Volume 350, January 22 – January 24, 1940

DIARY Book 350 January 22 - 24, 1941 Regraded Unclassified - B - Book Page Belgium See War Conditions - C - California-Texas 011 Company, Limited See War Conditions: Foreign Funds Control Campbell, Thomas D. ("Wheat King"). Hardin, Montana HMJr anke Heas for report - 1/23/41 350 185 a) Report in Book 352, pages 75 and 231 Discussion with Purvis, Watson (White House), and Wickard - 1/30/41: See Book 353, pages 44, 46, 51, and 66 Chen, X. P. For recommendation as Chairman of new Chinese Stabilization Committee, nee Wer Conditions: China China See War Conditions Coast Guard Navy taking over considered unwise at this time by Gaston - 1/23/41 246 a) Discussion at 9:30 meeting - 1/24/41 326 - D - Danube Basin See War Conditions: Germany - 1 - Export Freight See War Conditions: Export Control - F - Federal Bureau of Investigation Klaus memoranda - 1/22/41, 1/24/41 94,319 a) Wenner-Gren (Axel) report Financing, Government Debt Limitation, Tax-exempt Securities, etc.: Conference with FDR; Bell and Sullivan also present - 1/22/41 50 a) Debt limit discussion: FDR objects to any move which could be interpreted as Treasury conviction that appropriations cannot be made beyond stabilized debt limit 1) HMJr invites Harrison, George, Barkley, Doughton, and Cooper to discuss - 1/22/41 82 a) Bell memorandum describing conference - 1/23/41 160 1) Various exhibits 163,165,171 Economic phases discussed at 9:30 meeting - 1/24/41 320 a) Economist similar to Viner to check effects Bill as introduced in House - 1/24/41 306 Regraded Unclassified - 1- (Continued) Book Page Financing, Government (Continued) National Defense Notes: Conference: present: HMJr, Murphy, Haas, Odegard, Hadley, and Bell - 1/22/41 350 6 Salomon Brothers, Discount Corporation, and Devine estimates on new note - - 1/23/41 202 Hadley to visit Chicago and investigate "what went wrong with last note issue" - 1/25/41: See Book 351, page 1; Book 352, page 218 a) Jones and HMJr discuss - 1/27/41: Book 351, page 236 b) Federal Reserve Bank of New York reports on response to offering - 1/27/41: Book 351, page 335 c) Hadley report: Book 351, page 341 Finland See War Conditions France See War Conditions Freight, Export See War Conditions: Export Control - G - General Counsel, Office of Report of Legislative Section activities before Congress - - 1/22/41, 95 Germany See War Conditions - H - Harriman, Averill See United Kingdom, Ambassador to Henderson, Leon See War Conditions: Price Control - L - Lend-Lease Legislation See War Conditions Lumber See War Conditions: Price Control - K - Machine Tools See War Conditions: Purchasing Mission; U.S.S.R. - 0 - Oil See War Conditions: Foreign Funds Control Regraded Unclassified - P - Book Page Peacock, Sir Edward See War Conditions: Purchasing Mission Price Control See War Conditions - R - Revenue Revision See also Financing, Government Excess-Profite Tax Act of 1940 - suggested plan for granting relief under: Tarleau memorandum - 1/22/41 350 287 a) Sullivan explains status and why he is not prepared - - 1/24/41 332 - T - Taxation See Revenue Revision U - U.S.S.R. See War Conditions United Kingdom See War Conditions: Military Planning; United Kingdom United Kingdom, Ambassador to Harriman, Averill) Wiley, John ) Winant, John ) Frankfurter and HMJr discuss - 1/23/41 186 - V - War Conditions Airplanes: Deliveries by purchasers and types, 1/1/40-1/18/41 151 Belgium: British-Belgian trade agreement concerning Belgian Congo and Ruanda Urundi - 1/22/41 148 China: Central Reserve Bank report on deposits with forty Chinese banks in Shanghai - 1/22/41 116 Kung sent personal greetings from HMJr by Currie - 1/24/41 284 a) Chen recommended as Chairman of new Chinese Stabilization Committee Exchange market resume' - 1/22/41, etc 119,215,317 Export Control: Export freight situation: Haas report - 1/22/41 139 Regraded Unclassified - V - (Continued) Book Page War Conditions (Continued) Finland: Stabilization Fund with Finland again discussed by Procope and Cochran - 1/22/41 350 118 Foreign Funde Control: California-Texes 011 Company, Limited, discusses conversion of sterling receipts, at the official rate, into free dollars - 1/22/41 123 France: British agreement relating to French Cameroons and French Equatorial Africa arranged with de Gaulle's Council of Defense - 1/22/41 149 Opening of safe-deposit boxes in occupied territory by force postponed by Germany until January 31, 1941 209 Germany: Danubian agricultual assistance to Germany discussed in Foreign Agriculture (Department of Agriculture publication) - 1/22/41 124 Lend-Lease Legislation: Revised figures of British gold and dollar assete sent to Committee on Foreign Affairs e) Copy sent to Tinkham - 1/22/41 86 Arrangements made for hearing before full Committee - 1/27/41 182 British prees reports - 1/23/41 241 Berle's speeches in Middle West discussed by 9:30 group - 1/24/41 329 a) Hull apologizes for having testified that bill was drafted in Treasury; Berle's speeches to be watched for same statement Military Planning: Reports from London transmitted by Butler - 1/22/41, etc 152,252,311 Price Control: Henderson asks HMJr to "watch over Division" during his absence of several weeks - 1/23/41 191 Lumber: Henderson asks HMJr to reiterate right granted Federal agencies for flexibility in the application for specifications for lumber - 1/23/41 194 Purchasing Mission: See also War Conditions: Lend-Lease Legislation Wool: HMJr aske Foley to assign staff member to problem BO that it can be worked out quickly - 1/22/41 2 Plan worked out by which Army and Navy will certify to FDR placing of orders for $883 million worth of United States-type material after which FDR will direct Jones to place orders - 1/22/41 39 a) Machine tool contracts cleared - 1/22/41 128 Summary of orders: Preliminary report for period up to January 16, 1941 132,133 Regraded Unclassified - V - (Continued) Book Page War Conditions (Continued) Purchasing Mission (Continued): $13 billion in orders: HMJr, Stimson, Knox, Jones, Knudsen, McCloy, and Young discuss difficulties of immediate placing - 1/22/41 350 137-A a) For FDR's memorandum asking speed in (1) Reconstruction Finance Corporation taking over British payments made for plants, and (2) War Department taking over of materiel payments made by British, see Book 380, page 234 Peacock (Sir Edward) publicity to he released at decided by British - 1/23/41 158 Assets: HMJr concurs in Gifford plan to refrain from selling for balance of week as a test of whether British selling has caused depression of New York market - 1/23/41 158,159 a) Conference; present: HMJr, Bell, White, Purcell, Foley, Schenker, Louchheim, Phillips, Gifford, Pinsent, and Cochran - 1/24/41 263 United Kingdom: Belgian-British Trade Agreement concerning Belgian Congo and Ruanda Urundi - 1/22/41 148 Agreement relating to French Cameroons and French Equatorial Africa arranged with de Gaulle's Council of Defense - 1/22/41 149 U.S.S.R.: Machine tool purchases arranged for by Liaison Committee reported to FDR - 1/24/41 299 a) Hull sent copy of memorandum, 302 Wenner-Cren, Axel See Federal Bureau of Investigation Wheat See Campbell, Thomas D. ("Wheat King") Wiley, John See United Kingdom, Ambassador to Winant, John See United Kingdom, Ambassador to Wire Tapping Entire question to be considered by Senate: Irey, etc., to be asked to testify - 1/24/41 324 Wool See War Conditions: Purchasing Mission 1 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 22, 1941 TO Secretary Morgenthau FROM Mr. Cochran At 9:25 this morning Dr. White asked me by telephone if I would attend to the clearance through the Department of State of the letter upon British assets and liabilities which had just been completed for submission to Congress, and which I had checked with Dr. White after coming out of the meeting held at 9:10, in the Secretary's office. Dr. White sent me the Secretary's memorandum to him of January 21 requesting this clearance. I immediately sent a special measenger to Dr. Feis' office taking my copy of the statement. Dr. Feis had not yet arrived. but I insisted to his secretary that he give immediate attention to the document as soon as he ceme in, and then call me back, since we hoped to deliver this at the Capitol at 10 o'clock and thereafter have it released. I called Dr. Feis' office again a few minutes after sending the document, and rooke with Mr. Livesey upon learning that Feis had not yet arrived. Livesey promised to try to get the document cleared with Secretary Hull by 10 o'clock. Messre. Cox, Kuhn and Schwars went on to the Capitol with the arrangement that Mr. Kuhn would telephone me back at 10 o'clock to see if I had obtained the necessary clearance. Not having heard from the State Department by 10:05, when Mr. Kuhn called me back, I reached Dr. Feis on another telephone, while Mr. Kuhn waited. Feis told me that he had just discussed the document with Secretary Hull. Secretary Hull deferred to Secretary Morgenthau as to the windom of giving publicity to the statement in ouestion. Secretary Hull desired further to make sure that the British agreed to such publicity. Feis said that naturally the State Department had not been able to go into the technical accuracy of the document. I assured Dr. Feis that the document had been carefully checked by the British Treasury officials, as well AB by the Board of Governors of the Federal Reserve System and the Department of Commerce. These had all agreed with the Treasury on the draft in question, and on publicity being given thereto. I thanked Dr. Feis for having taken the matter un with Secretary Sull and promised to send over clean conies of the document in its final form. Upon terminating the conversation with Dr. Feis, I have the necessary clearance to Mr. Kuhn at 10:10, 3.m. Regraded Unclassified 2 January 22, 1941 10:40 a.m. H.M.Jr: Hello. Operator: Mr. Foley. Ed Foley: Yes, Mr. Secretary. H.M.Jr: Ed, on the English contract situation, Jones thinks it's a mistake for one of his corpo- rations to buy this English wool for fear that it might offend some of the Western states who then might be against the bill. F: Yeah. H.M.Jr: I raised the question of whether we couldn't get a group of private banks in New York to loan this money. Now, I had hoped that the wool was still in the hande of the wool growers, but it 1sn't, but if you would assign to Philip Young one of your ablest men 80 that he could work Just on this wool deal, you see, and see if we can't work something out to help the English. F: O.K. I'll pick somebody and have them get in touch with Phil right away. H.M.Jr: Well, give us one of your really tough fellows. F: O.K., Mr. Secretary. H.M.Jr: Will you? F: You bet. H.M.Jr: What's the name of that man who was over at W.P.A. or P.W.A. with you? F: Chuck Kades? H.M.Jr: Yeah. What's Chuok doing? F: Well, he works on taxes and things of that kind with me. I can put him on it or put somebody on it that would be more familiar with the Johnson Act and the Neutrality Act. Regraded Unclassified 3 - 2 - H.M.Jr: Who would that be? F: Well, it would be Huntington but Huntington has been sick and his man is Feidler. I can put him on it. H.M.Jr: Well, I'll leave it to you because I want a job on this if there 1s any possible way of doing a job. See? F: Yeah. H.M.Jr: We want it done and done fast. F: All right. Well, I'll put Feidler on it and I'll look at it myself. H.M.Jr: 0. K. F: 0. I. 4 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 22, 1941 TO Secretary Morgenthau FROM Mr. Cochran Mr. Pinsent, Financial Counselor of the British Embassy, telephoned me at 10:50 this morning. He said that Sir Edward Peacock would probably leave Lisbon by plane tomorrow. It was Pinsent's understanding that the plane which was to have left Lisbon on Sunday has been delayed until this date. Pinsent now asks whether the Secretary would approve the British idea of releasing upon Peacock's departure Tnom Lisbon the press communique which the Treasury had worked over with Sir Frederick Phillips. The British believe it more satisfactory to take the Lisbon departure rather than the uncertain hour of quitting Bermuda as the proper time of the release of the communique. I told Pinsent I would speak to the Secretary on this point. Jun. to Cochran Se memo from BMS. dated 1/03/41- Regraded Unclassified 5 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 22, 1941 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL Mr. T. Carlyle Gifford telephoned me from New York at 11:30 this morning. He reminded me that during the past five days the New York stock market had dropped about five points. He said that he had been able to keep up the totals of his sales for the last day or two to a fairly good figure only through disposing of certain lots of United States Government bonds. He now feels that the market has been drop- ping too steadily. He is inclined to move a little gently in the sale of his secu- rities in the immediate future to see if British official sales may have been responsible for the pressure. I told Mr. Gifford that I was bringing his daily statements to the attention of the Secretary and would also let the Secretary have the above information. see from memo Sun to dated cachron 1/03/41 M.S. 6 January 22, 1941 12:20 p.m. RE OPEN MARKET Present: Mr. Murphy Mr. Haas Mr. Odegarde Mr. Hadley Mr. Bell Mrs. Klotz H.M.Jr: If it is to be a five year, what has it got to be? Haas: One. It is very sweet. H.M.Jr: And a three quarters, how far can I go? Hadley: Three years and eleven months. H.M.Jr: Talk up. Hadley: Three years, eleven months. H.M.Jr: Are you fellows together? Haas: That is right. Murphy: Well, we thought that it would probably be better - that was the recommendation we sent you yesterday afternoon. H.M.Jr: What do you recommend now? Murphy: If you cut that three months further, to September, 1944 -- Regraded Unclassified 7 - 2 - Hass: That is sweet enough. H.M.Jr: Now Dan, let's see what you have got. Bell: First of Boston says that & three quarters per cent maturing December 15, 1944, will go if the amount is not over 750 million. They say that if you want to go out the full five years, it will take 8 one per cent coupon but they are afraid the one per cent coupon will have an adverse effect on all the other outstanding issues, and they do not recommend it. If it is over 750 - if it is more than 700 million, they all recommend two issues. H.V.Jr: well, you and I know it is going to be 600 at the moment. Bell: Yes. Repo and Belmar, the Discount Corporation, said that their first choice would be a three quarters per cent note for December 15, 1944, and they would think that that ought to sell somewhere around 19 to 22/32nds. You could sell five eights, March '49, a half per cent, December '43, and possibly 8. three eighths, March '43. M.M.Jr; Could I read the stuff, if you have not it typed^ Bell: Yes, it is all typed. It is underlined E little in spots, but you can read it. It is quite large. I was just giving you the summary. H.M.Jr: I will give it back to you. Bell: Do you want me to continue? H.M.Jr: Please. Klotz: It is small type. Regraded Unclassified 8 - 3 - Bell: Repp says that if it is 500 million, three quarters, December '44, and if it is over 500 million, he would recommend a three quarters September '44. That is what Murphy just gave you. Devine. If the Treasury wanted to do a five year, it would take one per cent. He doesn't recommend. His first choice from the point of view of the market would be to sell 500 million of half per cent notes due September 15, '43. He said the market is thin and the people are likely to check around and see whatever it is going to do owing principally to the recent reserve of Congress about the Reserve System. The second choice would be a three quarters per cent note of September 15, 1944, which he believes would not affect the market as much 8.3 the longer seven eighths or one per cent note. Burgess and Kane says it is 8. matter of taste. You could start at a half per cent coupon and work up. Their first choice is a half per cent note or A '43. However, the three quarters per cent would go but you would have to shorten the maturity one year over the other, and the other was -- Hadley: December, '45. Bell: So this would come back to December '44. Green of the Chase National said if the offer is over 500, he would recommend two issues. His first choice is also a half per cent note, March, '43. However, he believed the Treasury could sell 8. three quarter per cent note of September 15, '44, or R five year one but he would not recommend the latter. His choice of two issues - well, that is in cases of two issues. Garner of Guaranty's recommendation is for a three quarters, September, '44. That is about Regraded Unclassified 9 - 4 - all of it. September '44 at three quarters per cent seems to be the consensus. H.M.Jr: Now, who am I going to call up? Bell: I would call Rouse and let - you could call Sproul if you want to, but Rouse has been following it all morning and Devine and hepp are standing by. Klotz: Did you congratulate him? (Sproul) H.M.Jr: I don't know. Bell: You did that the day of the dinner. H.M.Jr: Did I? I don't think I wrote him a letter. Klotz: Is it too late now? H.M.Jr: Yes. Bell: George, what do you figure the September '44, three quarters, will go to? Haas: Twenty-three. H.M.Jr: (To McKay) If Professor Odegarde is here, tell him to come in. He can sit here and listen. Have you spoken to the Fed? Bell: No, I haven't. Murphy: Yesterday we recommended the December '44, and Mr. Haas and I had some conversation this morning, and he thought it would be better if we sweetened it by three months, because of the general bearish tone, and that is how we happened to be saying September now rather than December. It is upping the premium from 18 to 23. Regraded Unclassified 10 - 5 - H.M.Jr: You know we are going to have to be back again in a couple of weeks for another 500 million. Haas: I would rather do that than make this too big now. The fact that you have announced it, I think, is important - to stay by it. H.M.Jr: The 500? Haas: Yes. H.M.Jr: Dan thinks if we make it six we might be able to get by until the 15th of March. Hadley: I think the market would like it much better if we could do a little more now and be out until the 15th of March. H.M.Jr: So would I. Bell: That would give you 650 or 660, somewhere along there. H.M.Jr: I would love to do a five year and show what this Federal Reserve monkey business has cost us. That is the way I would like to do it. There is no way to show it. (Professor Odegarde entered the conference.) (Telephone conversation with Mr. Devine follows:) Regraded Unclassified 11 January 22, 1941 12:35 p.m. H.M.Jr: Hello. Operator: Mr. Devine. Mr. C.J. Devine: Hello, Mr. Secretary. H.M.Jr: How are you? D: Fine, and you? H.M.Jr: Well, I'm alive. D: I guess they keep you very busy, don't they? H.M.Jr: Yes, they do. D: How do you ever keep track of everything? H.M.Jr: Well, I don't know. D: Just keep going I guess. H.M.Jr: That's it. I thought you were going to come down here and help me. D: Well, I tell you, you see what I did the end of the year. I liquidated the corporation and formed a partnership BO I could Jump out any time. H.M.Jr: Yeah. Well, if you're at all interested ..... D: I really am, I'm on the fence. That's why I liquidated the corporation. It cost ne $370,000 in taxes to do that which I'd never have to pay if I just remained as I was but I thought if I did jump and want to do something else why I wouldn't have 80 many ramifications to go through. H.M.Jr: Well, why don't you come down here Friday and talk to me. The issue will be over then. D: All right. Suppose I drop down on Friday. H.M.Jr: 10:00 o'olook. Regraded Unclassified 12 - 2 - D: 10:00 o'clock Friday. H.M.Jr: Yeah. Now, let me ask you this. What does it look like to you? D: Well, I've gone over the thing since I talked with Rouse and Miller up at the Fed. this morning and I feel this way: have you got the time to go over the whole thing? H.M.Jr: I've got all the time in the world. D: All right. To sell a one, it's too rich in the first place, in the second place I wouldn't like to lend the impression that the first Defense Note was going at 3/4ths and the second one at 1 and the third one might go at 1-1/4. That's why I don't like a 1, plus the fact that it's worth at least par and 3/4ths. Then the next one would be 7/8ths. Well, 7/8ths would have to be June, 1945. That issue would go over and go over well. of course again it has to some extent an effect that the first was 3/4ths, thie one was 7/8the and the next is 1, but not as great as the first one. H.M.Jr: Yeah. D: My preference would be 8. 3/4ths, same coupon, due in 36 years. You could make it August lst, 1944 and it would positively be worth at least 1011, elightly below or elightly more, it wouldn't change the coupon, it wouldn't hurt the outstanding 3/4ths ...... H.M.Jr: Wait B minute, Chris, let me Bee. I've got a table here before me. You're talking about 8 3/4ths, 4 years and what? D: A 3/4the, 31 year note. H.M.Jr: Yes, 36 year. Just a minute. 3b year, 3/4the. Now how do you price that? D: I price that, a 36 year, 3/4the at about between & 60 and & 62. H.M.Jr: Yeah, and how much premium? Regraded Unclassified 13 - 3 - D: That would be somewhere around par and 1/2. A 61 on an August maturity is exactly par and 1/2. H.M.Jr: I 100. D: Now if you wanted to be a little more generous, which you truly do not have to be, why you could make it June, 1944. H.M.Jr: How about September? D: September is a shade over the line. H.M.Jr: You mean - which way? D: I think it 1e a little bit too lean. H.M.Jr: Well, this time you're much more on the rich side than you've been before. Why is that? D: Well, no matter what you sell, no matter what you sell, if you sell over 500 million the allotment is going to be at least 20%. Now for two reasons: I've been checking with banks around all the way across the country through the wire system here in our offices and I find out this feeling, that they are not going to go in for quite as many this time because they want to 800 what's going to happen to this Reserve bill and they know that there 18 plenty more coming. That's why I made over at the Federal this morning the suggestion that to be cagey, if you sold 1/2 of 1% note due in September 143 why it wouldn't necessarily cause the market to run away but it would be a stabilizing influence on the market. H.M.Jr: If we did what? D: If you sold a 1/2 of 1% note due in September '43 - now I realize that's short and you do not have to sell anything that short, but the effect on the market would be to stabilize it. It may temporarily do a little better because the tendency would be - well, we're not going to get additional higher coupons on each successive piece of financing. It would stabilize the market; I have no doubt about that. Regraded Unclassified 14 - 4 - H.M.Jr: Well, what premium would that have? D: Not 80 much, par and 10/32nds perhaps. Somewhere around a 38 basis. H.M.Jr: But you think 1/2 of 1% would stabilize it? D: Absolutely. The shorter you make this issue - bear in mind, I think you can sell anything you want in the market, the market isn't that poor, but it has a tendency and has had a tendency to drift. The feeling I would get of the market - it's sort of a wishy-washy market, it hasn't any firm tone underlying it at all. It could very easily go off a point or 1-1/4 pointe in the next two or three weeks. Now a shorter note would tend to eliminate some of that feeling and sort of stabilize the market at this level and it may, 8.8 I say, even have a tendency to rally which would worry me. H.M.Jr: Yeah. Well ..... D: But as the best bet, the 3/4ths. H.M.Jr: You're a little nervous this time, aren't you? D: Just a little bit. I'm nervous from the standpoint that I'd like to see you pick the right thing and have it go over well because it 1s the beginning of a lot of financing. H.M.Jr: Yeah. Well, I don't see how you price the September, 143. Our boys say about 4/32nds. D: Well, I price the September 143 on about B. 3/8the basis. Let's see - I price it close to 8 3/8ths basis. After all you have September 1 to '43 outstanding now and September l's - I'm sorry, I'm very sorry. I said - let me 800, Yeah, September 1 to '43 right now are running .19. Now certainly additional notes in there are worth a 38. Regraded Unclassified 15 - 5 - H.M.Jr: Well, we've got slide rules and the boys can figure it, but I get how you feel on it anyway. D: Yeah. H.M.Jr: Are you going out for lunch or will you be around in case I want to call you again? D: I'll be right here until I leave here tonight. H.M.Jr: O. K. D: Thank you. H.M.Jr: I'll be seeing you Friday at 10:00 o'clock. D: Yeah. H.M.Jr: Good-bye. D: Good-bye. Thank you very much. Regraded Unclassified 16 - 6 - H.M.Jr: I thought you (Odegarde) might be interested in seeing how we price this stuff. How did you do? Odegarde: I got in on the middle of it. H.M.Jr: Well, you know you just got in at the start. This is the first one. We have never done it so late, but we could only get in to see the President this morning. Hadley: Here are his estimates on that '43 stuff. They seem quite out of balance. (Telephone conversation with Mr. Sproul follows:) 17 January 22, 1941 12:40 p.m. H.M.Jr: Hello. Operator: Mr. Sproul. Allen Sproul: Hello, Mr. Secretary. H.M.Jr: Hello, Allen. 8: I'm sitting here with Mr. Rouse. Hello? H.M.Jr: Well, if you had the responsibility of writing the ticket, how would you write it? S: Well, do you want me to answer or Mr. Rouse to answer in the light of his discussions of the market this morning. H.M.Jr: Well, I've had what Rouse thinks through Bell. S: I 800. Looking at it both from your stand- point and the market standpoint I'd write it for 3/4the for September 144 and go up to whatever amount of cash you need to carry you up into March; that is, assuming that would be something - a billion or under.. H.M.Jr: Well, we're talking 5 or 600 millions. S: Well then down in 500 or 600 millions I think a 3/4the for September '44 would be the best bet both from your standpoint and the market standpoint. H.M.Jr: I'm kind of interested in a 1/2 of 1%. B: Well, there are some people in the market particularly interested in that I understand. They think it would be put away and kept away better than anything else you could put out but it seems to me it brings the maturity pretty close in when you consider the amount of financing and refinancing that is going to have to be done in the next two years. H.M.Jr: True but which would stabilize the market more: 1/2 of a percent note or 3/4ths? Regraded Unclassified 18 - 2 - B: My guese would be that the 1/2 would because there'd be less secondary distribution on it, it would be more largely taken and put away. What maturity did you have in mind there? We had suggestione anywhere from March 143 to September '43, the latter getting out as far 8.8 September 143, I think, is going out pretty far. H.M.Jr: Well, I don't know how our boys have figured it. Let me ask them a minute. (Talke aside). Well, our boys say here that they wouldn't want to go any closer than March '43. They figure that at 10/32nde. What do you figure that? 9: Just a minute. (Talke aside). The same. H.M.Jr: The same. Is that enough, Allen? S: I think it 18 enough for 1/2% yes. Plenty. H.M.Jr: You see - well, I needn't tell you, it's water over the damn, but that Federal Reserve System statement, you know, has got us all upset. S: Well, there are other elemente in the market too. I think that 18 certainly one of them but there are others. H.M.Jr: Well, such as. S: Wall, such as the whole financing program which is ahead of us. I think the market has that in mind too. They don't expect - I don't think that we can go through this whole financing program on the present level of interest rates. H.M.Jr: Allen, do you think that if I did B 1/2% it would be a sign of weakness? 8: No, I do not. No. H.M.Jr: Well, do you mind sticking around & little bit 80 I can call you back? You see, the President was 45 minutes late this morning 80 it has made me late all along the line. Regraded Unclassified 19 1/ Talks aside. H.M.Jr: How do you go about it? D. W. Bell: March '43 seems as thin as we want to go. Mr. Murphy: Our curve D. W. Bell: Our curve runs a little higher, but I should say March '43. Dearaded 20 - 3 - S: (Laughs). You ought to speak to him about that. H.M.Jr: Well, he had to tell us the story of how he held up Marie Dressler on the top of a rail while she made a baby bond speech and then she fell over backwards on him and a police- man and crushed the two of them, and that took fifteen minutes. S: (Laughs). Well, it's interesting anyway. H.M.Jr: Well, you see what you've got ahead of you. How are we going to sell bonds? S: I'd pick someone a little less hefty. H.M.Jr: Yeah, but she had a good voice. All right. 8: Well, I'll be here and Bob Rouse will be here. H.M.Jr: If you don't mind, another ten or fifteen minutes. S: All right. Regraded Unclassified 21 - 7 - Bell: June, '43, has a billion dollar maturity, and September, '43, has a billion six with the October 15 bonds which come in there. H.M.Jr: Six? Bell: No, the 450 million of the '43 is '43-'47, three eights, and the October '43 is a billion four of the '43-'45's. H.M.Jr: How about the five eights? You see, they have got that 13/32nds. They have got it here -- Hadley: Three years. H.M.Jr: Two, one, '44. Bell: Well, you have got two billion dollars maturing in March, 15. You have got 500 million of notes maturing in March '15 and then there is a billion and & half of bonds callable in April, '44, so that you could have financing in February, March, and April. H.M.Jr: We will have them every month from now on anyway. Have they got a copy of this? I don't want to hear afterward that they are apart from us. Are you fellows together that we could do two years, one and a half - do it three, 15, '43? Hadley: Yes. Murphy: Yes. Haas: Yes. (Telephone conversation with Mr. Eccles follows:) Regraded Unclassified 22 - 8 - H.M.Jr: Now I want to call up Repp. Bell: Yes, Herbert Repp, Discount Corporation. H.M.Jr: This will give you (Odegarde) a little insight on how you decide to borrow 500 or 600 million dollars. Odegarde: It doesn't give me any insight on how you keep them straight. H.M.Jr: What, what these people tell you? Odegarde: How you follow all these different issues and maturity dates and 80 on. H.M.Jr: I read your memorandum and I was very enthusiastic about it; and we have got to go to town next week. Odegarde: Did you read it all? H.M.Jr: Every last word of it, and some of it twice. We are going to try to get 8. bill introduced next week. Odegarde: Were there any additions to those suggestions? H.M.Jr: No, the main thing that I want you to think about is who in town has done the best publicity job;and if you can make up your mind who has done the best kind of job, we will just borrow him and if he makes good we will keep him. Take this man in AAA. Who is the man who has done the best job, and I will just borrow him and if he makes good, I will just take him over. If you could be thinking along those lines. I mean, that is better, I think, than going on the outside, don't you? Odegarde: Better. 23 January 22, 1941 12:50 p.m. H.M.Jr: Hello. Operator: Chairman Eccles. Marriner Eccles: Hello. H.M.Jr: Marriner, good morning. E: Hello, Henry. How are you today? H.M.Jr: oh, I'm 8. little under the weather but that's just ..... E: What's the matter? Got the flu or something? H.M.Jr: No, just a little bit over-tired, but as the family says, that's not news. E: (Laughs). H.M.Jr: Marriner, I got out late from seeing the President 80 I'll have to work late on this - I mean, I'm up against the clock on this financing and I suppose you've been in touch - we're being advised anywhere from - to sell a 1/2% note up to 3/4ths, somewhere in there. The 1/2% would be March 15, 1943. - E: Well, here's the way I look at the thing. The December '44 in the 3/4 note in the market this morning would be about 100-18/32nds. The September '44 3/4 note, that's three months shorter maturity, 1s 23/32nde. H.M.Jr: You're a few 32nds higher on both of those. That's immaterial. E: Well, it depends on which one of your fellows you talk with. H.M.Jr: That's right. E: The fellow that - we've usually been right on this and - well, I mean, there's one of your fellows and Pizer have been right on this thing. Regraded Unclassified 24 - 2 - H.M.Jr: Yeah. E: Well, anyway, there 1sn't an awful lot of difference. Now, there'd be no question about the September, certainly no question about it, at 23/32nde. That does look to be quite a premium however for that short a maturity. On the 1/2 of 1% yield, of course that would put it into the 143 class. H.M.Jr: That's right, March 15th. E: Well, you could put it in June. I think you can put it in June 143. That's only 8 2-year note and that still gives you a premium of 1/2 point. Now 1/2 a point is 8 better premium on a 2-year note ...... H.M.Jr: I think you're wrong on that Marriner. E: ..... well, 15/32nde. H.M.Jr: Well, our boye gave me 2 years, 3/15/43, and I think it had 10/32nds. to You mean on March 1437 H.M.Jri Yeah. is Well, they're figuring - I don't know how they figure it. Well, anyway it doesn't make much difference. A 2-year note then - June of course would be a little over 2 years - 2 years and 3 months and a 2-year note would certainly suit me. I feel and I have felt right along that the shorter the maturity, until Congress has determined what they are going to do with reference to this whole situation, the better, because the banks are going to take all of this stuff anyway and a lot of this stuff will sooner or later be refunded, we hope, into savings BO that the shorter the maturity, as far as I'm personally concerned, the better. H.M.Jr: Yeah. You wouldn't care then ..... in I wouldn't care personally at all. I haven't talked to the others about it. They seemed to express some preference for the 2 and 3/4e the other day on the September *44 3/4 note. Now of course that 16 6. little Regraded Unclassified 25 - 3 - over 2 year longer note. I think if I were doing it personally, I would take the 2-year note in the 1/2. H.M.Jr: Well, the 2-year in the 1/2. E: 2-year at 1/2, yeah - the '43 maturity, with 1/2% coupon. H.M.Jr: Yeah. That's what you prefer. E: I would personally prefer that but I don't feel very strongly about it. How do you feel? H.M.Jr: Well, I've only talked to 8. few people and I'm surprised that they seem to think that the market 18 a little bit more nervous than I realized and they think that a 1/2% coupon, that they'd put it away in a box and there'd be less dealing in it and it would be a stabilizing influence. E: Well, I think it's - you're getting a little lower yield, you're only paying 1/2% for 2-year money, you're only paying 1/2 for over 2-year money and before the 2-year period 19 over the whole picture is going to have to be revamped anyway in the light of develop- ments during the next two years which are inevitable. You're going to have to do a lot of financing through baby bonds and savings and 80 forth ao that if you've got these short maturities I would sooner save the - shave the 1/4 of 1% for the Treasury on it inasmuch as it's going to be a short maturity anyway. H.M.Jr: of course the other criticism 1s, well, if you can go three years why go two, but either one would satiefy you? E: Either one would satisfy me. H.M.Jr: All right. Then if it's agreeable we'll work on it a little bit more and Bell will call you back & little later. Regraded Unclassified 26 - 4 - E: I'll check with Piser and sue where he's off on these estimates because apparently he's figured a little bit higher.. H.M.Jr: Would you tell Piser to stay at his phone during lunch hour 80 we can call him? E: Yeah, I'll tell him to do that and see where he's off on these premiums here because he must have had some basis for figuring this and apparently there is quite a little difference. H.M.Jr: Well, if he could stay at his phone 80 our boys could call him back ..... E: I'll tell him to do that. H.M.Jr: Thank you. E: All right. Good-bye. 27 - 9 - H.M.Jr: Out of all these 117 men - Mr. Odegarde listed 117 - not men, but offices of press relations in Washington, 117 different groups. Is that right? Odegarde: There are 117 information offices serving 136 agencies. H.M.Jr: And no correlation between them whatsoever. Odegarde: Well, there is the correlation you get through Lowell Mellett. H.M.Jr: But if you could be thinking very hard, and I think you might talk to Lowell today - if you and Ferdie Kuhn could ask to see him and say, "Now who is the very best man who has done an outstanding job and we want to borrow him, rather than go out and try to get somebody new." Odegarde: The suggestion was made the other day in Agriculture that the best job might be done by someone who is an administrator rather than press relations. H.M.Jr: No. I want 8 fellow on that just oozes ideas, is going to give me ten times as many ideas. On the administrative side, we are all right. Odegarde: That was my suggestion. H.V.Jr: he are all right on the administrative side, but this setup that you had - to call for the second men, wasn't it" It was 8. director of publicity, isn't that what you call it? Odegarde: Yes. H.M.Jr: It wouldn't be UPA, would it? Odegarde: I don't think so, Regraded Unclassified 28 - 10 - H.M.Jr: Would it be three A's? Odegarde: I want to see the people over in Securities. H.M.Jr: Would you hit that today? Odegarde: Yes, I will do that. (Telephone conversation with Mr. Repp follows:) 29 January 22, 1941 1:00 p.m. Robert Repp: Hello, Mr. Secretary. H.M.Jr: How are you? R: Fine, thank you. H.M.Jr: It's going to be tough today, you won't have a chance to refer to your partner - going to have to make up your own mind. R: (Laughs). You know we never talk anyway. H.M.Jr: Oh, no. You just come down in the same drawing room and never talk to each other. R: Yeah, that's right. H.M.Jr: Well, now if you had to write the ticket how would you write it? R: Well, it would depend on the amount, Mr. Secretary. H.M.Jr: Well, between 500 and 600 million. R: Between $500 and $600 millione, in that amount, I would do a December, 1944, 3/4. H.M.Jr: Wait a minute, now. Wait a minute. December, 3/4s, huh? R: Yeah. H.M.Jr: What do you figure that? R: That would be worth about par and 1/2 to par, 19/32nds. H.M.Jr: I see. How uneasy is the market, Repp? R: Why the market is - it is uneasy, Mr. Secretary. It's awaiting various news items that will come out concerning the general plan of financing and the uncertainty in the market is the thing that is making it uneasy. of course it realizes it will have to take Regraded Unclassified 30 - 2 - larger amounts in the next year or year and a half and they are waiting for the thing to be refined a little bit 80 they can base their judgment as to how to adjust their positions and what they are expected to do. H.M.Jr: Well, let me ask you this: which would stabilize the market more, 1/2 of a percent note or 3/4's. R: I should say a 3/4. H.M.Jr: Really. I see. Will they put it away? R: I think they will, yes, in that amount. H.M.Jr: And it will go well? R: It will go quite well, yes. H.M.Jr: Which would go better, 1/2 of a percent or 3/4's? R: I would say a 3/4 in the amount 5 or 600 million, a 3/4. H.M.Jr: Is that right? R: Yes, that's my opinion. of course, an issue of this type appeals to your larger banks throughout the country and they also are the secondary market for it. A coupon at this rate hasn't & generally wide appeal although it will be subscribed. Now last time we had a $4 billions worth subscription and it is reasonable to expect we'll have the same or possibly slightly less and the allotments will be a little larger. H.M.Jr: But you favor a December 15th? R: For an amount - I just want to make myself clear on that - for an amount not to exceed $600 million. H.M.Jr: That's right. R: Anything larger than that I would go to a September, 1944. Regraded Unclassified 31 - 3 - H.M.Jr: And how did you figure the premium on that? R: Between 16 and 19/32nds. H.M.Jr: 0. K. Well, just a second and let me speak to Bell. Just hold on a minute. (Talks aside). 0. K., Repp. Thank you. R: All right, Mr. Secretary. Good-bye. Dograded Inaii 32 - 11 - Murphy: I talked to Piser this morning, Mr. Secretary, and he had the same figures that we had for everything except the five year. That is the basis of Eccles' statement that part of the staff had the same results. H.M.Jr: I see. Who haven't I called now? Bell: You have called them all. You said you would call Sproul back. Klotz: Yes, you told him to wait. H.M.Jr: Each fellow write on a piece of paper, the four of you, whether you want a half or three quarters and put your initials on it. Haas: This will be a landslide. H.M.Jr: Do you think so? Klotz: He peeked. H.M.Jr: Did he peek? Klotz: Yes. H.M.Jr: Well, Mr. Bell is for three quarters, September '44. Mr. Hadley is for a three quarters. George is for a three quarters. Aw, they are all for a three quarters. Now, I am going to be very, very honest. I was leaning for the half until I heard that Eccles was for it. - (Laughter) - It will look much better from his standpoint, you see. If it is a half a per cent, he said it didn't hurt the market if we brought in a half, but if we come along with a three quarters and have to go about two years shorter, it shows how much his statement hurt. Regraded Unclassified 33 - 12 - Bell: You have got a direct comparison now with the other financing. H.M.Jr: Yes. Heas: And what Devine said -- H.M.Jr: Of course, I never would be influenced by anything like personal feeling. (Laughter) Bell: I just don't see the difference, George, between B half and three quarters in this market. Haas: No, even Devine who suggested it came back and said three quarters was the first - you know, even Devine, when you finally pinned him down, the last word he said, "Well, three quarters was the first choice, even though he suggested the half. Hadley: I think if you had 8. half you would give an indication to the market that you didn't have confidence in the market. I think if you stick to the same coupon, it is better instead of backing down on such 8 short term, unless you want to go through a lot of explanations to the market. Murphy: Absolutely. H.M.Jr: Hadley is on the low on all of this, but I think he is playing safe this time. (Telephone conversation with Mr. Piser follows:) Regraded Unclassified 34 January 22, 1941 1:08 p.m. H.M.Jr: Hello. LeRoy M. Piser: Hello. H.M.Jr: Piser, this is Morgenthau speaking. P: Yes, Mr. Secretary. H.M.Jr: How do you figure & 3/4 note, I mean, to price it to eell. P: For September '44 I get a premium of 23/32nds. H.M.Jr: Just one second, please. September .44 you get how much? P: 23/32nds. H.M.Jr: And 18 that your choice? P: That would be my first choice, yes. H.M.Jr: September of '44. And that's your first choice. What's your second choice? P: My second choice would be a December '44, which I get at a premium of 18/32nds. H.M.Jr: Don't you think that's & little thin? P: That might be, yes. That's the reason for choosing September first, that plus the fact that the maturities already in September '44 are smaller than in December '44. H.M.Jr: Thank you, but you'll stand by won't you until we get through on this? P: Yes. H.M.Jr: Thank you. P: All right, sir. Regraded Unclassified 35 - 13 - H.M.Jr: I guess that is what we will do. I can see why Eccles wants to do a half. Are you all together? Haas: Yes, that little difference, Mr. Secretary, that has come up in this price - the error in this is larger than the difference between us. H.M.Jr: The air is what? Klotz: The area -- Haas: Error. H.M.Jr: I couldn't tell which he was talking about. Murphy: The area of error is smaller. (Laughter) H.M.Jr: I think it will be - what, September? Bell: That would be mine. H.M.Jr: Who is this fellow Hendricks they spoke about over there? Bell: He is the personnel man in the Department of Agriculture. He has been there a number of years. He took Dr. Stockberger's place. He has been there for a century, almost. H.M.Jr: That isn't the kind of man I want, is it? Bell: No, I don't think SO. I think the best man in Agriculture is Eisenhower; but again, Eisenhower has been in the Government service a long time and it is a little bad. They get their ideas along Governmental lines, and they don't get any ideas. Klotz: How about our own people? Regraded Unclassified 36 - 14 - H.M.Jr: We haven't got any. They are there, but this is going to be 80 vast - we will take everything they have, but I am not satisfied. They will stay there. Bell: Well, I think this ought to be separate from that thing downstairs. H.M.Jr: You do? Bell: Yes. H.M.Jr: But you would use Bryan? Bell: Yes, but I would leave him there on savings bonds and under Public Service. That is a manufacturing end. Let's leave that alone and put your publicity aside on that organization. (Telephone conversation with Mr. Sproul follows:) Regraded Unclassified 37 January 22, 1941 1:12 p.m. H.M.Jr: Hello. Operator: Sproul. Allen Sproul: Hello. H.M.Jr: Well, now, refresh my memory, will you? What's your No. 1 choice, Allen? S: My No. 1 choice was the 3/4 of September .44, but if you have in mind as a prime consideration the thing that would require the least market readjustment, I would then say the 1/2% and while you could go out to September '43 on that, I think with that requirement in mind I'd do it for the shorter period, possibly March '43. H.M.Jr: Well, we've been around the lot and it's pretty well in agreement here in the Treasury on September '44, 3/4's percent. S: Well, that would be my first choice. I think it would be better from your stand- point and would be good in the market. H.M.Jr: 600 million. 