APPENDIX I

NOTE ON THE CEEC DEFINITION OF DOLLAR OIL

The calculation of dollar and nondollar oil-import requirements, as presented in the CEEC report, is not entirely satisfactory. In the case of oil a really accurate break-down of supplies from dollar and other sources would have met great difficulties. The CEEC dollar and nondollar oil definitions should therefore be used only after their meaning has been clearly understood and full cognizance has been taken of all the qualifications, which must be introduced before it can be applied to the solution of the specific problems of an analysis of dollar and nondollar supplies. These main qualifications are discussed in the following paragraphs.

According to the CEEC definition, dollar oil is that marketed within the participating country by an American company, and nondollar oil is that marketed by a non American company, regardless of the source of supply. The nondollar figure in the CEEC report is not, therefore, a statement of the quantity of oil available from nondollar sources for ERP requirements, but rather a statement of the quantity which would normally be sold by other than American companies at the consumption level envisaged in the report. As a matter of fact, it is known that the British companies would have had to purchase 2.2 million tons of oil from dollar sources in order to supply the quantities required of them in 1948 by the original CEEC estimates.

Further, the definition used ignores the dollar-cost element in nondollar oil, such as royalties, wages, etc., for British-controlled production in the Western Hemisphere, or royalties or other expenses paid to middle eastern countries and convertible into hard currency. It also ignores the nondollar cost element in dollar oil, such as the royalties, etc., paid in connection with United States-controlled production in Iraq and Bahrein, or the sterling price paid by a United States company for purchases of oil from Iran.

In addition, it appears that the definition of dollar and nondollar oil as presented in the CEEC report has not been applied consistently by the different countries. Some countries simply divided total imports on a 50-50 basis between dollar and nondollar sources. Nor is it clear how, under this definition, sales of local independent companies in the participating countries have been treated. Some of these companies undoubtedly draw their supplies from dollar sources, yet it appears that under the CEEC definition such sales in some cases might have been classified as nondollar imports.

The dollar and nondollar oil figures, therefore, do not really indicate the country origin of the oil nor in all cases its dollar or nondollar company origin. The dollar and nondollar oil breakdown does not permit any accurate judgment on the actual availability of American- or British-owned oil, as the nondollar oil figures include oil to be obtained from American companies and vice versa. Finally, the report does not give a correct statistical picture of the real dollar and nondollar currency needs of the participating countries for oil purchases. Most of these factors, however, have been taken into consideration in the balanceof-payment calculations which include also the foreign-exchange income of the British oil industry from its world-wide operations.

The CHAIRMAN. Are there any further questions, gentlemen?

Mr. Douglas, we thank you for your appearance here this morning, and we realize that your time is precious and that you should give this amount of time to this committee is very much appreciated and will prove very helpful to us.

I know from my own experience that there is no one who is better qualified to speak of an explain and give information concerning the European program than yourself, knowing that you were in the center of it at all times during the past summer when it was under consideration and that your consideration has been continually given to it since that time.

We appreciate the opportunity we have had to have you before us as a witness this morning.

Ambassador DOUGLAS. Thank you very much, Mr. Chairman.

Mr. BULWINKLE. I want to say that we are certainly delighted to have you with us here today. We were on the same side of the aisle

once.

The CHAIRMAN. Notwithstanding the aisle may have divided the House, at that time there was no division as far as the membership was concerned as to the ability of the gentleman then from Arizona. Ambassador DOUGLAS. And still from Arizona. Thank you, Mr. Chairman.

The CHAIRMAN. That is all for now. We will adjourn, subject to

call.

(Whereupon, at 12:20 p. m., the committee adjourned, subject to the call of the Chair.)

(The following letter (and attached copy of letter) was later received from Ambassador Douglas:)

The honorable CHARLES A. WOLVERTON,

DEPARTMENT OF STATE, Washington, February 18, 1948.

House of Representatives.

MY DEAR MR. WOLVERTON: I am writing Congressman Heselton today giving him the additional information necessary to complete my answers to questions which he asked in the course of my testimony before your committee on February 6, 1948. Since the information in my letter to Congressman Heselton is necessary to complete my testimony before your committee, I am enclosing a copy for incorporation in the record in such manner as you may see fit.

Sincerely yours,

The honorable JOHN W. HESELTON,

(Signed) L. W. Douglas
(Typed) LEWIS W. Douglas.

House of Representatives.

MY DEAR MR. HESELTON: I have considered the questions which you asked me during my testimony on the European recovery program before the House Interstate and Foreign Commerce Committee on February 6, 1948, and to which you referred in your recent telegram. One of these questions concerned my views with respect to the three resolutions introduced by you on February 9, 1948, providing for embargoes on the export of petroleum and petroleum products for periods of 15, 30, and 60 days, respectively. You also inquired whether in my opinion the 5 years 1934-38 would constitute a fair base period for obtaining average export figures for comparison with current exports, assuming the same percentage increase in exports as in consumption in this country.

The placing of an embargo on exports to friendly countries for any period of time is a drastic measure for any nation to take relative to its established trade with other countries. In deciding whether such action is advisable, it seems to me that appropriate consideration must be given not only to the need for greater supplies for domestic consumers in the United States but also to our national interest in having friendly foreign countries obtain the minimum supplies essential to their economies. I believe these objectives can better be achieved by a more flexible solution than the prohibition of all petroleum exports for any given period of time.

The enlistment of the cooperation of foreign countries in reducing imports from the United States the maximum practicable extent at this time is the method of meeting this problem that I consider preferable. This approach more nearly would conform to the friendly and cooperative spirit in which problems arising in our relations with other governments are best solved. I understand that the Department of Commerce, in accordance with the resolution adopted by the committee on February 2, 1948, is endeavoring on this basis to effect further reductions in the export quotas of kerosene, gas oil, distillate fuel oil, and residual fuel oil. As to whether the years 1934-38 would constitute a fair period upon which to base current exports of petroleum, assuming the same percentage increase in such base-period exports as has occurred in our domestic consumption of petroleum, it is my judgment that such a basis would be entirely equitable in the establishment of over-all export quantities and in the treatment of foreign nations as a whole. It is a more liberal basis of determining total export quantities than that now in effect, either for all products, or on a product-by-product basis. If it