of coal from IJS. if her dollar resources were adequate. - 13 - Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Arff9ivr..fIZREelease 1999/09/16 : CIA-RDP67-00059A000400130002-1 - V. Includes German Silesia. Figures for 1929 and 1937 estimated. 0/ Retention of coal could be reduced by 6 million tons if transport were available. .2/ Covers Denmark, Sweden, Norway and Finland ioJ Spain and Portugal 11/ Greece, Bulgaria, Roumania, Hungary and Yugoslavia 12/ Austria, Ireland, Switzerland 12V European production in 1947 estimated at 454 of which 8 million from Poland is destined for USSR, leaving 446 for Europe. U.S. exports estimated at 36 million, giving . Europe availability of 482 million tons. 14/ European production equals 480 less 8 million to USSR plus 38 to 43 million from USA is/ European production equals 529 less 5 million to USSR pluS 25-30 from USA. Country breakdown for 1948 and 1949 not given as it would involve too many assumptions regarding the distribution of coal imports. - 14 COEFIDENTIAL Appendix "E" Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 ApporrisiEFRrillelease 1999/09/16 : CIA-RDP67-00059A000400130002-14 Table 4. U.K.: Probable production and Exports of Coal, 1946-1951 Production Exportsl/ ConsuMption2/ (millions of metric tons) 1929 263 79 184 1937 244 . 52 192 1946 189 3; 198 3/ 1947 198 0 198 4/ 1943 210 0 . 210 . 1949 220 . 0 220 1950 230 5 225 5/ 1951 230 F., , 225 5/ 1/ Excluding overseas bunkers .2./ Current requirements estimated at 220 million tons, Requirements in 1951 at 225 million tons Accomplished by drawdown of stocks Of which onlyabout 190 will be available for consumption owing to need to augment stocks. UK will have imported about 1 million tons US coal by end of 1947. Includes 5-8 million tons for overseas bunkers, leaving about 220 million for internal use. 4/ - 15 - Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 . Akailitielease 1999/09/16 : CIA-RDP67-00059A000400130002-1 Table 5.. 1929 1937 Germany: 1946-1951 Production 135 141 Probable production and Exports of Coal 1/ Available for .Exports internal con- (millions of Metric tons). sumption 2/ NA 2/ 136 28 127 4/ . 1946 55 12 43 5/ . 1947 ' 70 lo ? 6o 1940 85 14 71 1949 loo 16 84 1950 125 20 105 1991 132 27 105 I/ Present rump Germany excluding Saar. 2../ Rump Germany excluding Saar consumed about 127 million . tons of hard coal in 1937. New level of industry decisions will probably require about 105 million tons, 83% of 1937 ' consumption. It is assumed that Germany will ,retain a major portion of rising coal output; that shy will retain her full requirement by 1950 anthat -thereafter incre- ments in output will redound largely to the benefit of the rest of Europe. Consumption data are rough estimates as data on movement of coal from Silesian fields to rest of Germany are not available. Probably between 22-25 million tons. Production less exports are lower than this figure because? . part of Silesian coal production was consumed- in Germany. . Available from current production. Actual consumption was probably higher owing to Oraw-own of stocks. - 16 Appendix "E" COEFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 1999/09 il ApprigviestEpraelease 16 : CIA-RDP67-00059A000400130002-1 Table 6. Poland: Probable production and Exports of Coal 1946-1951 Available for In- , Year Production ternal Consumption Exports Total_ USSR Other (millions of metric tons) 1937 66 43 234/ NA NA 1946 47 32 15 10 5 1947 57 4o.?../ 17 8 9 1948 62 .38 24 8 163/ 1949 ? 68 38 30 5 25 1950 73 40 35 o 33 1951 77 40 40 o 37 I/ Including Upper and Lower Silesia 2/ Poland requires about 36 million tons and according to Polish Minos Administration, is retaining 40 million owing to transport shortages. 