3: 600. H.M.Jr: Is that all right? S: Sounds good to me. H.M.Jr: Well, it's sold. 9: Good. All right. We'll be ready. H.M.Jr: Thank you. Regraded Unclassified 38 - 15 - H.M.Jr: How is that, Mr. Bell? I didn't tell any funny stories, either. Bell: Well, it would have taken longer if you had. Do you want anything before you go to lunch? I haven't written anything this time. You had me in the dark. H.M.Jr: Before I go to lunch? Just a smile. No, you get the thing ready and any time - I will tell you what I am going to do. Regraded Unclassified 39 January 22, 1941 10:35 a.m. RE BRITISH PURCHASING PROGRAM Present: Mr. Purvis Mr. Young Mr. Phillips Mrs. Klotz H.M.Jr: Well, we had unbelievable success. I will talk 8 little fast; and then if there is anything I overlook, Philip Young can explain. I am due at the White House. Purvis: Quite. H.M.Jr: To boil down what has happened, the Army and Navy are proposing to certify to the President of the United States that they can place the orders for the 883 million dollars worth of United States type stuff, and that is going to - when they have certified to the President, the President directs Jones and Jones will go ahead and order the stuff. Now, what he is proposing to do is to order - place an order for 8 third of the 883, give the manufacturer a firm order for a third and say that the balance will be coming along as we need it, because Knudsen said if they got an order for a third, they could get started, you see, of what the total amount is. The reason they are doing it so gingerly is that they are afraid if they splash the 883, it would hurt the bill because they say they have found a way to do it, and they don't need the Regraded Unclassified 40 - 2 - bill and they circumvent it, you see, and Stimson - when Jones came through with this this morning without any pressure on him - he said he worked until midnight on this. He said he worked all afternoon and he worked until midnight, but when he came through with this suggestion, Stimson was knocked off his pins and didn't know whether he was ready to do it. Purvis: That is very interesting. H.M.Jr: Is that right? Young: Yes, that is right. H.M.Jr: He was knocked off his pins and didn't know whether he was ready to do it, and McCloy was very helpful on that; and Frank Knox said, "Well, whatever Stimson will do I will do." Purvis: So that there is a sort of broad authority to get ahead with 883, but to 70 at it on the basis of placing a third and giving the manu- facturer the chance to know that it is working out to a bigger sum. H.M.Jr: Oh yes. Purvis: A bigger quantity. H.M.Jr: He will know, for instance - if you want a million 800,000 from the York Safe & Lock, and they know that the order is a million 800,000 but he gets an order for 600,000, with an option on the balance Purvis: That enables him to start his planning and get it going. Regraded Unclassified 41 - 3 - H.V.Jr: Now, as to the English type stuff, they propose to continue with these deals of buying up your contracts of United States standard stuff. Purvis: It sounds to me like Champaigne for lunch. H.M.Jr: T am going to tell this to the President when I see him at eleven. I 'just want to get this over to Sir Frederick. They are going to continue - Mcoloy - buying up your United States standard contracts; but whatever money becomes available from that, they would like you to use it on your English standard stuff, you see, and Stimson said if that is not what they are going to do, he said, "I will issue an order to stop it now. In other words, if they are successful in retting 45 million or five million from buying un these contracts, they would like you to use that money, whatever they can make available, for English standard stuff. Is that agreeable to you? Phillips: That is agreeable. Purvis: Oh yes. U.V.Jr: Because I understood from Young that you were not sure about it. Purvis: Well, we can manage that. H.M.Jr: And Jones is going to continue to buy un whatever plants he can. That will 20 ahead just the same. I mean, Jones will continue to buy any plant that you have got - I mean, if you have paid for a nowder factory, he will buy it and if you have got anything else that you can sell, he will buy it; and whatever Regraded Unclassified 42 - 4 - dollars you get from that will go toward your English. Now, he doesn't feel that he can buy this wool for this reason, that if he bought 250 million pounds of wool, that the whole western block of wool growers might go against this bill, but I got this idea some time ago from Lovett, and he thought you could get un a bunch of bankers in New York who could buy this wool provided that this wool was still in the hands of the growers or in private citizens' hands in Australia. Phillips: I am afraid we have taken over the whole crop, lock, stock, and barrel. However, I will look into that and see what we can do. H.M.Jr: "ell, if you could, and ask Foley to lend them Cox on this to help them, Young: Yes. Purvis: Yes. He is an ingenious -- Young: Cox is up on the Hill. H.M.Jr: Well, tell Foley to give them somebody, you see, to assign somebody. I will tell Foley myself. (Unrecorded telephone conversation with Mr. Foley:) H.M.Jr: He says Huntington Cairns would normally do it, but he is sick; so it will be Fiedler. So, they are leaving it to us to work on the English stuff, you see; and the shape it is in now, if Stimson - and we have got to rely on McCloy and I think that within a day or so they will get these letters to the President 43 - 5 - and begin to move in on this list of stuff which I have given them, and then if Sir Frederick and you and I can see where we can raise every dollar available to get for the 375 million - to get it for the British. And then at the last minute McCloy brought up the 300 million for the airplane plant, but he brought it up too late. It was brought up too late in the meeting, and you could see that Stimson got all confused. Purvis: It was dangerous. H.M.Jr: So somebody said, "Well, let's forget about it," but we can bring it up again; but you see we started I think on December 2, the President said this is what he wanted done, and it has taken from now until the - from December 2 until now to get Jones to do this. Purvis: Still my congratulations, because I think that is not too long 8 time knowing the difficulties of this situation. H.M.Jr: Well, you could have knocked me over with a pin, but I called him up yesterday and told him, and the meeting which I thought he was going to come to yesterday, the disagreeable one, he ducked it; and he said, "I didn't come because I didn't want to get upset with Marriner Eccles so I didn't come." He said, "I was working on this until midnight. The answer has been there all the time, but he wouldn't do it. The way I put it to them was this. "Gentlemen, there is a billion and a half to be ordered; and if we do everything that we can, we can raise about 10% of what they need." Regraded Unclassified 44 - 6 - And I think finally Jones has got it through his head - he again went through the motions, "Why can't they put up the securities as collateral, and I finally explained to him that all that collateral was up once and we can't put it up twice. Purvis: Which, as a banker, he should appreciate. H.M.Jr: I think it is in pretty good shape. Purvis: Actually, perhaps some of this getting other people to knowing something about it may have helped. The pressure is apparently - all of them begin to feel that something has got to be done.to help. H.M.Jr: Oh, it is a combination of spices which finally make the pudding. Purvis: Since December 2. But I think it is a good job. I am immensely relieved. I frankly couldn't sleep last night. H.M.Jr: Well, I made up my mind - I was staying behind. I am going over on financing to see the President. I made up my mind - I have been pacing the floor since 8. quarter of si X this morning - that I was going to say to the President, "Nowlook, I haven't bothered you with this, but it has got to the point where you have just got to set an after- noon aside and knock their heads together." But now I can go over and say, "I have saved it." But the amusing thing was, already Stimson kind of backed away from it, but I think he is going to be all right. Young: He will be all right. Regraded Unclassified 45 - 7 - H.M.Jr: My estimate of McCloy has gone up, though. Purvis: I think the thing you can say for McCloy is that he is terribly keen to do it, and he trys all sorts of ways and means. H.M.Jr: Awfully anxious to do it. And Knudsen was fine and then another thing, which they said, and T am massing this on to you, that after the bill goes through, they said for the first time that they expect to order United States and British standard stuff, but I wouldn't take that too seriously. And the other thing that they are going to do - Phil, remember this - they are going to comb your list of so-called English and they think there are 8. number of things in there that can be brought across the line. Purvis: That, of course, is the most hopeful line. H.V.Jr: Like the Beaufort guns. Purvis: night, which is an international thing. I was saying that to McCloy yesterday. It is accepted in every country. E.N.Jr: McCloy said,"After all, it shoots and it throws things and if it does for the anglish, why can't it for United States." Purvis: And it also does for the english and the French. H.M.Jr: He says, "It throws things so if it does it for the English, why can't it for United States. Purvis: It is 8 common sense attack. H.M.Jr: I think it is - now, Sir Frederick, if you would be exploring where you can raise some Regraded Unclassified 46 - 8 - money for the English stuff and then maybe tomorrow we can get together again. Purvis: Excellent. H.M.Jr: this is what Mr. Young gave me this morning. (Referring to Attachment No. 1) I didn't give them -- Young: The copies. H.M.Jr: I didn't think it was good for them. Young: I didn't either. Purvis: Did you have some more? H.M.Jr: Some figures that George has on what you have ordered to date. Phillips: When you say ordered from, it may mean that this has been taken before. H.M.Jr: I don't know, but I didn't raise it today. Purvis: I asked for a statement last week. It has just arrived. They have probably been working together. I will probably get my copy today, too. H.M.Jr: I got this this morning, but I thought it might muddy the waters a little bit. Purvis: Oh, I think that could be locked away for good. Young: We will give you a copy of it. (Laughter) Purvis: It is probably done in conjunction. Regraded Unclassified 47 - 9 - H.M.Jr: I think that is a good day's work. Purvis: Congratulations and many thanks again for the determination with which you have gone at it. That would make it look as if it would move after the initial decision was taken, because that depends on the spirit, doesn't it? H.M.Jr: The spirit was fine, and I think all the dinners and parties that you have attended all bore fruit and you see, we started off by Knox saying, "Well, what about my plan," and I said, "Well, if you listen I think you will see what happens to it," but it all went through. The spirit is here. And this will move now. It is really settled. Purvis: Thank you. Regraded Unclassified 48 INTERIM FINANCING (Million Dollars) 1. Total amount recoverable from British contracts for U.S. type war materials: (a) For advance payments on contracts ------ $430 (b) For payments for plant facilities 1/ --- $109 Total $539 2, Amounts may be recovered as follows: (a) Advance payments, by transfer of British contracts for U.S. type material to U.S. - Total appro- priation available - Var Department $230,000,000.00, yielding British $ 45 (b) Plant facilities payments, by sale of British plant facilities to RFC, yielding British $109 Total recoverable by British $154 3. Balance not recovered $385 Additional War and Navy Department appro- priations might be available as basis of transfer of additional U.S. type contracts to U.S. The time required to effect a recovery of the above sums is so great as to diminish seriously the usefulness of the plan as a means of recovering funds available for British contracts. Non-recoverable items excluded. Regraded Unclassified 49 (Million Dollars) 4. Amounts urgently required for British type war materials: For product $345 For plant facilities $ 31 Total $376 5. Amounts recoverable from transfer of con- tracts and plant facilities (see item "2") $154 Balance of British type contracts for which no funds available $222 6. Amounts urgently required for U.S. type war materials: For product $836 2/ For plant facilities $ 48 Total $884 Additional requirement for aircraft plant facili- ties for contracts to be placed after February $300 U.S. type contracts for which no funds available $1184 These figures do not include approximately $200,000,000 of contracts for U.S. types (plus $22,000,000 of plant facilities) originally proposed to be placed with the $230,000,000 of War Department funds referred to in 2 (a) above. 50 MEMORANDUM January 22, 1941. TO: Secretary Morgenthau FROM: Mr. Sullivan SUBJECT: Conference at the White House. Present: President Roosevelt, Secretary Morgenthau, Under Secretary Bell, Mr. Sullivan. The Secretary presented the President with a. memorandum dealing with pending finances of 500,000,000 National Defense notes. The President commented on how poor we were and asked Under Secretary Bell how much money we had on March 4, 1933, and Mr. Bell replied $156,000,000. The President approved the immediate issuance of the 500,000,000 National Defense notes and then discussed the raising of additional cash in the amount of 1 billion dollars and the refunding of 11 billion dollars of meturities in March. He suggested our con- sideration of 8. type of securities which would be cashable at par at all times and said he thought it would serve the double purpose of (1) freeing the people from the fear of not being able to get the cash when they needed it, and (2) preventing deflation by preventing these bonds from dropping very far below par. The Secretary presented the memorandum on the legislation to make all future issues of Federal securities taxable. The President objected to any move which could be interpreted as Treasury conviction that appropriations could not be made beyond the stabilized debt limit. The Secretary and Mr. Bell explained to him they would have no diffi- culty in increasing the debt limit and that it would be much easier to work the problem out with Congress. The President then stated that no definite amount to which the limit should be increased should be for- mally recommended by the Treasury and that this bill should be B. com- mittee bill rather than a Treasury bill. The Secretary then presented the President with the memorandum relating to reciprocal taxation of Federal, State and municipal securi- ties. The President inquired if this was along the lines of the Glass Plan and Mr. Sullivan replied that it was not, that this bill called for taxation of all future issues of State and municipal securities by the Federal Government and taxation of future issues of Federal securities by the States. The President nodded approval but did not indicate whether or not this should be a Treasury bill or a committee bill. JLS Regraded Unclassified 51 January 22, 1941 90 THE PRESIDENT: The Treasury's working balance is, at the present time, down to $742,000,000 and w the and of January 10 vill be deva to approximately $500,000,000. It 1s, therefore, necessary for me to valse an additional amount of new each at this time to meet heavy expenditures for the next thirty days. I propose, therefore, offer- ing on Thursday of this week $500,000,000 of National Defense notes, the issue from which will be subject to all Federal taxes. If our legislation to raise the dobt limit and to tax the income from all Federal securities is passed before the middle of February, I contemplate as issue of Reconstruction Pinance Corpora- tim securities during that month in the anount of about $500,000,000. This will emable that Corporation to meet its commitments as well as return to the Treasury - $350,000,000 of capital trunds as - mended in year 1941 Budget. If this legislation is not enasted W that time, I my have to offer another issue of Defense notes. When this legislation is passed, I also contemplate issuing before March fifteenth around $1,000,000,000 of Treasury securities for sev each and, in addition, refunding $1,222,000,000 of securities naturing es March fiftcenth. It is hoped that the Treasury - as this time issue a long-term Treasury bond, the income from which will be subject to all Federal tame. DUBIBLE Regraded Unclassified 52 MEMORANDUM FOR THE PRESIDENT There is attached a draft of a bill relating to the public debt and the status of future Federal obligations from the standpoint of exemption from taxation, which I propose to recommend to Congress if it meets with your approval. The bill entitled "A Bill To amend the Second Liberty Bond Act, as amended, and for other purposes," would accomplish the following objectives: (a) It would fix the ceiling on the public debt at $60,000,000,000, an increase of $11,000,000,000 over the present statutory combined debt limit of $49,000,000,000. The new limit, of course, would not include guaranteed obligations issued by the Recom- struction Finance Corporation and similar agencies. (b) It would give the Secretary of the Treasury greater and more flexible authority Regraded Unclassified 53 - 2 - over Savings Bonds as a financing medium by giving him discretion (1) to fix their do- nominations, (2) to determine the aggregate face amount of them which may be held by one person at one time, and (3) to issue them on an interest-bearing as well as a discount basis. (c) It would authorise the Secretary of the Treasury to issue, in the same manner as Savings Bonds are issued, a new obligation similar to the old War Savings Certificate called a "Treasury Savings Certificate." (a) It would eliminate the partition between the general debt limitation of $45,000,000,000 and the National Defense limitation of $4,000,000,000, and would repeal that section of the Revenue Act of 1940 which earmarks certain taxes lovied under that Act for the purpose of retiring, over a five-year period, any National Defense obligations issued under the National Defense debt limitation. Regraded Unclassified 54 w . # (a) It would remove from all Federal obligations (including those of corporations and other agencies of the Government) issued in the future the privileges of exemption from Federal taxation which they now enjoy. REFILIBIA 1-21-41 Regraded Unclassified 55 A BILL To amend the Second Liberty Bond Act, as amended, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act my be cited as the Public Debt Act of 1941. Sec. 2. Section 21(a) of the Second Liberty Bond Act, as amended, is hereby further amended to read as follows: "Sec. 21. The face amount of obligations issued under the authority of this Act shall not exceed in the aggregate outstanding at any one time." Sec. 3. Section 22 of the Second Liberty Bond Act, as amended (U.S.C., title 31, sec. 757c) 1s hereby amended to read as follows: "Sec. 22. (a) The Secretary of the Treasury is authorized to issue, from time to time, through the Postal Service or otherwise, United States savings bonds and United States Treasury savings certificates, the proceeds of which shall be available to meet any expenditures authorized by law, and to retire any out- standing obligations of the United States bearing interest or issued on a discount basis. The various issues and series of the savings bonds and the savings certificates shall be in such forms, shall be offered in such amounts, subject to the limitation imposed by section 21 of this Act, as amended, and shall be issued in such manner and subject to such terms and conditions consistent with subsections (b), (c), and (d) hereof, and including any restrictions on their transfer, at the Secretary of the Treasury my from time to time prescribe. "(b) Savings bonds and savings certificates my be issued on an interest-bearing basis, on a discount basis, or on a combination interest-bearing and discount basis and shall mature, in the case of bonds, not more than twenty years, and in the case of certificates, not more than ten years from the date as of which issued. Such bonds and certificates my be sold at such price or prices, Regraded Unclassified 56 2 end esed before maturity upon cuch terms and conditions the Secretary of the Treasury my prescribe: Provided, met the interest rate on, and the issue price of savings and savings certificates and the terms upon which they my be redeemed shell be such EC to afford an in- ve taent yield not in excess of three per centum per annua, compounded semianmally. The denominations of sevings bonds end of savings certificates shall be such TE the Secretary of the Treasury may from time to time etermine and shall be expressed in terms of their maturity values. The Secretary of the Treasury is authorized, in Mr discretion, at any time or from time to time, by regula- tion to fix the amount of savings bonds and savings cer- tificates that may be held by any one person pt Any one time. "(c) The Secretary of the Treasury my, under such regulations and upon such terms and conditions LE he my prescribe, issue, or cause to be issued, stamps, or may provide any other means to evidence payments for or on account of the savings bonds and sevings certificates authorized by this section, and he mey, in his discretion, make provision for the exchange of savings certificates for savings bonds. "(d) For purposes of trxation any increment in value represented by the difference between the price poid end the redemption value received (whether at or before maturity) for sevings bonds end savings certi- ficntes shall be considered 0.5 interest. The savings bonds and the savings certificates chall not bear the circulation privilege. "(e) The appropriation for expenses provided by section 10 of this Act and extended by the Act of June 16, 1921 (U.S.C., title 31, secs. 760 end 761), shall be available for all necessary expenses under this section, and the Secretary of the Treasury is authorized to advance, from time to time, to the Postmaster General from such appropriation such sums 9.6 are shown to be required for the expenses of the Post Office Department, in connection with the handling of bonds, certificates, and stamps or other means pro- vided to evidence payments. "(f) The board of trustees of the Postal Savings System 1: authorized to permit, subject to such regula- tions ae it may from time to time prescribe, the with- drawal of deposits on less than sixty days' notice for Regraded Unclassified 57 -}- the survose of acquiring suvings bonds and savings certificates which may be offered by the Secretary of the Treasury; and in such cases to make payment of interest to the date of withdrawal whether or not : regular interest payment date. No further original issue of bonds authorized by section 10 of the Act proved June 25, 1910 (U.S.C., title 39, sec. 760), shell be node after July 1, 1935. "(g) At the request of the Secretary of the Treasury the Postmaster General, under such regula- tions CA he may rescribe, shall require the employees of the Post Office Department and of the Postal Service to perform, without extra compensation, such fiscal gency services as may be desirable and practicable in connection with the issue, delivery, safekeeping, redemption, or payment of the suvings bonds and savings certificates, or in connection with any stamps or other neans provided to evidence payments." Sec. 4 (a). Notwithstanding any other rovision of law all obligations isrued under authority of the Second Liberty Bond Act, as amended, and all obligations which by their terms bear interest or which are sold on a dis- count basis issued under authority of any other law by any instrumentality, corporation or agency of the United States or by any other corporation or entity created by, organized under, or established pursuant to authority contained in, any Act of Congress shall, NB to both principal and interest or other increment, be subject to all taxes now or hereafter imposed by the United States: Provided, That any such obligations which the United States or any such instrumentality, corporation, agency or entity has, prior to the effective date of this Act, contracted to issue at & future date, shall when issued bear such tex exemption privileges as are provided in the 1 = authorizing their issuance, (b). The provisions of this section shall, with respect to such ob- Regraded Unclassified 58 lightions, be considered as amendatory of and supplementary to the ren- poctive Acts or parts of Acts authorizing the issuance of such obligations, :§ amended and supplemented. Sec, 5. Section 32 of the Act approved June 13, 1898, 15 amended (U.S.C., title 31, sec. 756), section 6 of the First Liberty Bond Act, na amended (U.S.C., title 31, sec. 755); section 6 of the Second Liberty Bond Act, as amended (U.S.C., title 31, nec. 757); section 5(d) of the Second Liberty Bond Act, as amended (U.S.C., title 31, sec. 754(d)); and sections 301 and 302 of title III of the Revenue Act of 940 (54 Stat. 526); are hereby repealed. Sec. 6. Nothing contained in this Act shall be deened to alter or amend in any way the terms of any of the obligations described in section 4 hereof, issued prior to the effective dute of this Act, or to impair or otherwise affect any rights, privileges, or remedies accruing to the holders of such obligations under the terms thereof or under the Lows authorizing their issuance. Sec. 7. This Act shall become effective on the first day of the month following the date of its approval by the President. Regraded Unclassified 59 MEMORANDUM 7 on THE PRESIDENT There is attached & bill relating to the status of state and municipal obligations from the standpoint of exemption from taxation which I propose to recommend to Congress if it meets with your approval. The purpose of the bill is to provide the balance of the legislation necessary to enable us to complete our program of elimination of tax-exempt securities. This purpose would be accomplished by: (a) Making obligations issued in the future by any State, Territory, municipality, or other public body subject to income taxation by the Federal Government. To permit public bodies to take advantage of favorable market conditions, provision has been made for the refunding of outstanding callable bonds with tax exemption for the came period as the original issue. Regraded Unclassified 60 - 2 # (b) Consent to non-discriminatory taxation by States of the interest on all Federal obligations issued in t he future. I think it would be good strategy to have this bill acted upon by Congress after Congress has acted upon the proposed bill dealing with the taxable status of future Federal securities. LJB/EHFJr/fn 1/21'41 9.m76. Ths The Regraded Unclassified 61 (the dates herein used are based 02 the assumption that the mill will be ensated in April, 1941, w that an interval of about 60 days will exist between its mustant and the date separating the tamble Lawes from the tax-exampt issues.) A BILL to previde for the reciprecal income taxation of public obliga- tions, and for other purposes. 30 it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act say be cited as the "Public Bond Tax Act of 1941." Sec. 2. Section 22(b)(4) of the Internal Revenue Code is amended to read as follows: *(4) TAX-FREE INTEREST.-To the extent provided in section 116(b), interest upon obligations issued by (A) a State, Territory, or my political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any use or more of the foregoings or (a) - corporation organized under Act of Congrees, if such corporation is an instrumentality of the United States (as defined in section 116(b)); or (a) the United States or any of its possessions. Every person - ing any of the obligations emerated in clause (A). (D). se (0) shall, in the return required by this chapter, submit a statement showing the musher and - of such obligations used by him and the izosee N° osived therefrom, in such form and with such information at the Com- missioner may require." Sec. 3. Sestions 25(a)(1) and (2) of the Internal Revenue Code are unded to read as follows: Regraded Unclassified 62 - I - "(1) INTEREST ON UNITED STATES CHLIGATIONS.-The - received as interest upon obligations of the United States if such interest is included in gross income under section 22, and if under the Act authorising the issue of such obligations, as amended and supplemented (including the amendatory and supplementary provisions of section 2a of the Public Debt Act of 1941). such interest is exempt from normal tax, *(2) INTEREST ON OBLIGATIONS or INSTRUMENTALITIES or THE UNITED STATES,-The emount received as interest upon obligations of a corporation organized under Act of Congress, if (A) such corporation is an instrumentality of the United States (as defined in section 116(b)); and (B) such interest is included in gross income under section 22: and (c) under the Act authorising the incue of such obligation, as amended and supplemented (including the amendatory and supplementary provisions of section 4 of the Public Debt Los of 1941), such interest is exempt from normal tax." Bee, 4. Section 116 of the Internal Revenue Code is smended by inserting after subsection (a) a now subsection to real as follows: "(b) TAX-FREE INFEREST.-Interest upon obligations issued (1) before July 1, 1941, by a State, Territory, or any political subdivision thereof, or the District of Columbia. or any agency or instrumentality of any one or more of the foregoing or (2) by & corporation organised under Act of Congress, if rush Regraded Unclassified 63 - 3 - corporation is ML instrumutality of the United States: or (3) by the United States w any of its personsions. In the case of obligations w the United States issued after September 2, 1917 (other them postal savings certificates of deposit). and in the case of obligations of a corporation organized under Act of Congress the interest shall be exempt only if and to the extent provided in the resportive Asta authorizing the issue thereof, as amaded and supplemented (including the amendatory and supplementary previsions of section " of the Public Debt Act of 1941), and shall be of cluded from gross income only if and to the extends it is shelly - from the taxes imposed w this chapter. the term 'instrumentality of the United States' - instru- mentalith, corporation - agency of the United States, - my other corporation or catity created expended under, or outsblished persuant to authority contained - my Act of Gengress. 7er the purposes of this *(1) In determining whether - obligation is tenal after I'm 30, 1941, and whether a obli- gatien 10 issued after the date of emartments of the Public Dond Tax Ast of 1941. (hereinafter called - date'). it shall in either case be - sidered to be issued after such date, if any part of the payment therefor is reseived w the obliger after such date, or delivery thereef is mis w the obliger after such date. Regraded Unclassified 64 - b - *(2) Obligations which marely replace lest, Regraded Unclassified autilated, defance, or destroyed obligations, or - ligations of larger or sualler demonizations, mL - ligations in registered form or with compens which seraly replace obligations with coupons or in regis- tered from, shall be treated as if they were the or ligations replaced. "(3) w If the terms of an obligation issued before July 1, 1941, the naturity of which an enastand date is later them June 30, 1941, are, after exastment date, changed no as to increase the principal mount or interest rate or to extend the naturity, then such obligation shall (as to interest ascruing for any period after the date of the change or June 30, 1941, uld.chover is later) be - sidered as issued. after such later date. =(3) In the case of an obligation issued after the ensetment date and before July 1, 1942, such obligation shall (as to interest accruing for sky period after has 30, 1941) be considered as issued after I'm 30, 1941, if any part of the proceeds of the issue of which the obligation is a part, or if any obligation of the Lesue, is devoted to the retirement or refunding of as obligation the of which on exastment date vas later the December 31, 1941. For the purposes of this subper agraph, December 31, 1941, shall be considered the naturity, n enactment date, of a shligation the interest on which ceases to YUE before 65 - 5 - Jamary 1, 1942, by reason of such obligation being called for redemption in accordance with the terms thereof as they existed on succtment date. "(4) If as obligation is issued after June 30, 1941 (hareinafter called 'refunding obligation'), and 11- "(A) the issue of which 1t is & part (hereinafter called law issue') is issued for the purpose of refunding one or more obligations (hereinafter called 'refunded obligations'); and =(3) all refunded obligations have the - ammption expiration date, as defined in subpare- graph (J), and "(0) no obligations, other than those of the new issue, have been issued for the purpose of 20- funding my of the refunded obligations; and "(D) the aggregate principal amount of the new issue is not in excess of the aggregate principal - of the refunded obligations; and "(z) interest on each of the refunded oblige- tions comes (by reason of such obligation, being salled for redemption, in ascerdance with the time thereof as they existed as mastment date, or the date of Lowns, whichever is Later) to run upon 5 date mt more than seven months after the date upon Regraded Unclassified 66 - 6 - which interest on the refunding obligation begins to rung and "(F) interest on each of the refunded chlige- tieas, for the period at the and of which 14 coases to run by reason of mah call for redemption, is considered as interest on an obligation issued before July 1, 1941; and "(&) the refunding obligation, in its terms, states the exemption expiration date us, and identi- fies, the refunded obligations; and "(H) the interest rate on the refunding obliga- tiens for any period ending en or before the exemption expiration date of the refunded obligations is not higher than the interest rate which my of the no funded obligations had, or would (if eush obligation had not been called for redemption) have had, for the corresponding period; then the refunding abligation shall be considered as 1ssued before July 1, 1941, as to so wash of the interest as ascrues for any period ending before or on the exemption expiration date of the refunded obligations, and shall be considered as issued after June 30, 1941, as to the of mush interest. For the purposes of this paragraph== "(1) several obligations shall be considered as cas issue, only if web is identical with all Regraded Unclassified 67 - 7 - the others in maturity, interest rate, terms and conditions, and resitals, but the fast time the denominations differ, or that - are registered and - in coupon form shall be disregarded. =(3) 'Emmption expiration date* - "(1) with respect to a refunded obliga- tiem issued before July 1, 1941, the date of maturity which the obligation had on June 30, 1941, #(11) with respect to a refunded oblign- tion issued after June 30, 1941, the date M of which interest therem would (if the chil- gatien had net been called for redemption) have ceased to be considered as interest on an obligation issued before July 1, 1941.° See. 5. (a) the United States hereby consents to the teration, under an income tax, of interest upon, and gain from the sale or other disposition of, obligations issued after June 30, 1941, w the United States, any Territory 62 pessession or political not division thereef, the Mutrist of Columbia, or any agency or 1200 strumentality of any one or more of the foregoing. w any duly constituted taxing authority having jurisdiction to tax such interest and sain, if such tamtion does not discriminate against such interest or gain because of its secree. The consent given in this section shall not affect these obligations issued after Regraded Unclassified - 8 - 68 June 30, 1941 which the United States or any agency or instru- sentality thereof has prior to June 30, 1941 contracted to issue at a future date with such tax exemption privileges with respect to taxation by any State, county, municipality, or local sexing authority as are provided in the law authorising their issuance, se emended and supplemented. As used in this subsection, agency or instrumentality of the United States includes any corporation of the United States and any corporation or entity created by. organized under, or established pursuant to authority contained in. any Act of Congress. (b) For the purposes of this section- (1) In determining whether an obligation is issued after June 30, 1941. it shall be considered to he issued after such date if any part of the payment therefor is re- ceived by the obligor after such date, or delivery thereof is made by the obligor after such date. (2) Obligations which merely replace lost, mitilated, defaced, or destroyed obligations, or obligations of larger or smaller denominations, and obligations in registered form or with coupons which merely replace obligations with coupons or in registered form, shall be treated as if they were the obligations replaced. (c) The provisions of this section shall, with respect to any obligation, be considered as amendatory of and supplementary to the respective Acts or parts of Acts authorizing the issue of such obligation AS amended and supplemented. Regraded Unclassified 69 Jamury 22, 1941 KENDBANDOM FOR THE PRESIDENT) In your Budget Massage you mis the following statement: ....] an asseming that the Congress will accept the recomendation of the Secretary of the Treasury that the carnarking of taxes for retirement of defense obligations be repealed; . " The Badge's document above, based on the program set out therein, that the gross public debt will be $49,157,000,000 on June 30. 1941, and $58,367,000.000 on June 30, 1942. These two figures do not take into consideration the future accruals on Savings Bonds nor say contemplated aid to Great Britain. Accord- ing to Treasury estimates, the balance of the berrowing authority under the combined dobs limitations of $49,000,000,000 will be exhamated in May of this year. It will, therefore, be necessary for the Treasury to ask Congress for as immediate increase is our debt limitation, and ve should like to ask at the name time the elimination of the partition between the general limitation and the National Defense limitation, and the repeal of the provisions setting up the special fund into which serearked taxes are to to deposited for the purpose of retiring any outstanding National Defense securities. In view of the Indget program and the additional financing which may be expected of the Treasury under the Lond-Lease Bill for Regraded Unclassified 70 . 2 - Great Britain, I recommend that the public debt limitation be fixed at $60,000,000,000. The fellowing table above the Treasury's financing problem for the next eighteen months (exclusive of Savings Bonds, Treasury bills, and Trust funds): January - July, 1941- June, 1941 June, 1942 Total (In millions of dellars) Treasury - New cash $ 3,500 8 6,750 $ 10,250 Refundings 1,726 1,464 3,190 Governmental Corporations: New each 560 1,000 1,560 Refundings - 1,678 1,678 - 5,786 $10,592 $ 16,678 AVAILE Regraded Unclassified 71 January 22, 1941 2:36 p.m. H.M.Jr: Hello. Cong. Doughton's Secretary: Yes, sir, Mr. Secretary. H.M.Jr: Ie Mr. Doughton in town? 9: Yes, sir, he 18. H.M.Jr: Well, I've got to know whether he can come tomorrow morning or not. I've got Senator Harrison, Senator George and Mr. Cooper all tied up. S: I know that he can come but I will contact him from the floor immediately, Mr. Secretary, and then call you back. H.M.Jr: I wish you would. I've really got to know. S: All right, sir. I know that he can but I'll confirm that immediately. I'll go over there myself. H.M.Jr: And will you call back? S: Yes, sir. I'll go over there right now. H.M.Jr: Thank you. Regraded Unclassified 72 January 22, 1941 2:58 p.m. H.M.Jr: Hello Operator: Congreseman Doughton. Robert Doughton: Secretary, this is Bob Doughton. How are you, Henry? H.M.Jr: I'se all right. How're you? D: First rate, thank you. I just, through my secretary, got your kind invitation. H.M.Jr: Yeah. D: What's the occasion and how long will we probably be down there? H.M.Jr: Well, the occasion 18 this: I saw the President today and we need some changes in our law about raising our money. I want to draw your attention to the fact that we're approaching the debt limit. D: Death limit. H.M.Jr: Debt limit - not death. D: (Laugh) Well, I'm glad it's debt, not death. H.M.Jr: No, death and taxes. This is debt, and then this question about tax exempts on Governments. D: Well, that's one thing I've been thinking I'd come down and discuss with you and see if you were going to press that and if 80 we'd better get at it. We've got a. tax bill - if we're not why it wouldn't be 80 important. H.M.Jr: What are you doing around 9:30 tomorrow morning? D: Well, these National Defense people wanted an amendment to this excess profits tax bill and they want it done - get through Congress before the 5th of February. There's & dead- line there that they say has got to be Regraded Unclassified 73 - 2 - removed or it'll hamper their National Defense program. I introduced a Joint Resolution today and was going to call my Committee in the morning at 10:30 but I can do it a little later. I haven't called it yet and of course I'll come to your meeting. H.M.Jr: Well, if you could be here at 9:30 - if you're not here there's no use having any meeting. D: How's that? H.M.Jr: If you don't come, there won't be any meeting. D: Well, but I'll come. H.M.Jr: All right. D: We'll probably be down there an hour or two, won't we? H.M.Jr: God, I hope not. D: Well, probably how long would you expect? H.M.Jr: Oh, an hour. D: 9:30 to 10:30. Think I could safely call a meeting for 11:00? H.M.Jr: I think it would be safe. D: Up here? H.M.Jr: Yes, sir. D: Well, I'll just call my meeting then for 11:00 to consider my Joint Resolution. H.M.Jr: Fine. D: Who all will be in our meeting tomorrow? H.M.Jr: Well, if it's agreeable to you, I thought I'd have Senator Harrison, Senator George and Jere Cooper. Regraded Unclassified 74 - 3 - D: Always happy to have Senator Harrison, oh, yes, and Senator George and Jere Cooper. H.M.Jr: That's about all unless you had somebody in mind. D: No, I wouldn't have anybody unless you wanted to invite old man Tom. He is the ranking Democrat. He's not - we haven't organized any sub-committees yet you know, but I think he told me he was going home today anyhow. H.M.Jr: Well, then, that leaves him out. D: Yeah, he's mighty good always and I think would appreciate & little recognition. I think he has felt a little hurt that some boys below him on the committee have received more recognition although he hasn't complained. He's one of the loveliest characters in the world. Well, all right, just whoever you want to invite, you know, is always satis- factory and pleasing to me. H.M.Jr: Well, 9:30 tomorrow morning? D: At your office. H.M.Jr: Yes. D: I'll be there and I'll set my meeting for 11 o'clock. H.M.Jr: Wonderful. D: And then you think I'll be able to get back? H.M.Jr: Yes, sir! D: Thank you very much. H.M.Jr: Thank you. Regraded Unclassified 75 January 22, 1941 3:00 p.m. RE DEBT LIMIT Present: Mr. Bell Mr. Sullivan Mr. Schwarz Mr. Kuhn Mr. Foley Mrs. Klotz H.M.Jr: While I am waiting for Bell to come in, what did you do on the Hill? Kuhn: We couldn't get to Bloom until after the hearing. He said he would have to call his committee together and put that in the record before releasing it, so he held up the press releases. That means we are going to have to hold up the letter to Tinkham until we get word to him. H.M.Jr: You don't know what happened? Kuhn: Not after that. H.M.Jr: He is going to let you know? Schwarz: We will get word back as soon as the committee has approved that as & part of the record. He suggested holding it up until Friday or Saturday, and we urged him to speed it along because the longer that difference in the Federal Reserve figures and ours is un- reconciled, the more editorials we might have, questions. Regraded Unclassified 76 - 2 - He said he would do it. H.M.Jr: I am trying to clear 8. half dozen things. Dan, tomorrow morning at 9:30 I expect Harrison, George - I have heard from them. Also Doughton and Cooper. I haven't heard from Doughton, but I have got his man on the floor trying to get him. They are coming in here at 9:30, at which time I am going to put up what we talked to the President, and I want Foley and Sullivan here; but I am looking to you to have ready for me what we took over to the President, except to change it so that we won't ask for & fixed amount. We will draw their attention to the fact that if we borrow all of this money, we will exceed the debt limit; and we are just bringing it to their attention, to have it read the way the President asked us to do it, you see, which leaves it open. But we will carry it out. I expect to tell them that my position is that I would like to see it raised to an amount equal to what has been appropriated. So there is no misunderstanding, I am looking to you to have it here at 9:30. (Telephone conversation with Mr. Doughton follows:) Regraded Unclassified 77 - 3 - Sullivan: I think it is Tom Collins from Brooklyn. H.M.Jr: Did you know about this? Sullivan: This is an amendment which merely allows them to go beyond February 5 and certify these defense things. H.M.Jr: This isn't the thing that you talked about after we left the President? Sullivan: Not at all, sir, and we are keeping strictly out of this. You remember they tried to get Treasury in last summer, to join in the certification, and so when Mr. Greenbaum came over, I told him that we neither approved or disapproved. We interposed no objection, so we don't want to get in on it. This is a defense matter, and none of our affair. H.M.Jr: Oh, this is where all those three agencies certify? Sullivan: That is right, and they haven't been able to - I think - - I don't know. Have you heard about anything being decided on it, Dan? Bell: No. H.M.Jr: Then if they are having a meeting tomorrow, it is very timely that we have this meeting in the morning. I have got a call in for Barkley and the Speaker to tell them about this meeting. After eight years I learned a little But I am looking to you, Dan, to have that thing. Bell: Yes, I will have it. H.M.Jr: All right. We will have the same thing we took to the President, except -- Regraded Unclassified 78 - 4 - Bell: Current financing. H.M.Jr: We won't mention a figure. Now, I think we ought to show them what the borrowing is going to be just the way it was in that thing, for six months and 18 months. Bell: All right. There is 17 billion dollars piled up there for financing. H.M.Jr: Would you have & figure - what the figure would be if it included - to raise the debt up to the amount of the appropriations. Bell: Sixty-three billion dollars if you include the estimates in the Budget. H.M.Jr: Because you know Harry Burns said he would go along. Bell: Yes. H.M.Jr: Now, do you (Sullivan) want to ask me anything between now and 9:30 tomorrow morning? Sullivan: No, sir. H.M.Jr: Do you, Ed? Foley: No. H.M.Jr: Anybody else? Foley: Are you going to use the same bill, Dan, except just use the figure out, or are you going to use the other one that doesn't mention any figure? You know we had it both ways, yesterday. Bell: No, we will use the bill with a blank figure. Regraded Unclassified 79 - 5 - The Secretary, I think, made it quite plain to the President that he thought 8. figure ought to go in, but we wouldn't put it in. H.M.Jr: The President tried his best to - doesn't want the Treasury to name a figure, and he has changed 8. little bit from his Budget message. He wants us to say that it is Congress' responsibility. I have done that consistently, Ed. Ts that right Bell: That is right. Schwarz: You have done that in all your public statements. Bell: And I think the figure ought to be fixed up at this meeting tomorrow and ought to go in that bill when they introduce it. H.M.Jr: They will mention & figure, but I can't go along with the President on this. Sullivan: He also said that was to be a committee bill. H.V.Jr: They are all committee bills. Bell: Yes, they are all committee bills. H.M.Jr: Except those bills which are Foley Bills. (Laughter) Well, that is about all. Ed, you have got word that you are to go un with me on the Hill at 3:15 tomorrow? Foley: Yes. H.M.Jr: All right. After this, I am going home. I am under the weather. Has anybody got anything else for me? Regraded Unclassified 80 - 6 - Kuhn: You asked yesterday for the full text of what Bell said about the direct investments. I have been through it, and there is nothing in 8. long speech on that subject except what was in the newspapers. I have it here if you want it. H.M.Jr: I would hate to see it. Kuhn: There is no need of it. Schwarz: I brought along the text of Norman Thomas' talk this morning. I don't think you need that either. H.M.Jr: No. O.K., gents. Bell: Then your three o'clock meeting is off? It is Federal Reserve. H.M.Jr: That is very mean of you, Dan. Bell: It is all right with me. I would just put it in the safe permanently. H.M.Jr: Why? Nell: I don't think I would pull it out until I have to. H.M.Jr: Oh I am, but I am not going to answer it today. Foley: Is Hull going on first or is this just a preliminary? H.M.Jr: This is a - what do you call it -- Foley: Rehearsal. H.M.Jr: Rehearsal. This is a strategy meeting tomorrow. Regraded Unclassified 81 - 7 - Foley! Oh, I see, I thought we were appearing. H.M.Jr: No, this is a strategy meeting. Foley: Because I had to call in for Barkley to find out what happened, but I got your message so I canceled the call. Kuhn: Monday morning I think they start. Foley: Oh, is it? I didn't hear. Kuhn: It was just on the ticker. H.M.Jr: Okeydoke, gents. 82 January 22, 1941 3:19 p.m. H.M.Jr: Hello, Henry talking. Sen. Alben Barkley: Yeah. H.M.Jr: Alben, just to keep my lines straight with you, tomorrow morning I've asked Harrison and George and Doughton and Jere Cooper to come in to talk about some legislation we need on the debt limit and on this taxing Federal bonds and 80 forth and 80 on. B: Yeah. H.M.Jr: Now how would you like me to keep you posted Bo that I can get your advice? B: Why, all right. I'd be glad for you to. H.M.Jr: Would you want me to do it before tomorrow or after the meeting tomorrow or how would you like me to do it? B: Well, anyway you want to. H.M.Jr: Well, you tell me and I'll do it the way ..... B: Well, maybe you'd better wait until afterwards. H.M.Jr: And then get in touch with you? B: Yeah. H.M.Jr: O. K., because ..... B: If you want me to come to the meeting, I can do that. H.M.Jr: Oh, I'd love it. B: Well, what time is it? H.M.Jr: 9:30, at the Treasury. B: Well, if you want me to do it ..... 83 - 2 - H.M.Jr: Well, I hesitated to ask you because I know how busy you are. B: But still I can get the information better right there than I could - and save your time too. H.M.Jr: Well, that would be wonderful. B: All right. H.M.Jr: 9:30. B: 9:30. H.M.Jr: Thank you 80 much. B: All right. Good-bye. 84 January 22, 1941 3:25 p.m. H.M.Jr: Hello. Operator: Speaker Rayburn. H.M.Jr: Hello. 9am Rayburn: Henry? H.M.Jr: Yes, Sam. R: Down in our District we have a chief bank examiner who has reached the retirement age. Now there are a lot of bankers writing about him and 80 forth and 80 forth. Now, if you feel like extending it why that I think would be all right with all of us, but if you decide not to do that, there's a fellow down there who is his assistant named Sanelin who's a mighty, mighty good man. H.M.Jr: Now, let me get this straight. Who is the fellow who 18 going to resign? R: Collier. Collier has reached retirement age - he's 70. H.M.Jr: Collier. R: He's the Chief down in that Dallas District, and his Chief assistant, or whatever they call it, is a man named Sanelin. I say if it is decided not to extend Mr. Collier's time why this man Banelin is a powerful good man. H.M.Jr: Sam, tip me off. Which way would you like it? R: Well, Collier of course is 70 and he's hard of hearing and ..... H.M.Jr: 0. K. R: See what I mean? H.M.Jr: 0. K. R: All right. Regraded Unclassified 85 - 2 - H.M.Jr: Now, let me ask you one? R: Yes. H.M.Jr: Tomorrow morning into my office are coming Barkley, Harrison, George, Bob Doughton and Jere Cooper on some legislation that we need and we talked to the President about it this morning. It has to do with the debt limit and taxing Government bonds and State bonds and if you weren't too busy I'd consider it a great compliment if you'd come and sit in with us. R: What time 18 it? H.M.Jr: It's at 9:30. R: Yeah, that'll be all right. I'll be there, unless I get tied up somehow and I don't think I will. H.M.Jr: Well, if you could and could spare the time why it would be very helpful to me. R: Fine. Thank you, Henry, I'll be there. H.M.Jr: Thank you. Regraded Unclassified 86 January 22, 1941. My dear Mr. Tinkhams Before reseiving your letter of Jamary 18th I had prepared further information, including detailed figures, for submission to your Committee. I - send- ing herewith a copy of this material which has now gene to your Chairman. You will find, I think, that this material answers the questions which you have raised. Sincerely yours, R. 4. Home George Holden Tinkham, House of Representatives, Washington, D. C. 1-22-41 Teken-up-on-Hill-by MP, Kuhn and others Brought back and sent to Mr. Tinkham by Special Messenger 3:25 by Kuhn's office. FILE COPY Regraded Unclassified 87 The Secretary of the Tronsury COPY Washin ton January 21, 1941 My dear Mr. Bloom: When I appeared before your Committee on January 15, I presented figures of the British dollar position as submitted to ne by the British Treasury. Since then the British Treasury has communicated to me a more recent figure of their gold holdings. I submit this revised figure to you without delay, as I want the Committee to have the latest information in the possession of the Treasury. The figure the British had previously submitted to me of their total gold holdings (as of January 1, 1941) was $238 million; the revised figure is $292 million, or $54 million greater. The earlier British table included $33 million of gold scattered in various marts of the world, and not available for payments here; the new table makes this figure only $30 million, which means that 33 million more are available for use. On the other hand, the British Treasury has submitted to ne an additional debit item of $21 million, representing commitments already made on account of forward exchange contracts. This figure was not in our possession on January 15th and did not appear in my original table of British liabilities. The difference between the present total and my earlier total is, therefore, a net increase of 836 million in British dollar and gold assets which are available to pay for war supplies in this country. The following table of the United Kingdom's gold and dollar assets contains the revised figure of gold holdings on December 31, 1940, and to that extent supersedes the table I presented to you on January 15th. The present table includes also a set of figures which the British Treasury has just given us as to their gold and dollar exchange position on August 31, 1939, Just before the outbreak of war, All the figures in the present table are supplied by the British except the estimate of private dollar balances, marked with an asterisk, which is taken from United States Treasury data. Regraded Unclassified 88 - 2 - Gold and Dollar Exchange Assets of U.K. Aug. 31, 1939 Dec. 31, 1940 (In Millions) Gold $2,038 $ 292 Official dollar balances 50 54 Private dollar balances 545 305 Marketable U.S. securities 950 616 Direct and miscellaneous investments in U.S 900 900 Total gold and dollar exchange assets $4,433 3 2,167 From the total British nold and dollar exchange aggete of $2,187 million on December 31, 1940, the British exclude as unavailable $305 illion of private dollar balances regarded 2.8 necessary for the conduct of business, 30 million of gold scattered in different parts of the world, end $21 million (the figure I mentioned earlier in this statement) on account of forward exchange contracts. This leaves a total of $1,611 million in gold and dollar exchange assete which the British regard as available, AB compared with a figure of $1,775 million in the original table I presented to the Committee. It may be of interest to you to conpare the British figures of their position on August 31, 1939, with the figures published in the Federal Reserve Bulletin of January, 1941. The Federal Reserve Bulletin estimated British gold and dollar resources as of August 31, 1939, E.S follows: (In millions of dollars) Gold $2,000 Dollar balances 595 Market securities 1,080 Direct and miscellaneous investments in the U.S 1,185 Total $4,360 Regraded Unclassified 89 - 3 - The only significant difference between this estimate of the Federal Reserve Board and the British Treasury statement is in the figures of marketable securities and direct and miscellaneous investments in the United States. The Federal Reserve Board's estimates of the United Kingdom's holdings of U. S. securities and direct and other investments in the United States as of August 31, 1939, were based on U. S. Department of Commerce data. The difference of $130,000,000 in market securities 1s as might be expected between estimates built up from en- tirely independent sources of information -- particularly as nominee accounts are involved and the dates as of which the British have valued their investments differ somewhat from those of the Department of Commerce. Both estimates are based on market values. The Department of Commerce estimates of the value of so-called direct and miscellaneous investments do not purport to represent liquidating value sinoc these figures are based on book value and on the capitalization of earnings, respectively. The figure of the British Treasury for direct and miscel- laneous investments, stated to be "not in excess of 3900 million", is a tentative estimate that will be re- viced 08 more exact information as to the sum of such investments is obtained by the British Treasury and as evidence of their licuidation value accumulates. How was it possible for British assets to shrink 80 rapidly between the start of the war and the end of 19407 The shrinkage, as you will have seen from the first table submitted today, amounted to $2,316 million. The explanation will be found in the following table of the balance of payments of the British Empire, excluding Canada and Newfoundland, with respect to all transactions requiring settlement in dollars or in gold. This table, which I now submit to the Committee, Was compiled by economists of the Treasury Department, the Department of Commerce and the Federal Reserve Board, on the basis of data supplied by the British Treasury. Regraded Unclassified 90 - 4 - Estimated Gold and Dollar Expenditures and Receipts of British Empire, Excluding Canada and Newfoundland, from September 1, 1939 to December 31, 1940* (In Millions of U.S. Dollars) Gold and Dollar Expenditures A. Payments to the United States by United Kingdom. 