"(b) United States Government agencies are authorized to pay the costs of health and accident insurance for foreign participants in any exchange-of-persons program or any program of furnishing technical information and assistance administered by any such agency while such participants are en route or absent from their homes for purposes of participation in any such program.'

SEC. 9. Title V, chapter 3, of the Mutual Security Act of 1954, as amended, which relates to repeal and miscellaneous provisions, is further amended as follows: (a) Section 544, which relates to amendments to other laws, is further amended by adding the following new subsections:

"(c) In section 4 of the Act of May 26, 1949 (63 Stat. 111, 5 U. S. C. 151c) insert after the words 'such functions' the following: ', including if he shall so specify the authority successively to redelegate any of such functions,'.

"(d) In the first sentence of section 32 (b) (2) of the Surplus Property Act of 1944, as amended (50 U. S. C. App. 1622 and the following), after 'any agency thereof', insert ', including amounts received in repayment of principal or interest on any loan made under section 505 (b) of the Mutual Security Act of 1954, as amended,'.

"(e) Section 933 of the Foreign Service Act of 1946, as amended (22 U. S. C. 1148) is hereby amended by inserting after 'continental United States' where it appears in both subsection (a) and subsection (b) of that section', its Territories and possessions,'.

"(f) Section 1441 (c) of the Internal Revenue Code of 1954 is hereby amended by inserting after paragraph 5 the following new paragraph:

"(6) PER DIEM OF CERTAIN ALIENS. No deduction or withholding under subsection (a) shall be required in the case of amounts of per diem for subsistence paid by the United States Government (directly or by contract) to any nonresident alien individual who is engaged in anv program of training in the United States under the Mutual Security Act of 1954, as amended.'. "(g) Section 1011 of the United States Information and ducational 7xchange Act of 1948, as amended (22 U. S. C. 1442), is amended by inserting '(a)' before "The Director', by deleting everything after the words 'national interests of the United States', by inserting a period at that point, and by inserting the following new subsections:

(b) The Director is authorized to assume the obligation of not to exceed $28,000,000 of the notes authorized to be issued pursuant to subsection 111 (c) (2) of the Economic Cooperation Act of 1948, as amended (22 U. S. C. 1509 (c) (2)) (together with the interest accrued and unpaid thereon) and to obtain adances from time to time from the Secretary of the Treasury up to such amount, less amounts previously advanced on such notes, as provided for in said notes. Such advances shall be deposited in a special account in the Treasury available for payments under informational media guaranties.

66 61 (c) The Director is authorized to make informational media guaranties without regard to the limitations of time contained in subsection 413 (b) (4) of the Mutual Security Act of 1954, as amended (22 U. S. C. 1933 (b) (4), but the total of such guaranties outstanding at any one time shall not exceed the sum of the face amount of the notes assumed by the Director less the amoun's previously advanced on such notes by the Secretary of the Treasury plus the amount of the funds in the special account referred to in subsection (a).

"(d) Foreign currencies available after June 30, 1955, from conversions made pursuant to the obligation of informational media guaranties may be sold, in accordance with Treasury Department regulations, for dollars which shall be deposited in the special account and shall be available for payments under new guaranties.

"(e) Notwithstanding the provisions of subparagraph 413 (b) (4) (E) of the Mutual Security Act of 1954, as amended (22 U. S. C. 1933 (b) (4) (E) ), (1) fees collected for the issuance of informational media guaranties shall be deposited in the special account and shall be available for payments under informational media guaranties; and (2) the Director may require the payment of a minimum charge of up to fifty dollars for issuance of guaranty contracts, or amendments thereto.

"(f) The Director is further authorized, under such terms as he may prescribe. to make advance payments under informational media guaranties: Provided, That currencies receivable from holders of such guaranties on account of such advance payments shall be paid to the United States within nine months from the date of the advance payment and that appropriate security to assure such payments is required before any advance payment is made.

แ

(g) As soon as feasible after the enactment of this section, all assets, liabilities, income, expenses, and charges of whatever kind pertaining to informational

media guaranties, including any charges against the authority to issue notes provided in section 111 (c) (2) of the Economic Cooperation Act of 1948, as amended, cumulative from the enactment of that Act, shall be accounted for separately from other guaranties issued pursuant to subsection 413 (b) of the Mutual Security Act of 1954, as amended (22 U. S. C. 1933 (b)): Provided, That there shall be transferred from the special account established pursuant to subsection (a) into the account available for payments under guaranties other than informational media guaranties, an amount equal to the total of the fees received for the issuance of guaranties other than informational media guaranties, and used to make payments under informational media guaranties.'.'