3/ 2.11/ Assumes-considerable improvement in transport facilities at Baltic ports. Present optimum transport capacity for coal is about 5-10 million tons to areas other than USSR, com- prising 7 to 7,5 million by way of Baltic- ports and remainder by all rail movement. Delivery of port loading equipment in time to accomplish a significant increase in port capacity by 1948 is doubtful, Of which a considerable proportion was consumed in Germany. - CONFIDENTIAL Appendix "F" Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 co ITIDENTIAL Table.7. Year Estimated Coal Exports available to European Coal Importing Countries 1/ 1946-1951 FrOra European Sources From USA .Total (millions of metric tons) 1946? 19 17 36 1947 19 36 55 1948. 32 38 - 43 70 75 1949 45 25 - 30 70 - 75 1950 63 7-12 70 75 -1951 74 0 - 1 74 - 75 1/ Assumes European Coal importing ? million tons of net imports. Source: See preceding tables. countries require. 70 - 75 Table 8. Estimated net import requirements of Traditional European coal importing countries in 1950-1951 1/ (millions of metric tons). Total ' - Net import Country Production Requirements Requirements Belgium-Luxembourg 30 33 3 France 6o 80 20 Neth:,rlands 12 16 If Italy. 1 14 13 Scandinavia 0 20 20 Others 1 13 12 2/ Total 104 176 72 . I/ Derived from preceding tables. 2/ Covers Austria, If million; Portugal, Ireland, 2; Switzerland, 3; Greece, 1. - 18 - Appendix "E" CONFIDENTIAL Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 Table 9. Estimated dollar cost for U.S. coal, C.I.F., 1947-51 , (1) (2) (3) (4) (5) (6) (7) (8) U.S. Coal Coal FOB Cost FOB Ocean freight Tonnage carried Est. freight Total dollar Av. dollar Exports Pier 1/ Pier per ton 2/ on U.S. flag cost cost cost per ton (1) x (2) vessels 3/ (4) x (5) (3) plus (6) ? 36 $1o.oqy $360.0 $10.00 27 ? $270 $630 $17.33 38-43 9.75-10.00 370.0-430.0 10.50-11.50 26-31 273-356 643-786 16.92-18.28 25-30 9.00-9.25 225.0-277.0 8.50-9.00 11-16 93-144 318-421 12.72-14.03 7-12 8.00-8.00 56.0-96.0 8.00-8.25 2--5 16-41 72-137 10.29-11.58 0-1 7.75 0-07.8 0 o-8 7.75 106-122 1011-1170.8 Assumes full employment in US and conseouent high level of internal coal assumed to vary directly with foreign demand. 652-811 1663-1982 consumption. Price fob pier is also Assumed to vary directly with foreign demand for coal. Differences in rates to various destinations are smoothed over. Approximately 75% of coal carried in US vessels in 1947 and 9 million tons carried in foreign flag vessels. Foreign flag tonnage assumed to increase in coming years so that ton.r.age carried by US flag vessels -will be residual except for statutory requirement that coal bought with 2xim,-bank funds be carried in US vessels. Price of US coal averages about $10.50-$11.00 since new wage contract. Pre-contract price averaged about $9.50. Appendix "E" 0-1 Approved For Release 1999/09/16 : CIA-RDP67-00059A000400130002-1 ? Table 10. Dollar costs to Europe of Polish and German Coal Exports, 1947-51 .%- (1) (2) (3) (4) (5) (6) (7) CV 0 Av. price AssuMed price German. Coal Dollar cost Polish Coal Polish Exports Dollar cost of 0 US coal per European Ex- .Exports y of GermanExports U at 1/3 of 5 3/ Polish Coal 1/1 0 .. co ton Port coal Exports (6) 'ac (7) .%- (2) x (3) 0 0 NI' C) 1947 $17.00 $17.00 10 $100-115 1_1_/ 9 3 .?_i $ 51 0 0 1948 17.00-18.00 17.50. 14 245 16 5 87 ?C 1949 13.00-14.00 13.50 16 216 25 8 108 a) ul 1950 10.00-12.00 11.00 20 ,220 33 11 121 0 1951 7.75 10.00 27 270 37 12 120 0 C? N- Total 1051-1066 487 to IL C) GC ci Total Dollar Costs (.) - Country 1947 1948 1949 1950 1951 to Total .%- ai USA $630 $643-786 $318-421 $72-137 $0-8 $1663-1982 0 Germany 100-115' 245 216 220 270 1051-1066 01 01 Poland 51 87 108 121 120' 487 01 Total 781-796 975-1118 642-745 413-478 390-398 3201-3535 .%- a) co 3] CIF Europe as a) a) Ei Millions of metric tons DC 8 Assumes, as does E0O/5PC/16, that one-third of Polish coal exports will be paid for in dollars. Polish coal UL is now selling for between $14-18 per ton at Polish border; ECO estimate of $10 per ton for Polish-coal appears low. 73 a) p,> V Current German export price is about $10 per ton. If no increase occurs, then cost to importing countries is estimated L' at 100 million dollars. If price is raised to $15.00 then cost is estimated at 115 'million dollars. It is assumed CL 0_ that the price of German export coal will be raised in subsequent years in line with the policy of making Germany 2 CL m ?c ? .1547 PRODUCTION Ingots ? 