893.50 Recovery/6–2848

The Secretary of State to the Chairman of the Senate Committee on Appropriations (Bridges)

My Dear Senator Bridges: The receipt is acknowledged of your letter of June 28, 1948 in regard to the extension of aid to China as authorized by Public Law 472, in which you ask for an “explanation of the slow action by the Department of State” and request assurance that immediate action will be taken to carry out the wishes of the Congress as expressed in the enactment of Public Law 472.

The China Aid Act of 1948 (Title IV of the Foreign Assistance Act of 1948) authorized the appropriation of $463,000,000 for assistance to China to remain available for obligation for the period of one year. Of this total $338,000,000 was authorized to be appropriated for economic type assistance, which would be administered by the Administrator for Economic Cooperation. The sum of $125,000,000 was authorized to be appropriated for additional aid to China through grants, on such terms as the President might determine and without regard to the provisions of the Economic Cooperation Act of 1948.

On April 30, 1948, after consultation with the Administrator for Economic Cooperation and subsequent negotiation with Chinese Government representatives, the Secretary of State exchanged notes with the Chinese Ambassador67 which until July 3, 1948 would provide a legal basis for the implementation of Section 404(a) of the China [Page 105]Aid Act of 1948. Prior to this exchange of notes, the Acting Secretary of State addressed a letter to the Director of the Bureau of the Budget recommending that the $50,000,000 advance by the Reconstruction Finance Corporation authorized under Section 406 of the China Aid Act of 1948 be divided as follows: $36,500,000 to the Administrator for Economic Cooperation to provide initial economic assistance to China and $13,500,000 to be reserved as part of the additional aid through grants to the Chinese Government to be transferred in accordance with the terms decided upon by the President.

Accordingly, $36,500,000 has been made available to the Administrator for Economic Cooperation for use in the program of economic assistance. Most of these funds have been committed for commodities which have either arrived in China or are in the process of being shipped to China.

Following detailed discussion by representatives of the Bureau of the Budget, the Treasury Department and the Department of State of the question of the terms to govern the transfer of the funds under the $125,000,000 grants in additional aid authorized in Section 404(b) of the China Aid Act of 1948, the Secretary of State submitted a memorandum dated May 14, 1948 to the President in which he recommended that the President delegate his powers under Section 404(b) of the Act to the Secretary of the Treasury. On May 18 the Under Secretary of State forwarded a letter to the Director of the Bureau of the Budget68 enclosing a draft letter of allocation setting forth these terms and asking for Presidential approval thereof.

During the hearings on the China Aid Act of 1948 before the House Appropriations Committee, members of the Committee indicated to representatives of the Department of State and the Economic Cooperation Administration concern over what was regarded as a lack of adequate control of the expenditure of the $125,000,000 grants to be made available to the Chinese Government in accordance with the provisions of the China Aid Act of 1948. On May 24, 1948 the Committee in executive session asked the Under Secretary of State for a statement of the arrangements to be prescribed by the President for the transfer of these $125,000,000 grants to the Chinese Government. Statements by members of the Committee indicated that the terms which had been set forth in the draft letter of allocation forwarded to the Director of the Bureau of the Budget by the Under Secretary of State on May 18 would not conform to the wishes of the Committee in this respect. The Bureau of the Budget, therefore, in consultation with the Department of State, revised the terms contained in the draft letter of allocation and forwarded the revised terms to the Chairman of the House [Page 106]Appropriations Committee in a letter dated May 26, 1948. The Chairman was informed that the President had not yet issued any determination of the terms for these grants and that no payments had yet been authorized from the advances made available for this purpose under Section 406 of the China Aid Act of 1948. He was also informed that the arrangements presently contemplated included procedures which were set forth in the letter.

Under date of June 2, 1948 the President addressed a letter to the Secretary of State69 outlining the procedures under which the $125,000,000 grants authorized in Section 404(b) of the China Aid Act of 1948 were to be made available to the Chinese Government and stating that the Secretary of the Treasury had been informed of these procedures and that an allocation of $13,500,000 had been made to him to carry out the provisions of Section 404(b) of the China Aid Act of 1948.

The Department of State had already prepared a note to the Chinese Ambassador communicating to him the above-mentioned terms and was on the verge of transmitting this note when indications were received that the House of Representatives was considering a Foreign Aid Appropriation Bill which contained a proviso that the administration of the China aid program conform with the objectives of assistance to Greece and Turkey. This would have required the imposition of terms different from those called for in the enabling legislation and would thus have made impossible the use of the terms decided upon by the President, as set forth in his letter of June 2, 1948 to the Secretary of State. On June 4, 1948 the House of Representatives passed the Foreign Aid Appropriation Bill (H. R. 6801) containing the above-described proviso, reducing the total amount of aid for China from $463,000,000 to $400,000,000 and making no provision for an earmark of $125,000,000 for additional aid through grants. The Department of State did not, therefore, consider that it could communicate terms to the Chinese Government regarding these $125,000,000 grants which would be clearly inapplicable and inappropriate in the light of the action of the House of Representatives. Consequently, further action in this regard was held in abeyance pending the passage of legislation by the Congress appropriating funds for implementation of the China Aid Act of 1948.

The views of the Department on the reductions in the estimates and on the proposed controls are contained in the letter of June 10, 1948 addressed to you by the Under Secretary of State.70

On June 15, 1948 the Senate approved certain amendments to the Foreign Aid Appropriation Bill, 1949, one of which removed the [Page 107]Greek-Turkey proviso contained in the House Bill and thus made the $125,000,000 grants available in accordance with the terms of the enabling legislation. On June 19, 1948 the Foreign Aid Appropriation Bill, 1949, was sent to Conference. The Conference Report shows that the total amount of aid to China was reduced from $463,000,000 to $400,000,000, that the Greek-Turkey proviso was removed from the Bill and that the $125,000,000 grants were thus to be made available to China in accordance with Section 404(b) of the China Aid Act of 1948. The Foreign Aid Appropriation Act, 1949, was then passed by the Congress on the same day.

The President signed the Foreign Aid Appropriation Act, 1949, on June 28, 1948. On the following day, the Department of State forwarded a note, dated June 28, 1948, to the Chinese Ambassador communicating the terms prescribed by the President governing the transfer of the $125,000,000 grants under Section 404(b) of the China Aid Act of 1948 and informing him that implementation of this Section of the Act would be promptly undertaken upon the receipt of a note indicating the Chinese Government’s agreement to these terms. A copy of this note is attached for your information.

At the same time the Department of State forwarded copies of this note to the Secretary of the Treasury, the Secretary of Defense and the Director of the Bureau of the Budget. In the letter71 transmitting a copy of this note, the Director of the Bureau of the Budget was asked to take the necessary action to have allocated to the Secretary of the Treasury the funds authorized under Section 404(b) of the China Aid Act of 1948 and appropriated by the Congress in the Foreign Aid Appropriation Act, 1949.

I am certain that you will recognize from the foregoing description of the circumstances relating to the $125,000,000 grants under the China Aid Act of 1948 that the Department of State has taken and is taking all possible steps to carry out the wishes of the Congress as expressed in the enactment of the China Aid Act of 1948 and the Foreign Aid Appropriation Act, 1949.

Sincerely yours,

For the Secretary of State:
Charles E. Bohlen

Counselor
  1. See Department of State Bulletin, May 16, 1948, pp. 647–648. Cf. also telegram No. 843, May 10, 3 p.m., from the Ambassador in China, p. 515.
  2. Not printed.
  3. United States Relations With China, p. 946.
  4. Economic Cooperation Administration, p. 551.
  5. Not printed.