(b) Section 545, which relates to definitions, is amended as follows:

(1) Add at the end of subsection (h) the following: "Notwithstanding the foregoing provisions of this subsection (h) and for the purpose of establishing a more equitable pricing system for transactions between the military departments and the Mutual Defense Assistance Program, the Secretary of Defense shall prescribe at the earliest practicable date, through appropriate pricing regulations of uniform applicability, that the term 'value' (except in the case of excess equipment or materials) shall mean

"(a) the price of equipment or materials obtaining for similar transactions between the Armed Forces of the United States; or

"(b) where there are no similar transactions within the meaning of (a) above, the gross cost to the United States adjusted as appropriate for condition and market value."

(2) Add the following new subsections:

"(j) The term 'agency administering nonmilitary assistance' shall refer to any agency to which authorities and functions under chapter 3 of title I, title II, title III, or title IV of this Act are delegated or assigned pursuant to authority contained in sections 521 and 525 of this Act.

"(k) The term 'officer administering nonmilitary assistance' shall refer to any officer to whom authorities and functions under chapter 3 of title I, title II, title III, or title IV of this Act are delegated or assigned pursuant to authority contained in sections 521 and 525 of this Act."

(c) In section 548, which relates to unexpended balances, strike "heretofore", substitute "1957" for "1956", and strike out the colon and the remainder of the sentence following "Act" the second time it appears and insert a period. (d) Add the following new section:

"SEC. 550. SPECIAL PROVISION ON AVAILABILITY OF FUNDS.-An amount equal to 25 per centum of the funds authorized to be appropriated for any fiscal year for purposes of chapter 3 of title I, title II, title III, and sections 403 and 420 of the Act is authorized to be continued available for three months beyond the end of the fiscal year for which appropriated."

FOREIGN RESEARCH REACTOR PROJECTS

SEC. 10. As one means of furthering peaceful uses of atomic energy on an international basis, there is hereby authorized to be appropriated to the President for the fiscal year 1957 not to exceed $5,950,000 for use by the President, on such terms and conditions as he may specify, for research reactor projects undertaken or authorized by foreign governments which shall have entered into agreements for cooperation with the Government of the United States concerning the peaceful uses of atomic energy.

Chairman RICHARDS. We are privileged to have as our first witness this morning Mr. Herbert Hoover, Jr., Under Secretary of State. Mr. Hoover, we are glad to have you, sir, and would you proceed in your own way?

STATEMENT OF HON. HERBERT HOOVER, JR., UNDER SECRETARY OF STATE

Mr. HOOVER. Thank you, Mr. Chairman.

Mr. Chairman and members of the committee, I would like to read, if I might, a short statement that I have as to the policy objectives of the program.

I come before your committee this morning in support of the President's program for mutual security.

I do not intend to go into any great detail. The Secretary of State, who is returning to Washington tomorrow, plans to appear before you shortly to report on the SEATO meeting in Karachi and his trip through 10 of the countries in the Near and Far East.

He will undoubtedly touch upon the importance of this program in the areas he has visited. Mr. Hollister, the Director of ICA, who is with me this morning will discuss the details of the proposed program which is before your committee.

I do, however, wish to take this opportunity to express my conviction that the mutual security program is a fundamental and essential aspect of the conduct of our foreign policy today.

IMPORTANCE OF THE MUTUAL SECURITY PROGRAM

Many of the members of this committee have recently visited the areas whose problems and needs will be considered in connection with this program and I am sure that no one on this committee is unaware of the tremendous importance of the program.

It is vital to the security of the United States and of the whole of the free world. We are looked upon for leadership in the free world, and the consequences of what we do or fail to do with respect to the mutual security program reach far beyond our own national frontiers.

The world today is one in which we are our friends cannot relax our collective efforts for stability and security. There is no basis for any hope that the long-range objectives of international communism for world domination have been abandoned. We must, therefore, place continued reliance on the mutual security program and its provisions for continued economic and military assistance.

We seek, on the one hand, to make outright aggression unprofitable, and thus unlikely. To this end, we have supported mutual defense agreements throughout the world, and have supplied arms, materiel, and training to assist in the defense of friendly nations.

Without abandoning defensive efforts, we seek, at the same time, to help the construction of healthy economies and free institutions. and thus promote stability and minimize the threat of subversion.

THE SOVIET NEW LOOK

The Soviet Government continues to pursue its overall aim of Communist domination. The committee will recall that Mr. Khrushchev stated frankly to the Supreme Soviet 2 months ago that "we never renounced and we will never renounce our ideas, our struggle for the victory of communism."

We need to keep in mind in our consideration of the program this year that the emphasis on Soviet tactics has shifted from primary reliance on force to a campaign of political and economic blandishment.

In this campaign the Soviet Union and its satellites have expanded their trade relations with the free world, they have offered their technical and advisory services to the less industrialized countries, and they have provided long-term low interest loans for economic development.