1. On British Government orders in the United States $1,380 Goods delivered. $660 Advance payments 570 Capital assistance 150 2. For other morchandise imports from the United States 705 3. For shipping, interest, etc 197 $2,282 Shipping disbursements 125 Interest and dividends 48 Miscellancous (chicfly film royalties) 24 B. Payments to the United States by Empire countries, excluding U.K. and Canada 1. For commodity imports 435 2. For shipping, interest, etc 48 483 Interest and dividends $ 40 Shipping (net) 8 C. Payments by Empire countries, excluding Canada, to areas outside the U.S. requiring gold or dollars 1. Payments by Empire countries (chiefly U.K.) to areas outside the U.S. and Canada requiring gold or dollars 550 2. Gold payments by Empire countries to Canada and Newfoundland (not) 225 775 D. Withdrawal of Capital 1. By American and others, through sale of free sterling to American importers 300 2. By repayment of outstanding export credits às required by our Neutrality Act 200 3. By liquidation of forward exchange position in dollars 235 735 * Combiled from data furnished by British Treasury For details see supplementary table appended. Regraded Unclassified 91 - 5 - Gold and Dollar Expenditures (Cont.) E. Residual - Miscellaneous items and errors of estimation. $ 71 Total gold and dollar requirements for all transactions 4,346 Gold and Dollar Receipts A. Receipts from United States by United Kingdom 1. From merchandise exports $ 205 2. From interest, shipping, etc. 140 345 Interest and dividends $ 85 Shipping earnings 35 Remittances from insurance companies 20 B. Receipts from United States by Empire countries, excluding U. K. and Canada 1. From merchandise exports 640 2. From tourist travel, remittances, etc. (net) 30 670 C. Dollar receipts by Embire countries, ex- cluding Canada, from areas outside the U. S. 50 D. Receipts from sale of Empire gold (new production and dishoarding) 965 Total gold and dollar receipts by Empire countries, excluding Canada $2,030 Total drain on gold and dollar resources of British Empire, excluding Canada and Newfoundland, Sept. 1, 1939 to Dec. 31, 1940 2,316 Total gold and dollar requirements for all transactions $4,346 Regraded Unclassified - 6 - 92 Supplomentary Table Estimated Expenditures and Receipts of Canada and Newfoundland with the Rest of the British Empire from September 1, 1939 to December 31, 1940 (In Millions of U.S. Dollars) A. Payments to Canada and Newfoundland by Empire countries 1. For purchases from Canada and New- foundland by the United Kingdom, $795 2. For purchases from Canada by other Empire countries 125 3. Other payments to Canada by Empire countries 10 $930 B. Receipts from Canada and Newfoundland by Empiro countries 1. From merchandise exports to Canada and Newfoundland by U.K. 170 2. From merchandise exports to Canada by other Empire countries 100 3. From interest and dividends paid by Canada to United Kingdom 85 4. Other U.K. receipts from Canada, principally Canadian Expeditionary Forces 20 375 British Empire deficit with Cannda and Newfoundland on merchandisc, interest and dividends, etc 555 Canadian assintance to U.K. -- repatriation of British-held Canndian securities and increase in sterling balances held by Canada 330 Gold payments by British Empire countries with Canada and Newfoundland Sept. 1, 1939 to Dec. 31, 1940 225 I hope the foregoing figures will be helpful to the Committee. Sincerely, (Signed) HEARY MORGENTHAU, JR,, Secretary of the Treasury. Honorable Sol Bloom, Chairman Committee on Foreign Relations, House of Representatives, Washington, D.C. Regraded Unclassified 93 GEORGE HOLDEN TINKHAM G. C. HAMELIN - purent MASSACHUSETTS SECRETARY on FORDON AFFAIRS Congress of the United States Douse of Representatives Mashington, D.C. January 18, 1941 The Honorable The Secretary of the Treasury Washington, D. C. Dear Sir: May I ask how you explain the discrepancies between your statement before the House Committee on Foreign Affairs in relation to Britiah financial resources and the more or less rough estimates made by the Board of Governors of the Federal Reserve System in August, 1939? Then, I understand British gold assets were calculated to be about $2,000,000,000, compared with slightly more than one-tenth of this amount now; holdings of United States securities, at $1,080,000,000 then, against $616,000,000 now; dollar balances, private as well as official, $595,000,000 then, $359,000,000 now. In other words, there was a total shrink- age between these two sets of figures covering liquid asseta from $3,675,000,000 to $1,213,000,000. With the non-liquid assets, representing direct and other investments, the dis- parity was less marked, it is true, being $1,185,000,000 then and about $900,000,000 now. I should appreciate an answer as soon as possi- ble. Sincerely yours, GEORGE HOLDEN TINKHAM Regraded Unclassified 94 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION STRECTLY DATE January 22, 1941 Secretary Morgenthau TO FROM Mr. Klaus MI reports: December 18, 1940-January 6, 1941. Surveillence of Axel Wenner-Gren con- tinued. It appears, emong other things, that Axel Wenner-Gren is in communice- tion with H. A. Brassert Company, which 18 said to control practically all the iron ore needed in German war industries and acts 88 holding company for Goering's stockholdings in these concerns. Brassert is said to be related to Coering. Member-Gren 18 said to claim that he was called to Europe during the Finnish- RUBEIER conflict to act as mediator and that hefelt it was he who influenced Goering against dragging Sweden into the war. January 16. An informant who claims to have been in charge of Austrien counterespionage prior to the Anschluss says that a Germen agent end spurious refugee called Weisblatt 16 DOW in South America trying to establish a base in some country which could be used as EL landing point for thousands of German vivilian planes to constitute an effective reminder to the United States as to Lhe German serial power; Weisblatt was the main German agent in Spain prior to the Spanish civil war and was active in France prior to the capitulation and left France for Brazil and Argentina on a passport given him by Abetz (accord- 100 to the informant). Jenuary 17. Vera Montgomery appears to be working with the Brady brothers of Dellas, Texas, on an oil deal, the details of which are not yet known to FBI; Tots, Susband of Vera, has said that he is going to Washington because "they said they needed someone down there" and has advised his wife to "be careful." January 18. The National Chemical Corporation, 82 Wall Street, New York City, offered in October 1940 for delivery by Clipper 2,000 kilograms of fine silver and 1,000 kilograms of fine platinum to someone in Switzerland and pro- rosed to ship high speed steels on an export license with or without navicert to Lisbon. 17) Regraded Unclassified 95 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE JAN 22 1941 Secretary Morgenthau TO FROM Mr. Foley Re: Final report on activities of Legislative Section, Office of the General Counsel, during the 76th Congress. It is gratifying to be able to report to you that from the stand- point of the number of bills enacted the 76th Congress was the most successful one we have had since the establishment of the Legislative Section in this office in the summer of 1934 and the centralization in it (with some exceptions) of Treasury legislative activities. The following summary of the record of this office during the three Congresses in which it has been in existence tells the story: Number of Treasury sponsored bills actively pending Number of at the end of the Treasury sponsored Congress which Congress bills enacted failed of enactment 76th (1939-40) 50 8 75th (1937-8) 35 11 74th (1935-6) 40 8 A considerable number of Treasury measures of real importance were included among the fifty bills enacted during the 76th Congress. Regraded Unclassified 96 - 2 - Thus, the following were among the bills enacted during the 3rd session of that Congresst legislation providing a uniform method of restricting and regulating the delivery of Government checks drawn to payees residing in foreign countries where, in the opinion of the Secretary of the Treasury, there is not reasonable assurance of actual delivery of such checks to the payees and the ability of the payees to negotiate the checks for full value; legislation covering gaps in existing law with respect to the Treasury's authority to sell, exchange, or otherwise deal with railroad securities acquired by the Government as an incident to Federal control of the railroads during the last war; legislation (which we have been trying to get enacted for several Congresses) simplifying the accounts of the Treas- urer of the United States by covering into the Treasury as miscellaneous receipts the balance of the so-called 5% fund relating to deposits for redemption of national-bank and Federal Reserve bank notes, which are no longer being is- sued; legislation removing all possible doubts about the regulatory authority of the President and the Secretary of the Treasury in connection with foreign funds control and ratifying action previously taken in this field; legislation authorizing an increase in the size of the White House police force; legislation eliminating an administratively troublesome re- quirement in connection with the use of vehicles for Govern- ment travel; legislation giving the Secretary of the Treasury necessary additional authority in connection with his statutory responsibility of preventing the importation from abroad of piratical copies of works copyrighted in the United States; several important pieces of Coast Guard legislation, including an amendment to the act providing a system for the retirement and placing out of line of promotion of commissioned Coast Regraded Unclassified 97 - 3 - Guard officers so as to incorporate in that act changes which experience under it shows are necessary to make it workable, and an omnibus bill making a large number of necessary amendments to existing Coast Guard laws in the interests of clarification and better administration; legislation (which we have been seeking for & number of years) authorizing payment by the United States of the expenses of returning to their homes the remains, families, and effects of Federal employees dying abroad, and the re- mains of Federal employees dying while travelling on offi- cial business in this country; and legislation covering disallowances and adjustments amounting to about $170,000 in the accounts of the chief disbursing officer and the present and former Treasurers of the United States. The 2nd session of the 76th Congress was, of course, the short, special session which was restricted to consideration of the Neutrality Bill. No Treasury legislation was enacted and, indeed, only one public lew of any character, aside from the Neutrality Act, became lew during this session. Among the important Treasury measures enacted during the 1st session of the 76th Congress were the following: the Second Liberty Bond Act amendment removing the $30,000,000,000 bond limitation pertition from the Public Debt authorization; legislation extending and streemlining the highly successful Government Losses in Shipment Act which this Department sponsored and obtained enactment of in 1937; neveral important Coast Guard measures, including the so-celled Coast Guard national defense bill authorizing the construction of three large cutters, establishment of en Alaskan base and air station, and the purchase of fifteen seeplanes, E bill increasing the line officers of the Coast Guard by 154 and establishing the rank of Regraded Unclassified 98 4 rear admiral for the offices of Assistant Commandant and Chief Engineer of the Coast Guard, a bill establishing a voluntary and involuntary retirement system for Coast Guard enlisted men of 20 years or more service, and & bill establishing the Coast Guard Reserve to be composed of private yachtsmen and motorboat owners who will voluntarily assist the Coast Guard and encourage law observance; several important Treasury law-enforcement measures, in- cluding e bill to subject to forfeiture vessels, vehicles, and aircraft used to facilitate violation of the nercotic laws, the counterfeiting laws, and the National Firearms Act; & big relief bill covering disallowances and adjustments in the accounts of present and former Treasurers, disbursing offi- cers, end others (this bill, one of the largest of its kind on record, covered over $1,100,000 in disallowances and adjust- ments, and dealt with matters which had been hanging fire for many years, some dating back to wertime days); and the bill extending the powers of the President relating to the Stabilization Fund, the devaluation of the dollar, and the pur- chase of silver, until June, 1941 (this bill, as you will remember, gave us the hottest fight we had during the entire Congress). Eight Treasury sponsored bills were actively pending in Congress at the final adjournment on January 3, 1941. These bills, of course, died with the end of the Congress and will have to be reintroduced and pressed to ensctment in the 77th Congress. Some of them failed of enactment in the 76th Congress because they were introduced too late in the last session to get consideration, and some were stalled by opposition from other governmental agencies (the Comptroller General in one case, and the United States Employees' Compensation Commission in another) or from private interests. Tie are satisfied that we can secure the en- actment of most, if not all, of these bills during the new Congress. Te also, of course, did a great deal of work on other legisla- tion, notably the various Revenue Acts of 1939 and 1940, the Social Security Act umendments of 1939, various defense measures of 1940 Regraded Unclassified 99 - 5 - (ell of which were enacted into law), and the big 1939 lending bill, which did not become law. None of these bills, hosever, strictly specking, could be described ES & Treasury bill. Aside from the foregoing, the Legislative Section of this office handled a total of 1154 Treasury reports on legislation during the 76th Congress. Of this number, 696 were reports to comdittees of Congress, 223 were reports to the Bureau of the Budget on pending or proposed legislation, and 235 were reports to the Bureau of the Budget on enrolled bills to assist the President in determining whether or not to approve these bills. The Legislative Section transacted legislative business with the legislative counsel of both the House and Senate, and worked with, and appeared before, virtually all the major and many minor committees of both Houses of Congress, during the 76th Congress. In addition, it drafted, or assisted in drafting, much legislation not covered by this report, such as bills which are still in process, bills which have been submitted to, but not yet cleared by, the Bur- eau of the Budget, bills which were completed but which, for one reason or another, the appropriate administrative officers decided not to submit to Congress at this time, bills prepared as a courtegy accomodation to members of Congress, etc. The Legislative Section also opposed legislation objectionable to the Treasury Department and drafted, or participated in drafting, a considerable number of Execu- tive Orders, Proclamations, and proposed Reorganization Plans. In addition, this Section did & large amount of research work on Regraded Unclassified 100 - 6 - legislative and other problems of interest to the Department, and generally endeavored to keep the various bureaus and branches of the Department advised about all phases of legislative matters in which they were interested. The National Defense Program, during the last session of Congress and the accelerated legislative activity in connection therewith, re- sulted in & considerable increase in the Legislative Section's work in order to keep the many interested Treasury officers advised about the progress of, and other matters of interest to them in connection with, defense legislation. In this connection, also, the Section has co- operated with the Legislative Reference Service of the Librery of Congress in preparing mimeographed analyses of defense bills and legal memoranda of various kinds for the use of the Defense Commission. The attached progress report shows, in tabular form, the results we obtained during the 76th Congress in connection with bills sponsored by the Treasury. E.N.7h. Regraded Unclassified 101 FINAL PROGRESS REPORT ON TREASURY LEGISLATION DURING THE 76th CONGRESS. A. TREASURY SPONSORED BILLS ENACTED DURING 76th CONGRESS. I. Treasury sponsored bills enacted during First Session of 76th Congress (1939). PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 1. H.J. Res. 110 Permits acceptance of medal from Greece. Mar. 28, 1939 Private Res. No. 1 (S.J. Res. 75) Coyle, Commander Henry- foreign decoration 2. S. 529 Authorizes payment of balance due as compen- Apr. 15, 1939 Private No. 26 Relief of Margaret sation for post office site. Rose Uncapher 3. H.R. 3231 Extends to Coast Guard officers privileges May 15, 1939 Public No. 77 Coast Guard Mailing enjoyed by officers of other military of firearms services of sending firearms through mails. 4. S. 2244 (H.R. 5836) Authorizes the U.S. to accept certain real May 22, 1939 Public No. 84 Lizzie Beck bequest estate devised to it by Lizzie Beck, Mena, Ark. 5. S. 595 (H.R. 5738) Establishes voluntary and involuntary re- May 24, 1939 Public No. 87 Coast Guard 20 year tirement system for enlisted men with 20 retirement years or more service. Regraded Unclassified - 2 - 102 I. Treasury sponsored bills enacted during First Session of 76th Congress (1939) - (Continued) PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 6. 8. 1876 (H.R. 4982) Increases line officers of Coast Guard by May 24, 1939 Public No. 89 Coast Guard readjust 154, and establishes rank of rear admiral commissioned personnel for offices of Assistant Commandant and Chief Engineer. 7. H.R. 4131 (s. 528) Compensates enlisted man for personal May 31, 1939 Private No. 46 Relief of Melvin property lost in fire at Nome, Alaska. Gerard Alvey 8. S. 1369 (H.R. 4246) Authorizes Secretary of the Treasury to June 2, 1939 Public No. 104 Coast Guard national construct three cutters, establish Alaska defense base and air station, and purchase fifteen seaplanes. Over $14,000,000 involved. 9. S. 2404 (H.R. 6017) Authorizes demolition of old post office June 13, 1939 Public No. 128 Portland, Oregon, building. Courthouse 10. H.R. 5966 (s. 2258) Establishes voluntary reserve of private June 23, 1939 Public No. 152 Coast Guard Reserve yachtsmen and motorboat owners to assist Coast Guard and encourage law observance. 11. H.R. 3325 Continues powers relating to stabilization July 6, 1939 Public No. 165 Stabilization Fund fund, devaluation of the dollar, and purchase of silver. 12. S. 2167 (H.R. 5349) Authorizes reimbursement of Coast Guard July 15, 1939 Private No. 93 Coast Guard Hurricane personnel for losses of personal property Relief in 1938 hurricane. legraded Unclassi 103 - 3 - I. Treasury sponsored bills enacted during First Session of 76th Congress (1939). - (Continued) PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 13. H.R. 5346 (s. 1953) Provides compensation for loss of life and July 15, 1939 Private No. 95 Relief of Mrs. A. R. motorboat in attempt to help Coast Guard Barnard and others boat. (Stephens, Prairie, and Mrs. Needles) 14. H.R. 5748 Removes $30,000,000,000 bond limitation July 20, 1939 Public No. 201 Second Liberty Bond partition in the Public Debt authorization. Act amendment. 15. H.R. 5375 (s. 2166) Authorizes Commandant of Coast Guard to August 4, 1939 Public No. 258 Coast Guard Nautical detail officers to state and territorial Education nautical schools to give nautical instruc- tion. 16. S. 1882 (H.R. 5896) Compensates Coast Guard enlisted man for August 4, 1939 Private No. 125 Relief of Thomas 1. loss of personal property in a fire in Ross Nome, Alaska. 17. S. 1156 (H.R. 2742) Transfers target range at Morehead City, August 5, 1939 Public No. 268 Morehead City Target North Carolina, from War Department to Range Treasury. (Coast Guard) 18. H.R. 7288 (s. 2859) Provides for the induction into the Coast August 5, 1939 Public No. 291 Lighthouse Service Guard military establishment in ranks, personnel grades, or ratings appropriate to their qualifications, experience and lengths of service as determined by the Secretary of certain professional, scientific, and other personnel of the Lighthouse Service which was transferred to the Coast Guard by Re- organization Plan No. II. Regraded Unclass 104 - 4 - I. Treasury sponsored bills enacted during First Session of 76th Congress (1939). - (Continued) PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 19. H.R. 5611 Places District Commanders and constructors August 5, 1939 Public No. 292 Coast Guard District in the line of the Coast Guard and Commanders and con- abolishes the district commander and structors constructor corps, thus doing away with the last of the special service corps of the Coast Guard. 20. H.R. 6555 Permits advance of funds elsewhere appro- August 7, 1939 Public No. 339 Evidence - purchase priated by Congress to narcotic and of customs officers to purchase evidence and information of violations of narcotic and customs laws. 21. 8. 1899 Creates office of Assistant to Surgeon August 9, 1939 Public No. 345 Surgeon General - General with rank of brigadier general Assistant to and authorizes detail of Public Health Service officers to serve in such office. 22. H.R. 6021 (s. 2473) Repeals law fixing minimum price of August 9, 1939 Public No. 356 Akron, Ohio, post $100,000 for sale by Government of old office post office building and site at Akron, Ohio. 23. H.R. 6556 Provides for seizure and forfeiture of August 9, 1939 Public No. 357 Seizure and for- vessels, vehicles and aircraft used in feiture of vessels, violating narcotic, and counterfeiting vehicles and air- laws and National Firearms Act. craft 105 - 5 - I. Treasury sponsored bills enacted during First Session of 76th Congress (1939). - (Continued) PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 24. S. 1540 Permits Secretary of the Treasury to compen- August 10, 1939 Public No. 364 National Advisory sate nongovernmental members of the National Health Council pay Advisory Health Council at rate of not to exceed $25 per diem instead of $10. 25. H.R. 6747 Permits retirement at age of 64 instead of August 10, 1939 Public No. 370 Lighthouse Service 65 of certain Lighthouse Service personnel retirements who have 30 or more years of service and whose positions may be abolished as a re- sult of the consolidation of the Lighthouse Service with Coast Guard effected by Reorgani- sation Plan No. II. 26. H.R. 6614 Extends scope of Government Losses in Ship- August 10, 1939 Public No. 378 Government Losses ment Act of 1937, which wes sponsored by in Shipment insurance the Treasury, and generally streamlines bill that Act and remedies difficulties which administration of that Act has disclosed. 27. H.R. 7049 (s. 2706) Adjusts accounts of present and former August 10, 1939 Private No. 250 Relief of Summers, disbursing officers and treasurers of the Allen, and Sayles, United States end covers disallowed salary etc. payments to the late Captain William R. Sayles in his capacity BB Assistant Deputy Commissioner of Alcohol Tax Unit. Over $1,100,000 in disellowances and adjustments are covered by this bill, which makes it one of the largest of its kind on record. Regraded nclassified 106 - 6 - II. Treasury sponsored bills enacted during Third Session of the 76th Congress (1940). PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 28. S. 2689 Gives the Secretary of the Treasury and April 11, 1940 Public No. 450 Copyright bill the Postmaster General authority commen- surate with their statutory responsibility of preventing the importation from abroad of piratical copies of works copyrighted in the United States or copies which have not been produced in accordance with the manufacturing conditions of the Copyright Act. 29. H.R. 8540 Authorizes an increase in the White House April 22, 1940 Public No. 476 Increase in White police force of 1 lieutenant, 1 sergeant, House police force and 18 privates, thus increasing total force from 60 to 80. 30. H.R. 6693 Eliminates the requirement that vehicles April 25, 1940 Public No. 485 Auto mileage bill used for official travel must be personally and exclusively owned by the Government traveller involved. 31. S.J. Res. 252 Removes all possible doubts about the regu- May 7, 1940 Public Res. No. 69 (H.J. Res. 522) latory authority of the President and the Foreign Funds Secretary of the Treasury in connection with Control foreign funds control, and ratifies action previously taken in this field. *Note: The second session of the 76th Congress was A short special secsion in the Fall of 1939 devoted to the consideration of the Neutrulity Bill. No Treasury legislation and only tro public acts of any character were enacted during this session. Regraded Unclassified 107 - 7 - II. Treasury sponsored bills enacted during Third Session of the 76th Congress (1940) - (Continued) PUBLIC OR BRIEF EXPLANATION APPROVED PRIVATE NUMBER BILLS 32. H.R. 5423 (s. 3599) Amends Act of January 12, 1938 (which June 6, 1940 Public No. 556 The retirement and provided a system for the retirement and the placing out of line placing out of line of promotion of commis- of promotion of sioned officers of the Coast Guard) to in- Coest Guard officers. corporate changes which experience under that Act shows are necessary to make it workable. Principal change is elimination of officer's right to appear in person or by counsel before the personnel board and substitution for this of the right to have two different personnel boards pass on his case before he can be finally retired or placed out of line of promotion. 33. H.R. 8357 (s. 3600) Provides for enlargement of Coast Guard June 6, 1940 Public No. 557 Coast Guard depot depot at Seattle, Washington, and for and servicing base establishment of a Coast Guard servicing base st or near Chattanooge, Tennessee. 34. H.R. 9553 (s. 3865) Makes a large number of miscellsneous June 6, 1940 Public No. 564 Omnibus Coast Guard amendments of existing Coast Guard laws bill in the interests of clarification and better administration. The bill includes provisions: for adjustments in the retired rank and pay of officers who have served as engineer in chief or Assistant Commandent; clarifying the law relating to the discon- tinuance and reestabllshment of light stations und Cost Guard stations; relating to the re- tirement of former Lighthouse Service employees; defining more precisely Coast Guard liability for expenses of Coset Guard Reserve booto loaned to the Count Guard; etc. Regraded Unclassified 108 - 8 - II. Treasury sponsored bills enacted during Third Session of the 76th Congress (1940) - (Continued) PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 35. S. 3307 (H.R. 8097) Amends Act of July 15, 1939 (providing June 6, 1940 Private No. 338 Amending Coast Guard relief for widow of Vern A. Needles who relief bill for lost his life while siding a disabled Coast dependents of Vern A. Guard boat) to divide money appropriated by Needles that Act to Mrs. Needles ($5000) equally be- tween her and Needles' infant son by B. prior marriage whose existence was not known when original relief bill passed Congress in 1939. 36. S. 3487 (H.R. 8722) Authorizes the Secretary of the Treasury to June 7, 1940 Private No. 350 Relief for heirs of transfer to the widow and children of Lt. Lt. Clemmer of the Clemmer of the Coast Guard the license Coast Guard rights to a radio-direction-finding-system invention of Clemmer's, the commercial rights to which he had unintentionally assigned to the United States. 37. S. 3304 (H.R. 7492) Validates salary payments made to J. Frank June 8, 1940 Private No. 352 Relief for Private Kuner, a Secret Service Uniformed Force Kuner of Secret private, which were technically illegul Service because he was not a citizen, though neither Kuner nor Treasury was aware of this fact. 38. H.R. 9441 (S. 3775) Accepts the grent to the United States of June 6, 1940 Public No. 582 Accepting grent of certain land on Sullivens Island (Cherleston South Carolina land County, S. C.) by the State of South Carolina for Cosst Guard und authorizes Its use by the Coept Guard. purposes Regraded Unclassified 109 - 9 - II. Treasury sponsored bills enacted during Third Session of the 76th Congress (1940) - (Continued) PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 39. S. 3959 (H.R. 9349) Authorizes the Secretary of the Treasury June 13, 1940 Public No. 625 Easement granted over to grant easements for highway and utility Coast Guard Reserva- purposes to the City of Fort Lauderdale, tion at Fort Florida, over the Coast Guard Reservation Lauderdale, Florida (known as Base Six) at Fort Lauderdale. 40. S. 3958 Authorizes the Secretary of the Treasury June 25, 1940 Public No. 661 Essement granted over to grent to the Road Department of the Coast Guard Reserve- State of Florida an easement for a road tion at Flagler right-of-way over the Coast Guard Reserva- Beach, Florida tion at Flagler Beach, Florida. 41. S. 3899 Authorizes payment by the United States of July 8, 1940 Public No. 729 Return to U.S. of the expenses of returning to their homes remains of employees the remains, families, and effects of dying abroad Federal employees dying abroad, and the remains of Federal employees dying while travelling on official business in the U.S. 42. 8. 4032 (H.R. 10035) Reimburses Philip A. Penston, Coast Guard July 11, 1940 Private No. 488 Penston (Coast Guard) pharmacist's mate, for the value ($1267) relief bill of personal and household effects lost during the hurricane of September 21, 1938, at New London, Connecticut. 43. H.R. 10014 (S. 4112) Covers gaps in existing law with respect to August 13, 1940 Public No. 766 Amending Transporta- the Treasury's authority to sell, exchange, tion Act, 1920. or otherwise deal with railroad securities acquired by the Government as an incident to Federal control of the reilroads during the lest war. Regraded Unclassified 110 - 10 - II. Treasury sponsored bills enacted during Third Session of the 76th Congress (1940) - (Continued) PUBLIC OR BILLS BRIEF EXPLANATION APPROVED PRIVATE NUMBER 44. H.R. 10337 (s. 4274) Authorizes the Secretary of the Treasury October 9, 1940 Public No. 310 Recall to duty of to order retired Coast Guard commissioned retired Coast Guard or warrant officers to active duty at any officers time with their consent. 45. S. 4353 Provides a uniform method of restricting October 9, 1940 Public No. 828 Regulation of and regulating the delivery of Government delivery of certain checks drawn to payees residing in foreign checks to foreign countries, where, in the opinion of the countries Secretary of the Treasury, there is not reasonable assurance of actual delivery of such checksto the payees and the ability of the payees to negotiate the checks for full value. 46. 3. 3778 (H.R. 9086) Authorizes erection of protective gates October 10, 1940 Public No. 830 Customs and Immigra- and fences, and better buildings than pres- tion Border Facili- ently authorized, for the enforcement of ties the customs and immigration laws along the Canadian and Mexican borders of the United States. 47. S. 844 (H.R. 2541) Simplifies the accounts of the Treasurer October 10, 1940 Public No. 832 Simplifying U.S. of the United States by covering into the Treasurer's accounts Treasury as miscellaneous receipts the balance of the so-called 5% fund relating to deposits for redemption of national- bank and Federal Reserve bank notes which are no longer being issued. Regraded Unclassified 111 - 11 - II. Treasury sponsored bills enacted during Third Session of the 76th Congress (1940) - (Continued) PUBLIC OR BILLS BRIEF KEPLANATION APPROVED PRIVATE NUMBER 48. H.R. 10246 Amends Act of July 30, 1937 (authorising October 10, 1940 Public No. 843 Jurisdiction over conveyance by the United States of certain Stony Point Light portions of the Story Point Light Station Station Reservation Reservation to the New York Palisades Inter- state Park Commission), in order to remove all doubt as to the State's criminal and civil jurisdiction over the property in question. 49. H.R. 10354 ( S. 4231) Provides relief for Guy Allen, chief dis- October 14, 1940 Private No. 632 Relief for chief bursing officer, on account of certain disbursing officer disallorances in his accounts, and for present and present end and three former Treasurers of the United certain former U.S. States on account of certain unavailable items Treasurers in their accounts in check-reclamation and adjusted-service bond cases. All payments covered were made in good faith and without negligence. About $170,000 is involved in all. 50. H.R. 10194 (s. 4139) Provides relief for the late John L. Summers, October 14, 1940 Private No. 636 Relief for late Treasury disbursing clerk on account of John L. Summers, $12,000 in disallowances against his ac- former Treasury counts for disbursements mede by him in disbursing clerk 1934 and 1935 in good faith and without negligence. Also covers any other similar disallowances which may be raised egainst his accounts more than three years after he made payment. The Comptroller General wos holding up payment of Mr. Summers' re- tirement funds to nis beneficiaries pending adjustment of these disallowences. Regraded Unclassified 112 - 12 - B. TREASURY SPONSORED BILLS ACTIVELY PENDING IN CONGRESS AT THE END OF THE 76th CONGRESS (JANUARY 3, 1941). STATUS AT END BILLS BRIEF EXPLANATION OF 76th CONGRESS REMARKS 1. S. 3408 Makes the penalty for conspiring to Bill pending before We expect to secure en- Counterfeiting violate counterfeiting laws the same Senate Judiciary actment of this bill conspiracies as the penalty for the substantive Committee. during the first session offense of counterfeiting. of the 77th Congress. 2. H.R. 10397 Authorizes Customs to enter into ten Bills pending before This bill was held up by (H.R. 10175) year leases on buildings and grounds House Public Buildings objections to certain Customs leases abroad. At present they must be re- and Grounds Committee. phases of it on the part newed annually. of the Federal Works Agency. We hope to iron these out and get it enacted during the new session of Congress. 3. Settlement on Authorizes the Treasurer of the No bill introduced but Submitted to Congress lost or stolen United States to make settlement Treasury draft bill too late in the last checks (no in advance of reclamation with payees and letter of submission session to receive number, bill of lost or stolen checks which have pending before Senate consideration. not yet intro- been paid on forged endorsements. Banking and Currency duced) Committee and House Com- mittee on Expenditures in the Executive Depart- ments. 4. S. 3175 Requires International toll bridges Bill pending before Opposition of private Custom faci- (i.e., along Mexican and Canadian Senate Finance Com- interests and the con- lities at borders) to furnish free inspectional mittee. sequent necessity for International facilities for customs and other public hearings on this toll bridges Federal officers necessarily stationed bill prevented the busy there. Senate Finance Committee from bill Unclassified 113 - 13 - B. TREASURY SPONSORED BILLS ACTIVELY PENDING IN CONGRESS AT THE END OF THE 76th CONGRESS (JANUARY 3, 1941) . - (Continued) STATUS AT END BILLS BRIEF EXPLANATION OF 76th CONGRESS REMARKS 5. S. 3383 Relieves the Treasurer of the United Passes Senate April 10, This bill we.a pigeon- Future adjust- States of charges or disallowances 1940; pending before holed by the House ments in in his accounts arising out of in- House Committee on Committee because of the Treasurer's proper payments or deliveries of Expenditures in the Comptroller General's accounts checks and other instruments when Executive Departments. objections to it. such payments or deliveries were made without any fraud or negligence on the part of the Treasurer or his employees. 6. H.R. 9995 Authorizes the exchange of two Passed House June 17, This bill died in the (s. 4109) Coast Guard sites in Florida (one 1940; pending before Senate Commerce Committee Exchange of at Miami Beach and the other at Senate Commerce because of a feeling on Coast Guard Fort Lauderdale) for other property Committee. the part of some members sites and facilities more advantageous to of the Committee that the Government. Senator Pepper was inter- ested in the matter and that the Committee had al- ready done enough for him, There will be no trouble securing its enactment in the 77th Congress. 7. H.R. 6767 Authorizes an increase in the death Passed House This bill was stalled in (S. 3799) and disability compensation payable March 18, 1940; the Senate Committee by Enforcement to Federal enforcement officers and pending before opposition on the part of officers' death their dependents when such officers Senate Committee on the United States Em- and disability are killed or disabled while engaged Education and Labor. ployees Compensation benefits in hazardous work. Commission. Regraded Unclassified 114 - 14 - B. TREASURY SPONSORED BILLS ACTIVELY PENDING IN CONGRESS AT THE END OF THE 76th CONGRESS (JANUARY 3, 1941) . - (Continued) STATUS AT END BILLS BRIEF EXPLANATION OF 76th CONGRESS REMARKS 8. S. 4413 Repeals the Coast Guard Reserve Act Bill pending before the This lengthy and (H.R. 10652) of 1939, and substitutes a Coast Senate Commerce Committee important bill was Coast Guard Guard Auxiliary for the Reserve and the House Committee on not submitted to Auxiliary and established by that Act, and creates Merchant Marine and Congress till October Reserve a new Coast Guard Reserve patterned Fisheries. 1940, too late to re- after the Naval Reserve. ceive consideration in the 76th Congress. Regraded Unclassified 115 COPY TELEGRAM RECEIVED From Rome Dated January 22, 1940 Secretary of State, Washington. 51, January 22, 6 p.m. Council of Ministers on January 20 approved draft of the 1940-41 budget. Expenditures total 34,895 million lire, revenue 29,002 million, deficit 5,893 million. Appropriations for War, Navy and Air total 10,843 millions or 31% of total budget; this 18 an increase of 2,560 millions over present fiscal year. With two exceptions all Ministries have increased budgets. The press this afternoon is careful to point out that the above refers to "normal" budget and that unfore- seen events may lead to further increases. A simultaneous announcement was made of a new issue of 9 year Treasury bonds at 97 1/2. Subscriptions begin February 15. Proceeds will be used to finance the new budget expenditures and to pay off maturing Treasury notes. PHILLIPS. 05 MM Et Regraded Unclassified (CONDIDENTIAL) 116 PARAPHRASE CONFIDENTIAL A telegram (no. 100) of January 22, 1941, from the American Consul General at Shanghai reads substantially 8.B followe: Deposits have been made with about forty Chinese banks in Shanghai by the new Central Reserve Bank. Each deposit, which 1s in new notes, is twenty-five or fifty thousand Central Reserve Bank yuan. The Chinese banke with whom the deposits were made issued ordinary pasa- books of the type used for saving accounts or opened accounts current and issued check books bearing a rubber stamp notation to the effect that the checks are to be paid only in the new currency. No interest was asked on the deposits or is to be credited to them. Although it 1e not confirmed there is B report to the effect that deposits in the new notes of 100,000 Central Reserve Bank yuan each have been accepted by the Bank of Com- munications and the Bank of China. However, according to the report such deposits have not yet been offered to the Central Bank of China. The new Central Reserve Bank an required several selected prominent Chinese commercial banks also to accept deposits of 500,000 yuan each in Chinese national currency. This 18 interpreted as a part of the policy of the new Central Reserve Bank to use the Chinese commercial banks as agents for conversions into Chinese national currency from notes when notes are presented Regraded Unclassified 117 -2- CONFIDENTIAL presented by the public. It 1s understood that British and American banks have declined to accept deposits in the currency of the new Central Reserve Bank. It 18 the opinion of Chinese bankers that before long the new notes in the smaller denominations will be given as change to passengers by the tramways and buses in the French Con- cession. MOR Regraded Unclassified 118 January 22, 1941 Files Mr. (schren as mill es Saturday. January 18, Mateter Proceps of Pinism called a 30. le saked whether I had been able to obtain any resetion free Secretary Margenther to the Minister's inquiry made from ⑉ is Describer as to the presibility of & Diabiliss- ties Peril speration for the benefit of Finland. I teld the Minister that the Secretary had been too bear for no to breach this subject to date. 49 10 e'eleck resterday seraing I reported Minister Proseps's visit ovally to tegratory Margesthan. I volunteered the idea that I are not think this vas a field to which the Stabilization Fast should micr. That is, the importance of the Plan mark-dellar relationship is not sufficiently important Insurant & Stabilization Test intervention. This is expecially true since Finland's trade with the United Males has been ⑉ considerably ml off, and since Finlend's trade relationships with terms and Bussia have pm. I thought that if the Stabilization Past entered into at spient with Finland, 11 night legically be called upon to help other unformate countries in Perope is a my upon which w have not yet enharked (astão possibly from Dine). The Secretary thought the assistance could more appropriately --- from the Import-Impert Bank, and mão the suggestion that Minister Proceps ... Decretary James. I told the Secretary that I had already made this suggestion to Minister Procepo and had learned that be had already seen Mr. Jeans. The Minister, 11 appeared. bad net received nd exeveragement free Mr. Jense on the 1dea of a further credit, since 11 could not be nade clear to Mr. Jenes her another less sould be repoid through Planish experts. the Elaister still hoped, however, that with & nore treatment of Fisaleh shipping w the British, 10 sight be possible to get est SIN Finnish pulp and your to the Valted Mates and he hoped that he sould make - arrangment will Mr. Jesse - those commodities. It was understand that Minister Proceps would got is seach with as again is a for days. these he does, I shall emplain the Mecretary's position. Lewy WWC:lap-1/22/41 Regraded Unclassified 119 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 22, 1941 Secretary Morgenthau TO CONFIDENTIAL FROM Mr. Cochran Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns -75,000 Purchased from commercial concerns 10,000 Open market sterling WSS again quoted at 4.03-1/2. Transactions of the reporting banks were: Sold to commercial concerns £11,000 Purchased from commercial concerns & The Canadian dollar discount, which widened abruptly to 17-1/4% yesterday afternoon, opened at the improved level of 16% today. It immediately became weak, however, and again touched the low of 17-1/4% at the close. The Argentine free peso opened at .2375 this morning, as compared with last night's close of .2370. The rate remained steady throughout the day, closing at .2375. Closing quotations for the other currencies were: Swiss franc .2321 Swedish krons .2385 Reichamark .4005 Lira .0505 Brazilian milreis (free) .0505 Mexican peso .2066 Cuban peso 7-7/8% discount Chinese yuan .05-1/2 By order and for account of the Bank of Sweden, the Federal Reserve Bank of New York purchased 500,000 Argentine pesos at the free rate from the National City Bank, We sold $2,000,000 in gold to the Bank of Portugal, which was added to its carmarked account. Under licenses previously issued, the Federal Reserve Bank of New York transfered from the account of the Central Bank of El Salvador gold valued at approximately $284,900 to account No. 6 of the B.I.S. This transfer raises the amount of gold in B.I.S. account No. 6 to approximately $1,121,340: gold in this account is owned by the Central Bank of El Salvador and is pledged to secure repayment of credits granted that ank by the B.I.S. 120 -2- The Federal Reserve Bank of New York reported that the Central Bank of Salvador repaid $200,000 of the three-month loans previously made to it by the Federal. El Upon repayment, the Federal transfered $227,820 worth of gold from the collateral account to the Salvadorean bank's own earmarked account. The amount of loans outstanding is now $385,000. secured by $435,891 in gold. The Federal Reserve Bank of New York reported the following gold engagements: $3,026,000 from Canada, shipped by the Bank of Canada, Ottawa, to the Irving Trust Company, New York, for account of the Banque Mellie Iran, Tehran, for sale to the New York Assay Office. 421,000 from Peru, shipped by the Central Reserve Bank of Peru to the Federal Reserve Bank of New York, to be earmarked for its account. $3,447,000 Total The Bombay gold price WBS equivalent to $34.08, a decline of 3#. Silver was 3/16# lower at the equivalent of 44.87#. The prices fixed in London for spot and forward silver were both unchanged, at 23-3/16d and 23-1/8d respectively. The dollar equivalents were 42.10$ and 41.99$. Handy and Harman's settlement price for foreign silver was unchanged at 34-3/4#. The Treasury's purchase price for foreign silver was also unchanged at 35#. Tie made two purchases of silver totaling 175,000 ounces under the Silver Purchase Lot. One of these, amounting to 100,000 ounces, represented 8. sale from inventory, and the other 75,000 ounces consisted of new production from foreign countries, for forward delivery. 16M8 CONFIDENTIAL Regraded Unclassified 121 January 22, 1941 Under Secretary Bell Mr. declarem Bines we have had no used from the British for several days in regard to sego- tistions with respect to stabilization leans to Gine, I took up with Mr. Pincent yesterday. at Mr. Bell's suggestion, the question of w time schodule. Mr. Pinemt told 26 w telephone yesterday ovening that he thought m. Regore had arrived is Lendon last laturday. No vas avere that Dr. Seeng and Dr. Young have reselved - sages directly from Mr. Regers cince the latter reached.leaden. the Brittich Roberty and treasury efficials here. however, have not had any message from Regurs. Pinsent presteed to leek into the question. BMP EMC:lep-b/22/41 Regraded Unclassified 122 LONDON B Dated January 22, 1941 Rec'd. 3 p.m. Secretary of State, Washington. 250, January 22, 8 p.m. During P. cell at the British Treasury yesterday, Norman Young of the Far Eastern Department opened a conversation regarding a draft agreement concerning credits for Chine that has been received within the last day or two from Sir Frederick Phillips with a request for the British Treasury's comments. Since the Embassy is not informed on this subject it is possible only to report the tenor of Young's remarks which were to the effect that the British Treasury finds it very difficult to reach any conclusions as to the machinery proposed, without knowing more as to the policy that it is proposed to follow vis-a-vis the new Japanese-controlled Central Bank in China. The British Treasury is apprehensive as to the possibility that substential portions of the new credits night find their way into Japanese hands, saying that was based in part on recent past experience (reported by them to Phillips by confidential cpble). and partly on the fact that the Japanese have fixed their exchange rate this time at much more reasonable figure then was the case in North China. The British Treasury regards this whole problem 8.8 an exceedingly difficult one, 12 one :f the best "headache producers" before it today. Please inform Treasury. JOHNSON. TFV eh:copy Regraded Unclassified 123 Regraded Unclassified I z. THAT Files Mr. Cochram AN 3.15 this afterness Secretary Morgesther called as to his office to - Dr. 1. A. Beffers, head of the California Texas 011 Company, Limited, whoce mis office to is Bev York. Dr. Maffett came to of office and left with - the attached documents. the first is as office to his showing what the financial position of his company my be under certain My regulations of the LenAsa Exchange Central. the second is . circular from the treasurer of his sensors setting forth a americation dated December 12 from the Beak of Regland is regard to payment for sil imports into the sterling area, upon which internation maker case is calculated. Mr. Moffert explained to se that his company Le half svand by the Standard 011 of California and half by the Toxas Company. It was est - . few years age to headle business east of the thus. It has the Bahreis petroless concession. Since Behreis is is & British protectorate, 10 has also been associary for the consern to be inserporated in Canada, At Ottawa it mintains only a lawyer to represent 10, its "ustages being conducted from Bev York. It is entirely American crast. Its business ensiste is producing and distributing petroleum and its products is the Bast, that is, sast of face, including India, South Africa, Australia, New Zealand, China, The Philippine Islands, etc. Rr. Moffett realises that since the business of his company to principally is the sterling area that it may have to expect - neasures to provent the kitheric free conversion of its storling receipts, at the official rate, Late free dollars. No does not you decire to enter my protest against the Bank of England regulations as set forth is the attached memorandum. Ris company oridently has prospered, yislAing a profit of $12,000,000 last your of $1,000,000 per south, all of which vas brought late Waited States is dollars and nate available to the parent conserse. b. Meffett is taking the procention, beverer, of trying to use what fature prospects my be. If 10 appoare that the receipts of his consern are to be indefinitely blocked is sterling, be please to look arread and - what invostments in roal estate, etc., any be made in instralia and other starling areas is the for 201. & hopes that the British will at least permit sufficiest conversion of starling to beep - the Bev York peproll má other expenses is dollars. " is understood that Dr. Beffert desires no notion on the Preseury's cide unless n hour from kis further. m 9MC:da:1.22.41 124 Treasury Department Division of Monetary Research Date 19 To: Secretary Morgenthau Mr. White You may be interested in glancing at this memo., based on a Dep't. of Agri- culture study, which gives a definitely lower estimate of possible Danubian agri- cultural assistance to Germany than is commonly made. MR. WHITE Branch 2058 - Room 210 125 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 22, 1941 TO Mr. White FROM Mr. Snider Subject: Danubian agricultural assistance to Germany. 