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April 21, 1946 HAC p&per on distribution of Chulrs&n McCabe EKP aid between loang and grants Mr. Kaapp Attached is the paper prepared for the National Advisory Council on the subject of U p distribution of £KP aid between loans and grants during the first three months of the Program* The action which appears at the end of the paper was approved by the Council by telephone poll at the end of last veek. Attachment ccj Governor Eccles Governor Szymczak JBK:mla •'CONFIDENTIAL National Advisory Council Staff Comnittoo Document No* 218 April 19, 1948 MEIXIJAHDUM To: NAG Staff Committee rrom: S ub j e c 11 EH? .-orking Group Allocation of EPJ3 Funds, April-June 1943 Problem The Economic Cooperation Administrator at the National i.dvisory Council meeting of iipril 12 requested the Council to provide him with data prepared by the Staff Committee on allocations for the April-June quarter. The attached suamary table has been prepared in response to this request. Procedure Followed by the staff Committee The procedure followed was to apply a series of adjustments to the March estimates of the Western Hemisphere deficits of the various areas, after applying a uniform correction for price increases0 It is recognized that these March estimates are subject to considerable revision before they can be taken as the definitive basis for the year's allocations. However, they can be considered reasonably satisfactory as the basis for computing the first installment since thoro is the possibility for compensation in the later installments as the allocations for the full twelve months are being ostablished. (1) The first adjustment was to reduce the .ostorn Herd.sphere deficit by tho amount of loans and credits which may reasonably bo anticipated from Canada and Latin ^jaorica, and by the estimated drawings on existing credits from U.S, Government agencies or international agencies (Columns 2 u.nd 3 in the attached table) o (2) The resulting figures wcrw then converted to a total of ,,.1301 million by applying percentage ratios derived from the March estimates of gross shipments to each country from tho rib•torn Hemisphere during the period (Column 4 ) . (3) iidjustments were then estimated for offshoro purchases by Austria and Greece in Bizono of liorm&ny and in Belgium-Luxembourg respectively (Column 5)» (4) Tho adjusted figures (Column 6) are taken to represent first quarter installments of rjRP funds which would bo appropriately allocated to tho different countries on the basis of tho considerations explicitly set forth in preceding columns of the table. State Department's Juggestcd Allocations Column x shows figures suggestod indopondcntly by.the State Department. Attempts mado by the working Group to reconcile theso figures with those in Column 6 proved impracticable. Tho Department of State in arriving at its estimates has not used the March figures as a point of departure, CONFIDENT i:ii National advisory Council Staff Committee Doc. No. 218 - 2 - Problems Encountered in the jillocations The major technical problems encountered concern tho financing of' offshore procurement in Jurope and procurement by participating countries outside th~ ./cstorn Kcniiaphore* .ihile the Larch estimates for the balance of payments indicated deficits with other participating countries for Germany and BolgiunwLuxGrabourgj it was tho gonorai feeling that thoso countries would in fact run intra-lCRF surpluses during this period. Howovorj in absence of a satisfactory estimate of the amounts, it was considered desirable to limit the adjustments on this score to tho xainimuia considered essential. Thoso adjustments aru entered in Column 5 of the table. In particular, it was felt necessary to provide dollars to ^.ustria which would be passed to Germany in being used to purchase coal in Germany. The direct German allocation to meet its .cstcrn Hemisphere deficit would bo reduced by this amount which Germany would be receiving indirectly. A similar adjustment was made in the cases of Greece and Belgium-Luxembourg. There is some evidence that other countries may also find it necessary to pay dollars on balance to Germany, even though the existing balance of payments estimates indicate that Germany will have a deficit with tho other participants as a group. In the absence of a change in German policy, it might therefore be nec-jssary to take account of and make allowance during the next period for some drafts upon European reserves during the x.prilJune period. On the other hand, Bizono Germany has been committed to a purchase of $10 million of Italian fruits and vegetables during the quarter. This and similar transactions may result in a short-fall in German dollar receipts. The dataworo not available, however, to effect a complete redistribution of dollar payments to take account of the individual deficits or surpluses with other participating countries which may in fact be recorded in Germany's trade during this quarter. CGNFID&NTIii CONFIDENTIAL National Advisory Council Staff Committee Document No, 218 ' • Allocation offrl301Million of ERP Funds Based on March Estimates of Yifestern Hemisphere Deficits on Current Account and State Department's ISuggested Allocation April - June, 191*8 (millions of dollars) (2) . , (3) (U) (5) : (1) March estimate u. s. Co lumn Offshore Net of of V/.K. Deficit Procurement Columns (at adjusted (3) 1 and 2 Adjusted t/ Within Europe Funds Other Than ERP prices) a/ Austria rel-Lux and D.O.T. Denmark France (incl. D.O.T. and Saar) Germany: French Zone Bizone Greece Iceland Ireland Italy -50 -121 -1*1 •f- 1 (Exlm) -1*9 /35 (Bra zi 1-1**5 ^anada-l*#; -86 IBRD-5; Exim-22) -21 /20 (Exim-5; IBRD-15) -355 /30 (Argentina-10*; C ana da-10*; Exlm-5\ Brazil-5*) -20 -223 -20 -70 • A53 (GaRIOA-153) / 10 (Carryover from Greek -26 Aid Appropriation) - 2 -36 - 2 -325 -31 -31 -157 /32 (^rgentina-12; -125 ExIm-20) /68 (Argentina-ll**; Canada1**; IBRD-50) -120 /10 (Exlm) -15 -21* Neth. and D.O.T. -188 Norway Sweden Turkey U.K. and D.O.T. -25 -2J4 hh ^11 11 - 72 19 19 15 . 292 292 375 18 82 28 20 2' 1 10 18 93 c/ 23 : 5 '• ' • -11 2 28 113 1 1 3 .,._• -1839 A26 165 - 108 13 22 108 13 22 -199 hh9 -11*13 1301 » _ •-_ 90 10 0 10 375 (Contingency Fund) TOTAL 75 50 28 •y /67 (Canada-7 Argentina-60) (x) 70 20 XXX -566 (6) Computed State 1st Quarter Dept•s• Installment Suggested on yearly AllocaAllocation tion 0 1301 15-20 1301-1306 • f 6 CONFIDENTIAL N a t i o n a l Advisory Council S t a f f Committee Document No. 218 - 2 - # a/ Estimated amount of assistance to be forthcoming, Prices adjusted country by country en basis of uniform overall price adjustment used in presentation to Congress. b/ Column (3) adjusted to $>13O1 million in Column (I4) by distributing difference among the countries in proportion to each country's share of shipments from Western Hemisphere in Kpril-June period. c/ Includes $30 million for purchases in non-participating countries outside the Western Hemisphere. CONFIDENTIAL