1948 1949 1941 - CONSUMPTI07 Ir,,,,ot Eouivelent 1948 . 1949 1947 RuiR EqE=TT s .Ingct Eouivalent 194S 1949 Canada United States 2,700 ? 78,000 2,750 79,000 2,800 80,500 2,700 70,200 2,750 71,100 2,800 72,450 2,700 71,200 2,750 72,100 2,800 - 73,1450 Mexico 280 ? 300 320 . 620 640 bso 700 700 700 Cuba. 100 . 110- 120 100 110 120 Other Central America ? 100 110 110 100 110 110 Total North & Central America 80?1-9-80 82,05o 83,620 73,720 74,710 76,160 74,800 75,770 77,180 Colo:flbia 150 155 160 160 lbo a6o. Ecuador. , 1)4 11! 1 4 14 14 14 Venezuela.. 120 130 150 150 .15o 150 ParagParaguay14 14 14 14 14 14 Uruguay 100 100 110 100 100 110 Bolivia ---- 18 18 18 18 18 18' Argentina 150 ? 180 200 1 200 1,300 1,500 1500 1,500 1,500 Peru --- --- 90 100 110 .110 110 110 Chile 35 4o 50 170 180 190 190 190 190 Brazil 250 270 300 650 700 750 750 750 750 Total South America 435 490 550 2,526 2,711 3,016, 3,006 3,006 3,016 Austria 300 400 500 300 350 400 boo 600 600 Belgium-Luxembourg 5,000 5,500 6,500 1,250 1,500 2,000 2;000 2,000 2,000. Czechoslovakia 1,850 ? 2,100 2,400 2,000- ? 2,300 2,500 2,500 2,500 2,500 Denmark --- --- 350 350 350 450 45o 450 pinipnd 75 .85 90 250, 3co 350 390 ? 390 390 France 4,84o ? 4,50o 6;5x 5,700 b,27o. 6,900 8,000 8,000 Germany. 3,500. 5,000' 8,000 ? 3,500 5,000 8,000 15,000 15,000 ?185:000000 Greece --- --- 100 100 - 150 150 150 ? 150 Hungary 350 400 450 350 400 4 450 560 560 560 Approved For Release 1999/09/16 : CIATRDP67-00059A000400130002-1 SECRET PRODUCTION' Ingots 1947 1948 1949 1947 cc7s=7.1= Ingot Equivalent 1948 1949 REQUIREYETTS Ingot 7quivalent 1947 1948 1949 Italy 1,700 2,000 2,400 1,700 2,000 2,400 3,000 3,000 3,000 7etherlands 100 120 150 500 600 700 1,500 1,500 1,500 Yorway 30 50 70 330 350 370 1400 0-00 400 Poland 1,600 1,950 2,200 1,300 1,400 1,500 1,750 1,750 1,750 Portugal --- --- 100 loo 120 150 150 150 Rumania 100 150 200 ? 150 250 300 450 450 450 Spain 650 65o 650 ? 650 650 650 650 650 650 Sweden 1,200 1,200 1,200 1,700 1,700. 1,700 1,700 1,700 1,700 Switzerland negl. negl. 200 250 300 '400 450 500 Turkey 50 ,100 lop 27 325 325 350 350 350 United Kingdom 13,000 13,000 13 ,000 11,000 11,030 11,000 12,500 12,500 12,500 Yugoslavia .50 75 loo 100 150 200 350 350 350 Total Europe 34,395 38,220 44,510 31,805 35,345 42,665 52,850 52,900 52,950 Union of South Africa 650 700 750 1,250 1,300 1,350 1,300 1,300 1,350 Other, incl. Egypt, Algeria, Tunisia, French Morocco, Belgian Congo, French Equatorial Africa,- =Trench Test Africa, 'Northern -Rhodesia SOO 850 900 900 900 900 Southern Rhodesia, British '..lest Africa. Total Africa 650 700 750 2,050 2,150 2,250 2,200 2,W) 2,250 'Burma 45 6o 70 70 70 70 China 30 40 50 300 300 350 500 500 500 India 1,100 1,300 1,500 1,100 1,300 1,500. 1,500 1,500 1,500 Indochina 10 10 50 100 100 100 Japan 1,000 1,500 2,000 1,000 1,500 2,000 3,000 3,000 3,000 Korea 20 30 70 20 30 50 50 50 50 Malaya 150 150 200 250 250 250 Nanchuria Yetherlands East Indies 150 250 350 400 400 400 CIA-RDP67-00059A000400130002-1 CAD v- Zi a as a) 47) 0 u_ 73 CD 0 0- 0- SECRET 1947 ? PRODUCTIONS Ingots 1948 1949 1947 CONSUMPTION Ingot Equivalent 1948 1949 - REQUIREMENTS ? Ingot Equivalent 1947 1948 1949. c4i 0 -CD E130 ---.-- CO a C:D 'cr 0 0 P40 -4 < 01 in 0 0 C? i?- to . Philippine Republic Sian Total Asia Australia.. New'Zealnd U.S.S.R. ? TOTAL WORLD 1,150 1,500 .. 7-- 16,500 136,610 --- 2,870 1,600 18,500 144,490 3,620 1,700 ___ 20,000 154,750 120 20 2,915 1,500 350 16;500 131,136 130 40 _ 3,770 1,600 350 18,500 139,136 140 60 4,770 1,700 350 20,000 150,911 150 70 6,090 1,500 350 24,500 165,296 150 70 6,090 1,600 350 24,500 165,416 150 70 6,090 1,700. 350 24,500 168,036