1. Danubian agricultural surpluses are not suffi- cient either at present or probably in the near future to meet the war-time needs of German and German-dominated populations for food and feedstuff supplies. 2. Particularly on account of unusually adverse weather and crop conditions and war mobilization, 1940 Dambian surpluses were sharply reduced: 1940-41 wheat exports will amount to only one-sixth and those of corn to two-thirds of the 1935-39 average exports; they will meet only 30% of the pre-war European and 40% of the greater German wheat exports, and only 6% of the European and 13% of the German pre-war imports. 3. The inability of Hungary, Rumania, Bulgaria and Yugoslavia to furnish continental food-deficit countries with needed supplies is a result of more than temporary unfavorable weather conditions and the exigencies of mobil- ization. During 1935-39 total exports of these countries fell short of German import needs by 36% for feed grains, 95% for butter, 48% for eggs, 92% for oil seeds and 97% for oilcake. In spite of all efforts Germany actually obtained only 27% of Danubian wheat surpluses and 47% of corn exports during that period. 4. The prospects for a future expansion of agri- cultural production in the Southeastern European countries Regraded Unclassified 126 - 2 - are not favorable. The existence of unfavorable social conditions (illiteracy, etc.) and a backward economic structure (uneconomic distribution of land holdings, lack of capital, etc.) serves to make an expansion in farm production in the next few years improbable. (The above is a condensed summary of a monograph by Frederick Strauss entitled "War-time Agricultural Sur- pluses of the Danube Basin," appearing in the December 1940 issue of Foreign Agriculture, a monthly publication of the United States Department of Agriculture.) Regraded Unclassified 127 VOL. IV, No. 12 December 1940 Foreign Agriculture a Review of Foreign Farm Policy, Production, and Trade Issued Monthly by UNITED STATES DEPARTMENT OF AGRICULTURE OFFICE OF FOREIGN AGRICULTURAL RELATIONS WASHINGTON, D.C. Regraded Unclassified Regraded Unclassified $ MIL our IN-0267 and - No are TH-046T 10110 DUE Buying and 1 CA-Onet % (11 51.00% was, 10 40:1mg asse 944 to Autumos " $1,000.00 weggeting 19:02 446 $1,000.00 P BIL chang composition of farm exports The ag/ culture waport trade ILL 691 140,>> Indianated 1° Due Amount N1 691 10 946 894 Part 191 10 PIPAIS 59% 10 iv, 69% +91 Th-0+61 191,0 400,200 "41 E9L 400 100 12-0465 " Egg TN-046T 19139 pus Owjung ... C97 sijodxe u.n.j. je 991 10 PA 102we) 951 17 required ($) - and 00, (91 Amount #42 EST 40.00 ESL The agricultural Pattern of Tugotiarle 151 wg ------ av, 151 05/ will as, 1180 FGT 15, - TV) BNC 400,100 It 0.01 ... and Th-2467 101/0 pur Bujino 1955,2.00 and INC WIFE 10 - Bow 745 The composition of (arm exports not ,0 is trady the sicdes " END Securio " on: SPIPLE date w.j. BEI dous 10 SE1 puel BEL #:#) very issury 10 " (E) was pus) ⑇ 5308610 DEL DUF, FA 1900 SEE Avenung 10 , * and GEL AMYONCE NEE EEL and ------- NG 881 INST-DACT our 100 : 100 - TEL DhBT "4, OF IN-016T pur Aujune will 2/ aptio dist-laution of Rumanian farm exports 728 Tinde relations at to countries other than Germany 72% Garman-Rumanian trade relations 921 Reber Mebgraphi, Isucion of Rumanian foreign trade 724 000.1 godas " EBL The livestock economy 02/ pue spenie ITC Land utilization in Greater Aumania are Top pattern of Rumanian agricultural production 956 investment in agricultural machinery STI Effacts of soll and climate en grain production 712 Effect of land reform on farm afficiency TIL segniduns und VI accured OTL wis.0 w| 012 The Ag (sultural structure of Rumania VISTANE OT/ 601 sposu usedered 001 801 THE Bujune 0119g agnued #W1 1ª -1ng 901 JEN ANT $10,00 was P *(D) 705 AMONOD3 301 II RISTE 3PL so 32474 342 50% N/SYG JONNYO 3HL #0 1001 --- COMPENTS WARTIME AGRICULTURAL SURPLUSES OF THE DANUBE BASIN By Frederick Strause* The prezent war has tended to reduce the food supplies of continental Europe for two reasons: (1) domestic production in both belligerent and neutral commities has been adversely a/- facted by shortages of fortilizery, labor, and form machinery, by transportation difficulties, and by what devestation; and (8) supplies from overseds have been sharply curtailed by the Drintsh blockade. Under these conditions the Danube Basin is of special significance, since S # $5 one of the chief potential sources of supply for farm products sorely needed by Greater Dermany, Staty, the conquered countries, and the still nutral countries of Europe, The objective of the study, therefore, " 10 determine the potentialities of the your Danubian countries as sources of supply for a blookaded Turope duesng the current Mr. THE PLACE OF THE DANUBE BASIN IN THE EUROPEAN ECONOMY The countries of the lower Danube Basin - Rumania, Hungary. Yugoslavia, and Bulgaria - have long been the most important European producers of staple farm sur- pluses. Since 1933 National Socialist Germany has been exerting great effort to bring about an expansion in the farm output of the Danubian countries and to estab- Fish itself 85 the dominating factor in determining the distribution of their agri- cultural surpluses. The importance of the Danube Basin as a potential source of supply for form products has been greatly enhanced by the war. The British blockede of Morway, the Netherlands, Belgium, France, Italy, and North Africa has further Increased the de- nand for the Danubian foodstuffs and feedstuffs. The maintenance of livestock pro- duction and the assurance of adequate food supplies generally in the countries under German domination depend to a considerable extent on the volume of food and feedstuff Supplies forthcoming from the Danubian countries during the war. Italy and Switzerland also are increasingly attempting to draw upon the agri- cultural resources of the Danube Basin. Efforts by the United Kingdom to contract for large deliveries of farm products from Danubian areas were terminated with the entry of Italy Into the war, Exports formerly sent to the British market will now be available for shipment to the countries under German and Italian domination. as far as current surpluses allow. . Adrinuisural Economist. This article propared while en Leaporary detail to the office of Pursign Agricultural Relations: 705 Regraded Unclassified 706 Foreign Agriculture it is obvious that the Danube Basin must remain, for the present at loast, the chief potential foreign source of supply for the farm products needed by Greater Berwany and by the conquered and the still neutral European countries. The crucial question is the extent to which the Danube Basin will be able to meet the sharply increased demand for such products. For the immediate future, this ability will be determined largely by current crop conditions, the effects of war on the acreage planted to various crops, by the efficiency of transportation facilities, and by changes in domestic consumption brought about by the present war, An appraisal of potential exports during a long war must take into considera- tion a number of other important factors, outstanding among them the question of whether or not the countries of the Danube Basin can adapt their farm practices to specific wartime demands. The answer to that question involves a consideration of the structure of the Danubian farm economies, the adaptability of the farm popula- tions to changed conditions, and the possible effects of the war on agricultural practices. Since these factors vary widely among the four countries of the Danube Basin, the problem has been approached by treating each of the countries individually. The question of export potentialities of the individual Danubian countries in a war of long duration is discussed separately for each country. At this point, therefore, the reader will be given only a composite picture of the problems involved in the question of export potentialities of the Danube Basin as & whole, and of the relation between the magnitude of total potential Danubian surpluses and the total Import needs of a blockaded deficit Europe. HOLD OF THE DABURE MARIN BEFORE THE 942 The European countries now blockaded by the British were far from self-suf- ficient in essential farm products before the outbreak of war. To indicate the situation only with respect to such strategic products as bread grains and feed- stuffe, blockeded deficit Europe imported about 14 percent of its apparent bread grain needs and over 20 percent of its total feed-grain requirements. These Summary figures hide the significant fact that in some of the countries the role of imports was still more important: for instance, the countries now under complete German doe- Ination imported over 50 percent of their bread-grain and nearly 50 percent of their feed-grain requirements. Moreover, the relatively favorable position of continental Europe with regard to most animal products was more apparent than real. Donserk and the Methorlands had been able to supply the balk of the import needs of continental Europe for hog prod- ucts, butter, and eggs. These exports, however, depended largely on the availability of corn, oilseeds, and of lcake from overseas countries. of the total pescetime net imports of bread grains and feedstuffs (including feed grains, oilseeds, and oil- cake) by continental deficit Europe, the Danube Basin could supply only & minor part. As shown in table I, the Oanube Basin furnished only 37 percent of the con- timental European wheat imports, 17 percent of the rye imports, 19 percent of the carn imports, 3 percent of the oats imports, and 23 percent of the barley imports. TABLE 1. duerage pre-sar not exports of the Danubian Basin and average pre-war net imports of blocknded continental Europe BREAD GRAINS FEED GRAINS OIL- BIL DAT COUNTRY WHEAT I RTE TOTAL CORN DATE BARLET SEEDS CARE¹ EGGS BUTTER TOTAL DEANS A FLOUR 1 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 : 1,000 1,000 Canublan net exporter , tons tons tons 1 tone tom tons tons tons tons : tons-: tons tons Rumania 8501 771 gar: 6011 11: sen: #67: 68: 28: 47: 11: e Enegary 877: 83: 7321 -35: 3: 8: -18: - e: 18: 12: 4 Tugaslavia 8301 2: 2231 3891 4: 41 297: : as ⑉ IN 0 Delgaria 1491 61 148: sa: " g: 08: 01 18º 191 18: . Total Danube Basin 3 1,880: 1611 8,020: 1,018: 18: 306: 1,337: 611 ⑉ 118: 581 4 Senticental not Imports: I I 1 # I = # # 4 I : Germany 1 -7661 -1901 -875:-1,343: -188: -153:-1,616: -804:-1,307: -38: ⑉⑉ -II Austria -120: -126: -8501 -9711 -291 - -4891 -33: -0: -21 -9. 3 Caschoslovakia -110: -391 -1771 -83: 38: 481 -10! -38: -77: -4: * o Total Graster Ournany -0041 -3101 1,300: 1,700: -138: 2801-2,088 -805:-1,350 -861 -168: -94 Doussrk -363: -1787 -430: -403: -$8: ⑉ -3611 -19: -637: a: as: 194 Verway -3391 -1401 -886: -162: -18: -173: i -44: -7: 1: 0 Belgion 1,139: -134:-1,806: -006: -46: -400:-1,373: -65: -178: ⑉81 -11: -3 Fotherlands : -675: -181 -894:-1,013: -181 -84: -861: ÷ SO: se Denubian Surpluses Total Bersan-dominated countries 9,209: 19,784 5,433: -041 -004:-3,191: -19: 168: 119 France -149: -150: -770 -48: -198-1,011: -461: -0031 -28; -13: 4. Italy -000! - 28' 1 -0931 -100: -071 -88: -305: -17: -441 -361 -8: o Svitserland -0071 -90: -097: -107: -2161 -1451 -4881 -281 : -3: -15: -1 Opence -607: 0: -507: -621 - -18: -76: 11: 6 -301 -31 0 Total importe -8.074 -8261-8,000-5,244 -1361 18: 124 Danube Basin exports as percentage of Oreater Germany's importe 190.0 $9.71 156.01 80.81 14.00 110.00 04.0 7,8' 338.1 51.01 5.1 3.2 Percentage of total deficit Buropetn importe: 37,31 17.1: 34.4: 10.31 8.11 33.11 16.71 3.7 85.41 I I 1.3 Not imports and net exports of milseede and sileate are averages for the 5 years 1933-1937. Oilsoods are in terms of all =quiralent a 1938-1990 average for bread and feed grains, 1930-1998 everage for dry beans, butter, and *gge. 3 Net imports (-) are averages for the 4 years 1930-1939. 6 For pursly technical reasons France is not classified se a Garean-doninated region 5 Although not subject ** the Dritish blockade. Grance and Switzerland are regular purchasers of Denukian surpluses. Complied from ufficial sources, 707 Regraded Unclassified 708 Foreign Agriculture To the imports of oilcake necessary for the maintenance of the European live- stock industry, the Danubian countries contributed little more than I percent. With respect to oilseed imports - the most Important raw material for edible fats in most of these countries less than 4 percent was derived from the Danube Basin. Moet of these products came from countries to which continental Europe has no access under present blockade conditions, Even If Greater Germany had succeeded in monopolizing Danubian surpluses be- fore the war, they still would have net fully the Berman peacetime import needs only for bread grains and dry beans. During 1935-1939, for example, total Danubian ex- ports fell short of German import needs by 36 percent for feed grains, 95 percent for butter, 48 percent for eggs, 92 percent for oilseeds, and 97 percent for oilcake. In spite of all efforts Germany actually obtained only 27 percent of the Danubian whest surpluses and 47 parcent of the corn exports during that period. SOLE OF TAB BANDGE BASTE DURING TNE was Germany now virtually dominates Rumania and Hungary, the most important Danu- bien surplus producers, and it is safe to anticipate that at best only e small part of the Yugoslevian and Bulgarian surpluses will find its way to other former CUB- tomors, except Italy. The relative Importance of the Danubian farm surpluses during this war, for the Axis " well as for total continental European needs, will be determined by two sets of factors: (1) changed import requirements of the deficit countries as a re- sult of wer rationing and specific war influences on their domestic farm production: and (2) expansion potentialities of Danubian farm surpluses within the next few years, EVROPEAN IVEDS It must be assumed that Germany and Italy will o everything possible to main- tain their productive capacity of war instruments and the striking power of their armies. Therefore, those countries will endeavor to maintain at least the food rations that have been in force since the outbreak of the war, On the basis of the rations now prevailing in Germany, and considering the needs of the army and the occupational shifts resulting from the war, the wartine needs for most of the prod- ucts that can be obtained from the Danube Basin are well above peacetime levels. The minimum wartine German bread grain requirements, for instance, exceed peacetime needs by roughly 20 percent. These additional needs alone correspond approximately to the total average Danubian bread grain exports for 1935-1939, The effects of the war on domestic farm production in most continental European deficit countries are no less important. Intensive farming methods, built on the application of fertilizers and intensive labor, prevail in virtually all of those countries. Germany in particular has since 1933 pursued a policy of increasing yields per acre by exactly such methods of intensification, accompanied by increased mechani- zation. Lack of some essential fertilizers, especially phosphates, a varying degree Regraded Unclassified Danubian Surpluses 709 of labor shortage, reduced numbers of draft animals, impossibility of further mecha- nization. and shortages of fuel, binder twine, and other essentials, necessarily tend to curtail farm production in continental Europe. Moreover, since by far the greater part of the formerly imported feed concentrates will be unobtainable as long as the British blockade remains effective, meat and dairy production will be reduced in the highly important livestock economies. In general, domestic production In all of the continental European deficit countries cannot be maintained during the war, and will decrease continually as the war is prolonged. On the other hand, the total require- ments for bread grains and the import needs for feed grains and feed concentrates are greater than before the war, at least in the belligerent countries. DANUSIAN SURPLUSES The 1940 Danubian surpluses were sharply diminished by adverse weather condi- tions. The unusually severe winter of 1930-1940 affected most crops, greatly reduc- ing yields. In addition, the late spring and extensive floods retarded and curtailed spring sowings; and large-scale mobilization, particularly in Rumania, led to a size- able reduction of the winter grain acreage in most Danubian countries. To these handicaps must be added the effect of the territorial changes in Rumania, Sessarabia, now ceded to the Soviet Union, produced normally one-fifth of the Rumanian wheat and corn crops, and three-fourths of the oilseeds. The wheat loss this year will be even more serious, since the arld region of Beasarable enjoyed favorable crop condi- tions, whereas crops In the rest of Rumania were short. Unless the Danubian countries are deprived, by pressure, of part of their own urgent requirements, the total Denublan exports of wheat will hardly exceed 10 mile lion bushels, and those of corn 25 million bushels. This compares with pre-war im- ports by deficit Europe of 170 million bushels of wheat and 190 million bushels of corn. The 1940-41 Danublan wheat exports will thus amount to only one-sixth, and those of corn to two-thirds, of the 1935-1939 exports. They will meet only 30 per- cent of the pre-war European and 40 percent of the Greater Gerean wheat imports, and only 6 percent of the European and 13 percent of the German pre-war corn imports, On the basis of detailed analysis of the social and economic structure of the Danubian countries, it is believed that there is little likelihood of an expansion in fare production in the next few years. In some of the countries, peculiarities of peasants' attitudes, racial habits, and a high degree of Illiteracy make It improbable that educational methods could accomplish production expansion in a few years, since traditions and customs are Tikely to interfere with adoption of new modes of living and progressive farming methods. The uneconomic size of the farm holdings in Rumania, Bulgaria, and Yugoslavia remains another serious difficulty hampering rapid Improve- ments in farm conditions. Only a slow process of intensifying the agriculture of these regions holds out hope for future expansion of production. Even then it is doubtful whether such a process can be carried out without accompanying improvements in the standard of living of the peasants, a factor that would reduce potential ex- port surpluses. Other factors that would seon to prevent significant increases of exportable surpluses within a short time are discussed in the report. Regraded Unclassified 710 Foreign Agriculture RUMANIA Rumar can economists claim that even before the recent territorial revisions agricultural production in that country met only 78 percent of the country's actual food nemer, and that exports - constituting 15 to 20 percent of the production - do not represent actual surpluses, but rather food that should be consumed domestically. in order to Fornish sufficient food for the population and at the same time maintain agricultural exports at existing levels. it is believed that an increase in produc- tion of nearly 30 percent would be required.¹ in 11005 Tike the present, when strong economic and political pressure is Doing alsod on Rumania to provide increased exports of virtually all farm products, these Dolhiana 01001 appear to be of merely theoretical interest; yet the bulk of form exports undoubtedly has been made possible largely as 4 result and at the cost of " generally for level of domestic food consumption. lnc retarded development of the Rumanian economy, especially of the fare econ- any, complicates the problem of potential farm exports during the current war. More- over, in a time of emergency, when à substantial part of the working population is draffed for eilitary service or shifted into occupations typical of a war economy, the onsurna rise in food consumption is bound to curtail farm exports. Indications and hawever, that German authorities are intent on bringing about a demobilization n° (if Rumanian Army! and 4 rigid system of food rationing is under consideration. A. number of factors in the structure and operation of Rumanian farm economy, 45 well - existing natural conditions, Timit the possibilities of expansion in farm production and PARKO changes in the production pattern unusually difficult. at least The noxt ? DE a years. Since the primary purpose of this study is to deter- The to which agricultural surpluses say be forthooming from Rumania dur- -1nd the next ten years. only those factors pertinent in ascertaining this possibility will to cons ,dored, THE AGRICULTORAL STRUCTURE OF RUMANIA In 1939 the posulation of Rumánica was slightly in excess of 20 million. The predminantly agricultural character of the economy is shown by the fact that in 1939 Approximately 80 percent of the gainfully occupied population was engaged in agricul- the and Korestry and about 9 percent in mining, industry, and transportation. in spite of The territorial gains resulting from the World Mar, the occupational distri- bution die not change noticeably 18roughout the post-war period. CHANGES 1% GRAIN PRODUCTION The 7018 of Rumania, as constituted before the World War, was espe- cialiv important as A producer and exporter of grain. During the 5 years preceding the Sucretar Dusharast, in March 1000 - of 11 Subject late aconomy 5413 deals Larguly and AND Regraded Unclassified Denubian Surpluses 711 the World War 72,1 percent of the country's wheat production, nearly 73 percent of the eye, about 79 percent of the barley. 41 percent of the oats, and 39 percent of the corn were exported. Theacquisition of the former Austrian province of Bukovina, the former Hungarian provinces now included in Transylvania, Russian Bessarable (oc- cupied by Rumania in 1920). and Dobrogea, enlarged the country to more than twice the size of the old Kingdom. The area that could be aweded to field crops was likewise nereased to more than twice the pre-World-Mar screage, The Increase in area, however, did not result in a corresponding rise in grain production after the World War (see table 2). Characteristic of the pre-World-War situation was the relative stability in the total acreage to various grain crops: However, a comparison of production before and after the World War shows that daring the post-war period important shifts were taking place almost continuously, During 1928-1932, for example, the production of wheat and rye declined to two-thirds of the ore-Norld-War level, whereas that of barley surpassed the 1909-1913 production by nore than a third, and that of corn and oats by about 4 percent, Since 1928-1932 grain crop distribution has again changed noticeably: produc- tien of wheat and rye has tended to regain its losses, though still more than 10 and 15 percent, respectively below that of 1909-1913. Corn production, on the other hand, is now about 10 percent above the pre-World-War level. The production of bar- ley, which increased noticeably during the first decade after the World War, is now nearly 20 percent below that of 1909-1913; the output of oats has reversed its ten- dency and is now nearly 40 percent below the 1909-1912 level. CHATOMA in RXPORTADLE DRAIR SURPLUSSS The development of Rumanian exportable grain surpluses is of special signifi- cance, During 1909-1913 the areás comparable with Greater Rumania (encluding annexa- time following the World War) exported 44.9 percent of the gross production or wheat. 41.8 percent of the rye, 49,5 percent of the Darley. 28.9 percent of the cate and 33,2 percent of the corn, A Fundamental change in Rumania's grain export position is evidenced when the ratio of exports to production in 1909-1913 is compared with the present ration Only 70 percent of the wheat was exported during 1935-1939, as compared with 45 percent in 1009-1913, The decrease in this ratio is even sharper for the other grains: For no andle, the corn export ratio fell from 33 percent during 1909-1913 to 10 percent in 1935-1939. Only 2 percent of the 1935-1939 production of oats was exported, " 00 Dired with 29 percent during 1909-1913 The 1935-1939 level of exports was without exception still far below that of 1909-1913, despite favorable export conditions and unusually good drops IT 1936 ini These refer to net production total production less need but and - (Le TwEle of exports to - production 1% given in catin . Record sorritorial losses are disregarded throughous the healthg WATH 100 Mis the of agriculture thee ore, covered en - Regraded Unclassified 712 Foreign Agriculture 1939. Only 40 percent of the 1909-1913 volume of wheat, 37 parcent of barley, 33 percent of and corn, and 4 percent of oats exports was available during 1935-1939. Table 2. Function frain production and net exports, averages 1909-1913, 1928 1032, 1933-1937, and 1935-1939 MARAT ATE BARLEY DATE CORN PRIDUC, NET PRODUC- NET PRODUC- NET PRODUC NET PRODUC FERIOD SET TIU# EXPORTS TION EXPORTS TION EXPORTS TION EXPORTS TION EXPORTS 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 busine burdels bushe busine bushal bushe burre 414 Blogdow 3013 09,748 54,434 5,000 1,307 17,130 10,742 20,010 10,421,102,510 38,780 Rumania Love 1032 154,070 71,879 0.027 8,379 55,2841 30,7721 63,794 18,426 195,555) 08,000 1020 1032 101,382 11,202 13,003 1,467 67,307 42,164 00,202 37,728 1002 1937 111,785 13,743 14,439 2,355 57,0001 18,130 40,798 1,034'197,970 27,600 1924 1940 140,016 25,340 17,134 2,743 $6,482 11,933 $0,000 706:211,801 21,000 THOMA 1909 1113 100 100 100 100 100 100 100 100 100 100 1936 was 57 15:91 00.0 17.4 130.7 130.4 103.9: 16.01 104 1: se 1411 14.37 70 5 10.2 13.2 26.1 07.41 40.11 71.81 0.6 101.7 44 1415 1934 se 29.8 84.5 32.7 71.8 36.00 62,7: 3.81 106.9: 32,5 MI ******* " period Age: et recent Percent Percent Purcent ferera: Product lady DD 44.0 41.0 10.5 I 28.01 1926 1032 10.6: 19,8 48.3 : 4.6 15.6 1923 1937 No. 15.91 115 ; 2.81 140 1935 1930 WO-1: 10.07 25.5 : 1.8. Complied Cros official EFFECT OF LAND REFORM ON PARM REPECIENCY The reasons for the decrease in grain production, particularly of exportable surpluses, need not be traced in detail. However, in order to determine the valuee of exports that may be expected from Rumania during the next few years, it is neces- sary to ascertain whether the post-war decrease was brought about by random factors easily remedied in time of emergency or by more Fundamental structural factors that do not pérmil of reversal within a relatively short time. The distribution of land in Rumania. where the majority of the fare population was not freed from serfdom until 1864, is important in determining farm practices and thus crop yields and production. Before the World War, land distribution was charac- terized by holdings of two extremes in size: the small, uneconomical peasant farms averaging not quite 10 acres: and the large estates, averaging 3,500 acres. About 40 percent of the crop acreage was composed of holdings of less than 25 acres, where- Dembian Surpluses 713 13 estates of more than 1,250 acres accounted for 38 percent, Of the farm owners, 95.4 percent, or about a million peasants, owned only alightly more land than the 0.2 percent represented by 2,000 estate owners, Medium-sized farms, usually the most efficient under European farming conditions. were virtually nonexistent except in Transylvania, which at that time was part of the Austro-Mungarian empire. Another characteristic of pre-war agriculture was the relatively small number of landless farm laborera (only 200,000 in 1913) despite the prevalence of large es- tates. This is explained largely by the history of the inequality of Rumanian land division. After the emancipation of the sorts, the size of the peasent holdings was barely sufficient to provide them with a meager aubsistence, especially since the 0011 of the holdings was usually of poor quality. Consequently, a considerable portion of many large estates was rented in small lots to peasants and croppers. The estate owners depended on the peasants not only as farm helpers, but also for the use of their draft animals and, to a lesser degree, their primitive farm implements. Conso- Quently the number of landless workers was relatively small. The large estates (latifundia) of Greater Rumania were for the most part oper- ated efficiently and upon much the same principles as in Germany or France. Managers, frequently imported from neighboring countries, were usually well trained in advanced agricultural methods. The seed beds were carefully prepared in season, rational systems of crop rotation were employed, improved varieties of seed were used, the poorer soils were fertilized, and modern machinery was extensively employed, although at the time of the World War harvesting with a sickle was still common. la regions of uncertain rainfall up-to-date methods of poisture conservation were used, The size and topography of the peasants' fields, however, permitted the use of only the simplest type of machinery and most primitive methods of cultivation, often dating back 2,000 years to the time when the country was settled by farmers emi- grating from ancient Rome.° It is not surprising, therefore, that crop yields on large estates were considerably higher than on peasant fares. TABLE 3. 1.-Grain crop yields on Large estates and peasant holdings is the old Kingdom of Rumanta, average 1908 1912 31810 or LAROR SMALL PENSANT SETATES " РЕКСЕИТ CROF LAROR ESTATES HOLDIWOS AGE OF TIELD OF PEASANT HOLDINGS 563/2013 as Bushais Percent Theat 20.1 : 17.7 : 113.5 Eye 18,2 : 14.2 116.2 Attley 21.4 : 18.0 118.8 Data 28.8 : 22.9 125.7 Cara 23.2 " 19.0 123.1 : -1 Comptied Trom official saurces. W Michael, Louis 9., Agricultural Survey of Europe; The Damabe Darin. Part 41 Sui- 10.10 and Tech Bui No. 100, D. 1. Dept Agr., PP 18-18, Regraded Unclassified 714 Foreign Agriculture Toward the end of the World War, when the Central Powers had occupied part of Rumania, the peasant army made continuation of the war dependent on the promise of a radical land reform, which was effected by a decree of December 16, 1918. It was the original intention of the government to hold the expropriated estates under public control and to operate the land under cooperative management. When it became appar- ent that this plan could not be realized, the lend was subdivided into small plots. The result of this reform, affecting about 15 million acres of a total agrioultural area of 42 willion, was that 35 percent of the acreage formerly operated under rela- tively efficient methods came Into the possession of peasants who were not equipped to maintain the former level of efficiency. The backwardness and lack of ambition of the Rumanian peasant may be explained by a number of factors. The peasants are descendants of sorfs, who were exploited by the Turks until the middle of the nineteenth century and dominated by local landlords until their liberation. Even after their emancipation, and until the outbreak of the World Mar, the peasents were entirely dependent on the large estates. These condi- tions were not conducive to the development of initiative or efficiency. Moreover, the parcentage of Illiteracy among the pessants is high. It is also significant from the point of view of officiency and productiveness that a good deal of the farm work is done by women and children. and that there are 108 days in the year - chiefly church and national holidays - during which the peasant feels that he is obligated to do no work. Adding the winter days and other periods of adverse weather conditions, there remain only about 60 days for actual field work. Itils improbable that such a situation can be remedied in a few years. Only large-scale and slowly-working educational measures can be depended on to change the pessant's reluctance to adopt ways of living and farming methods that differ from those handed down from generation to generation. Since the World War little effort has been made to raise the socialand intel- lectual standards of the peasants. Existing difficulties eight have been overcome eventually if the original plans for cooperative management had been realized. The land reform failed to remove the chief obstacle in the way of efficient farming - the uneconomic sizeiof peasant holdings, The peasant family received an average of only 6 to 7 acres. The apparent advantages of the subdivision of the large estates could not be maintained. Since farms in Rumania are divided in equal parts among the heirs, the shall peasant holdings had to be parcelled into still sealler and smaller units as population increased. A further impediment to efficiency lies in the fact that the holdings of an individual peasant consist of lots scattered in different locations, e Ibid., , to 7 a Scajan, World Without Ind: the Saga of Southeastern Europe, New York, 1039, P: ass. » - of the initial improvement in the possents' situation bee been lest. The small According 162), to Pater F. Drunker (in *Can Oursany Win the Balkans." Harpers Nagazine, Jan. 1000. formers could not obtain Product and ware obliged to **** Financial assistance From their for Set . twentleth landlords, La when they gradually pindged all their property. As . result, not more than their land of the former owners installed by the land reform are *4111 in real control of Danubian Surpluses 715 which cannot be operated as a single farm. Moreover, throughout most of the post- war period emigration was rigidly restricted, and opportunities for nonagricultural employment were - and still are - extremely limited. Under these circumstances it is not surprising that the land reform adversely affected both the quantity and quality of Rumanian cropa and farm exports. A period of low production extremely small export surpluses, and sharply decreased farm In- come persisted a decade after the insuguration of the (eform measures. The transfer to peasant ownership of 15 million acres previously efficiently operated by the 08- tates would have alone caused a considerable decrease in production and yield. Be- fore the Isnd reform 51 percent of the total whest acreage, 34 percent of the oats, 25 percent of the barley, 12 percent of the rye, and 13 percent of the corn were grown on the estates The retrogression of farming methods and the resulting decrease In the produc- :Ion of some crops and in all exports have, therefore, been due to factors that cannot be readily altered Of these factors only the most important have been men- tioned. Many others, Institutional as well as natural are likely to prevent rapid expansion of production and exports even though strong pressure may be exercised to n-ing about such expansion An educational program followed over a long period of years would no doubt bring about a gradual improvement in farming methods; as a re- sult crop yields and livestock production might be increased to the point of regain- ing the Wor Id-War level of cereal exports and expanding the exports of livestock and its products Such an ovement however would equire complete revamping of the farm economy necessitating an extensive educational program, consolidation of the scattered farm lots, and vast expenditures for Tertilizers, farm machinery, and transportation facilities - a program not possible of completion within a few years, EFFECTS or 80.1 AND DESMATE off SBAIN PRODUCTION On the whole, physical conditions present no serious obstacle to expansion of Rumanian agriculture - especially to an increase in grain production - provided farming methods are adjusted to existing soil and climatic conditions, Although the soils of the billy sections are somewhat deficient in trumus and nutrients, since hu- sidity and rainfall wash away the soluble components those of the plains are unu- sually fertile, rich in such plant nutrients as potash and nitrogen (though fre- quently deficient in phosphorus). The plains, exposed to extremes of rainfall and temperature, are actually sealarid steppes, whose productive properties depend entirely on sufficient and uni- form noisture. Eastern Rumania, Dobrogea, and southern Bessarabia are the dryeat regions of the entire Danube Basin. Here the spring and fall seasons are short and the summers long and hot. Droughts are frequent: rainfall occurs largely in the form of a few heavy downpours. As a rule satisfactory crop yields are possible only when moisture-conserving methods are constantly applied. Managers of the large estates knew how to overcome this handicap to a considerable extent: the peasants, however depend on natural rainfall, and as a result crop failures OCCUT whenever unfavorable weather conditions prevail 716 Foreign Agriculture --- (#VESTMENT IN ASRICULTURAS MACHINERY The typical Rumanian peasant farm is equipped with only the crudest and most Inefficient farm implements. The average Investment per acre in farm tools is only half of that in Bulgaria, a third of that in former Poland, and one-fifteenth of the investment in Germany. TABLE --Relation of investment in apricultural implements to wheat yields INVESTMENT 1* INDEX AGRICULTURAL WORAT TIBLO COUNTRY INVESTMENT WREAT VIBLD IMPLEMENTS PER ACBE PER ACRE PER ACRE FER ACBE : Let : Bushals " Index H Index : : : : Pumania 1 408 : 9.5 : 100 : 100 Sulgaria 809 1. 14.5 : 200 : 154 Poland 1,214 : 15.9 : 300 : 167 Germany 1 6,070 : 22.8 : 1,500 : 241 Switzerland 17,402 : 24.8 : 4,300 : 262 ++ : Bannd un Figures complied by Or A. Chardivarance (see Featnate 1) - Additional farm machinery is necessary if production is to be maintained at even the present level, The Institute for Agricultural Research at Bucharest reports that the total value of Rumanian farm equipment is only about 14 billion lei (about 98 million dollars). In many cases the equipment is not only antiquated, but beyond repair. Many peasants still use wooden plows, and often one plow must be used by five farms. Replacement of the completely obsolete equipment, with provision for the most urgent additions, would require an expenditure amounting to more than the total value of the present machinery. Obviously. such a situation cannot be remedied In 8 short time. German su- thorities, who have a special interest in improving the situation, have pointed out that there are numerous difficulties. Because of topographic conditions, only spe- cific types of machinery can be used. High duties and other levies, as well as in- land and ocean Freight rates (the latter usually representing from 30 to 40 percent of the value of the machinery inthe manufacturer's price) constitute a severe handi- cap. The credit problem presents another difficulty; the peasant cannot pay cash for his equipment, and the seller, who retains no title in the property sold and no right to repossession in case of default, assumes a high risk in such sales. The Kational Cooperative Institute may act as an intermediary, but may vouch only for members of cooperatives. The Ministry of Agriculture recently recommended the expenditure within the next 5 years of 1.3 billion lei (about 9 million dollars) for farm machinery, to a 1940 Bedart an Landaaschimen." (Rusamin's fars sechinery neede) Jam. Danabian Surpluses 717 te provided by the National Cooperative Institute, largely through imports from Germany. Germany, however, with probably not be able to export much farm machinery for the duration of the war: moreover, in 5 years only 8 small part of actual re- quirements would be supplied. 10 The plan also envisaged the abolition, at leest In part, of duties and taxes on imported machinery. The long-run possibilities for improving fare methods and expanding produc- tion will not here be avaluated. As for the immediate future, however, and even for the next half-decade, it day be safely stated that no appreciable change may be ex- pected. THE PATTERN OF RUMANIAN AGRICULTURAL PRODUCTION Grain crops constitute the basis of Rumanian farm economy; partly because of natural factors but also because of the widespread Indifference of the peasants toward the introduction of new crops and farming systems. Table 5 shows the prevail- ing pattern of Rumanian agricultural production. LAND UTILISATION IN GREATER RUMANIA In the year 1938, of a total area of about 74 million acres approximately 33 million, or 45.6 percent consisted of arable land; II million, or 14.8 percent, of permanent meadows and pastures; and 1.6 million, or 2.1 percent, of tree and bush crops. Forests constitute 21.5 percent of the total, and the remaining 16 percent is unproductive. The importance of grain crops is shown by the fact that they ac- count for 83.8 percent of the arable land. Corn is by far the most important single crop, grown on 37.2 percent of all arable land, followed by wheat (28.4 percent) and barley (9.5 percent). The remaining 14.2 percent is divided almost equally among food crops, fiber plants, oilseeds, and tobacco. The production pattern of Rumania has shown only minor changes during the past 10 or 12 years; however, this is not necessarily proof that strong German pres- sure may not succeed in increasing agricultural production in some fields. It should not be overlooked. however, that such pressure has been exerted more or less contin- vously since 1934. Moreover, the depression of the 1930's should have stimulated definite shifts in acreage, but it resulted only in governmental recommendations for such shifts. Present indications are that official propaganda or pressure alone will not be able to induce the peasents to reorganize their crop system within the course of the next few years. Since the late 1920's the acreage planted to grain crops has shown little change (see table 5). During the 5-year period 1935-1939 the level of grain acreage was 3.5 percent above that of 1928-1932. Since 1936 a downward tendency has prevailed; howeve?, this tendency is too slight to conclude that it occurred as a result of LO According to the plan dreen up by Professor Jonassu-Disent) (Busanian Minister of agri- valture and Domator), published in Argus, Mar. 31, 1040. Regraded Unclassified 7.10 Foreign Agriculture the government's recommendation for at reduction in grain acreagein favor of legumes, ibers, oilseeds, and fodder crops to meet changes in the export demand. On the con- trary. there is reason to believe that the decrease in total grain acreage is due largely to random factors. TABLE 5. Land utilization in Greater Rumania, 1938¹ PERCENTAGE ARBA LAND USE OF TOTAL 1,000 acres Percent Tueanta 72,900 100.0 Total 33,223 45.6 Mahie Tand and pasture 10,806 14.8 1,564 2.1 and unage 15,650 21.5 and 11,658 16.0 Percent arable land 12,348 37.2 8,757 26.5 638 1.6 varies 2,958 -- 300 06 1,608 4.5 1,191 3.0 111 0.3 27,853 53.8 208 0.0 121 04 54 82 10 0.03 476 1.4 54 0.2 67 02 101 0.2 = 0.3 1.191 35 126 04 12 0.04 12 0.04 497 15 206 0.5 a 0.02 156 0.4 42 01 DEVER 119 0.4 1,201 3.6 368 - 469 - 413 - 114 1 Tree 1,092 - 012 plus troes I 371 I Total 279 1,564 I Minut are contained in the subtotals, but are net given individually. Daved on Tigures in the international Tearbook of Apricultural Statistics, 1938-39. It is especially noteworthy that on the whole the acreage changes in the va- rious grains conflict with governmental recommendations. The government demanded a reduction in wheat and corn acreage and an increase in barley and oats: but between 1928-1932 and 1935-1939 the wheat acreage increased nearly 20 percent and the corn Danubian Surpluses 719 ncreage 10 percent, while oats and barley decreased 30 and 25 percent, respectively, Since 1936 the acreage under oats has been reduced 26.7 percent and that under barley 32 percent, while the wheat acreage increased 19 percent. Only the 6-percent de- crease in corn acreage was in line with official recommendations. In the food materials of all countries under German influence there je at present a marked deficiency in protein of both animal and vegetable origin; conse- Twently, leguminous plants have attained added importance because of their high pro- Lain content. Thus far, however, Rumanian farmers have made no effort to expand the screage of such plants as beans, peas, and lentils - since 1936, in fact, a decrease of 10 percent has occurred. Also, the acreage planted to textile fibers, the prod- nets of which are in great demand domestically and in all German-dominated countries, rias shown no increase since 1934. TABLE 6. Cosp astedges in Greater Rumania, austages 1928 1932, 1238 1937. and 1935-1939; annual 1933 to 1939 AVERAGES CROP 1988- 1959 1035 1993 1934 1935 1920 1037 1930 1034 1032 1937 1939 1.000 coo" 1,000 1,000 : :,000 1,000 1. 1,000 2,000 1,000 acres 1 GOTHS 1 acrés acres T acres l'acres acres daras GIVES Usen 11.470 12 563 12,611 11,909 12,365 12,778 12,908 10,740 12,348 12.167 these 7.879 4 9.212 0.033 7,700 7,609 6,406 5,480 8.777 9.435 10.079 Dye 007 991 1,076 988 DES 360 1,041 E 1,083 1 1,101 1,107 Saring -- 4.687 : 4,123 3,553 4,485 4,001 4,079 il 3,950 3,730 3,188 3.708 DATE 2.611 1,000 1,762 2,050 2,044 : 1,970 1,996 1.030 1,600 1 055 Total 27,114 27,687 28,005 27,121 27,263 25,277 28,486 129,287 27,761 21,836 was 237 257 32A 253 1 277 245 259 249 age 1 - 110 42 74 (2) 129 109 103 1 44 40 37 (a) 40 49 54 / 1. 101 119 122 118 114 114 124 190 126 TAM and ***d: 1 no 00 60 47 04 77 78 NA IT Offer 1 a A a y a M & 12 1. 470 soa 407 472 004 ass 49T Repassed I 163 140 219 96 142 514 427 195 son #1 100 4 AO 110 241 15€ : I 39 36 no an 25 44 41 35 " "vent beets I 1 04 BT 59 106 at 01 72 T4 119 Vatative 487 014 514 and 504 030 50a 676 Verage 1985-1938 a Date not available. Prepiled Prom International Tearbook of Agricultural Statistics, International Institute of tricuiture for 1936-37 to 1958-39 and official date in the Office of Fureign Apricultural Asistions for other years Germany has been bending every effort to stimulate increased production of oleaginous plants, particularly moybeans. A German-Rumanian company, "Soia," con- trolled largely by the German Dye Trust, was founded in 1934 for the purpose of Regraded Unclassified 720 Foreign Agriculture contracting with Rumanian peasonts/for for the cultivation of soybeans, previously unknown in southeastern Europe. After much Axperimentation to determine the most suitable Doile and need, it was found that Bessarabia offered the best prospects for soybean production. Às a result 80 percent of the total Rumanian soybean acreage was located in Bessarable which has now been ceded to the Soviet Union, During the first few years the number of peasants with whom contracts (for 2.5 acres each) were concluded increased rapidly, reaching 74, 000 in 1937. In 1938 only the most efficient farmers were allotted seed and given instructions, and the number of producers was cut in half. In 1939, however, the upward trend was resumed, and is expected to continue as long as Germany offers its present high prices for soybeans. The available supply of farm labor, draft animals, and tractors, however, ao well as natural factors and prices of competitive crops will partly determine the future level of production. No noticeable expansion has recently taken place in the acreage of other oil-bearing plants PROP T/ELDR AND PRODUCTION The outstanding characteristics of Rumanian agricultural production are the low level of and extreme variation in crop yields, resulting chiefly from backward farming methods and inability to provide for adequate moisture conservation. Appli- cation of manure is care, and commercial fertilizers are practically never used in apité of the general deficiency of phosphorus in the soil. According to Rumanian officials the soils of even the beat districts are in danger of becoming depleted onless the use of fertilizers is indreased. The primitive relation system in Rumania results in low yields even for grains The yield of corn (m 1935-1939 was 28,2 percent, that of barley 24.6 percent, that of onts 209 percent below the 1909-1913 level, and even the wheat yield was 6.6 percent below 1909-1913. Adequate yields from crops now in greatest demand (such as fibers legumes and oil-bearing plants) can be obtained only if the government makes available the right qualities of seed and instructs the peasants in more efficient methods It is obvious that the prevalence of low yields during more than two dec- ades cannot be remedied immediately except during years of unusually favorable weather. even if sufficient fertilizers, modern fare equipment, and high-quality seed could be supplied No less disturbing is the extreme varlation In yields. During 1930-1939 the percentage deviation from the average yield was 23.3 percent for barley 19.4 percent for wheat (5.8 percent for F VO : 14.7 percent for oats, and 9.9 percent for corn. This instability in yield explains largely, the variability of Rumanian grain produc- tion, as will as the wide lluctuation in exports. Table 7 shows the yields of grain crops during the past two decades. For a number of ressons corn is the Rumanian peasont's most important grain crop, First of all, corn is his chief food grain) it is astimated that only 3 million 11 N., 1 Agree sure - Roannian Corvenpondance Row Danubian Surpluses 721 people of o total of 20 million regularly consume wheat as a bread grain. Moreover, in operations in production of corn may be performed largely by hand: and only 0,3 bushet of seed per acre is required as compared with 3.3 bushels for wheat, thus re- during production outlays. Because of the peasant's familiarity with carn and the suitability of the climate for that crop, fluctuations in production are smaller than those of other grains except in years of extremely adverse climatic conditions. Dur- ing 1930-1939 the deviation from the average production was 10 percent, due almost B/w tirely to variations in yield. TABLE 7. - Tieldo por acre of Humanian grain crops, averages 1800-1913, :928-1932, 1933 1937, 1935-1939, 1930-1939; annual 1933 to 3938 TEAR. CORE WHEAT EYE SARLEY DATE : Bushels : Bushels # Bushals : Bushels = Bushels anual: -1 " : : : 1033 15.0 = 15.5 : 18,3 : 19.3 : 27.1 1904 15.4 : 10,1 I 9.1 : 9.2 : 19.0 1035 16.6 : 11.4 : 12.3 : 10.4 : 20.8 17 0 = 15.2 : 17.1 : 16.6 : 29.4 1987 14.7 1 15.7 : 16,4 : 11.3 : 18 2 15018 1 16.3 : 18.8 : 17.1 : 12.1 : 19.8 : 19.5 1 16.2 : 15 3 : 13 A : 23.1 1 7 = 2 " 1909 1913 23.4 44 16.7 : 16.1 : 18.2 1 28.2 1928 1932 17.7 : 10.5 : 10.0 : 18.6 : 26.7 1935 1937 15.7 : 13.6 : 10.0 : 13.8 : 22.9 1935 1939 16.8 : 15.8 : 15.0 I 13.8 : 22.3 1930 1939 t 17.1 : 14.4 : 16,2 : 14.6 : 23.1 Average deviation from 1 1 : = : 1930 1939 mean yield : 1.7 : 2.8 : 2.4 : 2.4 : 14 T Percent 1 Percent : Percent : Parcent : Percent Percentage deviation : 9.9 : 19.4 : 15.8 T 23.3 : 14.7 : 4 : : : Capital From official The variability of the annual wheat crop, on the other hand, is more than twice that of corn. During and immediately after the World War the wheat situation was sf- fected by war influences, and later by the effects of the land reform. Before 1931 various governmental measures were undertaken to improve conditions, but with little success. In 1931 a wheat valorization program combined with a system of export pre- 11(0mg was initiated in the hope of raising the domestic price level. The system was modified in 1933 to one of government purchase of wheat when the domestic price fell Selow a fixed minimum. The new system maintained domestic prices at about twice the world market prices. Since 1935 a combination program has been followed of export premiums, minimum domestic prices, and government purchase. Barley production is the most unstable of that of all Rumanian crops, the de- vistion from the average of 1930-1939 amounting to 23,3 percent, of which two-thirds Regraded Unclassified 722 Foreign Agriculture was due to variations in yield and one-third to varistions In acreage. Production has been declining steadily: the average crop for 1935-1939 was only 46.9 million bushels, as compared with 57 million for 1933-1937 and 87.3 million during 1928-1932. Production of onta is also declining, but the annual crop fluctuations are not so sharp, being more nearly equal to those of wheat, TABLE 8. Production of Rumanian fore crops, averages 1938-1932, 1933-1937, 1035-1939; annual 1935 to 1939 AVERAGES CROP UNIT 1935 1985 1037 1038 1000 1010-1982 1985-1937 1030-1930 Thom Thou Phon- 1 thou- Thou- Thou Thou Phone sands sands sanda sands sonds sands sands sands Carn Du. 262,500 107,070 $90,000 107,071 301,450 235,237 These Bu 107,369 111.788 140,816' 00,430: 120,717 130,156 177,100 163.011 Age Du. 12,600 14,830 17,120' 13,724 17,024 17,708 20,361: 10.087 Barley ! 