By themselves these activities are more or less legitimate, but they are being carried on in combination with efforts to stir up local con

troversies and strife and with pressures to disrupt and destroy the security arrangements that have been constructed in the free world.

The immediate Soviet goal is quite clearly one of isolating the countries of the free world from the United States. This much accomplished, the goal of outright conquest or subversion would be greatly advanced.

We must view the new Soviet campaign with concern for it is aimed at the welfare and freedom of all the independent countries. We are not presenting the mutual security program as an answer to the Soviet activities, but we do need to make our own program, which is of long standing, as effective an instrument for aiding the cause of independence and freedom as is possible.

KEY NEW PROVISIONS

Our own security depends upon the security of the free world. This security, in turn, depends directly upon the ability of the free nations. to maintain their independence and to strengthen their free institutions. These continue to be our aims. From the founding of our country we have been deeply devoted to the cause of freedom. In this new phase of our struggle to achieve an environment of freedom, when many nations of the free world desperately need assistance in their efforts to achieve security and healthy economic development, it is vital that we have in the mutual security program a larger measure of flexibility.

Changes occur in the world at a very rapid pace. We cannot forecast them in advance, but it is vital to our national security that we have the ability to adapt the mutual security program to reflect changes. That presents a major dilemma.

Because of the long lead time necessary to the effective administration of this program, the proposals we are making today for fiscal year 1957 will not be implemented before early 1958. That is a period of almost 2 years. It is obvious that, to meet the conditions existing then, there be a degree of flexibility in the legislation now.

The President has accordingly requested a greater flexibility in his authority to use funds made available for this program by the Congress. Šome measure of flexibility is provided in the present legislation. But we consider it of the utmost importance to the efficient and economic accomplishment of our objectives that the President be given even wider discretion for future years.

The President has also asked the Congress for authority to make certain commitments of a longer term nature in assisting countries. to carry out a restricted number of important projects.

These commitments would be met from nonmilitary mutual security appropriations. We are not asking for additional appropriations. It is contemplated that this kind of assistance will be furnished in special cases where the recipient country cannot carry out a major project with its own resources.

I have in mind such projects as river development, improvement of ports, highways, railroads, or other means of communication and important large industrial projects. Works of this kind generally require a number of years for completion. Where we provide aid for these purposes it is essential that the recipient country be given reasonable assurance that our aid may be continued for the period of

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time necessary for completion of the projects and so long as the purposes of the free world are served thereby. Only with assurances of this type of support will these countries be able to develop additional financing from other sources.

RATE OF EXPENDITURE

The purpose of the proposed program is to carry on at approximately the same rate of expenditure as last year and the year before. In view of the increased threat of Communist economic penetration in the free world, we cannot afford to reduce our efforts at this time. The requested increase in appropriation from $2.7 billion in fiscal year 1956 to $4.9 billion in fiscal year 1957 does not imply a corresponding increase in expenditures. The details of this situation will be brought out later in the hearings. But I wish to make the basic facts clear at this time.

The $4.9 billion figure is made up of two parts: First is the defense support and economic program amounting to $1.9 billion. This compares to a fiscal 1956 request of $1.8 billion, and a final appropriation of $1.7 billion.

The second part is the military and direct forces support program of $3 billion. This compares to fiscal 1956 request of $1.7 billion, and a final appropriation of $1 billion which was less than half of the annual rate of expenditure.

To recapitulate, the increased request this year of $4.9 billion, as compared to the appropriation last year of $2.7 billion, or a difference of $2.2 billion, is made up as follows:

(a) Increase in defense support and economic aid of $200 million; (b) Increase in military and direct forces support of $2 billion. The increase of $200 million in defense support and economic aid. is requested to cover a prudent and moderate increase in the program for the Middle East, South and Southeast Asia, and the Far East.

This represents an increase of approximately 12 percent in the size of the program for this year. One-half of this increase, or $100 million, is requested for use as a special fund in the Middle East and Africa, with emphasis on the Baghdad Pact countries, while the other half is needed in Asia and the Far East.

The increase of $2 billion in military and direct forces support will bring to $3 billion the amount requested for these purposes for fiscal year 1957. This sum is designed to provide for 1 extra year's military expenditures at the average annual rate at which the Department of Defense is now expending funds for military assistance.

In addition, there is requested authorization of $530 million for advanced weapons, for most of which there have been no prior appropriations.

A detailed explanation of the various programs will be given, of course, in the hearings that are to follow. My purpose in presenting the basic figures at this time is to place the major aspects of the program in their proper perspective.

Again, I would like to reiterate that the purpose of the proposed program is to maintain approximately the same rate of expenditure during fiscal year 1957 as in the years 1955 and 1956.

The fact that increased authorizations are required in order to maintain the same expenditures, particularly in the military program,