57,307 57/030 46,0021 42,400: 74,021 42,127' 38,222 37,400 Date Bu. 68,362 45.702 40.000 40,004 19.362 35,338: 31,001 33,546 Deans : 2,900 2,830 . # 1,713: 3,464: 1,880 1,710 Potatoes Ton 69,782 59,592 # 74,298: 71,350 79,768 61,441 Sugar honds Ten 751 6347 I 690: 480: 549 808 Resp Too 16 29 1 as: 33 30 33 Piec Ten 4 10: I 10: 13 10. T1 Cotton Sale 1,015 I 1 461 1,384 2,306 2,707: Suntleeer send Ton 191 - 1791 211 191. 200 Repoused Tun do 36 I 13: 41: 75 547 Soyboans Ton # 1 - , Tobacco Ten 19 11 16: 16: 11: 14: : 1 - Compiled from International Fearbook of Agricultural Statistics and official data In the or- Five of Foreign Agriculture) Relations. Of the remaining crops, only 4 few are of importance to this study. Produc- tion of legumes shows wide annual fluctuations, but without any evident tendency toward increase, Potatoes and sugar beets are grown for domestic consumption only. Production of fiber crops, particularly cotton, is entirely inadequate to meet do- mestic needs; the fivefold increase in production since 1935 still meets only 3 per- cant of Rumanian requirements. Except in the case of soybeans, no increase has taken place in the producti of oleaginous plants. Normally 75 percent of the sunflower seed, 70 percent of the hemp seed, 65 percent of the flaxseed, and about 50 percent of the rapessed were con- sumed domestically before the recent territorial changes. At present, total produc- lion of oilseeds is insufficient to meet domestic needs. Fruit production has suffered from backward methods of cultivation, handling. and processing. The number of plum trees, constituting more than 60 percent of all fruit-bearing trees, is placed at 49 million: but the average yield per tree is very low, amounting to only 17 pounds as compered with 85 pounds in Yugoslavia and in Danubian Surpluses 723 - California, is In addition, the fruit is of inferior quality, with the result that only 25 percent of the crop can be consumed as fresh fruit or as dried fruit or jam. The remaining 75 percent is used in the manufacture of plum brandy. In 1937 the B million apple trees in Greater Rumania produced a crop of 660,000 short tons. In the same year 115,000 tons of pears, 408,000 tons of walnuts, and 34,000 tons of quinces were produced. Rumania exports little fruit, because of the generally low quality and the lack of a standardized product; according to offi- cial estimates only I percent of the total production was exported in 1937. There are long-time possibilities of improving both quality and quantity of the fruit crops and of exporting larger surpluses; these, however, cannot be realized within the next few years, THE LIVESTOCE ECONOMT Although the predominance of small farms should be favorable for the develop- ment of an intensive livestock industry, the proportion of animals to population is very low. Hog numbers per capita In Yugoslavia, former Poland, and former Austria are twice those in Rumania: and in Germany and Hungary three times as great. TABLE 0.-Livestock numbers in Rumania, 1937 KIND NUMBERS KIND : Thousands 11 : Thousands Horses : 2,065 :: Goate : A08 Cattle : 4,184 :: Roge 3,170 Milk cown : 2,110 :: Poultry 73,897 Sheep 12,373 :: : : :: : Compiled from official sources. Meat consumption in Rumania is very Tow: in the years 1926-1935 it fluctuated between 5.5 and 11.2 pounds per person for the peasants and between 20.2 and 26.6 pounds for the urban population. The government has been attempting, however, to improve livestock breeds and encourage increased consumption. Rumanian exports of livestock and its products are relatively unimportant, and prospects for greater surpluses in the near future are not favorable. Increased exports are not possible without an increase in livestock numbers and the development of better breeds - con- ditions that depend in turn on the establishment of a better feedstuff basis and the peasant's adoption of advanced methode of animal husbandry. Production of dairy products is Insignificant. À total of only about 600 ail- lion gallons of milk is produced per year; a quantity barely sufficient to meet do- mestic needs In spite of the low level of domestic consumption. It is believed that 12 Arcadian, Nirolas P., "Agricultural var enterials need Jn the Russalan food industry." Car- respondence Boonomique Roumaine, No. 3. tess, 9. 39. Regraded Unclassified 734 Foreign Agriculture no real progress can be eade in the Rumanian dairy industry until the peasent's standard of living has been vastly improved. Certainly no exports may be expected within the next few years. AGRICULTURAL EXPORT TRADE Although Rumania is predominantly an agricultural country (so percent of the working population is engaged in agriculture), total farm exports represent less than 50 percent of the value of all exports. The bulk of nonagricultural exports consists of minerals, chiefly petroleum products. Exports of forest products account for about 10 percent of the total value. Table 10 shows the recent position of agricul- tural products in the total trade of Rumania. TABLE 10. Composition of Rumanian exports by value, 1839 with omparizons ASBICOLTURAL PRODUCTS FOREST PRODUCTS MINEBAL PRODUCTS ALL PERCENTAGE PERCENTAGE PERCENTAGE YEAR EXPORTS TOTAL OF ALL TOTAL OF ALL TOTAL ON ALL EXPOSES EXPORTS EXPORTS Million : Million : Nillion : i Willion : 1 int F. me = let : Percent : int : Percent 1929 28,960 : 14,096 48.8 : 4,679 : 16.2 : 9,904 : 34.2 1954 13,613 4,733 34.8 : 1,504 : 11.1 7,310 : 53.7 1935 16,756 = 6,416 38 3 : 1,519 : 9.1 8,730 : 52.1 1936 21,699 10,827 49 9 : 1,746 : 8.0 : 9,027 - 41.6 1937 31,568 15,368 48.7 = 2,934 : 93 IT 13,164 : 41.7 1038 21,533 9,400 43.7 : 2,532 : 11.8 : 9,498 : 44.1 1939 26,909 12,250 40.7 T 2,530 " 9.4 11.426 41.9 = : PLANT PRODUCTS GRAINS LIVESTOCE AND EDIBLE (INCLUDING GRA(NS) (INCLUDING FLOUR) ANIMAL PRODUCTS AGRI PERCENTAGE PERCENTAGE PERCENTAGE CULTURAL OF AGRI or AGRT or AGRI- EXPORTS TOTAL CELTURAL TOTAL TOTAL CULTURAL CULTURAL EXPORTS EXPORTS EXPORTS : Million +1 Million : Million : Nillion : let : let : P, nt : let I. Percent let : Percent 1920 14.096 : 10,530 747 : 1 : 2,884 - 20.2 1934 4,733 ) 3,432 1 72.5 : : : 1,018 21.5 1935 5.416 4,788 * 74.6 : 3,287 : 51.2 : 1,382 : 21.5 1936 10,827 - 8,520 78.7 : 6,841 1 63 2 : 1937 1,747 -- 16.1 15,368 . 12,429 il 50.9 1 10,177 ++ 66.2 - 2,081 13.5 1938 9,409 Y 7,121 : 75.7 : 5,258 " 1939 55.9 - 1,859 19.8 - : 7,210 # ! : : 1 for Une leu as the official rate of exchange = 80.007035 Complied True Correspondance Economique Roumaine, Dec. 1930. P. ... and official sources. Regraded Unclassified Danubian Surpluses 725 --- TABLE 11.-Rumanian exports of apricultural products, 1033-1839 Ret exports for calendor year] PRODUCT UNIT 1031 1934 1025 1900 1037 1858 1930 : : from : thou- : Thou- : thou # Thou : Thou : Thou- Grains: : : sanda : sands : sands I sands : sands sands : rands Corn Bn. : 42,206: 20,869: 24,093: 30,366: 20,599: 9,521: 10,932 Wheat :,Bu. : 223: 5: 9,274: 22,439: 36,786: 38,420: 40,781 Barley : Bu. : 28,553: 15,316: 8,149: 23,077: 14,656: 7,964: 4,921 Oata : By. : 1,615: 28: 1,144: 1,174: 1,211: 0: 0 Eye Bu. : 0: 0: 368: 1,190: 10,219: 858: 1,079 Oilseeds and legumes: : : : : : : : : Oilseeds Ton 2 I : - : 146: 60: 120: 129: 123 Oilcake Ton : - : 1 : 95: 101: 111: 99: 85 Legumes Bu. : - : - # 3,564: 2,609: 2,499: 1,690: 2,315 Fruite and oute: : : : : # : I : Apples : Ton : - : - : 11: 26: 18: 11: 11 Frunes Ton : - : - : 4: 2: 3: 2: 4 Grapes Ton : 11 2: 2: 2: 2: 24 - Nuta Ton * - : - : 8 B: 12: B: 5 Livestock and products: , I : : : : 1 Cattle : Bead: 16: 46: 69: 41: 43: 40: - Hogs Head: 105: 71: 431 204: 190: 197: I Sheep : Head: 2: 95: 79: 19: 19: 46: - Poultry : Head: 2,568: 3,504: 3,192: 2,830: 2,533: 1,248: - Animal products Ton : 15: 16: 17: 251 23: 21: - : : : : : : : : Compiled from International Tearbook of Agricultural Statistics and various official sources. TABLE 12.-Rumanian exports of grains, averages 1928-1932, 1933-1937, and 1935-1939 PERIOD CORM THE BARLEY DATE RTE Average: : Bushels 1 Bushale : Bushals : Bushels : Bushels 1928-1932 : 37,720 11,363: 42,164: 3,062: 1,457 1933-1937 H 27,806: 13,743: 18,130: 1,034: 2,355 1935-1039 : 21,082: 28,340: 11,933: 706: 2,743 : 1 : : : Compiled from official sources Exports of grains, constituting from half to two-thirds of the total agricul- tural exports, reflect clearly the characteristic sharp fluctuations in production. Corn exports ranged during the last 5 years from a low of 9.5 million bushele In 1938 to a high of 30.4 million In 1936. On the whole, however, the volume of corn exports Is declining: the 1935-1939 level was 17.5 percent below that of 1928-1932. The wheat export situation has improved significantly since 1933, Targely be- cause of the sharp Increase In acreage and production. Although the Rumanian govern- 726 Foreign Agriculture ment recommended reduction of the wheat acreage infavor of feed crops and industrial plants, its policy actually atimulated increased production and exports of wheat, Government support of the wheat market 18 still being continued. Barley exports have greatly diminished as a result of the acreage reduction since 1933; the volume of exports during 1935-1939 was only 29.3 percent of that dur- Ing 1928-1932. Reduced acreage and production caused a similar, though sharper, de- crease in exports of oats, and in 1938 and 1939 no shipments at all were made, Despite the activities of the German-controlled Soia Company which purchases the entire moybean crop for shipment to Germany at high fixed prices, the export volume of all oilseeds has not expanded during the last few years. An increase in soyboan exports has been accompanied by a reduction in shipments of rapeseed and sun- flower seeo, 15 well as of bilcake. Exports of legumes fluctuate around a level of 2.5 million bushels annually. Fruit exports as a whole are insignificant, averaging only 28,000 tons annu- ally during 1935-1939. A mávimum of 38,000 tons WAS exported in 1935 as compared with A minimum of 20,000 in 1939. The relative unimportance of these exports is ap- Garent when this Figure is contrasted with German fruit imports during 1938 of $36,000 tons. Exports of livestock products fluctuate in accordance with the domestic feed situation. Live animals represent about 50 percent of the export value of the animal products group The maximum quantities available for export LA any year since 1933 were 200.000 hogs and 70,000 cattle. equal to about 30,000 tong of dressed meat. The annual exportation of animal products has never exceeded 25,000 tank GEOGRAPHIC DISTRIBUTION OF RUMANIAN FOREIGN TRADE With the German demination of Rumania, 42 well as of practically all the coun- tries of central and northwestern Europe, future Rumanian trade relations will un- doubtedly be largely controlled by Germany. Nevertheless an analysis of the goo- graphic distribution of Rumanian agricultural exports during the past few years is of more than theoretical interest. It reveals the dependence of various European importers on Rumanian farm products and the extent to which anticipated changes are likely to alter the direction and volume of such exports, GERMAN MUMANIAN TRADE In spite of its territorio al expansion after the World Mar Rumania suffered severely from the trade dislocations following the breakdown of the Austro-Nungarian monarchy. The export situation became even more critical during the world depres- # ion, As a result the government was forced to institute rigio foreign exchange control and other regulations to control the nation's foreign trade and internar tional payments. with most trade regulated by clearing agreements Transactions with free-exchange countries, however, furnished most of the active trade balance Regraded Unclassified Danubian Surpluses 727 necessary to obtain sufficient foreign exchange for servicing the foreign debt and for imports of such essential products as cotton, Iron ore, and machinery, Germany began its economic drive into southeastern Europe in 1934, at 8. time when the Danubian countries faced serious difficulties in disposing of their agri- cultural surpluses. Since the Denubian countries export principally form products and raw materials (needed by the Reich) and import manufactured products that Ger- many can normally supply, this complementary trade greatly facilitated transactions between Germany and the Southeast. The proximity of the Danubian states to Germany. especially important under blockade conditions, also favored the flow of trade between the countries. In addi- tion, the controlled trade and exchange conditions of the Danubian countries could easily be adjusted to German foreign trade methods, since most of the German clear- ing agreements provided for a complete balance of exports and imports through clear- ing accounts. which did not require the acquisition of foreign exchange. Mormally these favorable conditions should have enoreously increased trade relations between Germany and the countries of the Danube Basin: however, the expan- sion was in most cases far less rapid than was anticipated, partly because of Ger- many's inability to export the desired quantities and qualities of manufactured goods, This inability may in turn be attributed to the fact that the German rearma- nent program taxed the nation's economy 60 severely that the demands of the Denubian countries for industrial goods could not be supplied. The trade situation was further complicated by the fact that Germany was in & position to drive hard bargains and frequently forced UDON the southeastern coun- tries products that they did not need, or allowed clearing balances to pile up in the German favor, thus virtually borrowing funds from the Danybian states. 18 De - layed deliveries of German goods, often of unsatisfactory quality, together with the desire of the Danubian countries to avoid a German trade monopoly, served to prevent a more pronounced expansion of their trade with Germany, The absorption of Austria and Czechoslovakia tremendously increased the Ger- man sphere of influence. As far as Rumanian farm exports were concerned, however, the effects were slight, A comparison of Germany's share in Rumanian exports during 1920-1932 with its share during the subsequent trade drive in southeastern Europe shows that Germany and Austria together took 27.5 percent of all Rumanian exports before and only 28.1 percent during the drive, including Czechoslovakia, the share of Greater Germany during these two periods was 34.1 and 36.4 percent, respectively. In March 1939 a new German-Rumanian trade agreement was concluded, which originally provided for A complete reorientation of Rumanian economy in accordance with German import needs, Since the agreement stipulated that a bilaterally balanced trade should continue to be maintained and that the requirements and interests of if Richter, Pass "Boutherstern Europe's sende incressing 57 Receign vol 111. May 1939, FP LBP 17%. Regraded Unclassified 728 Foreign Agriculture --- Rumania in her trade with other countries were to be considered, no immediate sharp expansion in trade was anticlpated. it is significant. however, that In 1939 Greater Germany purchased 43.2 percent of the total Rumanian exports, largely as a result of the agreement. In the same year Greater Germany furnished 56.1 percent of the Ru- manian import needs, as compared with 53.6 percent in 1935-1939 and 48.8 percent in 1928-1932. FRADE RELATIONS WITH COUNTRIES OTHER THAN CHEMAFT In apite of the decided tendency to strengthen trade with Bermany, the neces- sity for ascuring raw materials and manufactured goods that Germany could not supply forced Rumania to maintain trade with free-currency countries. To such countries as Belgium, the Netherlands, Denmark, and Poland - now under complete German domination - Rumania sold 7.4 percent of her exports in 1935-1937 and bought from them 6.7 percent of her total imports. Italy also exerted effort En 1939 to intensify her trade relations with Ru- mania. Tha Italian-Rumanian trade agreement effective January I, 1939, envisaged an annual volume of trade valued at 5 billion lei (About 37 million dollars). In the 5 preceding years total annual trade had never exceeded 3.5 billion lei, and in 1938 It amounted to only 2,5 billion. 14 The largest increase proposed was on Italian Im- ports of wheat and petroleum, which Germany also needs. Actually, Italian-Rumanian trade in 1939 reached a value of 5.236 billion lei, with Italy taking 12.1 percent of Rumania's exports as compared with 6.2 percent in 1938 and 9.3 percent in 1935- 1939, Rumanian imports of Italian products rose from 5 percent in 1938 and 5.5 per- cent in 1935-1939 to 8.9 percent in 1939. A trade agreement with the United Kingdom also resulted in a sharp increase In Rumanian exports to that market; in 1939 the United Kingdom took 14,1 percent of total Rumanian exports AS compared with 11.1 percent in 1938. On the other hand, Rumanian imports from that market decreased. Since it 10 unlikely that British- Rumanise trade can be maintained during the war, former Rumanian exports to Britain appear virtually the only potential reserve for increased exports to the agricul- turally deficient countries of the Continent. Any attempt by Greater Germany or Italy to import quantities of Rumanian agricultural surpluses larger than their 1939 takings plus Britain's former share - would further deprive the other Danubian countries, as well as Switzerland and the German-dominated torritorios, of part of the Importe they formerly took from Rumania, - DISTRIBUTION OF RUMARIAN PARM EXPORTS As a consequence of the recent political rearrangements, the geographic dis- tribution of Rumanian farm surpluses is expected to show significant changes from the distribution prevailing before the outbreak of wer. 14 V. #. Department of Agriculture. Special Rept. No ... of the Agricultural Attachd. - canie. recent trade agreements." Oelgrade, Toguslavia, Jah. 4, 1030. Danubian Surpluses 729 in order to determine the nature of the changes expected in geographic dis- tribution of Rumanian farm exports it le necessary to examine the direction of fare exports during the last few years. The actual trend in the near future will depend largely on the size of current crops, changes in domestic consumption. the degree of disorganization of trade routes, availability of transportation facilities, and the willingness of Germany and Italy to admit former Rumanian customers now under their domination to participate in the purchase of Rumanian agricultural surpluses. Bread grains: Germany begen to purchase Rumanian wheat in 1937, when the Berman policy of storing bread grains for emergency purposes was initiated. Germin purchases in 1939 give a better indication of the potential future minimum demand on Rumania than would an average covering years during which Germany had access to over- seas markets. Thus in 1939 Greater Germany took 25 peicent of Rumanian wheat exports, st a time when German wheat production reached a near-record level, The share of the United Kingdom in total Rumanian wheat exports in 1939 was 31 percent. The wheat formerly exported to Britain may now serve to offset to some extent the deficiencies in Germany, as well as in the territories under German domi- nation, which purchased about 20 percent of the Rumanian wheat surplus during 1935- 1939. Italy's share increased sharply In 1939 over the 2 proceding years, but Italy had been a large importer of Rumanian wheat in 1935 and 1936. Of the small Rumanian rye surplus, Greater Germany usually has bought either the total supply or the largest part, except in 1939, when Italy and the countries now dominated by Gerwany took two-thirds. Feed grains. The European feedstuff situation is likely to remain critical even In years of unusually large Danubian surpluses. As lang as the British block- ade is in force, Germany and the other European livestock-producing countries that are deficient in feedstuffs will be deprived of most of their importe of corn and concentrated feeds, which they had purchased regularly from overseas countries. Germany proper did not depend greatly on Rumanian corn before the outbreak of the war except in 1937. when it took 60 percent of the Rumanian surplus. During 1935- 1939 the Serman share was only 25 percent. The proportion taken by Greater Germany, however, represented 50 percent of the total. The Netherlands, Belgium, and Denmark increased their Rumanian purchases to 16 percent in 1938 and 10 percent in 1939: however, if their livestock industries are to be maintained at even present levels, a much greater volume of exports to these countries will be necessary. Great Britain's share In Rumanian corn exports of 30 and 23 percent in 1938 and 1939, respectively, would If diverted to the occupied countries case the feed- stuffs situation there, but both Germany and Italy will undoubtedly demand much greater Quantities from Rumania than before the war, Rumanian exports of corn to other southeastern European countries, amounting to 17 percent of the total in 1935- 1939, cannot be curtailed without endangering the livestock exportation of those countries to Germany and Italy. The geographic distribution of Rumania's exports of barley was similar to that of corn during 1935-1939. Since 1937 however Greater Germany's share has Regraded Unclassified 730 Foreign Agriculture --- Increased sharply. of total Rumanian barley exports in recent years, between two- thirds and three-fourths has gone to Sermany, Austria, and Crechomlovakia. Greater Germany took 60 percent of the exports, and the remainder went to Hungary and other European livestock-producing countries. Denmark and the Watherlande imported nearly half of the Rumanian surplus of ollcake. The 16 percent taken by England and France, now divertable to other coun- tries, cannot offset the serious deficiency in the Metherlands, Denmark, and Ger- many. The bulk of the Rumanian oilseed exports was taken by Greater Bermany; only small quantities went to Italy and the conquered territories. Because of the ces- slon of Bessarabia, the Rumanian oilseed crops cannot meet even domestic requirements. One-fifth of the legues was formerly shipped to Great Britain and France: Gormany had increased Its share to 62 percent in 1939. The small surplus of fruit went at- most exclusively to Greater Germany. POTENTIAL FARM SURPLUSES DURING AND AFTER 1940-41 The preceding discussion has pertained to Greater Rumania, Including Bessarabia and northern Bukovina, now ceded to the Soviet Union: northern Transylvania, now ceded to Hungary: and southern Dobrogea, now ceded to Bulgaria. The ceded terri- tories represent important farm-surplus-producing areas, and their loss Is bound to affect the future volume of Rumanian farm production and exports. The surpluses of the territories ceded to Hungary and Bulgaria will still be available to continental Europe in the future. These territorial changes, therefore, affect morely the agri- cultural oconomies of the immediate countries concerned. The cession of Bessarabia and northern Bukovina to Russia, however, probably represents a definite loss of Im- portant surpluses to the European deficit countries. Bessarabia and northern Bukovine covered an area of about 12 million acres, or 17 percent of the area of Greater Rumania. The relative loss in arable land is even greater, amounting to 8 million acres, or 23 percent of the former total arable area. The loss of these two territories will noticeably reduce the volume of most farm exports, since they contributed normally nearly 19 percent of the total Rumanian wheat production and over 20 percent of the corn. The relative loss in this year's grain output 10 much greater, since Bessarabia is the only section that did not ouf- for from the heavy rains which damaged crops throughout the Danube Basin. The cession of Besserabia and northern Bukovina also resulted in the loss of 29 percent of the potato crop and 32 percent of the sugar beets, These losses, how- ever, will affect only the domestic economy. On the other hand, a reduction of 17 percent in cattle numbers and of 20 percent in numbers of hogs and sheep will prob- ably correspondingly reduce the exports of animal products. Although little Tive- stock was exported from Bessarable, some quantities were shipped to deficit regions within Rumania. The effect of these territorial losses on the future exports of oleaginous products is especially serious. The loss of Bessarabia, where In 1938 75 percent of Denubian Surpluses 731 the total sunflower seeds and BO percent of all the soybeans wore produced, will make It impossible for Rumanla to export oilseeds for many years. Even domestic require- ments, in fact, will probably not be supplied. The principal result of the cession to Hungary of mountainous northern Transyl- vania is that future Rumanian grain production will be reduced by about 9 percent. This loss reduced the total area of Rumania by 14 percent and the population by about 13 percent. The cession of southern Dobrogea will affect Rumanian economy less seriously than the loss of Bessarabia. It will, however, considerably increase Bulgarian sur- pluses: the Bulgarian wheat crop will be Increased by 9 percent; the rye crop by 45 percent; corn and barley, 18 percent; oats, 12 percent: and dry beans, 67 percent. Southern Dobrogea is very fertile; nearly 70 percent of the total area is in grains, TOB 1040 OUTLOOK The Rumanjan crops of 1940 were affected by two unfavorable factors - one di- rectly connected with the war and the other resulting from the adverse climatic con- ditions during last winter and spring. Like most other countries of southeastern Europe, Rumania felt obliged to mobilize an army of between 1.5 and 2 million men, who as a result were not available for their peacetime occupations, chiefly farming. Although much farm work is per- formed by women and children, the mobilization. as well as the withdrawel of many draft animals for military use, is known to have affected production adversely. Ru- mania did not yield to the German demand that men be returned to their farms to plant the spring cereals, and the compromise of putting youth to work on farms only partly overcame the acute labor shortage. The principal result was a sharp reduction in the area sown to winter cereals. However, e large proportion of the army was released in July, so that the shortage was somewhat relieved at harvest time. The resulting situation appears to have been especially harmful to the wheat crop. According to the latest semiofficial information, the decrease in acreage, com- Dined with the effects of the exceptionally severe winter, late and rainy spring, and devastation by floods, resulted in a total wheat crop in Greater Rumania of only 89 million bushels, as compared with 164 million in 1939 and 177 million in 1938. This would mean a reduction of 45.7 percent from 1939 and 49.7 percent from 1938. The loss of Bessarabia and northern Bukovina further aggravated the wheat alb wation for the 1940-41 marketing year. Indications are that the present territory of Rumania produced only 60 million bushels this year: adding the estimated carry- over of 17 million leaves a total supply of about 77 million bushels. Assuming nor- as consumption, domestic requirements will amount to 93 million bushels, or 26 willion more than the estimated crop. The Rumanian Government has prohibited exportation of wheat in order to safe- guard Supplies for domestic consumption: moreover, it is contemplating an enforced Regraded Unclassified 732 Foreign Agriculture reduction of the wheat content of flour. This procedure my somewhat Alleviate the anticipated domestic shortage, but will not provide export surpluses in 1940-41. Furthermore, the army mobilization resulted in a sharp increase in domestic wheet consumption: although the Rumanian farmer consumes very little wheat, as B soldier he receives - much more nearly adequate diet and consumes an even higher bread ration than the average Rumanian city dweller. For all these reasons, It Is certain that wheat exports will be impossible in 1940-41, despite pressure from the belligerents. Undoubtedly. German demands for the army of occupation represent an added strain, This year's rye crop of about 7 million bushels (for present boundaries) will seet only about 40 parcent of domestic requirements. In view of the shortage the government has prohibited all rye exports. Exports of barley have been prohibited since November 1939. The 1940 crop is believed to be about 5 million bushels in excess of domestic requirements. Rumania has had no surplus of oats during the last few years, and exports have been prohibited since October 18, 1939. The corn situation looks somewhat more promising. The government urgently recommended the planting of corn and barley this spring on a part of the acreage that could not be sown to wheat last fall. Semiofficial estimates place the 1940 corn crop for present boundaries at about 160 million bushels and the 1939 carry-over et 15 million; domestic requirements are estimated at about 155 million bushels. The supply, however, is not sufficient to compensate for the shortage of wheat and rye. Any corn exports would be at the cost of further reducing the Rumanian standard of living, which is already low. Prospects for increased exports of oilseeds are unfavorable. Even before the cassion of Bessarabia and northern Bukovina exports of sunflower, castor, rape, hemp, and flaxseed were prohibited: the present territory does not produce enough oilseeds to meet domestic requirements. The soybean situation has completely changed as 8. result of the territorial losses. Since most of the soybean and sunflower seed was produced in Bessarabia, Rumania will face serious difficulties in meeting domestic requirements. Rumanisn soybean plantings in 1940 amounted to only 54,000 acres, as compared with 256,000 in 1939, and production was no doubt correspondingly reduced. Little information is available concerning prospects for the exportation of animal products. Meat consumption has been restricted by the introduction of three mont less days a week. Mobilization and the intensified rearmament program have, how- ever, increased sharply the number of neat consumers and the per-capita consumption. It is certain that no increase in exports is possible; in fact, a decrease is likely in view of the damage suffered by livestock as a result of floods, The ceasion of Basserable and northern Bukovina will also tend to reduce livestock exports. THE OWELOOK AFTER 1940. 1040-1941 Unquestionably, Rumanian farm production - especially of animal products and farm products for industrial use - could be greatly expanded in the future if certain Regraded Unclassified Danubian Surpluses --- 733 prerequisitos ware fulfilled. Among these prerequisites are the widespread education of peasants in the science of modern agriculture, adoption of improved methods of forming and livestock breeding. of greater attention to seed selection, increased use of fertilizers and modern agricultural machinery. and elimination of strip farming - in short, a reorganization of the entire Remanion farm economy. THE FIVE TEAR PLAN During the past 5 or 6 years effort has been made toward accomplishment of these objectives, stimulated especially by the law of March 1937 for the encourage- ment of Rumanian agriculture. Moreover, the German-Kumanian trade agreement of 1939 provided for a sweeping reorganization of agriculture under the supervision of German experts. The Agricultural Five-Year Plan, drawn up by the Rumanian Minister of Agri- culture in March 1940, is the latest attempt in this direction. In spite of all these measures, however, little fundamental improvement has yet been accomplished. The object of the Five-Year Plan is much the same as that of the 1937 law and of the German proposals in the trade agreement. Recognizing the necessity of a far- reaching educational program, the plan provides for the establishment of a network of farm organizations to secure the active cooperation of the farmers, It also recoge nizes that a prerequisite for the improvement of agricultural conditions is the stabilization and consolidation of farm ownership, and toward that end is proceeding with the division of land - which has not been completed even after 20 years of agrarian refore - and the consolidation of strip farms. Many economists believe, however, that consolidation of strip farms is impossible except under a system that will entirely disregard individual rights. Although it is realized that grain cropa produce the best results under ex- isting conditions and require less care and labor than other crops, the Five-Year Plan¹⁵ provides for a reduction during the next 5 years of 2 million acres, or 25 percent, in the present wheat acreage. Corn acreage is to be reduced by 12 percent. The present level of production, however, in to be maintained and even increased by improving yields through better seed selection, the application of fertilizers, and the control of plant diseases, The acreage retired from grain crops, together with 700,000 acres of reclaimed wastelands, is to be used to expand production of indus- trial and fodder crops. Considering the present status of the Rumanian peasant, It is obvious that the objectives of the Five-Year Plan cannot be realized within the next few years. Nevertheless, the plan suggeste the possibility of interesting modifications in Ru- manian farm production over A. longor period of time. Altogether the plan would involve the transfer of 4.2 million acres formerly planted to corn and wheat with which the peasant is sufficiently Familiar to obtain at least low yields - to crops that require more care and more intensive preparation. is The plan Ha and up prior Co the recent Lerritorial changes. Undoubtedly cerriborial longer Fill offect varrespending changes in the production plans Regraded Unclassified 732 Foreign Agriculture reduction of the whest content of flour. This procedure may somewhat alloviate the anticipated domestic shortage, but will not provide export surpluses in 1940-41. Furthermore, the army mobilization resulted In e sharp increase in domestic wheat consumption although the Rumanian farmer consumes very little wheat, as 4 soldier he receives a much more nearly adequate diet and consumes an even higher bread ration than the average Rumanian city dweller. For all these reasons, It is certain that whest exports will be impossible In 1940-41, despite pressure from the belligerents. Undoubtedly, Gorman demands for the army of occupation represent an added strain. This year's rye crop of about 7 million bushele (for present boundaries) will meet only about 40 percent of domestic requirements. In view of the shortage the government has prohibited all rye exports, Exports of barley have been prohibited since November 1939. The 1940 crop is believed to be about 5 million bushels in excess of domestic requirements. Rumania has had no surplus of oats during the last few years, and exports have been prohibited since October 18, 1939. The corn situation looks somewhat more promising. The government urgently recommended the planting of corn and barley this spring on a part of the acreage that could not be sown to wheat last fall. Semiofficial estimates place the 1940 corn crop for present boundaries at about 160 million bushels and the 1939 carry-over at 15 million: domestic requirements are estimated at about 155 million bushels. The supply, however, is not sufficient to compensate for the shortage of wheat and rye. Any corn exports would be at the cost of further reducing the Rumanian standard of living, which is already low. Prospects for Increased exports of oilsseds are unfavorable. Even before the ceasion of Bessarabia and northern Bukovina exports of sunflower, castor, rape, hemp, and flaxseed were prohibited: the present territory does not produce enough oilseeds to meet domestic requirements. The soybean situation has completely changed as a result of the territorial losses. Since most of the soybean and sunflower seed was produced in Bessarabia, Rumania will face serious difficulties in meeting domestic requirements. Rumanian soybean plantings in 1940 amounted to only 54,000 acres, as compared with 256,000 in 1939, and production was no doubt correspondingly reduced. Little information is available concerning prospects for the exportation of animal products. Mest consumption has been restricted by the introduction of three montless days a week, Mobilization and the intensified rearmament program have, how- ever, Increased sharply the number of meat consumers and the per-capite consumption. It is certain that no increase in exports is possible: in fact, a decrease is likely in view of the damage suffered by livestock as a reault of floods. The cession of Bassarabia and northern Bukovina will also tend to reduce livestock exports. TSP OUTLOOK AFTER 1940-1941 Unquestionably, Rumanian fare production especially of animal products and farm products for industrial use - could be greatly expanded In the future If cortain Denubian Surplunes 753 prerequisites were fulfilled. Among these prerequisites are the widespread aducation of peasants in the science of modern agriculture, adoption of improved methods of farming and livestock breeding, of greater attention to seed selection, Increased use of fertilizers and modern agricultural machinery, end alimination of strip farming - in short, a reorganization of the entire Remanian farm economy. TAX FIVE THAR PLAN During the past 5 or 6 years effort has been made toward accomplishment of these objectives, stimulated especially by the law of March 1937 for the encourage- ment of Rumanian agriculture. Moreover, the German-Rumanian trade agreement of 1939 provided for a sweeping reorganization of agriculture under the supervision of German experts. The Agricultural Five-Year Plan, drawn up by the Rumanian Minister of Agri- culture in March 1940, is the latest attempt in this direction. In spite of all these measures, however, little fundamental improvement has yet been accomplished. The object of the Five-Year Plan is much the same as that of the 1937 Taw end of the German proposals in the trade agreement. Recognizing the necessity of a far- reaching educational program, the plan provides for the establishment of a network of farm organizations to secure the active cooperation of the farmers. It also recog- nizes that a prerequisite for the improvement of agricultural conditions is the stabilization and consolidation of farm ownership, and toward that end is proceeding with the division of land - which has not been completed even after 20 years of agrorian reform - and the consolidation of strip farms, Many economists believe, however, that consolidation of strip farms is impossible except under a system that will entirely disregard individual rights. Although it is realized that grain crops produce the best results under ex- isting conditions and require less care and labor than other crops, the Five-Year Plan's provides for a reduction during the next 5 years of 2 million acres, or 25 percent, In the present wheat acreage. Corn acreage is to be reduced by 12 percent. The present level of production, however, is to be maintained and even increased by improving yields through better seed selection, the application of fortilizers, and the control of plant diseases. The acreage retired from grain crops, together with 700,000 acres of reclaimed wastelands, is to be used to expand production of Indus- trial and fodder cropa. Considering the present status of the Rumanian peasant, It is obvious that the objectives of the Five-Year Plan cannot be realized within the next faw years, *evertheless, the plan suggests the possibility of interesting modifications in Ru- manian farm production over a longer period of time. Allogether the plan would involve the transfer of 4,2 million acres formerly planted to corn and wheat with which the peasant is sufficiently familier to obtain at least low yields - to crops that require more care and more intensive preparation. is The plan TM ⑉ up prior to the recent Lerritorial changes. Undoubtedly the - **** offect corresponding changes in the production plans. Regraded Unclassified 704 Foreign Agriculture I with the cultivation of which the peasant is largely unfamiliar. The educational preparation necessary cannot be accomplished in a short time under existing condi- tions. Furthermore, it is recognized that a sharp increase in the use of fertiliz- ers, especially phosphate. is essential; and there is now 4. shortage of phosphates in all countries under German domination and in Germany itself. It is also doubtiul whether fare machinery can be made available to nearly the number of units called for by the plan. TABLE 13. Proposed acreage changes in crops other than grains under the Rumanian Pive-Tear Plan AVERAGE ACREAGE ARNA TO BE INCREASE CROP 1000-1000 BOWN BT 1944 OVER 1935-1989 : 1.000 acres : 1,000 acres Percent Fiber plants: : : : Plax 6.3 : 297 I 4,600 Heap 126.3 : 371 : 290 Cotton 11-9 : 259 = 2,100 Oilseeds: : : # Sunflower need 472 : 741 1 57 Rapessed B8 : 371 1 70 Poppies 8 : 18 : 200 Peanuts 0 : 5 1 - Castor beans : 3 30 a 900 Legumen: : : I Peas 116 : 494 : 330 Beans 225 : 494 : 120 Lentils 44 : 173 : 290 Soybeans 163 of 395 : 140 Forage cropa: : : ** Alfalfa 347 : 494 : 42 Clover 450 T 618 : 37 Beeta 111 T 247 : 120 Sugar beete : 97 : 148 : 60 : : : Compiled from official spurces CONCLUSIONS Although it is Impossible to evaluate possible developments, it appears cer- tain that no more than minor changes in Rumanian agriculture may be expected within the next Few years. This conclusion is based on an appraise) of the difficulties pre- viously mentioned, of the additional complications caused by the war, and of the many unsuccessful attempts at production expansion in the past. In general it is believed that the existing pattern of Rumanian production will continue for at least the next 2 or a years. There may be some increase In oilseed and legume acreage: however, in view of the current war-Induced shortages in European grain supplies, it can hardly be expected that the Rumanian peasants or the government itself will be induced to curtail cereal acreage in favor of industrial crops. Demibian Surpluses 735 The Five-Year Plan recognizes that in many sections of Rumanie the diet of the peasants is often unvarled and poor, and that any expansion and diversification of production must be accompanied by an improvement in the peasant's standard of living, Such an improvement, however, would necessitate increased domestic consumo- tion, which in turn would tend to limit any Increase in export surpluses. During the present war any significant expansion of production is unlikely. There appears to be little probability of a material Increase in exports during 1941 and 1942 from the reduced territories of Rumania. The cession of Bessarabia and northern Bukovina will reduce the exports of grains by at least 20 percent from the pre-war average. Many years will probably be required before exportation of oil- seeds, legumes, and other specialty crops will again be possible. On the whole, it appears unlikely that either the composition or magnitude of Rumanian farm production will show any important change during the next several years, insofar as meeting the deficits of other European countries is concerned. HUNGARY Although far less important than Rumania as a supplier of agricultural prod- ucts to the deficit countries of Europe after the World War, Hungary regularly fur- nished large exports of wheat, some surpluses of live animals and meat products, and various Crop specialties. The pattern of farm production in Hungary is similar to that of Rumania, but the structure of its farm economy, its production methods, and the general problems confronting agriculture are sufficiently different to warrant consideration. THE AGRICULTURAL STRUCTURE OF HUNGARY Pre-World-War Hungary, with a population of 21 million, was an integral part of the Austro-Hungerian monarchy. Hungarian agriculture had at its disposal I free market of more than 50 million consumers. Largely because of natural advantages, pre-Morld-War governmental policy was directed toward maintaining the predominantly agricultural character of the country, except for industries closely connected with agriculture, much as the milling Industry, sugar refining, and other enterprises processing farm products, Hungary probably suffered more than any other Danubian country from the changes brought about by the peace treaties following the World War. The Treaty of Trianon reduced the area of Hungary to less than one-third its former size and the population to about 8 million people. These dislocations could not be overcome without many difficulties and great strain on the national economy. Lack of markets for the agricultural surpluses immediately after the World War, the resulting diffi- culty in settling the international balance of payments. and the Impossibility of employing the bulk of the working population in agriculture naturally resulted in increased industrialization during the post-war period. Statistics on occupational distribution reveal that post-war Hungary has been rapidly losing Its character as a. predominantly agricultural country, and that the Regraded Unclassified 736 Foreign Agriculture - post-war population increase has been absorbed largely by nonagricultural Industries. Territorial acquisitions following the diamemberment of Crechoslovakia did not bas- ically alter the economic structure, although they increased Hungary's area by about 13 percent and its population by about 12 percent. The annexation of northern Transylvania in 1940 further increased the Hungarian population by 2.4 million and the crop acreage by 3.7 million acres, or about 27 percent. The Farm economy of pre-World-Mar Hungary had a pronounced feudal character. Nearly a third of the area was held by 4,000 large estates, whereas 2.4 million peasants owned little more than half the total area. Unlike the situation in Ru- mania, there were about 800,000 farm workers without land, who constituted the prin- cipal labor force of the estates. There were 500,000 peasants whose average holdings of 2 or 3 acres were Insufficient to provide a living, and who for that reason might also be included in the category of landless rural workers. POST WORLD was LAND ERPORM MEASURED Land refore after the World War changed the distribution of holdings compara- lively little. About 36 percent of the total area is still owned by a few large pro- priotors and only 47 percent by the peasants. 15 The agrarian law of 1920 WWB not intended to bring about a radical division of large estates, as in Rumania, but merely to give small holdings to landless farm workers. The size of these holdings, however, was fixed at 4.2 acres, far too low to provide even a meager subsistance. It is esti- mated that between 1920 and 1935 the area in estates was reduced from 8.2 million acres to 6.8 million, or by 17.2 percent. At the same time, the area in small hold- ings increased from 10.9 to 11.9 million acres, and the number of landless workers declined from 754,000 to 563,000. At present, however, 43 percent of the farm land 10 still held by large estates, averaging 5,613 acres in size, and by farms exceedin 280 acres. or these estates 1,300 or only 0.1 percent of total holdings, comprise 30 percent of all farm land. On the other hand, 05 percent of all farms are less than 14 acres in size and constitute loss than 20 percent of the total farm land. Fully 40 percent of the farm population is still without any land. Thus, of a total population of 9 million in the 1930's the landless workers with their families constituted 1.3 million, or 14 percent, An additional 600,000 workers. or 7 percent, were permanently employed on large farms and estates, while 1.1 million people, or 12 percent, lived on farms of less than 7 acres, where they existed on an extremely low standard of living, These *3 million beggars" consti- tute one of the most serious economic and political problems confronting Hungary- 17 The need for further land reform measures has been recognized by the govern- ment, and attempts have been made to remedy the situation. The Settlement Act, adopted in 1936, offered a plan for progressive liberation of entailed properties. se Magazion Bronomic Yearbook, 1930 If 23 IT su bloo show Oscar, "Fandai agracianies in Foreign July 1998 P14. and . Department of Agriculture Office of Foreign Agricultural Relations. Applics Sept to 100 Rungarian agreeviewed 3.A. 1936, Delgrade Des 12. 1999. Danubian Surpluses 787 More than a quarter of the land In Hungary is entailed, and belongs to the church, to municipatities, or to banks; or It represents Pider Kommisse (properties with family entail). The law provided for a gradual distribution to the peasants of about 300,000 acres of such entailed land. Furthermore, the Settlement Act was intended to easist small peasant farmers in expanding their farms to a more efficient size of between 7 and 14 acres. So far little progress has been made under the Act, Early in 1939 a total of only 40,000 acres had been leased to 13,000 families, In connection with a far-reaching 5-year plan of rearmament and reconstruc- tion initiated in March 1938, an acceleration of rural settlement, with emphasis on small leaseholds, was planned. Under the plan 1.1 million acres, or about 17 percent of the acreage still held in large estates, was to be used for settlement purposes ever a period of years. A new bill introduced in January 1939 would make available for small leaseholds 2.4 million acres to be taken from large estates, from Jewish landowhers, and from foreigners. PROBARM EFFECTS OF LAND REFORM MEASURES The realization of the proposed Hungarian land reform measures may somewhat alleviate the present plight of the rural proletariat, but no radical or prompt change may be expected. In appraising the Fundamental position of the Mungarian form econ- any, it must be remembered that even a far more radical land reform - that is, the distribution among farm workers and small peasents of the total acreage new held by large estates - would still Fail to provide these groups with holdings of even sub- marginal size. In contrast to Rumania, where the breaking of the large estates resulted in à relative deterioration of farm practices and a corresponding decline in exportable surpluses, the Mungarian land refore measures thus far have not appreciably affected farming methods, the composition of total fare production, or altered the prospect for potential surpluses. Farm practices on the larger farms in Hungary are far superior to those of the peasant holdings in other countries in southeastern Europe, and are more nearly com- parable to those in western Europe. Since the Hungarian farm economy is character- ized by a large number of farm laborers accustomed to the relatively advanced methods of the large catates, it is probable that even with a rapid expansion of small lease- holds the general farm practices would still remain far superior to those of Rumania, Nevertheless, the peasants are in urgent need of agricultural training. The govern- ment is asid to be considering plans for the improvement of agricultural education. Should proposed land reform measures be carried out, certain shifts in farm production could be expected to take place - from crop to livestock production, for example, and from cereals to industrial crops. it is unlikely, however, that such reforms would result in an expansion of total farm production: it is more probable that these shifts would tend to raise the living standards of peasants and farm la- borers and to decrease the volume of farm products available for export. Regraded Unclassified 138 Foreign Agriculture --- PATTERN OF HUNGARIAN FARM PRODUCTION The character of Hungarian fare production is largely determined by natural and climatic conditions, and only partly by the system of land distribution. Hungery is a level country, 60 percent of the total area consisting of arable land. The great Danubian plain, covering the central and eastern sections, constitutes the greater part of the country: the northwestern part is formed by the small Danubian plain. As a result Hungary possesses a larger share of pralrie soil than any other country of southeastern Europe. This in itself explains the predominance of grain crops, particularly of wheat, In the Hungarian farming system. LARD UTILIZATION Table 14 gives a concise picture of the land utilization in Hungary In 1938. Grain crops occupied 73.4 percent of the total agricultural land. Wheat was the most important single crop, accounting for 28.4 percent of the arable area, followed by corn with 19.5 percent. The acreage planted to rye, barley, and oata together was less than that of wheat alone, and only slightly more than that of corn. Aside from cereals the potato crop was the only one of great importance, accounting for 5.2 percent of the cultivated area, Legumes and vegetables constitute only about I parcent each. It should be noted, however, that legumes and other vegetables are grown chiefly in household gardens and are not recorded in official statistics, which include only the crop grown on areas registered in the "Land-book" Industrial crops, of which sugar beets alone made up 0.8 percent, were grown on 2.1 percent of the erable land, DEVELOPMENT OF CROP ACREACEM Table 15 shows the changes in the distribution of crop acreage during the last decade. It should be noted that the 1939 figures are not strictly comparable with those for the preceding years, since they include acreages of the newly acquired territories. According to official estimates, the acquisition of new territories in 1938 and 1939 increased wheat acreage by 13 percent, of rye by 16 percent, barley by 23 percent, oats 5.5 percent, potatoes 19 percent, and sugar beets 50 percent. Morthern Transylvania added another 18 percent to Hungarian wheat production, 22 per- cant to corn, about 9 percent to rye and barley, and 37 percent to oats. Except for the usual annual fluctuations, and diaregarding territorial acqui- sitions, the total grain acreage has remained remarkably stable. The average grain acreage during 1935-1939 was about equal to that for 1928-1932. The Hungsrian Gov- arnment has repeatedly recommended a shift from grains to legumes and Industrial plants. Thus far, however, virtually no changes have occurred in the acreages de- voted to industrial plants. Certain shifts in legume acreage have taken place, but without any marked upward trend. 18 Sociology, Feb. 1938. International Institute of Agriculture, Nonthly Bulletin of Agricultural Beanomics and Regraded Daraibian Surpluses 739 TAULE 12-band utilization in Sungary, 1938 LAND USE ACREAGE PERCENTAGE OF TOTAL AREA : 1,000 acres : Percent : : Total area of Hungary 23,000 : 100.0 Arable land 13,865 : 60.3 Permanent meadows and pastures 1,596 : 6.9 Tree and bush crops 828 : 3.6 Woods and forests 2,728 : 11.9 Uncultivated productive land 74 : .3 Unproductive land 1,512 : 6.6 : Percent of arable land Grains 10,178 : 73.4 Winter wheat 3,954 : 28.5 Spring wheat 54 -- .4 Corn 2,907 : 19.5 Spring barley 909 t 6.6 Winter barley 214 : 1.6 Rye and maslin 1,564 : 11.3 Oats 554 : 4.0 Food crops 971 : 7.0 Total legumes 124 : .9 Beans, drg 10 # .1 Lentils 35 : .2 Peas, dry 79 : .6 Potatoes 719 : 5.2 Cabbage 15 : .1 Melons and watermelone 42 : .3 Onione 15 : .1 Fiber plants: : : Bemp 37 1 .2 Flax 8 # .1 Oleaginous plants: : : Hemp 35 : .2 Flax 20 : .1 Rape 27 : .2 Poppy 20 : .1 Sunflowers 17 : .1 Other plants: " Sugar/beets 109 : .8 Tobacco 35 : .2 Millions : Fruit trees 33.6 : Plum 9.6 : Apple 6.0 : - : International Tearbook of Agricultural Statistics, 1933-1839. 740 Foreign Agriculture --- The total acrenge in fibers during 1935-1938 was still the same as that for 1928-1932. Flax covered I smaller acreage, but the reduction was offset by a corre- sponding increase in hemp acreage, Shifts also occurred In acreage of the various cleaginous plants, but no real expansion took place. Gorman sources state that the Hungarian Government realizes now that shifts from grains to industrial plants cennot be obtained merely by propaganda methods, and that some form of coercion must be exercised. TABLE 15. Hungarian crop acreage, averages 1928-1032, 1933-1937, 1935-1939; annual 1935 to 1939 AVERAGES CROP 1925 1030 1937 1038 1958 1925 1032 1033 1007 1935-1030 1,000 = 1,000 t 1,000 1,000 : 1,000 : 1,000 : 1,000 : 1,000 Grains acres : acres il ares 1 acres : acres : acres 1 acves : acres Wheat 3,909 : 3,910 : 3.957 L 4,155 : 4,008 # 5,665 : 4,000 : 4,609 Carn 8,720 : 9,840 1 3,877 E 8,045 : 9,810 1 5,054 1 9,001 : 3,150 Eye 1,070 1 1,581 I 1.851 L 1,537 : 1,607 : 1,490 1 1,662 à 1,728 Darley 1.132 J 1,150 : 1.194 E 1,057 : 1,101 : 1,155 : 1,121 , 1,344 Date 10001 033 545 : 539 E soa : 529 4 570 I 554 4 030 ) 1935 1938 : t 1 Leguess I 100 : 110 : 101 en 111 T 124 t 124 T Deans I 11 1 10 . B 1 10 E 10 E 10 I Pass - so + es ! se ! 64 : 77 E 70 : Dontils I 38 : 36 T 36 in 57 E 37 - 35 - Polition -- 094 - T20 : 719 : 694 : 734 : 780 t 719 - Resp 20 as : 32 : 22 ET 32 E 35 I 37 t Pine " , 12 : G : 10 TB 10 : 10 il 7 E Ollawed. E 106 - 101 107 : se : 95 : 114 : Puppy seeds T OH : 10 : 10 - 17 1 20 1 20 T Linesed ⑉ il ST - 27 T 30 " H 25 ! 30 Hompsond ao 1 28 1 32 T as 1 se T 36 : 37 Repeased as il 24 1 04 1 37 T 17 : 18 : ST = Bugar beats 100 : 115 118 110 I 121 : 116 : 100 - Tobacco ow : 39 1 an . 37 I 37 : 35 I as E T : 1 Complied from International learbook of Apricultural Statistics and various official sources. VARIATIONS is CROP TIRLDS The average level of crop yields in Hungary far surpasses that of Rumania and the other Denublan countries, This is due partly to soil properties and partly to more advanced farming methods, Except for a relatively small unproductive section of the Great Plain and a sandy region in the northeast, the prairie soil is rich in plant nutriants and is especially favorable for cereals. The climate, however, is characterized by extremes of heat and cold, and by drought and torrential rains. Generally, there are annually two periods of 2 or more weeks of drought, frequently occurring in the growing Danubian Surpluses 741 - season. A further danger to crop yields arises from winds in March and April that dry out the newly turned furrows. LE The methods of moisture conservation, particularly on peasant farms, are free quently insufficient to overcome these handicaps. The situation may eventually be improved by a reforestation of the Great Plain. Although special provisions have been made since 1923 to reforest selected regions, only 90,000 acres of a total of 750,000 in need of reforestation had been improved by 1936. More extensive irriga- tion and reforestation plans have recently been proposed, but no significant change may be expected for many years. The Hungarian yields of grain crops, unlike those of Rumania, have not de- plined 88 compared with the pre-World-War period. With the exception of rye, the average yields during 1935-1939 were higher than in 1909-1913 or in 1928-1932, due largely to the favorable corn yield in 1936-1938 and the heavy wheat, barley, and oat crops in 1938 and 1939. Wheat shows relatively the least instability in yield. During 1930-1938, the average deviation from the mean yield was 10 percent. This is little more than half the amplitude of variation existing in Rumania. Nevertheless, there was a wide difference between the minimum yield of 17 bushels per acre in 1934 and the maximum of 24.7 in 1938. Corn yields are extremely variable: the average devistion from the mean yield during 1930-1938 amounted to 21.1 percent, as compared with the average deviation in Rumania of 9.9 percent. During 1930-1938 Hungarian corn yields fluctuated from a minimum of 19.6 bushels per acre to a maximum of 36.8 bushels, a max)mum difference of 88 percent. The variation in yield of barley, oats, and rye is slightly larger than of wheat. Since changes in the total grain acreage were slight during the last decade disregarding territorial changes - the fluctuations in production were determined largely by variation in yields. Among cereals, wheat production is relatively most constant. Corn production, however, varies widely. During the last 10 years Hungarian wheat growers have enjoyed various forms of government aid, directed toward keeping domestic prices above the world market price, Since 1934 the Hungarian bread-grain policy, aided substantially by the ex- port agreements with Italy and Austria, has in general been one of maintaining min- inum prices. Government assistance was particularly successful in seed selection. It is estimated that in 1935 two-thirds of the total wheat acreage was sown with four types of improved seed. Greater stability of production in the future will de- pend largely on the program of reforestation of the Great Plain. Some progress has been made in obtaining better crops of alfalfa, which is noted for its resistance to drought and frost, but the expansion has occurred largely at the expense of vetch. The total production of legumes, like that of fibers and La Michael. Lawis 4., "Agricultural survey of Europe Hungary e . Department of Agrient ture, Tech #ul 160, Jan. 1020, also Wheat 3tud4ed w/ TM Food Research Instruct, vos 1 "The Dicute as - producer and exporter." Regraded Unclassified 742 Foreign Agriculture ollseeds. has remained virtually unchanged. Fiber and oilseed production meets only a small share of domestic needs. As already indicated, official recommendations for expanding acreages devoted to commercial crops have so far been largely unsuccessful, TABLE 16 Production and yield of Bungartan grain crops, aterages 1909 1913. 1928 1932, 1933-1937, 1935-1939; annual 1934 to 1939 PRODUCTION TIBLO GRAIN WHEAT CORN ATX BARLET DATE WHEAT CORP RYS BARLET DATE 1,000 1,000 1,000 1,000 1,000 Average: bushe ist bushels: bushe Is bushe in bushe Last Bushe In Bushe Is: Bushe is Bushe is Bushels 1969-1913 71.400 60,810: 31,340 38,270 28,400 19.5 27.7 10.6 34.6 33.5 1023-1932 79.108 73,208 26,996. 28,850 21,770:- 10.9 24.4 : 18.3 25.5 34.5 1939 1937 91,870 54.07% 18,635 29.001 19,325 20.7 1 10.0 : 18.0 y 25.3 il 35.2 1 1035 1989 85.787 92,632 28.191 20,000 10.775 22.3 31.4 18.8 35.7 35.6 1934 04,824 82,599 24,360 24,989 17,960 20.4 10.6 16.9 34.3 33.7 1035 04,224 55.637 26,650 25.057 16,941' 21.8 36.3 17.5 25.0 34.1 1030 97,784 102,095: 28.114 10.237 18,048: 10.7 30.8 : 16.2 : 22.1 33.7 1037 72,154 108.606: 24,325 25,579 15,620 34.7 : 30.1 20.3 1 20.7 38.8 1938 08,770 104,799: 31.876 33,2521 21,363 34.3 1 18.1 20.4 20.7 38.0 1930 112,767 48.019- 35,010 35.847 24.578 17.1 39.7 15.4 21.2 33.6 1035 1938, four your average since 1939 figures include crops in --- territorios Compiled from International Tearbook of Apricultural Statistics. TABLE 17 Bungarian production of stops other than grains, average 1935-1938; annual 1933 to 1938 AVERAGE CROP 1833 1934 1935 1030 1937 1936 1035 1938 1,000 TONS 1,000 tons 1.000 tons 1,000 tons: 1,000 tons 1,000 tone 1,000 tons Deans, dry 0.0 0.3 5.0 2,5 4.4 4.5 3.7 Londits # 2 0.5 7.2 5.9 8.8 10.1 1 0.1 Peas, dry 20.8 27 # 23.1 22.9 35.1 61.0 45.0 Total legumes 12.1 43.1 36.1 34.3 41.8 56.0 58.7 Hosp 3-8 T 4 7.2 5.7 10.2 11.2 12.2 Fina 1.5 1.5 13 1.1 19 1.8 1.7 Total fibers 11.4 0.0 85 0.0 18.1 10.0 15.5 Newpaeed : 2,2 29 1.2 : 1.3 5.4 t 4.7 Flareord ....... 0.8 5.6 90 7.1 13.0 7.9 11.5 Reprised 8.3 6.0 9.1 11.5 : 7.4 T 0.5 10.0 Puppyseed 4.3 10.7 7,3 3.6 0.6 4.3 4.0 Sunflower seed 6.0 3.2 5.5 4.2 57 N.T 8.2 Linueed 7.4 5.0 B.T 7.1 6.7 5.8 U.S Total vileweds 410 33.3 41 2 11.0 42.4 35.6 61.3 Potatoes 3,196 1,906 2.170 : 1,422 0.010 2,637 2,205 Sugar boocs 1.096 1,041 1,016 : 048 : 1,030 1.237 : 1.009 Tobacca 23.4 26.2 20.1 23.8 10.1 33.8 22.5 Compiled from International Fearbook of Agricultural Statistics and various official sources Danubian Surpluses 745 THE LIVESTOCE Livestock and poultry play an important part in Hungarian agriculture, contri- buting nearly 30 percent to the total farm Income in 1934-1935 and over 31 percent in 1936-1937. 11 Rapid expansion in the livestock industry. however, is handicapped by the uncertainty of feed supplies, Before the World War, the feedstuff basis was guaranteed by the surpluses of districts later ceded to Rumania and Yugeslavia, The extreme variability of Hungarian corn yields constitutes an especially serious 11m- iting factor. During the greater part of the post-war period there was also the dif- ficulty of limited export opportunities for livestock and meat products. Even after the government succeeded in obtaining rather constant export outlets. however, the increase in livestock numbers was very slow. The number of cattle on farms in Hungary, according to the spring consus in 1938, was 1,882,000, as compared with 1,678,000 in 1934 and 1,819,000 in 1929. About 20 percent of the cattle in Hungary are now owned by small peasant farmers. Great efforts have been made to improve the quality of cattle by selecting better breeds and introducing more adequate feeding methods. The average annual milk yield per COW has been increased from 355 gallons in 1924 to 435 gallons in 1937. As a result, The total milk production of 400 million gallons now exceeds domestic needs, thus illowing for some butter exports. Ten years ago Hungary imported butter. According to recent estimates, the number of hogs In Hungary in 1939 was 5.5 cillion. in addition there were about 300,000 hoga in the regions ceded to Hungary in November 1939. 22 In line with the changed export demand, there has been a decided tendency to increase the number of lard-type hogs, the proportion of which in total hag numbers rose from 5,8 percent in 1924 to 17.5 percent in 1937, Hungarian sheep numbers increased from a low of 1,087,000 head in 1934 to 1,529,000 in 1938. It is believed that the government policy of Fixed domestic wool prices and of forcing the textile Industry to take the entire domestic wool clip con- tributed largely to this expansion. Poultry represents an important source of in- come, particularly to the small peasants, Furnishing about 6 percent of total farm income. Dead poultry and egga also represent important export items. AGRICULTURAL EXPORT TRADE Agriculture contributes between 30 and 40 percent to the total national In- come of Hungary and industrially produced commodities about 52 percent. pa Farm prod- vets, however, account for between 60 and 70 percent of the total export trade, Al- though in recent years the relative importance of agriculture in the total national 4/3 D. Diagracy D., "Agricultural exports Crok Hungery during the yours 1997. 1037." Nonthly Malletin of Agricultural Economics and Dostology, Aug 1038, , 24YF 01 Hungarian Economic Tearbook, 1989, D- wa " 9. Department of Agricolcure. Office of Termina Applicatures Relations, Special Dept. "Nove Hungarian hag number --------- and TRAKING Origrade: May 17. 1938 as Fungarian &conomic Yearbook, 1999. e 01 Regraded Unclassified 744 Foreign Agriculture --- income has decreased, the status of farm products in the export trade shows no down ward tendency (see table 18). The amplitude of the annual fluctuations in agricultural exports depends largely on the current size of the crops rather then on export demand. The fact that Tarm products represent the greater part of all exports has determined Hungarian foreign trade policy, and has led to many difficulties during the post-Norld-Mar 00- riod, when some of the Important former deficit countries embarked upon - policy of increasing their self-aufficiency in foodatuffs. Tests 18. Hungarian exports by lasses of products in percent of total value, 1934 to 1939 PLANT LIVESTOCE AND PROCESSED TOTAL AGRICUL. ALL OTHER TT16 PRODUCTS ANIMAL PRODUCTS FARM PRODUCTS TURAL EXPORTS EXPORTS 7 Percent : Percent : Percent : Percent : Percent : T : 1 1934 20.7 T 31.5 - 5.0 : 67.5 : 33.8 1035 25.9 T 34.11 4.9 : 65.4 : 34.8 1936 1 31.4 : 30.1 : 4.5 : 66.0 : 34,0 1037 30.5 1 25.4 -- 5.5 : 64.4 : 35.6 1938 32.3 1 00.5 (1) : 62.8 1 37,2 1930 38.4 I 13.0 -+ (1) : 71.4 4 28.6 1 : : : 1 Professed Thre products each #1 wine canned not. *** are included In *Plant Products' and and animal products? for 1038 and 1030. Hunga-ian Γ ONONE. Tea.book. 1928 Idato for 1004 LOW?), Stattrique Primary profit. 1000 Idade for (928-1039) REPORTS or COUNTRY OF DESTINATION Refore the World War approximately 75 percent of the Hungerian farm surpluses found A free market in Austria, which in turn supplied 73 percent of the Hungarian import needs. During the first decade after the war, Hungarian foreign trade with the Succession States (Austria, Czechoslovakia, Rumania, and Yugoalavia) declined. In 1930, however, these countries still took 53.8 percent of the total exports and supplied 46.5 percent of Mungarian imports. Imports from Germany increased from 12.9 percent of the total in 1921 to 21.3 percent in 1930. During the world depression the direction of Hungarian trade changed relatively little. The share of Czecho- slovakia decreased, but the shares of Austria, Germany, and Italy were well main- tained. As in the case of many other countries, foreign exchange difficulties forced Hungary to adopt a system of import regulations. In December 1932 the Hungarian Clearing Bureau for Agricultural Products and Foreign Trade was established for the purpose of arranging clearing agreements to facilitate exports, Since Hungary needed a number of raw materials that could not be supplied by the countries participating in the clearing system, efforts were also made to scquire freely convertible foreign exchange from Great Britain, Egypt. the United States, and Switzerland. Danubian Surpluses 745 Since 1934 trade connections with Germany have been greatly strengthened in spite of a number of difficulties - outstanding among them the fact that Hungarian manufacturing industries in many instances require the same type of raw materials needed by Gorman manufacturers. Hungary depended to a Targe extent on Germany for these raw materials. in exchange for Hungarian farm products. As a result of the German rearmament program, however, Hungary found it impossible to obtain from Oer. many its usual supplies of pig iron, cellulose, and other raw materials. Meverthe- less, Germany's share In total Hungarian exports Increased from 11.4 percent in 1933 to 22.2 percent in 1934. Exports to Austria and Germany together declined gradually from 46 6 percent of the total in 1934 to 41.0 percent In 1937. After the inclusion of Austria in the Reich, however, and the intenalfication of the German trade drive into southeastern Europe, Hungarian exports to the Greater Raich increased to 45.7 percent of the total in 1938 and to 50.1 percent in 1939. Czechoslovakia's share, which in 1929 was 16,4 oercent as compared with Germany's 11.6 percent tell abruptly to less than 5 percent in 1934 and dwindled to 1.6 percent in 1939. italy, bound to Hongary and Austria politically as well as moonomically through the Rome agreement of 1934, noticeably improved its position in Hungarian Mde, Its share was increased from 7 percent in 1929 to 8.3 percent in 1934 and to about 13 percent in 1935-1937. Although declining slightly in 1938. Hungarian ex- ports to Haly Increased to 15.5 percent in 1939. The share of the Danublan countries in Hungarian trade has remained compara- tively constant, at A little less than 10 percent of the total Switzerland was also a steady customer, taking about 4 percent of all exports. The various European countries now under German domination bought regularly certain crop specialties that they are bound to need Increasingly during the next few years. Until 1938 Great Britain maintained its share of about 8 percent. In 1939 tiansportation difficulties led to 4 sharp reduction in these exports, and trade with Great Britain has now en- Lirely ceased. Since two-thirds of the total Hungarian exports in recent years have been di- rected to Greater Germany (including Czechoslovakia) and Italy, and since the other Danubian countries and Switzerland have also enjoyed close trade relations. no marked changes in the geographic distribution of Hungarian exports may be expected, except for a diversion to the Axis powers of the share formerly taken by Great Britain, THE COMPORITION OF PARK EXPORTS Wheat and live animale are the outstanding Hungarian fare exports accounting in recent years for about 30 percent of the total exports and about 50 percent of the agricultural exports. Various masures have been adopted by the Mungarian Government to stimulate wheat exports, A grain certificate system coupled with outright export subsidies was in operation from 1930 to 1934. Exports were manopol by an export syndicate, which also supervised a minimum-price guarantee introduced after the Rome Regraded Unclassified 740 Foreign Agriculture agreement of 1934. That agreement provided for wheat export quotas to Austria and Italy. Trade agreements with Germany, Switzerland, and several other countries also greatly laproved the grain export position. The magnitude of the annual wheat exports depends entirely on the size of the current crop. As a result the exports of wheat show sharp variations from year to year, ranging from 14.8 million bushels in 1935 to 40.6 million in 1939. Neverthe- less, wheat exports represent relatively the most constant surpluses in the entire farm economy. TABLE 19.-Principal Hungarian fare exports (not), averages 1928-1932, 1935-1939. annual 1934 to 1939 AVERAGE AVERAGE COMMODITY 1934 1935 1936 1037 1938 1039 1928-1939 1935-1919 Willion Million Willion Nillion Million Nillion Nillion Nillion bushels bushels il bushels bushels i bushels bushels bushels bushels Whose 11.8 18.8 13.2 21.0 19 8 10.0 37.0 10.0 Flour 0.0 0.4 a e 9.8 1.0 1.7 3.0 2.7 Total wheat 30.8 19 2 14.8 33 6 14.0 17.7 40.4 385 Cara 4 11 9:8 14 7 5 4.5 1.0 9 Rye 1.6 0.5 . 11 4.3 2.4 4 7 20 Darley 1.8 6. a 6 6 4 3 Data 6. - e 2 - à Beans, dry a 7 $ 4 11 a 4 6 Peas, dry & a 5 5 6. 8 5 Thousand Thousand Thousand Thousand Thousand Thousand Thousand Thousand tons tons tone tons toss tons tons tons Wall 21 37 37 44 33 49 40 Olloweda 16 B3 18 18 18 14 18 Clover send . 10 16 17 18 11 12 Vegetables 30 93 60 41 as ss 30 Fruit, Cresh - 11 so 64 49 34 64 45 Tubacco 9 : 11 9 9 e e A 11 9 Meal, fresh - . 17 in + # e 11 Poultry 30 26 as 20 se aa 26 Lard and becon 14 as 01 23 21 16 1) as Butter 1 I é a 6 7 E 4: 1. I 4. 11 11 0 . 12 18 11 11 Phousands Phousands Thousands Thousands Thousands Thousands Thousands Phousands Live cattle 94 70 TO 71 100 55 75 17 Live hage 160 196 143 178 166 ass 360 a EST Live sheep : 46 36 38 44 : 24 se 12 L. Compiled from afficial murces Exports of other grains are insignificant, except in years of unusually favor- able harvests. Rye surpluses, averaging 3,6 million bushels annually during 1928- 1932, were reduced by almost 50 percent during 1935-1939, largely because of the small exports of 1935 and 1939. In the case of corn, the extreme variations in yield result Demibian Surpluses 747 - in corresponding fluctuations in the level of exports. In years of low yield Hungary must import considerable quantities of corn. During 1935-1939 net carn Imports aver- aged about I million bushels a year. During 1928-1932 average annual exports emounted to 400,000 bushels. On the whole, livestock exports have been well maintained, A decided tendency toward increased exports of live hogs is evident, but live cattle exports have de- clined. Exports of animal products, such as meat, lard, butter, dead poultry, and eggs, show considerable variation. Exports of fresh meat are small and have declined, whereas those of lard, poultry, and egge have been rather stable. Butter exports Inc creased alightly until 1937, but have been only nominal in recent years. Fruit and vegetable exports vary widely in accordance with annual yields, and no definite ten- dency is apparent. GEOGRAPHIC DISTRIBUTION DF FARM EXPORTS The importance of Germany as a market for Hungarian agricultural surpluses has increased sharply in recent years. In 1937, before the annexation of Austria Germany purchased 29.9 percent of total Hungarian fare exports, At that time Austria a share amounted to 23.1 percent, 50 that Bermany and Austria together took 53 percent of the total. As an immediate result of the annexation of Austria a new trade agreement be- tween Hungary and Germany was signed on May 7, 1938, providing for higher quotaa on imports of the more important Hungarian farm products. The intensification of Hungar- ian dependence on Greater Germany increased Germany's share of total Hungarian farm exports to 62 percent in 1938. Greater Garmany and Italy together received almost three-fourths of all Mungarian agricultural surpluses. Germany proper became interested in the Hungarian wheat surpluses only after 1938, but Greater Germany and Italy absorbed together nearly three-fourths of total Mungarian wheat exports during 1935-1939. Italy alone took 60 percent in 1939. Switzerland was the only other important customer, taking 14.4 percent in 1935-1939, Greece purchased Hungarian wheat only occasionally, as in 1937 and 1939, when its pur- chases amounted to about 6 percent of the total. No major shifts in wheat export mar- kets appear likely during the next few years. The small surplus of rye was exported almost entirely to Greater Germany and Italy. Corn exports are very irregular. In the frequent years of low yield, as In 1935, 1936, and 1939, Hungery depends largely on imports from Rumania and Yugoslavia. In good crop years the Scandinavian countries were important purchasers; in 1937, for example, their share of Hungsrian corn exports amounted to over 50 percent of the total. In 1939, however, the total net surplus of 50,000 short tons was exported to Greater Germany. The small exports of barley go to Italy, Belgium, and Switzerland, which countries also take the surpluses of dry beans. About half the exports of dry pess are normally purchased by Bermany. Graat Britain's share of about 30 percent will now be available to either Germany or Italy. Regraded Unclassified 748 Foreign Agriculture Hungery is on 3 net import basis for oleaginous raw materials, Since the former imports of linseed and copra are now threatened, it is unilkely that even the insignificant oilseed exports of 1935-1939 can be maintained. the greater part of which was shipped to Greater Germany and Italy. Most of the Hungarian surpluges of fresh fruits have been taken regularly by Greater Germany. Switzerland and former Poland bought 9.8 and 7.3 percent. respectively, from 1935 to 1939. Before 1938 Italy was the principal foreign market for Hungarian live cattle, but in 1938 and 1939 was exceeded by Greater Germany. The two countries have been virtually the only foreign markets since 1935. Much more important is the volume of live hog exports, for which former Austria and Czechoslovakia were the traditional markets. Greater Germany, therefore, absorbs the entire surplus. Untill 1938 Great Britain imported between one-third and one-half the total poultry exports, the re- mainder going to Greater Germany. Italy entered the market in 1939, and during the next few years it may take the share formerly going to Britain. Most of the exports of lard. bacon, and eggs go to Greater Germany. The future geographic distribution of Hungarian farm exports is expected to resemble that of 1938 and 1939, but with Germany predominating more than ever, since all of Hungary's former customers except Switzerland and perhaps Italy are now under German domination or cut off entirely. Only Great Britain's former share of the ex- port trade (5.7 percent in 1937 and 6,9 percent In 1938) will be available to conti- nental European importers in addition to their previous takings. POTENTIAL FARM SURPLUSES DURING AND AFTER 1940-41 So far Hungarian export surpluses have probably been less affected by the war than have those of Rumania. Shortages of certain products essential to the Hungarian Farm economy, especially of fertilizers and fuel. were evident immediately after the outbreak of war. Hungary regularly imported phosphates from Franch Africa and the United States. Since the use of such fertilizers increases plant resistance against climatic changes typical of Hungary continued shortages are likely to affect ad- versely the quantity and quality of the crops and the export surpluses. Transporta- tion difficulties and shortage of coal may also reduce the level of current Farm production and exports. THE 1040 a) OUTLOGE At the time of the winter and spring sowings for the 1940 crop, the Farm-labor shortage in Hungary resulting from partial mobilization appears to have been less acute than that in Rumania, The labor shortage was intensified at harvest time be- CAUSE of increased mobilization preceding the Hungarian demand for Transylvania, which was subsequently ceded by Rumania. These and the other factors previously mentioned, however, were of minor importance compared with the adverse effects of weather conditions on the size of the 1940-41 crops and, consequently, on the current export surpluses. Danubian Surpluses 749 The unusually severe winter and extensive spring floods seriously damaged most of the Mungarian crops and jeopardized the potential surpluses of livestock products. In 1940, according to recent reliable entimates, the acreage of all cereals except corn was about 20 percent below that of 1939, The Mungarian Ministry of Agriculture stated early in May that serious frost and flood damage to winter seedings and rá- tarded spring sowings necessitated shifts from bread cereals and barley and oats to corn. Information recently received Indicated that much of the wheat crop had lodged and that some rust had developed. Reports indicate that the 1940 wheat crop was less than 80 percent of the 1939 crop. The total 1940-41 crop, including that of the new territories, 10 estimated at about 75 million bushels. The 1939 Hungarian crop, excluding the cropa of the new territories, amounted to 112.8 million bushela, as compared with the average of 85.4 million during 1935-1938 for Hungary as then constituted. The 1940 rye crop probably did not exceed 30 million bushels, as compared with 25.3 million in 1939 - a decline of about 15 percent. The 1940 cΓop, however, in spite of Increased area, will about equal the 1935-1938 average. In view of the feed shortage prevailing as a result of the poor 1939 corn har- vest, the Hungarian Government has ordered a sharp reductionin the milling ratio for bread grains in order to obtain larger supplies of bran. The milling ratio for wheat cannot exceed 75 percent, and that for rye 70 percent. The reduction ordered may in- crease domestic bread-grain needs by about 10 percent, in addition, army require- ments have resulted In en increase in domestic consumption of bread grain. In view of these factors, no substantial exports of bread grains may be expected during the 1940-41 marketing season, even with pressure from outside of Hungary. The 1940 barley crop was very poor. According to the International institute of Agriculture, from 40 to 70 percent of the area of winter barley had to be plowed under, as The total 1940-41 crop is estimated at about 32 million bushels, BY which represents a reduction of about 10 percent compared with the 1939 crop but only a slight reduction compared with the 1935-1938 average. Even the larger crops of the last decade provided only Insignificant export surpluses. During 1935-1939 barley exports averaged 300,000 bushels annually; however, the 1940 crop will not meet do- mestic requirements. Reports indicate that winter oats suffered great damage. There were no exports of oats in 1938 and 1939, and no surpluses may be expected in 1940-41. The 1940 corn crop may reach 110 million bushels. as compared with 89 aillion in 1939 and the 1935-1938 average of 93 million for Hungary ss then constituted. Low corn yields In 1939 necessitated imports from neighboring Danublan countries. Exports are hardly possible in 1940-41 in view of the poor clover and alfalfa crops. 24 Internationaler Getreidemorkt, Way 18, 1940. 28 International Institute or Apriculture, Nonthly Crop Report and Supt 1940. 26 loid, May 1940. 27 new, Dept. 1940. Regraded Unclassified 760 Foreign Agriculture Reports indicate that pastures had to be used prematurely because of . lack of fod- der supplies, with a consequent deterioration of pasture conditions. Exports of oilseeds were prohibited by the government as soon as it became apparent that the British blockede would cut off the usual importe of copra, whale 011, and other fats and oils. In order to Increase the domestic supply of adible oils, 6 decree was issued compelling all corn producers to plant soybeans on the borders of their corn fields. A 1940 soybean area of 14,200 acres, as compared with 5,750 in 1939, was expected as a result of that measure, but no information is avail- able as to developments or crop yields. A large part of the winter rapeseed crop was destroyed by frost and the weight of the snow, and the spring crop was retarded by cold and wet weather. It is believed unlikely that Mungarian oilseed crops in 1940 will be large enough to offset the loss of former Imports. Prospects for the 1940 fruit crops are far from promising. According to re- liable reports. vineyards and fruit trees were greatly damaged by frost. It is 83- timated that from 80 to 100 percent of the peach trees, 70 percent of the cherry trees, and 30 to 40 percent of the apricot trees were destroyed. The livestock industry was faced with serious difficulties following the short corn crop of 1939, and the severe winter and late spring intensified the shortages. The government attempted to remody the situation by importing corn from Rumania. In- dications are that hog numbers have been reduced during the past few months because of the feed shortage: moreover, large numbers of hogs and other animals were killed by floods. Despite the introduction of meatless days, the domestic consumption of meat has increased as a result of greater industrial activity. All these factors will undoubtedly influence the level of potential livestock and meat exports during 1940-41. It is also feared that a new epidemic of hoof-and-mouth disease (which pre- vailed in 1938 and into 1939) may break out. In any case, it is certain that the 1940-41 surpluses of live animals, as well as of animal products, will fall far short of the 1939 exports. ves OUVLOOK FOR YES NEXT FEW THAN The most urgent problem facing the Hungarian farm economy is that of improving the status of landless farm workers and peasants. This is possible only by à more rigid 14nd reform or by transfer of large numbers to nonagricultural industries - measures not to be expected in the near future. In the meantime no significant shifts in the pattern of farm production may be anticipated. No attempt has been made to appraise the effects on future farm production and surpluses of the proposed land reform. reforestation program, and varlous other con- templated measures. Should these measures be adopted, however, it is quite possible that the new leaseholds, aided by the cooperatives, would eventually considerably increase the total production of animal products and of fibera and oilseeds. In view se Probly Promonic Report for May N. 1940 from the American Consulate in Hudapent. Hundary Danubian Surpluses 751 - of the prevailing political situation, however, it is not likely that the reform measures will be made effective in the near future. Only minor changes may be antic- lpsted during the next few years. The volume of export surpluses, therefore, will depend largely on current crop conditions and the effect of the war on the avail- ability of farm labor, fertilizer supplies, and transportation facilities. TUGOSLAVIA Yugoslavia la predominantly an agricultural country, According to the lat- est official census (in 1921) 78.9 percent of the gainfully occupied population was engaged In agriculture, 9.9 percent in industry, 2.6 percent in commerce, 1.7 percent in transportation, and 2.9 percent in public service and the professions. The occu- pational distribution has not changed significantly since that time. More recent unofficial estimates indicate that of the total population of 15.6 million, BI per- cent is engaged in farming, 30 and the total number of farm holdings is ostimated at 1,986,000. The average farm must provide food and shelter for 5.3 persons. The efficiency of the Yugoslav farm economy varies sharply from region to re- gion. In northern Yugoslavia farming methods are generally similar to those of Hungary, whereas in the remainder of the country they are about as primitive as in most parts of Rumania. Although Yugoslavia regularly produces surpluses of wheat. corn, livestock, and livestock products, it is not probable that production can be expanded rapidly enough in the near future to make any significant contribution toward offsetting the shortages of farm products in the deficit regions of Europe. THE AGRICULTURAL PROBLEM IN YUG05LAVIA The Yugoslavian fare problem is one of providing sufficient agricultural land for the large and Increasing farm population. About 42 percent of the total area consiste of foresta and unproductive land; and all of the country except the north- sastern section, which is a part of the Great Danubian Plain, is mountainous. of the total area of 62 million acres, only 11,7 million, or less than one-fifth, are avitable for intensive agriculture. In 1938, 24.2 million acres of mountainous and poor land were utilized for farming purposes. A total agricultural area of 36 mil- 11am acres, of which more than two-thirds is land of inferior quality, must furnish a livellhood for 10.6 million passents and about 2 million landless farm workers, It is estimated that under present farming conditions in Yugoslavie at least 25 acres are needed to provide adoquate subsistence for one family. At present. however, only 10 percent of the holdings are farms of more than 25 acres. These 13 New Tan Franges, O., Die Struktur der Juios lav LSC hant Landwir $50 haft The Social and Economic Screcture of Yogoslavism Agriculture), Barlin, 1937; Virtschaf Enzylo paedie des Balhans, "Dis sirtschaftliche Lage der Salkanlaunder, The the Dalkens val. T, Belgrade, 1035, 0. 5. Department of NEACO. Consuler Report Agracian reforms 1a Tugeslavia, 1918-1940.* Delgrade, Warsh 14. 1940 30 Yes Franges, *Changes in the export of agricultural products From Tuguilaria Monthly Bulletin of Agricultural Beonomics and Sociology, Jan. 1039 Regraded Unclassified 752 Foreign Agriculture - larger holdings account for 45 percent of the total agricultural lend. The hold- Ings of the remaining 90 percent of the farm population average about 8 acres, of which, as a rule, only 5 acres are arable. Despite the land reform measures initiated in 1920, the uneconomical size of most Yugoslavian farm holdings remains the most serious obstacle in the way of a permanent improvement in agricultural conditions. Yugoalavia was formed after the Horld War out of part of the former Austro- Hungarian Empire and all of the former Kingdoms of Montenegro and Serbia. Land dis- tribution and farming conditions varied greatly in these regions. "Old Serbia* was a typical peasant country, with no large estates, whereas the former Turkish provinces of southern Serbia, as well as former Bosnia, Mercegovina, and Dalmatia, had pro- served a feudal system In which the status of the peasants bordered on serfdom. Although the agrarian reform measures initiated in 1920 abolished feudal re- lations in Yugoslavia, large-scale redistribution of land in southern Yugoslavia could not be effected, since most of the peasantry there had always operated small farms, though in a vassal relationship to their overlords. About 2.5 million acres were distributed among 250,000 families of former serfs as a result of the land re- forms. The pessants, however, continued to live on the same small holdings as be- fore, and made no changes in their primitive farming methods. in the northern part of the country, comprising Slovenia, Croatia-Slavonia, and Volvodina, the situation was different. There the peasants had been freed in 1848. In contrast with the situation in southern Yugoslavia, only a small percentage of the total area represented peasant holdings. About 750 large estates, operated largely by farm workers, as in Hungary, comprised 2.7 million acres of land. In northern Yugoslavia as a result of the land reform measures 1.9 million acres for- merly belonging to these estates have been distributed to 275,000 families of Former form workers and war veterans. Altogether the agrarian reform redistributed 5.7 million acres, or 13 percent of the total productive area, among 765,000 families. The effect on farm practices and the level of production was slight, since most of the peasants continued to use primitive farming methods, in the north some retrogression in farm production may have resulted, but on the whole farming conditions there are still far superior to those In the southern section of Yugoslavia. Southern Yugoalavia produces few farm surpluses: most of the small farms there are hardly able to produce enough for their own needs, The southern part of old Serbia, south Serbia, central Bosnia and Croatia, Dalmatia. Hercegovina, and Monto- negro must import supplies from the north. The northern districts are virtually the only regions capable of producing crops for export. It is significant that (lliteracy among the peasents increases progressively from less than 10 percent in the north to over 70 percent in the southern provinces. The few remaining large estates - maintained largely to produce high-quality seeds and improved breeds of livestock use tractors and steam plows, and practice advanced methods of mois- ture farms, conservation. In the north, Iron plaws are In general use even on peasant Danubian Surpluses 753 - Mearly helf the farmora in Yugoslavia are mombers of cooperative societies. The peasant cooperatives have been active In providing farm implements. The agri- cultural depression in 1929 interrupted this activity and led to a general deterior- ation of farming practices in the southern parta of the Kingdom. As in Rumania, a gerlous obstacle to Increased efficiency is the peasant's adherence to traditional customa and practices. In Slavonia, for instance, only 20 parcent of the available working days are utilized for farm work. In Serbia there are 120 official and 80 unofficial holidays, so that only 160 working days remain. Yugoslavia cannot solve the problem of its surplus agricultural population by land distribution alone, since there are few large estates left to divide. Moreover, most peasant holdings are already too small to provide even a meager subsistence. it is believed that farmera' conditions can be improved only by a slow process of ag- ricultural intensification, which will require many years of education, THE AGRICULTURAL PATTERN OF YUGOSLAVIA Only about 20 percent of the total area of Yugoslevia consists of level land suitable for farming. The best of this land is located in the north and east, where 70 percent of the area is arable. Except in some valleys, soils in other sections of Yugoslavie are relatively unproductive. In the southwest the Harst, covering about a fourth of the country, is predominantly barren, lacking surface water and to à large extent surface soil, In this region only from 10 to 20 percent of the land 10 arable. Since the southern provinces produce very little for export, only the northern region will be considered here. The land of northern Yugosiavia consists largely of fertile prairie soil. The valleys are ordinarily protected from Inundation by the dams on the Danube and Tisa rivera; but severe floods occasionally cause serious damage, as In 1927, when the Danube flooded 750,000 acres of land seeded to winter cereals, Only spring crops like corn, dry beans, and hemp can be grown in northeastern Yugoslavie. The northern plain is open to the cold winds of the Alps and the Car- pathian Mountains, and severe cold weather is frequent. The most serious handicap to production is the prevalence of cold northerly winds, which blow away the protective snow blanket and result in widespread damage, which unually cannot be offact by in- creased spring sowing. The nummer temperature Is excessively high, with little pre- cipitation. The distribution of rain is usually favorable, however, since the greatest rainfall Is In May and June. The months of July and August are very dry, resulting in premature ripening of cereals. case PRODUCTION An in Rumania and Hungary, grain crops are most important, accounting for by far the largest part of the cultivated land, In 1938, 15.2 million acres, of 82.2 Regraded Unclassified 754 Foreign Agriculture percent were planted to grains of a total arable area of 18.5 million RCFOS. in some northern districts the proportion of grains was over 90 percent. Corn is the most important single Crop, accounting for about 87 percent of the arable land Fol- lowed by wheat with 29 3 percent. of other food crops occupying 1,1 million acres (5.7 percent of the arable land) in 1938, potatnes alone accounted for 657,000 acres and legumes for 94,000. In the same year. of 455.000 acres or 2.5 percent, devoted to industrial crops, over 40 percent was planted to fiber crops, chiefly hemp. Oilseeds occupied 129,000 acres and sugar beets and tobacco 72,000 and 42,000, respectively. Since the pensants are traditionally familiar with the cultivation of wheat and corn the acreage of both crops has tended to increase throughout the post-Norld- War period, During the recent depression, when cereal prices dropped rapidly. 11- pansion of wheat and corn acreage appeared to the peasants the only means by which they could maintain their already low income. Between 1924 and 1934 wheat acreage increased from 11 423 000 to 5,002.000 acres, or by 13.1 percent. The expansion in corn acreage was even more pronounced increasing from 4,924,000 acres in 1924 to 6,505,000 in 1934 an increase of 32,0 percent. Since 1934 no clear-cut tendency has been apparent Production of both wheat and corn has merely shown rather wide annual fluctuations caused largely by the peculiar climatic conditions of Yugeslavia. Barley and nata are grown only to reet the domestic bread- and feed-grain re- quirements The INR acreage is limited to local needs in districts inhabited by Germans None of these grains 13 important in the export trade. As in Rumania and Hungary, crop yields vary widely from year to year The stability of the wheat yeld 15 50 percent higher than to Hungary and nearly as high as that of Rumania The average deviation from the medn yield between 1930 and 1939 amounted to 16 2 percent as compared with 11.5 percent in Bungary. During this DO- riod the may : mum luctuat ranged from 11,1 bushels per acre in 1932 to 21.2 - n 1938 the higheat y eld being nearly double the lowest, The variability of the corn yield is equal to that of wheat, the average the vistion from the mean being also 16.2 percent between 1930 and 1939 The volume of production of wheat and worn 10 largely determined by yields. The wheat crop fluc. tuated between 53.4 million bushels in 1932 and 111.3 million in 1938. The fluctu- ation in corn production is even more pronounced: the maximum crop of 210 million bushets in 1937 wão nearly 3 times the minimum crop of 72 million in 1928 Thus far Yugoslavian agricultural policy has favored cereal crops. Since 1930 the government has regulated wheat prices through the Frizad (The Privileged Export Company) e joint stock company which purchases all wheat offered by farmers at prices well above current world market prices and attempts to find export outlete. Gradually similar subsidies have been introduced for other farm products. Since 1933 provisions have been made to establish the necessary storage facilities for coreals. fruita, eggs and other commodities, These plans are to be carried out by = new Core poration known as *Silon Inc, working with the cooperatives. Danubian Surpluses 766 Although the importance of grains has not decreased there has been a Lendency toward increased production of Industrial crops. However, the expansion in fiber crops. ollseeds, tobacco, and sugar beets has been slight 10 for, and has not notice= ably affected the general farm situation. Among the fibers, hemp is most important, Since 1931, when 93,000 acres were planted, hemp acreage has Increased gradually to 143,000 Between 1928-1932 and 1035-1938, production was doubled, rising from 26,600 to 53,700 short tons. Most of the increase occurred between 1933 and 1936, and little expansion has taken place since then. During the same period cotton production also increased, but the total crop is still insignificant, amounting in 1939 to 1,200 short tons as compared with 1,300 in 1938 and only 300 In 1933-1937. Present production meets only about 5 per- cent of the domestic needs. Imports of cotton in 1938 amounted to 21,600 short tons, and imports of cotton yarns and textiles are also needed. The acreage in legumes has remained unchanged during the last decade. The production of dry beans, which are of exceptionally high quality, usually exceeds 00- mentic requirements; however, annual fluctuations In this crop are pronounced. Oleaginous plants probably offer the best prospects for the future and should take en important place in a more intensive agriculture. Before 1938 the total pro- duction of oilseeds was insufficient to meet domestic needs, which are estimated at about 50,000 tons. In 1938 production for the first time about equaled these needs, The government has strongly urged a shift toward oleaginous plants, and since 1933 , continuous increase in production has been observed. The Yugoslav vegetable oil in- dustry is obliged to purchase domestic seeds, prices for which are fixed by the govern- ment agency Uljarica. Since 1934 the cultivation of soybeans has been promoted by this company, though it has proceeded slowly to allow producers to become familiar with the requirements of söybean culture. About half the crop is used as feed. Tobacco is produced in the regions of Fow rainfall, For many years the Yuga- slavian Tobacco Monopoly has maintained control over production and marketing Due- Ing the depression the tobacco acreage was reduced from 54,400 acres in 1932 to 18,200 in 1934. By 1937, when the area planted amounted to 47,700 acres, most of this reduction had been recovered, Neither the 1938 area of 36,800 acres noi the 1939 area of 39,500, however. approached the 1937 level. Indications are that the government desires to bring about en expansion of tobacco production. A decree of the Ministry of Finance on June 16, 1939, provided for a standardization of tobacco production and announced that only variaties ap- proved by the Monopoly could be grown. The necessary seed is produced on expert- mental fielda operated by the Monopoly- The National Tobacco Monopoly, created di the same time, promotes improved cultural practices and attempts to develop export outleta. Domestic consumption requires approximately 20 million pounds per year or about 50 percent of the present crop. as D. 1. Department of Agriculture, Office of Foreign Decardine Special Rept No. 980. "13- oriented Cobseco situation, " of October 1. 1000 C.S. 20- 1000 Regraded Unclassified 756 Foreign Agriculture TABLE 30. Acreage, production, and yield of Fugoslav grain crops, 0141 are 1928-1932, 1933-1837, 1935-1939; annual 1933 to 1939 AVERAGES 1033 1934 1936 1025 1937 URAIN 1036 1938 1035-1938 1930 1052 1693 1937 1,000 to 1.000 1,000 a 1,000 : 1,000 1,000 17,000 1,000 1.000 1,000 ACREADE area acres acres acres acres acres acres acres CTES 5,051 5.225: 8,377 0,137 5,003 5,315 5,460: 5,369: Theat 0,200 5.004 Corn 5,100 8.455 6,563' 6,372 8,860: 0,100: 5,6581 0.640: 6,801. 5,575 001/ 025 5387 5331 0131 ass: 0381 eas: Aye 6401 680 Darley 1.000 1.045 1,029 1,050 1,049: 1,044 1,001 1,030 1,025 1,048 Date 024 ass: 9291 916: 010: 000 654: 017 910 Burh Bush Bush- Bush- Bush- Bush- Bush- Bush Bush Bush FIELD PER ACRE eir als els els els als els els els els Wheel 17.1' 16.5/ 17.00 10.0: 13.7: 10.0 19.71 16.41 21,3: 18.7 Corn 23.0- 111 26.43 22.5: 30.01 10.5 30.51 31.01 37.01 00.1 Rya 13.6: 13.2: 11.4 10.3 13.8: 12.41 12.71 19.11 14.0: 14.7 Barley 17.7: 18.1 17.91 00.1 18.1 16.5 18.0: 17.11 18.0: 19.6 Data 23.00 24.60 06.01 07.51 95.17 20.8: 20.81 83.83 34.5 20.3 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 I,000 PRODUCTION bushels business bushels bushels bushels bushels: bushels brehels Wheat 50,170 65,324 Caro 107,2171 175.400: 803,946: 210,061 187,220 145,432 Rya 7,013: 9.262. 9,480 9,659 7,088: 7,719 8,002: 8,243 9,061 0,087 Barley 18,317 18,972 16,518 21,207: 10,626: 17,248 10,401(17,596) 10,348. 10,477 Date 91,164 22,195 21,7551 26,563 23.971> 10.144:32, 20,358 22.405 - International Tearbook of Apricultural Statistics and various official sources. TABLE production of crops other than grains, overages 1938-1932, 1933-1937, 1935-1939; annual 1933 to 1939 AVERAGES CROP 1933 1934 1030 1936 1957 1998 1936 1928-1853 1903-1937 1035-1039 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1.000 Fand cooper bushels bushels bushels bushels: bushels bushele Beane, des 11 29.07 33.0 D.A: 07.0: 19.5: 33.71 30.21 po Potators 1,727 1,794 1,603 :2,009 L479 :1,779 1.7 04 1,874 Heap 20.0 45.2 62.7) 30.8: 41.4. 41.3: 57.3 an.01 01. Plan 11.01 M.T. 10.0: 11,61 u.t: 13.21 18.2° 14.01 Cotton 51 (8) / - 1: -2: . .4: you 1.0 1.4 Olloweds : Hompaned 1.41 1 2.7 8,81 1.7: 3:1: 2.3: 2.6 6.00 2.31 Cuttomered 2- 1.83 .3: 4: . . 1.01 1.71 0.3 20 5.1: 10.4 10.00 1.1. 0.0 11.11 23.11 0.01 0.0 " Deppyseed = 5.2: 4.47 1-17 6.0: 11.9: 8.0: 0.00 20 4.5 Buyheans - .g: # 5.60 - ... - 1.11 111 1.71 4.2 10.1 Sunflower .... 1.1 10.2: - 4.4: 9,71 7.71 16.81 81.7 Total t 81 10.7: 25.8: 18.01 39.51 54.3 Fruits : Olives 1 1 00.00 - # 18.4: 14.3: 53,2: 32.81 Plues J 488.41 360,81 494.31 482.8: 301.8° 687.61 236.4 333.1 1.000 Apples 2 103.0: 100.71 84.5: 135.9: 153.6: 125.10 190.4 120.0 (#0 Peaches - : 20.3: 30.0) # 17.3: 7.91 as.e: 37.00 00.0 40 Pears 1 1 51.9: 40.6 Charries J 1. RE.01 58.11 34.8: no.5: 47.23 01-F 21.0: 24.01 - 37.5 10.8: 30.0: 24,9: 24.7' Tobacco 14-1: 13.1: 18.1: 9.71 0.81 10.1: 10.0: 52.91 16.2 21.4 = 4-year average 9 5-year average International Tearbook of Agricultural Statistics and vartous official sources. in years of good crops there are large surpluses of plums and apples. Plues, however, show extremely veriable yields. During 1933 to 1939, for example, the amallest plum crop - that of 1937 - was only 236,000 tons, compared with a record crop in 1939 of 1,650,000, or 7 times the 1937 production. Prunes are used in Yugoslavia chiefly for the distillation of a brandy known as Slivovic. The govern- ment ported. has established commissions to control the quality of the prunes to be ex- Damubian Surpluses 767 The development of an export market for the apple crop has been hindered by the great number of varieties grown in Yugoslavia. For that reason the authorities have attempted to limit production to a few varieties in order to provide possible increased exports of a standardized product. THE LIVEBTOCK ECONOMY The importance of the livestock industry in Yugoslavia is shown by the fact that It provided 18.3 percent of the total national income in 1937, whereas all other branches of agriculture accounted for 24.6 percent. 02 If stable export outlets can be found, an expansion of livestock production probably would be the most effective means of overcoming the (1) effects of the pressure of fare population. Rapid expan- sion is jeopardized, however, by the precarious feedstuffs situation, which prevents a transfer from pasture feeding to more progressive stall feeding. Before the land reform, the feudal economy made it Impossible to produce feed- stoffs in about a third of the territory comprising present Yugoslevia. Although the clover and alfelfa acreage has been expanded, the production of feedstuffs is still too limited to warrant a large increase in livestock numbers. The uncertainty of the corn yield is also a limiting factor. Furthermore, 6. change from en extensive to an intensive pastoral economy could only be accomplished over an extended period of time. Nevertheless, various government measures have resulted in a gradual improve- ment of cattle and hog breeds. During the last decade a slight upward trend in live- stock numbers has been apperent (see table 22). To many small pessant farmers, the sale of poultry and eggs represents virtually the only source of cash Income. TABLE 22.-Livestock numbers in Fugoslavia, 1935, 1934, 1938, and 1939 KIND 1920 1954 1938 1930 : Thousands : Thousands : Thousands : Thousands Borues : 1,106 + 1,208 : 1,264 1 1,273 Cattle 3,768 : 3,990 : 4,267 - 4,225 Bogs 2,802 : 2,792 : 3,451 1 3,503 Sheep : 7,907 : 8,868 : 10,137 ** 10,154 Poultry 16,800 - 21,500 : 22,800 : 22,500 : ++ : : Compiled from official sources. THE AGRICULTURAL EXPORT TRADE Although exportable farm surpluses vary widely in accordance with crop yields, Yugoslavian agricultural exports constitute regularly between 50 and 60 percent of 32 The Royal [natitute of International iffeirs. South-Bastern Burope, / Political and #conomic Jurvey, London, 1930, P. 144. Regraded Unclassified 758 Foreign Agriculture the value of all exports. Total Yugoslav farm exports are divided almost equally between vegetable and animal products. Prior to 1930 Yugoslavia's imports exceeded the value of exports. The balance of payments was settled largely by emigrant remittances and by Germany's reparation payments. Since both these factors have now disappeared and hardly any capital in- port is forthcoming, Yugoslavia has had to make special efforts to maintain a high volume of exports. This is virtually the only method of assuring the country of sufficient foreign exchange to obtain her needed fibers and manufactured products, TABLE 23 Polue of Augoslavian exports by class of product, average 1935-1939, annual 1935 to 1939 CLASS OF PRODUCT 1935 asse 1907 1908 1939 AVERAGE 1936-1039 Million : Nillion Million : Million Million 1 Million 1 : dinors : dinors : dinors .. dinors : dinors 1 dinors Total exporta 4,030 : 4,376 : 6,272 : 5,047 : 5,521 1 5,040 Total farm exports 2,250 : 2,694 : 3,474 : 2,688 : 2,918 1 2,805 Vegetable products 1,132 : 1,243 E 1,939 : 1,368 : 1,323 : 1,401 Animal products 1,118 : 1,451 : 1,535 : 1,320 : 1,595 4 1,404 Forestry products 773 - 545 : 779 : 783 : 1,004 : 777 Mineral products 218 = 262 : 606 : 455 : 373 : 383 Metals 401 : 401 : 563 : 508 : 571 t 489 PERCENTAGE OF TOTAL EXPORTS 1 Percent : Percent : Percent Percent : Percent # Percent Total farm exports 55.8 : 61.6 = 55.4 : 53.3 : 52.9 1 55.6 Vegetable products a = 2 2. 2 50.3 2 46.1 a 55.8 : 50.9 : 45.3 : 49.9 Animal products a a = 2 48.7 2 e 53.9 : 44.2 : 49.1 : 54.7 : 50.1 Forestry products 19.2 : 12.5 : 12.4 : 15.5 : 18.2 : 15.4 Mineral products 5.4 : 6.0 : 9.7 : 9.0 : 6.8 # 7.6 Metals 10.0 : 9.2 : 9.0 : 10.1 : 10.3 + 9.7 - : : : : 1 1 One dinar at the current official rate of exchange 8.2490 cents. 2 As percentage of total Care products Compiled From official survers. REPORTS " COUNTRY OF DESTINATION Until 1935, when Yugoslavia participated in the League of Nationa' economic senctions against Italy, the Italian market was the principal outlet for Yugoslavian exports, taking more than 28 percent of the total. In 1935, however, Italy's share dropped to 16.7 percent and in 1936 to 3.1 percent; in 1939 it was still only 10.6 percent. Germany's share in the export trade of Yugoslavia rose gradually until 1937, Contrary to the situation in Hungary, the annexation of Austria did not result in any marked increase in the combined purchases of Greater Germany. The German block, Damubian Surpluses 759 consisting of Germany, Austria, and Czechoslovakia, now buys nearly half the total exports. Greater Germany and Italy together took 56 percent of the total exporte during 1935-1939. An increase in exports to Italy may be expected as & result of a trade agree- ment recently concluded. In September 1939 Yugoslavia owed Italy a clearing debt of 135 million dinars (about 3 million dollars). which was to be set by increased ex- ports of timber, minerals, and farm products. Exports to Great Britain had already declined to 6.6 percent of the total in 1939. France took less than 3 percent of total exports during 1935-1939. There is little poesibility of a further expansion of Greater Germany's share exceptby the ad- dition of the volume formerly taken by Great Britain, unless Belgium and the Mether- lands, now under German domination, lose their share of 7.9 percent, TABLE 24.-Exports from Tugoslavia by country of destination, average 1935-1939, annual 1935 to 1939 AVERAGE COUNTRY 1935 1936 1927 1038 1950 1835 1030 : Million : Million : Million : Million : Million : Nillion : dinars : dinors : dinors - dinors : dinars : dinais : 1 : : : : Germany 751 : 1,039 -+ 1,361 : 1,814 $ : Austria 577 : 818 : 1,762 640 : 306 :) 1,820 : Crechoalovakia 540 : 540 : 493 : 398 : 801 : 554 Greater Germany : 1,868 : 2,219 : 2,702 : 2,518 : 2,563 : 2,374 Belgium, Netherlands : 152 = 292 : 662 : 446 : 452 I 401 Great Britain 212 : 432 : 465 : 485 : 367 : 392 France 63 # 86 : 339 = 75 : 140 : 141 Italy 672 : 137 : 587 : 324 : 584 1 461 Svitzerland 97 : 98 : 112 : 84 : 168 : 112 Sumania, Greece, Bungary: 365 T 450 : 456 : 397 : 489 I 431 United States 2 235 : 214 : 291 : 256 : 281 : 253 PHRCENTAGE OF TOTAL EXPORTS : Percent : Percent : Percent : Percent : Percent : Percent Germany 18.6 : 23.7 : 21.7 : 35.9 9 : 31.9 36.0 Austria 1 14.3 : 14.6 : 13.5 : 6.1 $ : Csechoslovakia 13.4 ** 12.3 : 7.9 : 7.9 : 14.5 : 11.0 Greater Germany 46.3 50.7 : 43.1 : 49.9 : 46.4 : 47.0 Belginm, Netherlands 3.8 : 6.7 : 10.6 : 6.8 : 5.2 : 7.9 Great Britain 5.3 : 9.9 : 7.4 : 9.6 : 6.6 : 7.8 Prance 1.6 : 2.0 : 5.4 : 1.5 : 2.5 : 2.8 Italy 16.7 : 3.1 : 9.4 : 6.4 : 10.6 : 9,1 Switzerland 2.4 : 2.2 : 1.8 : 1.7 : 3.0 : 2.2 Rumania, Greece, Hungary: 9.1 1 10.3 : 7.3 : 7.9 1 5.8 4 8.5 United States 5.6 : 4.9 : 4.6 : 5.1 : 5,1 : 5.0 : : : : Compiled from Statistique du comerce exterieur (annual): Regraded Unclassified 760 Foreign Agriculture COMPOSIT. OF AGRICULTURAL SEPORTE in accordance with the predominance of corn and wheat In the production pat. tern of Yugoslavian agriculture. these grains constitute the principal agricultural export Items: Since both crops are characterized by extreme fluctuations in yield, the surpluses available for export vary sharply from year to year. Even in years of favorable yields most of the corn and wheat production is needed domestically. It is estimated that 57 percent of the population consumes cornbread exclusively and that only 24 percent consumes wheat, The annual per-capita consumption of carn is 6,2 bushels and that of wheat 3.6, Domestic corn needa may be calculated as follows: for human consumption, about 95 million bushels: for feeding hogs and poultry, from 25 to 40; and for seed, about 6 million Ar a total of 125 to 140 million bushele. The consumption of wheat is es- timated at 55 million bushels, to which must be added from 15 to 17 million for seed, Normally From 7 to 10 million bushels of wheat are carried over. over.³³ 31 " 15 obvious that large exports are possible only If favorable yields pre- vall. Because of low yields, corn exports in 1935 and 1939 were below 4 million bushels whereas the 1937 exports, as a result of favorable yields in 1936 and 1937, were POTE than a times those of 1935 and 1939. The volume of wheat exports has been declining. the average for 1935-1939 was 30 percent below that of 1928-1932. More- over, the annual fluctuations are pronounced. Between 1935 and 1939, for example, wheat exports ranged from a little over I million bushels in 1935 to 12 million in 1937. Exports of other grains are negligible. During 1938 and 1939 there were no exports ni barley, oats, and rye, Dry beans have long been important in Yugoslav farm exports. In line with the increased production during the last decade, average exports during 1935-1939 were 55 percent above the 1928-1932 level. The annual variations in exportable surpluses are not so sharp as those for grains, During the last 5 years, maximum exports of 49,000 tons in 1037 compare with minimum exports of 14,000 tons in 1939. Hemp is the only industrial crop which has shown a continuously high level of exports during the last 5 years. The 1935-1939 export level was more than double that of 1928 1932. Mith respect to oilseeds, Yugoslavia has not been in a position to supply her own needs This is of special significance in view of the fact that ailseeds are urgently needed in all countries under German domination. Production and marketing are under the supervision of the government-controiled Uljarica, en organization which maintains high domestic prices by virtually forcing producers to sign contracts for the entire harvest. Soybeans have been exported in small quantities. principally to Germany the only country willing to pay the high price demanded. Total exports of soybeans amounted to 300 tons in 1937 and 4,700 In 1938. or the 1939 crop of 44 These are based an computations by 0. van Franges. The present consump 100 lotal To probably higher. wince the parties mobiliamtion and some shortages In asser (604) Land in Invoice the consumption of brand grains, Danubian Surpluses 761 --- 10,100 lons, only 5,500 were taken by the Oljarica, partly for export: the resulter was used by the peasants as protein feed. In spite of government efforts to make the peasants expand their oilseed acreages, net imports of olloceda Increased from 11,000 tons in 1937 to 21,000 in 1939. Yugoslav fruit crops, particularly prunes, apples, and grapes, are regularly above domestic needa. In years of favorable yield, as in 1939, it is difficult to find sufficient export outlets. During 1935-1939 exports of fresh fruit ranged between 29,000 and 77,000 tons annually. Exports of dried prunes fluctuated between 3,000 and 42,000 tons annually during the same period. The Yugoslav livestock industry exports substantial quantities of live cattle, live hogs, pork, dead poultry, and eggs. Live cattle exports, however, were cut in half between 1928-1932 and 1935-1939, whereas live hog exports were well maintained. Exports of poultry and eggs usually exceed in value those of live cattle and hoge and are nearly equal to those of fresh pork. TABLE 25.-Principal Tugoslation yers exports, averages 1928 1982. 1935 1838; change 1935 to 1939 AVERAGE AYERAGE COMMODITIES 1935 1036 1037 1936 1939 1989-1922 1036 1936 : Million Nillion : Million : Nillion : Nillion Million Million : bushals butwis = bushels : bushels : buthels - bushels e Wheat, floar : 10.5 : 1.2 : 11.0 : 12.1 e 4.5 - 7.9 : 2.2 Corn : 8.0 1 10.3 : 3.6 : 28.8 : 18.4 : 3.7 : 13.9 Barley : 0,2 : 0.1 : 0.5 : : - : 0.2 Date -0.1 : 0.4 : - : 0.6 : : - : 0.2 Eye : I 0.1 1 0.1 : 0.4 : : n. H.T : thousand Thousand Thousand : Thousand if Thousand fhousand di Thousand : tons : tons = tons : tons : SCAS : tons 1. to Beaus, dry : 18.0 : 30.0 ++ 19.0 : 40.0 : 30.0 : 14.0 1. 28.0 Tobacco 3.1 : 6.7 1 4.1 : 4.0 : 6.1 :- 3.5 # 4.9 Hope 3.6 : 4.0 I 4.0 : 2.6 - 2.9 : 3.4 - 3.4 Bomp : 10.0 : 21.0 : 22,0 : 26.0 - 22.0 : 24.0 : 23.0 Flax 2.0 : 8.0 . 11.0 : 18.0 - 15.0 : : 1 12.2 Penit, fresh : - : 77.0 - 64.0 : 29.0 -- 69.0 , 75.0 : 62.8 Pruses, dry : 14.0 : 30.0 1 10.0 : 8.0 : 42.0 " 20.8 1gg» 26.0 : 13.0 : 14.0 : 14.0 : 18.0 :: :: 17.0 .. 15.0 Cheese, butter: 2.0 : 2.2 1 2.4 : 2.1 : 1.7 1 1.9 - E.I Meat, fresh 23.0 : 21.0 : 19.0 : 21.0 - 21.4 - : 23.0 I Meat products : - : . : 3.0 I 3.0 : 3.0 I 3.7 : 3.2 Oilseeds : : : 3.7 : -21.1 : 14.2 : -11.4 12.A = Animal fata : : 2.6 : 0.2 : 1.2 " 2.1 1.6 - Thousands: Thousands Thousands: Thousands: thousands Thousands: Phousands Live cattle 91.9 : 38.5 : 52.0 : 71.4 :- 28.0 .. 35.0 E 45.11 Live hage 245.0 : 218.0 : 301.0 en 307.0 : 260.0 .. 298.0 E 377 o 4 1 : .. : : n iverage 1025-1936. Average 1006-1939. Complied From official - Regraded Unclassified 762 Foreign Agriculture GROSSAPHIC DISTRIBUTION OF FARM REPORTS The greater part of the Yugoslavian agricultural surplusis sent to the marketa of Central Europe. For some products, such as wheat and corn, the markets have changed from year to year, but for fruits and livestock products they have remained substantially the same during the last 5 years, Austria, Ozechoslovakia, and Italy were the principal purchasers of wheat throughout most of the post-war period. To B. large extent, their wheat quotas were fixed by trade agreements. However, In 1936 and 1937, years of large export sur- pluses, Great Britain and France took more than 29 and 42 percent, respectively, of total wheat exports. In 1938 Greater Germany contracted for the entire surplus. In 1939, 86 percent went to Germany and the remainder to Italy. No wheat export sur- pluses may be expected during the 1940-41 marketing year. Surpluses in the next few years will be absorbed by Greater Germany and Italy. The geographic distribution of corn exports has varied greatly from year to year. In 1935 and 1936 more than 80 percent was exported to the countries compris- ing Greater Germany. Their share, however, declined sharply in 1938 and 1939, when Great Britain and the Scandinavian and Low Countries entered the market. The Nether- lands and Denmark, like Greater Germany, are now cut off from overseas supplies of feedstuffs. Consequently, they must depend largely on the corn surpluses of south- eastern Europe. In view of urgent German needs there Is little Tikellhood that these countries can obtain even a small part of their requirements. Greece is normally Yugoslavia's chief market for dry beans, taking from 30 to 40 percent of the total surplus. The United States imported about 10 percent during 1935-1939, or a little less than Greater Germany. Exports have been prohibited since September 1939. Most of the tobacco exports have normally been purchased by former Czechoslo- vakia. France and former Poland occasionally took small quantities. Germany is at- tempting to encourage production of Virginia tobacco in Yugoslavia, and in the future may take a portion of the total surpluses. Greater Germany is by far the most important customer for Yugoslavian fruit Only small quantitiesare exported to Switzarland. Poland purchased some dried prunes before 1939. No changes in the distribution of fruit exports may be expected. Greater Germany and Italy took about 50 percent of all exports of live cat- to during 1935-1939, and Greece and Great Britain each purchased about 10 percent. In 1939 nearly 90 percent went to the Axis powers, and Greece took a small share. During the last few years virtually the entire surplus of live hogs and meat products and between half and two-thirds of the eggs have been exported to Germany, Austria, and Czechoslovakia. Switzerland and Italy took 20 and 10 percent, respect- ively, of the exports of eggs. Great Britain's share of 12 percent will now be available to Germany or Italy. Denubian Surpluses 763 POTENTIAL FARM SURPLUSES DURING AND AFTER 1940-41 THE 1040-43 OUTLOGE As in Hungary, the volume of the 1940-41 surplusos of farm products will be affected largely by the adverse weather conditions of last winter and spring rather than by the direct influence of the war, Some shortage of farm labor and draft ani- sals has persisted because of the mobilization; however, these factors alone probably would not have greatly affected the volume of crop surpluses and livestock exporta in 1940-91 if average or better-than-average yields had been realized. Difficulties in obtaining formerly imported farm products are certain to diminish exports of fi- bers and oilseeds, since domestic products must now take the place of imports cut off by the British blockade. The outlook for the 1940-41 wheat crop is far from promising. According to reliable information, the sowing of the winter wheat crop was restricted by bad weather in several important producing regions. This factor, together with the no- bilization of many farmers, resulted In a reduction of 500,000 acres in the winter wheat acreage, or of about 9 percent. In addition, spring floods damaged 125,000 acres, Reports indicate that the 1940 crop was from 35 to 40 percent below that of 1939, and about 25 percent below the average for 1935-1939. No wheat exports are likely during 1940-41, especially since the rye crop is estimated at 20 percent below that of 1939 and 9 percent below the average for 1935-1938. The 1940 production of barley, which serves as a bread grain for 10 percent of the population, is estimated at 24 percent below the 1939 crop and 20 percent be- low the 1935-1939 average. The oats crop is placed at 25 percent below that of 1939 and 17 percent below the 1935-1939 average. Unless supplies can be obtained from neighboring countries there will be a marked shortage of oats in Yugoslavia during 1990-41. With respect to corn, however, the 1940 crop is estimated at 40 million bush- els above the 1939 cΓop and 15 million above the average for 1935-1939. Although most of the apparent surplus would normally be retained to compensate for the short- age in other grain crops, German pressure may succeed in making about 20 million bushels available for export. Since September 1939 exports of dry beans have been prohibited by government decree. In view of the unfavorable bread-grain outlook, it is unlikely that this probibition will be cancelled, even though the crop probably will be close to normal. Root crops and oleaginous plants apparently suffered relatively little from the adverse weather conditions; however, Yugoalavia will need its total production of oilseeds for domestic purposes. It is improbable that Germany will receive an in- creased share of the soybean cΓop, The severe winter and unfavorable spring seriously reduced the fruit crops. It is estimated that this year's prune crop probably did not amount to more than 20 Regraded Unclassified 784 Foreign Agriculture - percent of the 1939 crop, or 65 percent of the average for 1935-1939. The export surplus of prunes accordingly will be drastically reduced. The cold and wet apring also seriously damaged vine crops. As a consequence of the feed shortage, a reduction in the number of lard-type hogs seems certain. In order to conserve supplies the government has introduced three meatless days a week.34 In view of the feed shortage and the livestock loosee resulting from floods and disease, it is believed that livestock numbers will be re- duced during the 1940-41 marketing season. This may not affect the level of the 1940-41 exports of hogs, and it is possible that the shipments may again approach 300,000 hogs, THE OUTLOOK AFTER 1940-41 As In Rumania and Hungary, the long-time possibilities of a more intensive farm production and of shifts to industrial crops depend largely on factors connected with the present land distribution and the status of the peasants. Yugoslavian econ- omists are agreed that the most serious handicap to a permanent improvement of farm- ing conditions lies in the existence of an excessive agricultural population and the uneconomic size of the average peasant holding. The prevalence of uneconomic holdings tends to prevent an increase in produc- tivity, Moreover, since most of the farms lack sufficient feedstuffs, the most ef- fective means of bringing about an intensification of farming - namely, through an increase in livestock numbers - can be realized only after the feedstuffs basis has been greatly Increased and the peasants have learned the essentials of progressive breeding and feeding methods. Lack of capital and the difficulties in maintaining 8 subsistence level of consumption on the seall holdings seriously retard any rapid improvement in farming methods. 35 According to an investigation by the Yugoslavian agricultural cooperatives, only 439 of every 1,000 peasants possess iron plays, 183 have wooden DIOWE, and 379 own none at all. There is urgent need of at least 100,000 additional iron plows. 38 Under the existing structure of the Yugoslavian farm economy, no essential shifts in production or increases in productivity may be expected during the next few years. The tendency toward acreage increases in industrial crops, such as oil- seeds, fibers, and tobacco, may be accelerated. In view, however, of the lack of textiles and oilseeds formerly imported from abroad, an increase in the exportable surpluses of these crops is unlikely. No expansion in grain acreage may be expected. The export level will be determined by current yields. The conclusion seems war- ranted that a significant expansion in farm production must await improvement of the peasants' status. This in turn will tend to increase domestic consumption and thus curtail exportable surpluses. 34 American Consulate, Belgrade, July 8, 1940. 35 Mirhovic, MASS, Fugoslavian Agricultural Policy, abote. In March 29.194 36 Sudost-Scho, Feb. 10. 1940 Danubian Surpluses 765 BULGARIA Bulgaria is the smallest of the countries constituting the Danube Basin, with a population of 6.3 million inhabitants. The territorial changes following the Balkan wars and the World War did not greatly alter the total area of the country. Of the districts ceded by Bulgaria to Rumania and Yugoslavia, comprising an area of 2.3 mil- lion acres, 50 percent consisted of plow land. On the other hand, of the 4 million acres gained from Turkey, less than 10 percent was plow land. These shifts had a marked effect on the production pattern of Bulgarian agriculture and on the composi- tion of farm surpluses. Over 80 percent of the population is engaged in farming, and farm products con- stitute 95 percent of all exports. The territorial changes necessarily affected the post-World-War development of the Bulgarian farm economy and the development of the national economy as well, Before the acquisition of southern Dobrogea from Rumania, of a total area of 25.5 million acres, only 10.1 million, or 39.6 percent, were are- ble. The return of this fertile region has noticeably improved the ratio of arable to total land, since 70 percent of the total area of southern Dobrogea is in grains. Like most Danubian countries, Bulgaria was predominantly a grain-producing country before the Morld War. Grain exports during 1935-1939 declined by 58 percent for wheat, 76 percent for corn, 90 percent for rye, and 81 percent for barley, com- pared with 1909-1912. It is significant, however, that the country has made progress in adjusting agricultural production by the adoption of e more intensive agriculture, with the result that today increased exports of tobacco, fruits, and oilseeds partly offset the loss of grain exports. THE ABRICULTURAL STRUCTURE OF BULGARIA Outstanding problems confronting Bulgarian agriculture are those arising from the small-eized farms, scattered holdings, and the steadily Increasing pressure of farm population. Even before the World Mar Bulgaria was a peasant country, with few large estates. In 1908 only 0.1 percent of the total number of farms consisted of holdings of more than 250 acres, covering 5.5 percent of the total area. About 45.5 percent of all farms had less than 5 acres, occupying only 6.9 percent of the total area. Most of the farms ranged between 5 and 75 acres, 42.3 percent ranging from 5 to 25 acres and 36.5 percent from 25 to 75. Since even before the World War virtually all land was in small and medium- sized farms, it is obvious that land reform could make little change in land distri- bution. Mevertheless, the refore law of 1921 provided for expropriation of all holdings exceeding 75 acres, In 1924 and again in 1930, however, the expropriation measures were modified, with the result that the total area disposed of did not ex- ceed 200,000 acres, Population increase and continuous subdivision of land through Inheritance have tended to reduce the size of the holdings. in 1926, of a total of 750,000 farms Regraded Unclassified 768 Foreign Agriculture 427,000, or 57 percent, were less than 12.5 acres in extent. 07 At that time the av- erage size of all fares was 15 acres. By 1934 it had declined to 12.5 acres. " Since opportunities in other occupations are limited, little migration from the land can take place. The problem of pressure of the surplus farm population le even more serious in Bulgaria than in the other Denubian countries. It is estimated that there are 5.8 farm workers for each 25 acres of land, as compared with 4.1 in Rumania, 4.0 in Yugoslavia, and 2.8 in Hungary. de Studies by the Bulgarian Inst i- tute of Agricultural Economics show that only about 60 percent of the supply of available labor can be effectively utilized. These conditions indicate clearly that intensification of agriculture is the only solution of the problem of the farm labor surplus. It appears, however, that serious obstacles must be overcome before such intensification can be accomplished foremost among them the existing system of landholdings, which makes for ineffi- ciency in the use of labor. Through aubdivision, resulting from inheritance and community legislation, the average Bulgarian farm of 12.5 acres now consists of 15 different strips of land, often widely separated. Between 7 and 10 percent of the human labor and 10 to 20 percent of the animal labor is wasted in traveling to and from these scattered fields. The uneconomic size of farm holdings necessarily retards the adoption of ad- vanced farming methods. Although some progress has been made In replacing wooden with Iron plows, the Central Statistical Office estimates that in 1934 only 391,000 iron plows were in use, whereas the number of wooden plays totaled 457,000. On the average one iron plow served for the cultivation of 75 acres of land, Harrows were owned on only 5 percent of the farms. To remedy this situation the government on April 29, 1939, enacted a law to facilitate the distribution of agricultural implements to farmers." Under this law the Agricultural and Cooperative Bank of Bulgaria was authorized to purchase and dis- tribute farm implements against non-interest-bearing loans to be repaid in 5 years. It was provided that about 100,000 unite, valued at 500 million leva** would be supplied in 1939-40. In view of the difficulties resulting from the war, it seems highly improbable that more than a small fraction of this number will be supplied. 37 Molloff 2. St., Dhe sarialohonamische Struktur der bulgarischen Landwirtschaft (The Social an and Boonomic Structure of Bulgarian Agriou]ture) Berlin, 1936. P: 116. Survey, Landon. 1939, 9. 170. Regal Institute of International Affairs, South-Bastern Europe, A Political and Nonomic 40 36 stanes. Bulgarian Agriculture and Neasures for its Improvement, Sofie, 1936. Mallott, 1. St., op. cit., R. 38, 119. ciology. Dat. 1939, P. 548. 41 International Institute of Apriculture, Monthly Bulletin of Agricultural Economics and 30- cents, 42 Das 14v at the August 1939 official Pain of esebange (Istest available quotation) I all Danubian Surpluses 767 To these difficulties must be added the inherent attitude of the Bulgarian peasant. "The extensive farm practices prevailing cannot be changed as rapidly 88 is desirable, since the paychological basis for a transition to intensive farming is still lacking and the traditional habits of most of the peasants cannot be easily overcame. Nevertheless, a tendency toward more intensive agriculture may be ob- served. PROGRESS TOWARD ISTERSIFICATION OF AGRICULTURE The authorities have exerted every effort to Induce the peasants to expand production of crops requiring a larger supply of labor than is required for grains. The closer trade relations with Germany and the German demand for increased quanti- ties of these products have accelerated this tendency. The shift from grain to in- dustrial crops, however, has not yet progressed far. Moreover, the most effective means of Intensifying the farming system - expansion of livestock production - faces serious obstacles. The authorities are also endeavoring to educate the farmers by extension work, through the agronomes, or county agents. In addition the areas devoted to some crops are being regulated through government monopolies and by price-fixing and buying operations, and the government is distributing high-quality seeds and alding financially in the construction of dairies and warehouses. These measures, it is believed, will encourage farmers to extend the production of more intensive crops, Probably more progress toward intensification was made In Bulgaria during the post-World-War period than in any other Danubian country, Table 26 shows the expansion in specified crops, using the pre-World-War period (1908-1912 = 100) as a basis for comparison, It may be observed that the relative changes in acreage have been pronounced, not only when compared with the period prior to the World War, but also when compared with the 5-year period 1930-1934. It will also be noticed, how- ever, that In spite of the rapid expansion, most of these crops still occupy a rel- stively small proportion of the total cultivated land (see table 27). TABLE 26.-Acreage expansion of specified Bulgarian crops, averages, 1908-1912, 1930-1994; and 1938 TEAR SUBFLOWERS TOBACCO COTTON BUGAR BEETS NEWP ORCHARDS : Index : Index : Index : Index : Index 4 Index : : : : : : 1908-1912 100 : 100 : 100 -- 100 1 100 -- 100 1930-1934 3,390 : 349 1 1,524 : 541 : 141 : 239 1938 8,000 E 500 : 3,990 : 541 : 270 - 390 : : : : : # 1908-1912 and 1990-1994 data derived from J. It. Malleff (see fortnete 39) : 1908 data compiled From official sources. 48 Malloff, 1. " op eit, 100. Regraded Unclassified 768 Foreign Agriculture --- LAND UTILISATION As in all other Danubian countries, grain crops predominate In Bulgarian agrin culture, although the proportion of grain acreage (67.7 percent of the cultivated land) is smaller than in any other Danubien country. About half the grain acreage is devoted to wheat, one-fourth to corn, and one-fourth to rye, barley, and oats, Of the food crops other than grains, which occupy 5 percent of the cultivated land, dry beans are by far the most important, accounting for half the area devoted to such crops. The acreage in industrial crops has increased noticeably, but et present still accounts for only 8.7 percent of the total cultivated land, Oleaginous plants con- atitute the greater part of such acreage, followed by fiber crops, tobacco, and augar. It is characteristic of Bulgaria that in spite of the relative scarcity of land the prevailing primitive crop system allows 11.7 percent of the arable land to remain fallow each year. In this respect also progress has been made, for the share of fallow land was over 20 percent before the World War. The present distribution of acreage among the various crops in 1938 is shown in table 27. TABLE 27.-Distribution of Bulgarian crop acreage, 1938¹ PHRCENTAGE PERCENTAGE LAND DISTRIBUTION ACREASE OF. CULTI- LAND DISTRIBUTION ACREAGE OF CULTI- VATED LAND VATED LAND :1,000 dores: Percent :: :1,000 acrest Arcent : : : Total grains 7 6,862 : 67.9 ::Total oilseeds 734 : 7.3 Wheat 3,447 : 34.1 :: Sunflower seed 467 : 4.6 Corn 1,730 : 17.1 :: Cottonmeed 140 : 1.4 Barley 556 : 5.5 :: Rapeseed : 54 1 .5 Rye : 465 : 4.6 :: Soybeans ao .3 Oats : 356 : 3.5 :: Other 43 2 .4 Total food crops : 504 : 5.0 :Tobacco 89 : 9 Beans 247 : 2.4 ::Sugar beets # 30 I .5 Watermalons # 140 : 1.4 : Hotation meadow : : Potatoes 49 : .5 :: and other feed : : Peppers 15 : .2 :: crops : 645 : 6.4 Total fibera 172 : 1.7 ::Fallow 1,180 : 11.7 Cotton 140 : 1.4 ::Total culti : : Hasp 25 : .3 :: tivated land 1 10,099 : Flax 7 : 1 ::Total acreage I 25,488 : : : :: = Acreages of sinor crops are included in the subtotale. International Yearbook of Agricultural Statistics. Regraded Unclassified Derubian Surpluses 789 THE PATTERN OF AGRICULTURAL PRODUCTION ACREASE. TISAD, AND PRODUCTION OF PRINCIPAL CROPS For about 70 percent of the Bulgarian population wheat and rye are the prin- cipal food grains, and the remaining 30 percent uses corn. The acreage and produc- tjon of wheat and corn during the last two decades, however, have not kept pace with the population Increase. As a result the available surpluses have been noticeably reduced. Few changes have taken place during the last decade In the total area de- voted to grain crops. A slight increase in the wheat acreage was offset by a de- crease in the acreage sown to corn, rye, barley, and oats. As a result of the government program of agricultural intensification, further reductions in grain acreage may be expected. Better seed selection and a more advanced system of crop rotation may even- tually increase average yields. Field experiments of the Sofia Experiment Station have shown that even 4 slight improvement in the rotation system, with increased use of fertilizers, will greatly raise the present yield of most grains. It does not appear, however, that such improvements can be attained In the near future. As in all other Danubian countries, climatic conditions in Bulgaria do not permit constant yields. The average deviation from the mean yield of wheat was 13.2 percent during 1930-1939, and that for corn was 9,4 percent. The record wheat yield of 1938 led to an average level of wheat production of 64.4 million bushels during 1935-1939, 20 percent above the average for 1933-1937 and 28 percent above that for 1928-1932. The extent of the crop fluctuations is shown by the fact that the 1938 crop of 79 million bushels was twice the size of the 1934 crop of 39.6 million, whereas the 1938 corn crop of 21 million bushels was little more than half the 1935 crop of 39.7 million. Tobacco production, insignificant before the World War, has become the most important source of export surpluses, largely because of the acquisition after the Balkan war of extensive tobacco-growing districts from Turkey. The Ministry of Ag- riculture has endeavored to improve the quality of the tobacco crop by providing peasants with good plants, combatting various plant diseases, and establishing proper facilities for drying and manufacturing. The government virtually regulates the area that may be planted to tobacco each year. During the depression, this area was sharply restricted, but since that time much of the acreage reduction has been recovered as 6 result of improved export possibilities. The Agricultural and Cooporative Bank purchases tobacco at fixed prices whenever the market situation warrants this action. Before the World War Bulgaria had to import more than 10,000 tons of sugar annually. During the last decade, however, domestic production of sugar beets has 44 Mallorr. 4. 26., оф. cit,, D. 194. $5 It should be noted that the date on ******* and production after 1030 are not strictly von- Barable with these or the period before 1936, since the welhod of collecting these stagiation has been changed. Regraded Unclassified 770 Foreign Agriculture --- been sufficient to meet total domestic needs. The government controls the sugar best acreage through agreements with sugar refineries. This control explains in part the sharp annual fluctuations in production. TABLE 28 Moreage, yield, and production of Bulgarian grain crops, overages 1928 1932, 1933-1937, 1835 1939; annual 1933 to 1939 AVERAGES CROP 1033 1934 1938 1936 1937 1938 1028-1020 1933-1037 1939 1030 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 ACREKOX actes actes actes acres acres acres acras acres : acTe3 acres Whent 2,931 3.025 3,080) 3,097. 3,114 3,729. a 965 3,253: 3,448: 3.064 Aye 363; 401- 471: 516 496: 133 480 0211 464: 447 Barley 602 547 52%) 602 566 501 5371 5401 588: 163 Data 321- 316 3131 187 318- 268- 2991 369: 353: 276 Corn 1,757 1,720- 1.674 1.796 1,002- 1.775 1,650 1,000 1,701- 1,527 Bush Burh Bush Bush- Bush Bush Bush Buch Bush Bush- TIELD PER ACRE: els els els (if e Zs ela els als els els Whent 17.1 17.77 20.81 17.0 17.6 20.41 20/1: 22.9) 22.8 Rya 10.9 16.00 19.0 19 a 13 0 17's 18.7 18.01 15.9: 21.0 Barley 24.7. 24.8: 27.8: 20.4. 15 % 26.8 27 6. 20 1. 20:4: 27.2 Own- 23.2 25.0: 25.1 27.4 10.1 23.8 31.31 27.4 17.4. 32.2 Carn 17.9 20 5: 20.81 20.8- 15.8 22.4F 20.9 20/1 12.11 1,000 1,000 1,000 1,000 1,000 1,000 1.000 1,000 T 1,000 1.000 PRODUCTION bushels burhois bushels bushels bushels bushels bushels: bushels bushels Whent 60,338 55,647 04,370:50 454 39,095 47,925 60,352 04,010 Bya 8,527 5.203: 5,483: 9.083: 6.430 7.767: 8.188 9,387. 7,397 9.974 Darley 14,8817 12,603 14.077.16,147 8.00v 12,940 14,400 10,162 16,294: 15,322 Date 7,441 7,984 8.158 6,947 5.133 6.379 9,386,10,094 0.137: 0.010 Corn 31.534. 35.278 39,721 34,309.33 426120.955 T 1035 1036 sverage Compiled TION International fenrbook of Agricultural Statistics and other official cources TABLE 29 Bulgarian production 11 prin 401 nongrain Tops, overages 1928 932 1933-1937, 1935-1939, amount 1933 to 1939 CROP AVERAGES 1938 1930 1933 1937 1933 1035-1039 1934 1935 1930 1937 1938 1930 1.000 1,000 1,000 1.000 1,000 1,000 1,000 1,000 1,000 1,000 time tons tons Fons sons tona forts tons fors fors Food crops Deans dry 533 01.1 30.1: 57.0 45.2 612 70.2 01.3 7.6 Potatoon 58.3 121 1 122.9 90.00 04.1 135 $ 121.9 163.8: 71.11 Peppers 28 31 35.21 87 3 87.11 96,01 Fibers Heap $ 1.6 3.8 4.31 3.4 3.0 3.8 1.7: 5.31 : Flex , I è ... -8 : 1: .6: .a. Cotton 1.0/ 7.0 0.9- 4:71 + 4 9.4 7.31 11/4 Y.T Total 17 11.1 10 6: 0.8: T.71 13.6 11.01 12:01 Oilsweds Saybeens 1. : 5 1 11:0: 19 3 Peanuts : 12.0: 7.81 1,7; 8.6: .2. 3.0 Responed 2,3 5.4: 2.3. 1.2 1.4 2.7° 1.9 Repeared 9.11 2.7 3.7 2.8: 0.5: 5.0 16.51 10: V.1 24.4 Cottonseed 1.11 1.12 29.10 20 10.8- 35.61 7.1: 10.3 Service seed 20.6 10.01 04.3: 17.71 49 is 2.0 1.8: Nunflower 3.6; = 1.7 11: 1.0: -9F and 184.2. 1 106.7° Sugar beats E 84.4 90.3 132.7 181.2 183.0 131.6: 150 275.1: 109.5 160.21 Tobacco 331.0: 21.5 172.7 60.71 254.4 144.00 17.6 33.8: Grapes 1. 35.8/ 27.4: 20,7 30.8 47.3 30.0 19.3 42 373.0 491.6 540.4 402.7 508 622.3 334.9 010.0: 720.00 000 I 1936 1936 average. Compiled from International Tearbook of Agricultural Statisti , and other official sources. Among the fiber crops, cotton has shown the greatest expansion in recent years. Production increased ninefold between 1928-1932 and 1935-1938, but still falls short Danubian Surpluses 771 of domestic needs. In 1938 and 1939, for instance, 14,000 and 12,000 short tons, respectively, were Imported to supplement domestic production. The production of most oleag/nous plants has increased greatly during the last decade, Sunflower seeds take first place among the oilseeds. The increased production of ollseeda has made Bulgaria virtually self-sufficient in vegetable oils. Rapeseed production has been predominantly for export. Cottonseed output has increased as a result of the expan- sion in production of 1int cotton. Rapid progress has also been made recently in the fruit industry. Largely be- cause of the work of the government experiment stations, both quantity and quality of the fruit crops have Improved noticeably. The most striking development was the Suc- cess in the cultivation of table grapes (at the expense of wine grapes), brought about in response to the export demand for table varieties, THE LIVESTOCE ECONOMY The most serious handicap to the development of an intensive livestock industry in Bulgaria lies in the insufficiency of the domestic feed supply. Before the No. Id War communal pastures furnished a considerable portion of the necessary fodder. As a result of the land reform, however, the area in communal pastures was reduced from 2.2 million acres in 1908 to less than I million at the present time. It is estimated that the present number of livestock in Bulgaria requires 2.8 billion carbohydrate units and 235 million protein units annually, even assuming that feeding takes place during only 180 days and that the animals utilize pastures during the rest of the year, 4.8 Under present conditions, however, only 2.0 billion carbohydrate units and 180 million protein units are produced annually. As a result there is an annual deficit of 30 percent in feed units and of 25 percent in protein units. The government has made recommendations with a view to improving the feed- stuffs situation. The feedstuffs acreage recommended and the actual acreages are shown in table 30. It will be noted that no actual increase in the acreage planted to fodder crops has taken place since 1934, and that in most cases the 1938 acreage is only a fraction of the acreage anticipated in the government program. TABLE 30, -Sulgarian feedstuffs acreage in 1934 and 1935, and 1940 acreage recomended by Bulgarian Government RECOMMENDED 1928 ACREAGE AR COMMUNITY ACREADE ACTUAL ACREADE SCREAGE PERCENT OF RECOM 1524 1938 1840 MENDED ACREAGE : 1,000 acres 1 1,000 acros : 1,000 acres : Percent Tetch 437 560 464 sa Alfairs 71 247 105 -- 42 Reparcet (1) 247 2.6 1 , Grass ooro 147 494 00 : 4. Forage willed 57 124 1 03 oi Mangela 57 148 : 10 11. I Negligible. Bulgarian Agriculture and Measures for its Improvement, 1. Ousewooff 1945 48 Chlebarav, 0. ave *Die bulgarizehe and thre Problems* (Sulgarian Livestoon ony and 113 Frohiams). leitschrift for Gulgarischen landwirtschaftlichen Gesellachaft. TVL. ITEM, 1926. Regraded Unclassified 772 Foreign Agriculture The experiment stations and county agents have succeeded In bringing about some Improvement in quality of poultry and eggs, which are the most Important surplum products in the livestock industries. All categories of livestock, however, show a continual reduction In numbers, largely because of Inadequate feed supplies, Table 31 gives Bulgerian livestock numbers in 1934. TABLE 31.-Bulgarian livestock numbers, 1934 KIND SUMBERS KIND NUMBERS : fhousands :: : Thousands : :: : Horses I 532 :Duffaloss : 375 All cattle : 1,498 :Sheep : 8,839 Milk cowe : 176 : : Hoga : 902 All cown : 281 ::Poultry : 12,800 : :: : Compiled from afficial sources. THE AGRICULTURAL EXPORT TRADE Since Bulgaria has no important mineral or manufacturing industries, its ex- ports consist almost exclusively of agricultural products. The nonagricultural popu- lation of a little over I million can consume only a fraction of the farm surpluses, To the Bulgarian economy, therefore, exports of farm products are essential for three reasons: (I) they provide most of the cash income of the peasant; (2) they are vir- tually the only means of securing foreign exchange for the necessary imports of fi- bers, textiles, and machinery: and (3) they provide funds for meeting the foreign debt service. CHANGERO COMPOSITION OF FARM EXPORTS Territorial changes, as well as the progress attained in promoting the produc- tion of more intensive crops, have resulted in marked changes In the composition of Bulgarian farm exports (see table 32). Most striking are the shifts in the impor- tance of grain and tobacco in the export trade, Before the World Mar, grain crops contributed nearly two-thirds to the total valuebof exports, whereasin 1938 and 1939 they constituted less than 10 percent of the total. The sharp decline in the impor- tance of grain in the export trade may be attributed to the post-war loss of grain- surplus-producing regions, increased domestic consumption resulting from population growth, and the increase in surpluses of other fare products. The pre-World-Mar place of cereals has now been taken by tobacco. Exports of tobacco were insignificant before the World Mar, whereas during the past decade this product has constituted the outstanding export item, representing about 40 percent of the value of all exports. Denubian Surpluses 773 Hardly less significant is the increase in the export trade in fruits, Until the world depression, fruit exports constituted only a fraction of I percent of total exports. In the 1930's, however, a continually Increasing importance is apparent. In 1939 fruit exports represented nearly 20 percent of total exports, and were 3 times those of grain. Exporte of live animals and meat products have always been relatively Insig- nificant as 8 result of the uneatisfactory domestic feed situation. There has been a recent tendency toward reducing the exports of live animals In favor of neat products. Cattle and cheese exports have declined steadily. Egge still represent the outstand- ing export product of the livestock economy. Rose-oll exports, a Bulgarian monopoly, have suffered from the competition of synthetic substitutes in foreign markets. Oilseed exports showed a marked expansion until 1937; however, during 1938 and 1939 increased domestic utilization reduced the surpluses. TABLE 32. -Composition of Bulgarian fare exports, 1939 with comparisons Expressed as percentages of volue of total exports COMMODITY 1911 1030 1993 1936 1927 1938 1930 : : : : : : : Grains and flour : 64.3 : 8.9 : 13.8 : 14.0 : 18.7 : 9.5 : 7.4 Tobacco : 1.0 : 45.3 : 41.3 : 32.3 : 32.1 : 42.4 : 41.0 Beans, dry - 3.3 : 3.1 : 2.6 : 2.4 : 2.4 : 0.4 : Fruit 0,2 è 0.9 : 4.3 : 9.4 : 7.5 : 17.5 : 19.2 Oilseeds 2.0 : 2.4 : 1.9 , 4.9 : 5.0 : 2.1 : 3.8 Cattle 1.2 = 1.9 : 0.7 : 1.0 : 1.2 : 0.8 : 0.3 Hogs : 0.2 : : 0.9 : 1.7 : 2.3 : 1,2 Poultry 0.5 : 0.4 : 1.2 : 0.3 : 0.5 : 0.5 : 0,2 Total live animals : 4.5 : 3.4 : 2.0 : 2.2 : 3.4 : 3.6 : 1.7 Meat, poultry, fat - : 0,4 : 1.9 : 6.4 : 5.4 : 4.6 ++ 2,1 Cheese 1 2.4 - 1.2 : 1.2 : 1.1 : 0.7 : 1.0 : 0.3 Eggn 7.4 : 11.5 : 16.0 : 11.9 : 8.6 : 7.8 : 8.4 Vides 1.7 : 5.3 : 4.1 : 3.6 1. 4.5 : 1.8 : 1.8 Rose-oil 4.1 : 5.4 : 1.8 : 1.3 : 1.3 : 1.2 : 1.3 : : : : : : : Weltwirtschaftliches Archiu, *Die stantlichen Meanahmen sur Forderung der &usfuhr der Agrer- produkte Bulgariens," by Milks Deyanuwa, March 1940, P. 430. VOLUME ON PARM EXPORTS Although farm exports form the basis of the Bulgarian economy, the absolute volume of most surpluses is small, particularly in comparison with the needs of the European deficit countries (see table 33). Among the grains, only wheat and corn furnish continuous though varying sur- pluses. In relation to the surpluses of the other Danubian countries, however, Bulgarian corn exports are of minor significance. The level of corn exports during Regraded Unclassified 774 Foreign Agriculture -- 1935-1939 was 57 percent below that of the average for 1928-1982. Corn exports show wide fluctuations. For example, in 1936 exports amounted to 4. million bushels, whereas in 1939 only 50,000 bushels were exported. Wheat exports during 1935-1939 exceeded those of 1928-1932 by nearly 30 per- cent. Even the average 1935-1939 exports, however, were only one-sixth those of Rumania. The record 1937 exports of 7.2 million bushels would have net only one- sixth of the German wheat imports of that year, one-fifth of the Belgian, or one- third of the Dutch Imports. Between 1933 and 1937, exports of dry beans were large, and could have met about 75 percent of German requirements. During 1938 and 1939, however, the upward tendency in exports was reversed partly because of crop fluctuations and partly as a result of government precautionary measures to safeguard domestic food supplies. For the same reasons the increased production of oilseeds has been used largely to make Bulgaria independent of foreign sources, The sunflower-seed crop still provides most of the total oilseed exports. The peak was reached in 1937, when exports amounted to 47.700 short tons. In 1938 only 10,900 tons were exported. In- creased exports of soybeans, however, may be expected in years of normal yields, since in 1940 the soybean area was increased to.100,000 acres, as compared with 44,000 in 1939. To the Bulgarian farm economy, oilseeds represent an important source of income. Even the high 1938 exports could have met only 3 percent of the total German imports of oilseeds. Likewise, the record oilcake exports of 1937 - 54,500 tons - amounted to no more than 2 percent of the German oilcake imports of that year, The prosperity of 120,000 peasant holdings, representing one-sixth of the total number of Bulgarian farm holdings, depends on the exports of tobacco. The gov- ernment regulates production according to market conditions and exercises control over the quality of the crop. Since export potential improved during the last few years, the number of tobacco growers increased Exports during 1935-1939 were 23 percent above those for 1928-1932. Grapes are now the most important fruit entering the Bulgarian export trade. The government has succeeded in inducing peasants to reduce their production of wine grapes and to expand the production of table grapes in response to the increased foreign demand for this fruit, As a result, exports of grapes rose rapidly from 3,500 tons in 1928-1932 to 45,100 In 1935-1939. Exports of live animals and animal products have declined, largely because of the inadequacy of domestic feedatuffs, Live cattle exports have decreased sharply. but during the last few years live hoge have been exported in increasing numbers. Even these exports, however, amount to only about 10 percent of the exports of either Mungary or Yugoslavia. Exports of meat products. chiefly dressed poultry, have in- creased; however, the volume is still inalgnificant. In general it appears that although Bulgarian farm surpluses, except for to- bacco, are too small to go far toward meeting the urgent needs of the European Danubian Surpluses 775 deficit countries, considerable progress has resulted from the various government measures in the field of production and export regulation. The application of gov- ernment measures was begun in 1930, when a "Grain Administration" was established to lend support to peasants impoverished by the precipitous decline in the price of grain. A *Grain Monopoly" followed, and became an autonomous government agency in 1936. The Grain Monopoly also exercises control over the exports of corn, sunflower, rape- and cottonseed products, hemp. and flax. The Agricultural and Cooperative Bank exercises similar control for tobacco and rose-oil. In addition a law has been in effect since 1935 regulating the quality of export products. These measures are closely integrated with a rigid control of foreign exchange and Imports. TABLE 33.-Bulgarian exports of agricultural products, averages 1928-1932, 1035-1939; annual 1933 to 1939 AVERAGES COMMODITY 1933 1954 1933 1000 1957 1638 1030 1928-1932 1005-1939 E 1.000 1. 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 bushels bushels bushe Lg: bushe is: bushe is bushe Lei bushe is bushe Lg: bushe Wheat 3,856 4,730 9,790 1,359 1,263 4,677 7,227 4,020 0.434 Bye 1,082 190 ) 51 12 . 78 T 485 1 245 E 101 -- Barley 1,400 376 1 704 F 528 T 92 = 728 :1,043 E 33 DATE 14 L 47 4 F - 21 213 ! Corb 4,809 2,110 :3,952 4,956 # 200 4,004 13,207 no 1.000 Γ 1,000 a 1,000 1,000 : 1,000 : 1,000 E 1,000 1,000 : 1,000 tono toms tons L tons il tons : tons E tons tons tons Tran 36.2 26,1 23.5 11.1. 36.5 58.0 6.8 14.1 Beans, dry 10.2 19.61 36.5° 18.3: 31.5 27.3 24.5 4.7 depessed 14.6 0,0- .85 2.5° 17.0 1.0: 3.9: 2,6- 6.7 Soybeans 1 o 7,87 di :47 8.11 5.7/ 11.2: 4.87 Cottonseed 1.11 2.21 1.50 o 2.0: 1.5 7.31 o 0 Sunflower and 20.00 37.41 11.0° 10.2: 52.9 51.2 47.71 10-8, 04.0 Otloake 44.72 27.0: 32.0: 31.4: 04.0: 50.31 42.71 36.7 Tobacco 24.6 30.2 28.0° 33.3 27.3 22.4: 24,8: 37.61 39.0 Grapes 3.5 46.1 11.8 31.8 38.11 36.0: 40.3: 64.1 57.0 Prunna a.1 6.0: .8: 4.6 10.8 6.1: 4,0, 11.1 10.9 Applee or 7.21 ,3° ,10 5.0: 0.31 LOT 1.2 10.8 Next products 9.11 6.9: 2,0' 3.1: 5.1 8.7: 8:5: 8.5 4.0 18.5 17.11 17.3: 16.01 16.1: 10.3: 10.01 16.7 10.3 Cheese 1.31 1.6: 1.30 1.3) 1.1: 2.0: 1.51 1.8: .7 Thou Phou Thou Thou Phone Thom Thou E Thou Thou sands sands sands sands sands sands sands sonds gands Cattie 6.11 12.6- 0.7 2.2 13.2° 1.8 5.0 12.1 12.1: Hoge 1.9 23.91 .4: 1.1: 1.31 12.8: 29.47 48.11 23.3 Poultry non 607 11,000 1,040 1,172 293 799 : 853 267 : T e 1935-1928 average Including dressed youltry. International Tearbook of Agricultural Statistics; Statistique du commerce exterieur (sasual) Regraded Unclassified 776 Foreign Agriculture TOTAL SULGARIAN EXPORTS BY COUNTRY OF DESTINATION Largely as a result of the changes in composition of farm exports, the direc- tion of Bulgarian foreign trade has experienced marked shifts. Before the World War Bulgaria was indebted to Western Europe, particularly to Great Britain, France, and Belgium. Consequently, it exported most of its grain surpluses to those countries for debt service and for textile and machinery imports: TABLE 34 Total exports by ouniry of ination, 1939 with ompartans Expressed 00 percentages of value of total exports AVERAGE COUNTRY 1011 1939 1933 1934 1935 1036 1937 1936 1939 1935 1930 : Germany 12.4 29.9: 36.0: 42.7 48.0: 47.6: 43.1) : 58.9 67.8 4.6: 3,0: 4.0.) 55.4 Austria 5.71 12.6: 9,7: 5.3: Crechoslovakia : 4.8: 3.53 3.6 6.9: 3.3: 5.6: 4.8: 3.3: 4.7 Greater Germany 18.1 47.3 49.2 51.8 59.5: 53.9 52 ? 63.54 71.11 60.1 Italy 2.1- 10.5 91 92 8.8 316: 4.2 7.6: 6:1: 61 Great Britain 13.1 1.8 17 2.13 44 11.6: 13.8: 4.8: 3.11 7.5 France 6.0 0.1 3.3 2.1' 1.8 2.1: 1.6: 1.5: 0.9: 1.6 Netherlands. Belgium, Dennark, Norway 30.4 6.1) 13.34 8.9 14: 9.2: 6.3: 4.41 2.8: 5.4 Foland 8.8: 17 1.8 2.11 37 4.7 5.7: 3.8. 10 United States 0.6 1.7 1.12 0.71 1:0: 2.6: 3.8: 3.4. 3.4. 2.8 Welford hartliches An He, March 1940 Statistique du Commin exterieur, Sorie (annual, The predominance of tobacco surploses, which replaced former grain exports, eventually led to an Increase in the share of the Bulgarian exports taken by Cen- tral Europe, from 20 percent before the World War to 60 percent in 1925, and to more than 70 percent in 1929. On the other hand, the Western European countries, which had purchased 50 percent of total Bulgarian exports before the World War, reduced their purchases to 14.6 percent of the total in 1925 and to 12.7 percent in 1929. Germany was the principal market throughout the post-war period, whereas be- fore the World Mar it took much less than Belgium and also less than Great Britain and Turkey. By 1933 Germany's share had increased to 36 percent of total Bulgarian exports. The annexation of Austria resulted in even more pronounced Bulgarian dependence on the German market. The combined purchases of Germany and Austria rose to 58.9 percent of Bulgaria's total exports in 1938 and to 67.8 percent in 1939. The German trade drive into Southeastern Europe is partly responsible for the increased Bulgarian interest in Industrial crops. In foreign trade policy, however, Bulgaria endeavored at the same time to expand exports to the free-currency countries, Actually exports to free-currency countries (Great Britain, the United States, the Scandinavian countries, Egyot, and Palestine) increased from 4.8 percent in 1927-1929 Danubian Surpluses 777 to 10.9 percent in 1933-1935, and to 25.4 percent in 1937. In 1938 and 1939, however, the share of these countries fell to 13.1 and 10.3 percent. largely because of the decline in exports to Great Britain. At the same time Bulgarian exports to countries (other than Germany) with clearing agreements fell from 59.2 percent in 1930-1932 to 41.3 percent in 1933-1935, and to 14,3 percent in 1939. Germany now virtually dominates the foreign trade of Bulgaria. Greater Ger- many takes 71 percent of the total exports. Italy, which ranks second, takes less than one-tenth as much as Germany. Great Britain's share of the exports was re- duced to 3.1 percent in 1939. It is doubtful whether Britain's former purchases can be diverted to the Axis powers, because the Soviet Union, following the conclusion of a trade treaty in January 1940, has become a new outlet for such Bulgarian farm products as tobacco, hogs, rose-oil, and hides, in exchange for Russian oil, metals, machinery, and cotton. GEOGRAPHIC DISTRIBUTION OF FARM EXPORTS Since farm products comprise over 90 percent of the total Bulgarian exports, and since Germany and former Austria took more than two-thirds of the total in 1939, it is evident that only about one-third of the Bulgarian farm surplus has been available to other countries. The greater part of Bulgaria's grain surpluses had to be sold to the free- exchange countries during 1935-1939, largely In order to obtain orgently needed for- eign exchange for imports that could not be furnished by Germany, Great Britain was the principal market for wheat and corn, although about 10 percent of the exporte of each went to Scandinavia and the Low Countries. Italy took about one-fifth of the wheat surplus. Germany did not enter the Bulgarian whent market untill 1937. The greater part of any grain surpluses available during the present war prob- ably will be absorbed by Germany, since exports to Great Britain will not be pos- sible. Except for dry beans, sunflower seed, ollcake, and live cattle. by far the largest share of the exports has been sent to Germany, which contracted for the en- tire surplus of soybeans, In addition Germany has been importing about nine-tenths of the total Bulgarian exports of fruits, two-thirds of the tobacco, egg, and meat products exports, and about half the exports of hogs and poultry. Scandinavia and the Low Countries took about one-third of the sunflower seed and nearly two-thirds of the ollcake exports. Italy was an Important market for poultry and dry beans. Switzerland took about 15 percent of the exports of eggs. It is difficult to appraise the future role of Russia. The Russo-Bulgarian trade agreement provides for the delivery of various Dulgarian farm products in exchange for Russian mineral oil, machinery, and fibers. It To believed, however, that Ger- many's share will at least be maintained. 47 Famenow, K., "Esports of agricultural products Iron Bulgeria Nonthly Bulletin of cultural onomics and Socialogy, Feb: 1940, D: 64, also Dayanues, MLINE, op. 450 Regraded Unclassified 770 Foreign Agriculture POTENTIAL FARM SURPLUSES DURING AND AFTER 1940-41 Shortly after the outbreak of the present war the Bulgarian Government took stops to safeguard domestic stocks of foodstuffs and law materials On August 29. 1939, the exportation of cotton, flax, hemp, fendstuffs and hides was prohibited, A for days later exports of live animals, neat products (except bacon), cheese, OUT- ter and other animal fats potatoes. end sugar were prohibited. Subsequently how- ever the exportation of hoge and lard was again permitted THE 1040 41 OUTLOOK According to recent information, it is believed that the 1940 acreage of the principal crops (tobacco, grains, oilseeds and fruits) will be slightly above that of 1939, however. a delayed spring and heavy rains retarded growth by about a month and caused some damage to winter end early spring plantings plant Late spring plantings, particularly of tobacco, apparently were not greatly affected by adverse weather conditions The tobacco crop is expected to exceed that of 1939 The 1940 wheat crop is estimated at about 70 million bushels, or about the somo as that for 1939. it is not believed that any wheat export surplus will be available Nuring the 1940-41 marketing season The annual exports of wheat averaged 6.4 million bushels due ing 1935-1939. Prospects for corn and minor grain crops have been reported as promising in both quality and quantity Corn exports, however. will hardly exceed 5 million bushels in 1940-41. The average for 1935-1939 was 2 million bushels The 1040 crop of suntlower seed and other oilseeds '5 estimated al about the same as the 1939 production. The extent of available export surpluges, however, will depend largely on government policy. The general quality of the 1940 Truit crops was poor, and truit exports will be reduced from the 1939 level. The plum crop was small. and the grape crop was well below that of 1939. THE OUTLOOK ACTER 1940 OL in all probability the Bylgarian Government will continue its efforts to pro- mote the expansion of industrial crops. Increasing export surpluses of oilseeds and probably a further rise in fruit exports may be expected in years of normal yield. There 16 little likelibood, however, of an increase in exports of live animals and animal products during the next few years, since the volume of domestic feedstuffs supplies cannot readily be expanded. According to the latest information, 8 4-year agricultural plan is under con- sideration. Its main features are a large-scale irrigation program, an increase in supplies of farm implements, and a more extensive use of commercial fertilizers Mowever, large-scale delivery of fare equipment and commercial fertilizers does not appear possible for the duration of the war, Regraded Unclassified then - Perron "& 1/21/71 128 Contracts not's CONFIDENTIAL ACTION REQUIRED 1. m young 112- January 22, 1941 To: The Secretary From: Mr. Young Re: Approval of British Contracts Attached herewith is the first group of contracts on which the British would like approval so that the orders may be Inced. You will note that Sir Prederick Phillips has attached a letter of approval and that he has also signed the actual statement. All of these contracts are for machine tools. I have advised the British informally that there is no objection. P.Y. O.K.10m2 2 Regraded Unclassified 129 WILLARD HOTEL WASHINGTON, D. C. TELEPHONE REPUBLIC 7860 BRITISH PURCHASING COMMISSION January 22, 1941. The Hon. Henry Morgenthau, Jr. Secretary of the Treasury Washington, D.C. Dear Mr. Secretary, I write to inform you that I have approved and noted for the British Treasury all the machine tool contracts contained in "Application for Placement of Orders in the United States by the British Government". This statement is dated January 21, 1941. It shows the total value of the orders at $5,853,611.03, and the initial payment thereon at $1,545,836.54. I have also signed the original of the statement at the end thereof, on page 4. Yours very truly, 7 Phillips Regraded Unclassified 130 WILLARD HOTEL WASHINGTON, D. C. TELEPHONE REPUBLIC 7860 BRITISH PURCHASING COMMISSION January 22, 1941. Mr. Philip Young, Assistant to the Treasurer, Treasury Department, Washington, D. C. Dear Mr. Young, We enclose herewith three copies of application for placement of orders in the United States. This statement is dated January 21, 1941, covers machine tools only and shows, Total Value of Orders $5,853,611.03 Initial Payment $1,545,836.54 We also enclose a letter of Sir Frederick Phillips stating that these con- tracts have been noted and approved on behalf of the U. K. Treasury. Yours very truly, G.T. Ballartyne Regraded Unclassified 131 January 22, 1941 Mr. Young Secretary Morgenthau pee ans of 1/23/41 Please let me know how many Curtiss P-40s there are in New York awaiting shipment now, and while you are asking the English for that information, you might as well find out how many other planes there are awaiting shipment in New York. I would like to have this informa- tion from now on regularly once a week. Regraded Unclassified 132 STRICTLY CONFIDENTIAL Summary of Orders Placed by the British Government Through the British Purchasing Commission after December 19, 1940 Preliminary Report for Period up to January 16, 1941 (In millions of dollare) : Value of orders : Product : Capital : Total 99 contracts for $50,000 and over 113.1 6.4 119.5 393 contracts for less than $50,000 2.5 .2 2.7 Total: 492 contracts 115.6 6.6 122.2 ffice of the Secretary of the Treasury, January 22, 1941. Division of Research & Statistics. Excludes two orders for ships placed on December 20 with Todd-Bath Shipbuilding Corporation (amounting to $40.0 millions and 847.2 millions, respectively) and one order for airplanes placed on December 26 with Curtise-Wright Corporation (amounting to $13.6 millions). Also excludes orders placed during the week December 16-21 through the British Iron and Steel Corporation aggregating 1,462 thousands. Excludes an indeterminate number of contracts of the British Iron and Steel Corporation, the dollar values of which have been in- cluded in the above statement. Regraded Unclassified 133 Orders Placed by the Eritish Government Through the British Purchasing Commission after STRICTLY CONFIDENTIAL December 19, 1940 1 Preliminary Report for Period up to January 16, 1941 Contractor - Description 1. Date of: Quantity Value of order order : : : Product : Capital - Total Dec. Pratt A Whitney Div. of Jig borers, including 10 # 111,840 111,640 20 Riles-Bement-Pond Do., additional equipment Yest Hartford, Conn. Dec. Gray Motor Co., Four cylinder Diesal enginee 88 306,954 306,954 20 Detroit, Mich. completely equipped Doc. Kearney A Trecker Corp., #2H milling machines, extra 15 72,625 72,825 20 Milwaukee, Wiec. equipment and wiring Den. Pratt & Whitney Div. of Two-spindle reaming 10 60,687 60,687 20 Silee-Sement-Pond Corp., machines New York, N. Y. Dec, The Thospeon Grinder Co., Surface grinding machines 7 70,490 70,490 20 Springfield, Ohio Dec. E. V. Bliss Co., Capital assistance to 8 387,450 387,450 20 Brooklyn, K. Y. Resington Arus Co. for production of .50 caliber ammunition Date. Automatic Machinery Mfg. Hydraulic dual milling 25 123,750 123,750 20 Corp., Bridgeport, Donn, machines, complete with aquipment Dec. Pratt & Whitney Div. of Jig borers, including 7 118,545 112,545 20 Milee-Bement-Pond Co., equipment West Hartford, Conn. Dec. Pan American Airways Co. Spares for Beoing Model 324 335,224 335,224 20 Nov York, N. Y. flying boote Den. Consolidated Aircraft Corp., Bonb hoist and assembly for 3 20 Sen Diago, Calif. flying boats 67,503 67,503 Single cable bomb holes for 56 flying boats Dec. Fairchild Aviation Corp., Spare parts for Cine canara 63,761 63,761 20 Jamates, L. I., %. Y. guna Dec. Lookhend Aircraft Carp., Ammunition boxes and rittings 667 167,417 167,417 20 Burbank, Calif. for -50 cal. gun and 20 m. Bannon Dec. E. I. duPont de Nenours Rethyl Nethacrylate reain 3,039 60,576 21. 60,576 à Co., Arlington, N. J. sheete Dec. Pratt & Whitney Div. of Jie borere, including 18 125,666 21 128,686 Nilea-Sement-Pond Co., additional equipment West Hartford, Conn. Deo, General Machinery Corp., Time saver lathes, reste 25 440,825 21 140,825 Niles Tool Works Div., and equipment Hanilton, Ohio. Deo, Cos & Stevene Aircraft Corp., Reconditioned Douglas DC-2 3 137,100 21 Kineola, N. Y. 137,100 transports equipped with- engines, propellers, etc. Dec. Sperry Gyroscope Do., Ino., Boobsights and equipment 167 1,543,015 21 Brooklyn, N, Y. 1,543,015 Dec. Carter Carburetor Corp., Purchase of RYG futes 7,000 23 St. Louis, Mo. Assembly and packing of RYO futes 1,407,000 67,473 87,473 Obsoleecence expense charge Den. R. I, LaBlonde Machine Tool 10* X 24" bench lethes 150 140,058 23 Co., Cincinnati, Ohio 140,058 and extra equipment Dec. Forrecute Machine Do., Capital assistance to 23 Bridgeton, N. J. 291,000 291,000 Vestern Cartridge Go. Dec. Parter MoLeot Machine Tool Porter Holeod e ᵒ cold metal 25 75,552 23 Co., Inc., Hatfield, Mass. newing machinee 75,552 Dec. Simpone Machine Tool Carp., Micro-speed drive lathes 38 95,430 23 Sev York, I. Y. 95,430 Dep. Line Locomotive Vorke, Ino., Drag shovel unite, drag- 10 2 67,652 Line, Obio line mechanisms, and 67,852 dragline buckete Chain orowd shovel attach- 4 menta and clamshell graba $5-425 Buda engine complete 1 with all (Continued on next page) Office of the Bearetary of the Treasury, Division of Research and Statistics. January 22, 1041 Excluise two orders for ships placed on Dwoember 20 with Todd-Dath Shipbuilding Corporation (amounting to $48.8 millions and $47.2 willions, respectively) and one order for airplanse placed on December 26 with Ourties-Wright Corporation (smounting to $13.6 millions). Also excludes orders placed during the voek December 16-21 through the British Iron and Steel Corporation aggregating $1, 462 thousands, Regraded Unclassified 134 Orders Flaced by the British Government Through the British Purchasing Counission after STRICTLY CONFIDENTIAL December 19, 1940 1 Proliminary Report for Period up to January 16, 1941 (Continued - 2) Date off Contractor Description Quantity Value of order order E : I : Product : Capital 1 Total Dec. Cincimetti Milline Mch. 5 Vertical high speed dial 22 151,371 I 151,371 76 Sincinnati Orindere, Inc., type milling machines Cincinnati, Ohio and equipment Deg. International Machine Tool Turret lathee and extra 60 299.700 299,700 26 Co., Indianapolis, Ind. aquipment Reg. 11. a. Steel Export Co,, Nitration toluol 1,740,000 gale. 522,000 522,000 27 New York, 1. Y. Deo. Ensten Bickford Co., Primacord instantaneous 15 mil. 525,000 525,000 27 Biesbury, Conn. detonating ruses ft. Dec. Production Machine 90, Hand screw machines with 150 290,325 290,325 27 Greenfield, Mass. electrical and other add1- tionel equipment Keneney + Tresher Corp., *2HL svivel bend high apeed 78 Milimukee, Wine. vertical type milling machined 40 149,600 149,600 Dear. Xemeney A Trecher Com. #SH vertical type high speed 14 **,120 AR,120 Visc. Milveukee milling machines Dep., Internall-Myant and Miscellaneous items and 1,231,#00 1 1#,690 1,250,490 THE Jennan Foundry Co., capital sesistance for drawinge Mich. and patterne Co., Inc., Capital assistance for equip- 1,500,000 375,000 179,809 354,200 the Feaver Falls, Tenns. ment to manufacture 20 no. high explosive shelle for gune Dec. Younuth Pte. COLL Termath 225 h.m. 780m Wolf" 140 23#,000 PM Optrelt, Mich. 230,000 engines as Iron and steel ordered by the Britteb Iron & Steel Doro. Pig iron 40,000 gr.tone 1,200,000 1,200,000 Serap steel A iron 1,717 gr.tone 35,340 34,340 Commercial carbon steel 79,132 gr.tone 3,956,600 Alloy and special 1,956,600 purpose steel 9,019 gr.tone 1,57e,325 1,57m,325 Dec. Varner & Denney Co., +1-A universal hollow hexa- 9 95,500 10 Cleveland, Ohio. 95,500 gon turret lathes Dec, Horey Machinery Co. Inc., #12-M high apeed two-spindle 200 513,000 to 513,000 Nov York, N.Y. vertical profile and milling machines Onc. Chiebela-Ryder Co., Inc., E.M. bar Lanbert type hori- 40 500,000 500,000 30 Misigare Falle. N.Y. vontal boring, drilling. and milling aschines, with standard equipment Dec. Prove A Sharpe Mrg. Co., 4000 automatic acrew machines 58 95,59P 11 95.592 Providence, R. I, Freight charge to Sev York extra Den. Morey Machinery Co., Ino., Reconditioned machine taole 23 61,350 61.350 3) Nev York. n. Y, Dec. The National Acne Co., 2-1/4" Model "L" Gridley single 50 11 Cloveland, Ohio. spindle automatic machines and equipment 141,250 341,250 Extra charge for wiring and mounting electrical enuipment and boxing Dec. United kircraft Corp., Hamilton standard hydromatic 444 1.110,523 31 1,110,523 Tast Hartford, Conn, propellers Dec. Tennessee Coal, Iron . Nitration toludi M40,000 gale. 252,000 31 Railroad Co., 252,000 e/o U. 9. Steel Cory., New York, X. Y. Jan. Remington Arms Co., Cartridges 750,000 2 M7,56m 17,568 Bridgeoort, Conn. (Continued on nest page) Office of the Secretary of the Treasury, Division at Research and Statistics. January 22, 1941. Excludes two orders for ships placed on Donember 20 with Todd-Bath shipbuilding Corporation (smounting to $48.6 millione and $47.2 millions, respectively) and one order for airplanes placed on December 26 with Ourties-Wright Corporation (amounting to $13.6 aillions). Aleo arcludes ordere placed during the week Docember 16-21 through the British Iron and Steel Corporation aggregating $1,462 thousands. Regraded Unclassifie 135 Orders Placed by the British Government Through the British Purchasing Commission after STRICTLY CONFIDENTIAL December 19, 1940 Preliminary Report for Period up to January 16, 1941 (Continued - 3) Date of: : Contractor order : : Description : Quantity : Value of order : Product : Capital : Total Jan. Brown & Sharpe Mfg. Go., $20 automatic screw machines 28 # 162,702 I 162,702 2 Providence, R., I, Jan. Brown à Sharpe Mfg. Co., #000 automatic screw machines 40 125,261 2 125,261 Providence, R. I. and equipment Jan. United Aircraft Corp., P. & #, double wasp engines 1,438 45,921,206 3 East Hartford, Conn. B-2500, model 52A4-0 $5,921,206 P. & V. twin wasp engines 510 R-1830, modals 8304-0 and 5103-0 Jan. Higgine Industries, Ino., 36 ft. "Dureka" rescue bosts 112 649,600 3 New Orleans, La. 649,600 Jan. Pay & Boott Bullet canneluring machines 30 60,000 60,000 3 Dexter, Maine Jan. Gisholt Machine Co., Turret lathes with bar feed 2,622,000 3 2,622,000 Madison, Wisconsin attachment and collet chunks Jan. Cincinnati Willing Machine Milling machines 544 3,755,236 3 & Cincinnati Grindere, Inc., 3,755,236 Cincinnati, Ohio Jan. Dincinnati Willing Machine 18" milling machines with 500 1,342,350 3 A Cincinnati Grinders, Ino., 1,342,350 coolant pump, piping, and Cincinnati, Ohio arbors Jen. R. X. Le Blonde Machine Tool #2 deep hole drilling and a 52,938 W 52,938 Co., Cincinnati, Ohio reaning machines Jan, Brown è Sharpe Mfg. 06., #38 plain ailling machines 6 Providence, R. 1. R vertical milling machines 10 137,037 #2 surface grinding machines 137,037 50 Jan. Brown & Sharpe life. Co., #000 screw machines 12 3 Providence, R. I. 600 screw nachinee 8 #20 screw machines 12 132,347 #2 wire feed screw monines 132,347 6 #2 wire feed screw machines 6 Additional equipment Jan. Bundetrand Machine Tool Do., #00 hydraulic feed rigid aills 15 3 Rockford, n. 40 rigid mills 12 #1 rigid mille 12 111,930 #2 electromille 111,930 3 Equipment for above Jun. Landie Tool Co., Hydraulic grinding machines 6 - 70,611 70,611 Wayneaboro, Penne. and equipment Jan. The Ohio Machine Tool Do., Ohio production milling machines 20 4 125,000 Kenton, Onio 125,000 Jan. Landie Tool Co., Various hydraulic grinding 150 4 712,498 712,498 Waynasboro, Penna. machines Jun, Cone Automatic Machine Co., 1-1/2* six spindle conomatic bar 15 143,344 4 143,344 Windsor, Vermont machines, etc. Jan. Brown & Sharpe Vfg. Co., #2-0 high speed saraw machines 25 114,375 4 114,375 Providence, R. I, with electrical equipment Jan. Tan Foote-Burt Co., 1ª and 1-1/2* single spindle 40 223,125 4 Cleveland, Ohio 223,185 automatic acres machines Jan. Scripps Motor Co., Y-A enginee 100 at 53,005 Detroit, Mich, 53,005 Sets of 12 volt electric equipment 100 Deo. Iron and steel ordared by 29- the British Iron & Steel Jan. Corp. 4 Serap steel & iron 3,773 gr.tons 75,460 75,460 Commercial carbon etee) 86,569 gr.tone 4,329,450 4,329,450 Alloy and special 5,634 gr.tone 647,550 647,550 purpose steel Drop forgings 11,869 gr.tone 4,154,150 4,154,150 Jan. Brown & Sharpe Mfg. Do,, Various grinding and screw 6 147,918 Providence, a. I. 147,918 machines (Contimed on sext page) Office of the Becretary of the Treasury, Division of Research and Statistics. January 22, 1941. Expludes two orders for ships placed on December 20 with Todd-Bath Shipbuilding Corporation (mounting to $48.8 millions and $47.2 millions, respectively) and one order for airplanes placed on December 26 with Curties-Wright Corporation (amounting to $13.6 millions). Also excludes orders placed during December 16-21 through the British Iron and Steel Corporation aggregating $1,462 thousands, Regraded Unclassified 136 Orders Placed by the British Government Through the British Purchasing Commission after December 19, 1940 1 STRICTLY CONFIDENTIAL Proliminary Report for Period up to January 16, 1941 (Continued 4) Date of: Contractor 3 Description Quantity Value of order order : : Product : Depital 1 Total Jan. Jones & Laughlin Steel Nitration toluol 180,000 gals. $ 54,000 - Products Co., New York, N.I. 54,000 6 Jan. Wheeling Steel Co., Nitration tolual 200,000 gale. 60,000 6 New York, N. Y. 60,000 Jan. Wyman Gordon Go., Inc., Crankshaft forgings for 2,000 158,000 7 Woreester, Mass. Merlin engines 158,000 Jan. Hood Rubber Co., Submarine battery containers 240,950 8 11,500 7 Watertown, Kaas. with equipment; and Cap- 252,450 ital assistance Jan. Cincinnati Milling Machine Cincinnati Hydro-Tel ver- 11 233,651 7 and Cincinnati Grinders, tical die-sinkers and 233,651 Inc., Cincinnati, Ohio equipment Jan. Loewy Engineering Co., Ltd., 2000 ton horizontal extru- 1 265,000 7 New York, N. Y. sion press plant 265,000 Jan. Louis E. Enernan & do., Used machine tools & 17 120,655 7 Chicago, Ill. equipment 120,655 Jan. Great Lakes Steel Corp., Nitration toluel 180,000 gala. 54,000 8 Detroit, Mich. 54,000 Jan. Brown & Sharpe Hfg. Co., Screw-machines and 72 272,027 8 Providence, R. I. equipment 272,027 Jan. Warner & Swaney Co., Turret lathes and 1,500 8 2,167,125 Cleveland, Ohio. equipment 2,167,125 Jan. Pratt & Whitney Div. of #1B two spindle rifling 5 8 Niles-Bement-Pond do., 55,440 machines 55,440 Hartford, Conn. Jan. Delta Air Corp., Douglas DC-2 transports 4. 8 Monroe, La. 170,720 equipped with engines, 170,720 propellers, navigation and radio equipment Jan. Gisholt Machine Co., Turret lathee with collets 358 9 Madison, Wiso. 1,672,782 and feed chucks, etc. 1,672,782 Jan. Kent-Ovens Machine Co., 1-8 hydraulic milling 175 9 Toledo, Ohio. 320,950 machines and equipment 320,950 Jan. Caterpillar Tractor Co., Inc. Caterpillar Diesel tractors 10 Peoria, Ill. 258,542 with equipment and spare 258,542 parts Jan. Waterbury-Farrell Foundry Capital assistance for 10 5 & Machine Co., Remington Arms Co. for 67,500 67,500 Vaterbury, Conn. the production of amuni- tion Jan. Western Cartridge Co., Capital assistance for 20 East Alton, ni. machines and equipment for production of ammunition, etc. 222,270 55,174 277,444 Jan. United Aircraft Corp. Hamilton standard hydromatic 600 10 East Hartford, Conn, 1,797,600 propellers 1,797,600 Jan. National Fireworks, Inc., Additional capital assistance 11 Vest Hanover, Mass. 441,100 for machine tools for 75 - 441,100 shells Jan. U. 8. L. Battery Corp., Additional capital assistance 11 Long Island City, N. Y. 358,317 to facilitate production of 358,317 20 - inert projectiles Jan. 4-11 Iron and steel ordered by the British Iron & Steel Corp. Commercial carbon eteal 51,536 tone 2,319,912 Alloy and special 2,319,912 75,014 gr,tens 13,990,850 13,990,850 purpose steel Drop forgings 975 tone 341,075 342,075 Jan. Wayne Pump Do., Capital assistance for 13 1,000,000 Fort Vayne, Ind. 860,490 72,719 machinery and equipment 933,209 to produce 2 pounder high amplosive shells Nose plugs, die cast 250,000 Base plugs, die cast 250,000 Steel base plugs 3,000 Puse hols pluge 3,000 (Continued an mrt page) Office of the Secretary of the Treasury, Division of Research and Statistics. January 2, 1941. Excludes two orders for ships placed DE December 20 with Todd-Bath Shipbuilding Corporation (amounting to $48.8 millions and $7.2 aillions, respectively) and other order for airplanes placed on December 26 with Curties-Wright Corporation (asounting to $13.6 millions). Also excludes orders placed during the west December 16-21 through the British Iron and Steel Corporation aggregating $1,462 thousands. Regraded Unclassified 137 Orders Placed by the British Government Through the British Purchasing Commission after December 19, 1940 STRICTLY CONFIDENTIAL Preliminary Report for Period up to January 16, 1941 (Continued - 5) Date of: Contractor : Description I Quantity : Value of order order : : : : Product I Capital : Total Jan. National Malleable and Cast steel equare link 670 13 Steel Castings Co., mooring chains 600,000 $ Claveland, Ohio Mooring shookles 606 600,000 Jan. Republic Steel Corp., Additional capital assistance 3,750,000 15 Cleveland, Chio for production of armour 3,750,000 plate for M3 tanks Jon. Tennessee Povder Co., Additional capital assistance 160,100 15 to aid production of TNT and 160,100 Memphis, Tenn. DNT Jan. Tennessee Powder 00., Additional capital assistance 188,400 15 %eophis, Tenn. to ald production of rifle 188,400 and cannon nitrosellulose Jan. Curties-Wright Corp., Capital assistance to purchase 15 liev York, 11, Y, 56,000 special toole for construction 56,000 of engines Jan, llack life. Corp. Spare parts for 330 Mack trucks 363,208 15 Long Island City, N. Y. 363,205 Jan. Putnam Tool Co. Annular thread silling huba 5,000 68,392 15 Detroit, Rich, Center drills 66,392 2,000 Jm. National Firevorks, Inc., 2 pounder( (naval) H. V. anti- 1,000,000 1,720,000 15 West Honover, Nass. aircraft complete rounds 1,720,000 Jan. Union Bvitch é Signal Co., 20 no, Cerlikon H. E. shelle 1,250,000 309,375 15 Svisevale, Fa. 309,375 Jon. Voterbury-FarreIl Foundry Various machine toole 48 16 122,800 È Machine Co. 122,800 Vaterbury, Conn, Jan. liew Jersey Powder Oo., Additional cepital assistance 16 Kenvil, E. J. for powder plant 400,000 400,000 Jan. Cleveland Automatic Model "A" spindle automatic 10 16 Machine Co. 59,952 and out-off attachmente 59,952 Cleveland, Ohio Jan. Horton Co., Grinding machines & aquipment 13 16 Vorcester, Rees. 77,775 77,775 Jan. Cleveland Automatic Hodel "A" spindle automatic 15 16 Hachine do. #9,928 and out-off attentmente 89,926 Cleveland, Ohio Jan. John B. Stavens, Ino. Screw machines and extra 60 16 109,380 New York, E. Y. aquipment 109,380 Jan. Kelsey-Hayee Wheel Do, Additional oxygen cylinders 9,604 79,233 Detroit, Mich. 79,233 - Total, all ordere of $50,000 and over; 99 contracte 113,071,782 6,437,159 119,508,941 Combined total of orders for less than $50,000: 393 contracts 2,538,651 158,629 2,697,260 Grand total: 492 contracts 115,610,433 6,595,788 122,206,221 Office of the Secretary of the Treasury, Division of Research and Statistics. January 2, 1941. 1 Excludes two orders for ships placed sa December 20 with Todd-Batb Shipbuilding Corporation (mounting to $48.8 millions and $47.2 millions, respectively) and one order for airplanes placed on December 26 with Curties-Wright Corporation (amounting to $13.6 willions). Also excludes orders placed during the vest December 16-21 through the British Iron and Steel Corporation agregating n. 462 thousands. Emludes values of an which infeterminate have been minher included of in contracts the above of statement, the Brittial Iron and Steel Corporation, "Regraded Unclassified 137-A Conference Held in the Secretary's Office on January 22nd, at 9:15 A. M. (1341) Those present were Secretary Morgenthau, Secretary of War Stimson, Secretary of Navy Knox, Secretary of Commerce Jones, Mr. William S. Knudsen, Mr. John J. McCloy, and Mr. Philip Young. Secretary Morgenthau opened the conference by stating that the British wanted to place immediately in the United States about one and one-half billion dollars worth of orders, and that it appeared that the British could be helped only to R. very limited extent by the Army taking over standard United States contracts. Secretary Jones asked why it took so long, and McCloy replied that it took consider- able time to call in the manufacturers, readjust the contracts, and make the necessary changes in price. Secretary Morgenthau said that McCloy and the Army people had been moving heaven and earth to get something accomplished along that line but that it took days to do it and that a short cut crust be found. Secretary Knox said that the starting point must necessarily be the total amount of money which was currently available for such & job and added that certainly Jesse Jones didn't have a billion and one-half dollars on hand. Secretary Jones said he didn't have it, and that if he did he couldn't use it for that purpose. He stated that the Britiah had told him that the total VAB a billion one hundred million dollars. Secretary Morgenthau said that Purvis was sending over a list which should be there in B. few minutes. (The list arrived shortly thereafter). Secretary Stimson inquired 89 to how such of the billion and & half total was represented by United States type goods. Young said that about 376 million dollars were British type and 884 million dollars was United States type. Secretary Jones said that what would have to be done would be to take the most urgent items from the list and study those. Secretary Morgenthau said that & short cut must be found. Secretary Knox added that he thought it would be necessary to & to Congress. Mr. Knudsen also said that he thought an emergency appropriation would be neces- sary. It was Secretary Jones' reaction that if Congress were asked for the money it could probably be secured without much trouble. Secretary Stimson said that he had no argument with the 380 million dollars worth of British type stuff, but he did feel that ve should go easy in buying it, McCloy said he thought it was fictitious to talk about a distinction between British and United States types on the grounds that ve would probably adopt some of the British type stuff anyway. Regraded Unclassified 137-8 - 2 - Knudsen said that he thought we ought to start with what we already know about, and in response McCloy said that, after all, the critical items on the British list were of standard type. Secretary Stimson stated that he thought two crises were coming along. one inside of four weeks, and another some time after next winter. Secretary Jones asked Mr. Knudsen if he were buying for the British. Knudsen replied that he had been told at the White House that the Army and Havy were going to do it. He added that he didn't see how the United States could buy anything except United States type stuff until after the Lend-Lease Bill was passed; until that time the British would have to buy British type stuff with their own soney. Secretary Morgenthau nsked if they would buy British type stuff after the bill YAS passed. To this question both Secretary Knox and Secretary Stimson remlied yes provided that the President thought it vas in defense of the United States. Secretary Stimson pointed out his testimony before the House Committee in which he stated that there should be only one purchasing channel and that the British purchasing agencies out in the field should be cut out. Secretary Jones said let's put up something to shoot at 86 it would save time and suggested that the discussion start out with respect to plants. Mr. Knudsen nsked AS to how much was involved in setting up new plants and the materials for the new plants. Secretary Jones replied that there vas A substantial amount needed for the facilities and to set un the machinery. He suggested that the War Department and Knudsen send a letter to the President telling Jones to go ahead and place the orders. Secretary Stimson naked Jones how far he was prepared to go. and Secretary Jones replied that he would do all that needed to be done un- til Congress passed the Lend-Lease Bill, He added that he saw no reason why orders could not be placed for the product as well as the facilities. Further, it was Secretary Jones' reaction that the bill would be hurt if an appropriation for the British was requested before its passage. Secretary Morgenthau asked Secretary Jones to repeat his position in order that it be made perfectly clear. Again Secretary Jones said if you people will request the President to request Jesse Jones to do it then it can be done, and at the same time the authorization should cover enough orders to make it worthwhile. Mr. Knudsen pointed out that all the orders could be placed and that actually only one-third of the abount of money would be necessary. In other words, only that portion of it which would have to be used for an initial down payment. Regraded Unclassified 137.C Secretary Jones said that he could commit enough money for that provided, of course, that the Secretary of Var asked the President to direct Jones to do it. Secretary Morgenthau sug- costed taking York Safe and Lock as on example, which appeared on the detailed list of British contracts in the memorandum referred to above. Secretary Morgenthau asked Jones as to whether he could the whole order for $18,000 worth of bombs and ammunition with that company and actually give out the down payment. Secretary Jones said yes that he would order the goods if he had e. request from the Var Department end the Navy Department and the President, Secretary Stimson BRIC that he vanted to talk it over with his own smoble to be sure that the stuff on the British list ves stuff that the United States Army needs and could use Also. Secretary Jones sointed out that after all you didn't need to place an order for 883 million dollars of United States type goods just to start the -lants. Secretary Morgenthau again referred to the York Sefe and Look order And asked Mr. Kaudsen if in his experience it helped to include options with the original order, evidently having in mind the thought that perhaps a small order could be placed with an option for exten- sion, Mr, Koudsen said that was all right, and Secretary Jones edded that you con be sure the plan 1s practical if he said it. Secretary Stlason pointed out that, after all, the President WRE the only one Vis had the authority to nsk Jones to do it. Secretary Knox inquired concerning the 376 million dollars worth of British type goods as to whether A legitimate loan could not be code, Secretary Jones replied that his people had done a lot of work on it. For example, the British would have to place An order on duPont, who, in turn, would went a 20 million dollar down payment, end then the RFC would lend the money to duPont against Pritish col- Interni. Secretary Knox pointed out that the British hed already out up A lot of money in down payments. Secretary Morgenthau stated that they couldn't use the anze collateral twice and inquired as to the numbibility of Jones giving the British around $100,000,000 for Australian wool, which the British could then use to offset the 375 Million dollars of British type goods that they wanted to buy. Jonee said that he could buy the wool if it were certified AE 8. strategic and critical material. He said, however, that he thought 11 would by = dangerous thing to do as it might have an adverse reaction on the mill. He said that he couldn't lend to the 3ritish or for the account of the British. Regraded Unclassified 137-D Secretary Morgenthau inquired if there was any objection to New York banks making such 8 loan. Secretary Jones replied that he thought that would be fine. Secretary Morgenthau said that he would inquire into that, but that, if he couldn't work it out, he vould like to talk with someone in Jones' shop who knew about the wool business. Secretary Jones said for him to talk to Clayton or to Jones. It was Jones' reaction that the banke would shy away from it. Secretary Morgenthau pointed out, however, that the title would still remain in private hands. 800 Mr. Knudsen suggested that 18 million dollars worth of United States type goods be placed through Jones, 50 per cent down and 50 per cent more in sixty days. Secretary Morgenthau said that it would have to start with the Army and the Navy, Secretary Stimson said that he vas afraid it would hurt the bill if the contemplated plan leaked out through the various contractors involved. Secretary Korgenthau said that he felt the President should not do anything without discussing it with the leaders on the Hill. Further, that considerable thought should be given to maintaining British morale. Secretary Stimson stated that he thought of it all night and every night, and that he vas worried about what he could say in the future when he had to testify again if this contemplated plan were out through in the meantime. Secretary Morgenthau said that it was in the laps of the other gentlemen present and that he felt Secretary Jones' attitude had cleared the atmosphere. Secretary Jones said that he could trade out the deal with the various contractors 80 that each contractor had just enough to go ahead on. Secretary Stimson inquired as to what amount was necessary for A. firm contract, and Mr. Knudsen replied about 30 per cent. Mr. Knudsen also inquired from Jones as to who was to give the order to the contractor. Secretary Jones replied that he didn't know yet n.8 the machinery would have to be worked out. Presumably, the Army and Navy would negotiate the orders and then the RFC could place them, Secretary Morgenthau esloed if McCloy should continue his negotia- tions with the British, taking over AS many contracts for United States type goods as possible. Secretary Stimson said that he thought McCloy should so continue as far as he could. Secretary Jones said that he could only buy an outstanding plant from the British, not every little piece of property. Secretary Morgenthau said he was still troubled about what the British would do for money. McCloy stated that there was 300 million Regraded Unclassified 137-E 5 dollars of aircraft manufacturing capacity included in the one billion dollare of proposed British contracts, He suggested that Secretary Jones go ahead and finance that AS there WAS certainly no doubt about the United States needing it too. Mr. Morgenthau neked Secretary Jones if he could do it, and Jones replied that he didn't know if he could go 80 far as 300 million dollars. Secretary Stineon added that he didn't know whether or not he could certify to that extent. McCloy repented that the United States had to get that much capacity anyway. Secretary Knox stated that he thought Harry Hopkins should 6° up on the Hill and ask for the money. He added that the Havy got some money overnight for its share of the 12,000 plane scheme. Secretary Jones said that he thought the immediate program should be kept as small as possible in order that Congress should not be worried about it. It vas his feeling that Congress would complain and criticize 1f the figures were too large. Secretary Stimson said that he guessed he was more conservative as he was worried about what the President would say if e real emergency for the United States came - overnight. Secretary Morgenthau congratulated Secretary Jones and Secretary Stimson on the attitude which they had taken as it looked as though this night be the solution for carrying the British during the interim period pending the passage of the Lend-Lesse Bill. He thanked the gentlemen for coming, and the meeting was adjourned with the understand- inc that Secretary Jones would talk it over with some of his people end also look into the wool situation A little more, while at the same time Secretary Stimson would 60 over the British list of proposed contracts to 000 how for the Army could certify AS to what was necessary for both the United States and the British. Dr. Regraded Unclassified 138 January 22, 1941 Mr. White Secretary Morgenthau Please let me have your latest chart on shipping losses; also if you have a chart now showing tonnage delivered to England. Pearaded 139 January 22, 1941 Mr. Haas Secretary Morgenthau Please let me know the next time you see me what the situation is at the Port of New York with respect to movement of goods out of the Port. The last time I saw the chart, merchandise was accumulat- ing in New York. Regraded Unclassified 140 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE January 22, 1941 TO Secretary Margenthau FROM Mr. Haas DA Subject: Export freight situation. In response to your request of this morning, I am attaching herewith three charts showing the export freight situation at the Port of New York. The volume of export freight accumulated at New York reached a peak in the first week of January, and then de- clined sharply. A elight increase was shown last week. (See Chart 1.) The drop in accumulated export freight during the second week of January was due to a sharp increase in the amount ex- ported during that week, coincident with 8. falling off in re- ceipts. The exports fell off somewhat last week, however, (see Chart 2), while receipts of export freight at New York (Chart 3) showed an increase. It 18 likely that export freight receipts at New York and at other North Atlantic ports during the first two weeks of January were affected to some extent by reduced carloadinge during the hollday period. Attachments Regraded Unclassified 141 LIGHTERAGE FREIGHT IN STORAGE AND ON HAND FOR UNLOADING IN NEW YORK HARBOR 1019 1940 1941 nov, DEC. JAM. FCB. MAR. APR. MAY JUNC JULY AUG. SEPT. OCT. NOV. DEC. JAN. FCB. MAR, APR. 11 1 CARLOADS CANCOMES THOUSANDS requested 12 12 11 If 10 10 9 0 6 # 7 6 5 4 , 21 4 16 I 15 1 15 29 12 26 16 30 13 27 11 25 822 6 20 Las 17 31 14 28 12 26 9 23 7 11 = DI 9 23 6 20 3 17 2 JUNE JULY DOT, NOV. DEC. JAN, FER, MAR. APR. NOV. DEC, JAN. YCD. MAR. MAY AUG. SEPT. APR. 1941 1939 1940 *LANGELY EXPORT FREIGHT, BUT ABOUT 10% REPRESENTS FREIGHT FOR LOCAL AND COASTAL SHIPMENT. FIGURES EXCLUDE GRAIN. an M the Secretary of the Treasury C - 303 - A United of Resersh and Statistics 142 CARLOADS OF FREIGHT EXPORTED PROM NEW YORK* Chart 2 CONF CONFIDENTIAL 1939 1940 1941 NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. ocT. NOV. DEC. JAN. (CD. MAR. APR. 1 CARLOADS CARLOADIS THOUSANDS THOELANDS 6.0 6.0 5.5 5.5 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 3.0 1.0 2.5 2.0 2.0 at 11 3 9 23 6 20 3 17 2 16 30 13 27 11 25 B 22 6 JULY 20 3 AUG. 17 31 SEPT. 14 26 OCT. 12 26 9 NOV. 23 7 DEC. 21 4 JAN. 10 * FER. 15 1 MAR. 15 29 APR. 12 26 NOVE DEC. FEB. MAR. APR. MAY JUNE 1941 JAN. 1940 939 . AS ESTIMATED FROM DATA OF GENERAL MANAGERS' ASSOCIATION OF NEW YORK. (Wire of - funny of the Treasury C C - 308 - A 1 and 143 41% RECEIPTS OF FREIGHT FOR EXPORT AT NEW YORK AND AT 9 OTHER NORTH ATLANTIC PORTS 1939 1940 1541 Chart NOV. DEC. JAN, FEB. MAR. APR. MAY JUNE JULY AUG. SEPT OCT. NOV. DEC. JAN, FEB. MAR. APR CARLDADS CARLOADS THOUSANDS THOUSAND 6.5 6.5 0.0 0.0 5,5 5,5 New YORK 5.0 5.0 4.5 4,5 4.0 4.0 3.5 3.5 9 OTHER PORTS 3,0 3.0 2.5 2.5 2.0 2.0 1,5 1.5 1.0 1.0 .5 3 o c 29 12 % 11 17 2 16 30 13 27 11 25 8 22 6 20 3 17 31 14 28 12 26 9 23 7 21 4 16 I 15 1 15 26 25 9 23 6 20 3 NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DEC. JAN. FEB. MAR. APR. 1941 1939 1940 Office of the Secretary of the Transary C - 304 - A of and Statestics