THE MUTUAL SECURITY ACT AND OVERSEAS PRIVATE INVESTMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP58-00453R000200110001-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 94
• Document Creation Date: November 17, 2016
• Document Release Date: August 7, 2000
• Sequence Number: 1
• Publication Date: June 3, 1953
• Content Type: REPORT

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83d Congressl
1st Session J
[SUBCOMMITTEE PRINT]
COMMITTEE ON FOREIGN AFFAIRS
THE MUTUAL SECURITY ACT
AND
OVERSEAS PRIVATE INVESTMENT
PRELIMINARY REPORT
OF THD
SUBCOMMITTEE ON
FOREIGN ECONOMIC POLICY
JUNE 3, 1953
UNITED STATES
GOVERNMENT PRINTING OFFICE
31156 WASHINGTON : 1958
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FOREIGN AFFAIRS COMMITTEE
SUBCOMMITTEE ON FOREIGN ECONOMIC POLICY
JACOB K. JAVITS, New York, Chairman
DONALD L. JACKSON, California LAURIE C. BATTLE, Alabama
KARL M. LECOMPTE, Iowa BURR P. HARRISON, Virginia
SUELDON Z. KtPLAN, Staff Consultant
HELEN L. HASILICEN, Staff Assistant
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LETTERS OF TRANSMITTAL
HOUSE OF REPRESENTATIVES,
COMMITTEE ON FOREIGN AFFAIRS,
Washington, D. C., May 27, 1953.
This report has been submitted to the Committee on Foreign Affairs
by the Subcommittee on Foreign Economic Policy, comprising Hon.
Jacob K. Javits (chairman), Hon. Donald L. Jackson, Hon. Karl M.
LeCompte, Hon. Laurie C. Battle, and Hon. Burr P. Harrison.
The report is being distributed in subcommittee print form so that
it may be available to the ffill membership of the Committee OD
Foreign Affairs.
ROBERT B. CHIPERFIELD, Chairman.
MAY 27, 1953.
HOD. ROBERT B. CHIPERFIELD,
Chairman, Committee on Foreign Affairs,
House of Representatives, Washington, D. C.
DEAR MR. CHAIRMAN: There is transmitted herewith the report of
the Subcommittee on Foreign Economic Policy on the Mutual
Security Act and Overseas Private Investment.
It is hoped that the information which the report contains will be
useful to the members of the committee in connection with the present
hearings on the proposed Mutual Security Program for fiscal year 1954.
JACOB K. JAVITS, Chairman.
HI
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CONTENTS
Page
m
nc
Letters of transmittal
Foreword
I. Introduction
1
A. Committee report on Act for !International Development
1
B. Committee report on Mutual Security Act of 1952
1
C. Purpose of subcommittee report
2
D. President's state of the Union message (February 2, 1953)_
2
II. Division of functions
2
A. Mutual Security Agency
2
B. Department of Commerce
3
C. Department of State
3
D. Technical Cooperation Administration
3
E. Overall supervision by Director for Mutual Security
3
III. Mechanics of organization
4
A. Structure
4
B. Interagency mechanism
8
1. Establishment of Inter-Agency committee
8
2. Establishment of steering group
8
3. Agency-to-agency contact
9
4. Preliminary work pending Commerce study
9
IV. Increasing interest in the program
9
A. Impact of Mutual Security Program
9
B. The Douglas appointment
9
C. President's message to Congress (May 1, 1953)
10
D. United Nations
10
1. Economic and Social Council
10
2. General Assembly resolutions (December 1952) _ _
11
3. Fiscal Commission
13
4. Secretariat report
13
5. Fiscal Commission Resolution
13
6. Other activities
14
E. Executive branch
14
1. The President's Materials Policy Commission
14
2. The International Development Advisory Board__ _
15
3. The Maffry report
16
4. The Sawyer report
18
5. The Bell report
18
F. Legislative
18
1. House Resolution 96 and Senate Resolution 25_ _ _ _
18
2. S.849
19
3. H. R. 4199
20
4. H. It. 4465
22
5. Senate Joint Resolution 78
23
G. Private business
25
1. Commerce and Industry Association of New York__ _
25
2. The National Foreign Trade Council
25
3. National Association of Manufacturers
26
4. Detroit Board of Commerce
26
V. Department of State
26
A. Commercial treaties
26
1. General assurances
26
2. Recent negotiations
27
3. Hearings before Senate Foreign Relations Com-
mittee
27
4. Impetus of treaties on future negotiations
28
5. Establishing the proper climate
28
6. Limitations
28
7. Temporary arrangements
28
8. Field instructions
29
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V. Department of State-Continued
Page
B. Department of Commerce study
29
C. Accomplishments
29
1. Republic of China
29
2. Colombia
30
3. Egypt
30
4. Ethiopia
30
5. Japan
31
6. Israel
31
7. The Netherlands
31
8. Pakistan
32
9. Southern Rhodesia
32
10. Peru
32
11. Turkey
33
12. Venezuela
33
.
VI. Mutual Security Agency (MSA)
33
A. Requirements of section 516 (b)
33
B. Industrial guaranties issued
34
C. Bilateral agreements
34
D. MSA descriptive release
35
E. Latin America
35
F. Weaknesses in existing law
36
1. Time factors__
36
2. Need for broader coverage
36
G. Remaining funds for new uses
37
H. Tabulation of guaranties issued and pending
38
1. Industrial investment guaranties issued, cumulative
April 3, 1948-December 31, 1952
38
2. Industrial investment guaranties pending as of
December 31, 1952
40
' VII. Technical Cooperation Administration (TCA)
42
A. Overall responsibilities
42
1. General objectives of program
42
2. Responsibilities under section 516 (e)
42
3. Pooling of resources with Department of Corn-
merce
42
B. Locating opportunities for private investment
42
C. Service to business project
44
D. Extension of the investment-guaranty program
44
E. Industrial development-private investment program
44
1. Productivity centers
45
2. Latin America and small industries
45
3. South and southeast Asia and industrial develop-
ment
45
4. Latin America and flow of capital
46
5. Asia Development Service
46
F. Promoting.participation of private agencies by contract_
46
1. Mandate of section 407 (a)
46
2. Summary of contracts and amounts
47
G. The Maffry report
51
H. Need for accelerated action
51
THE Department of Commerce
51
A. Requirements of section 516 (c)
51
B. Need for basic information
51
C. Shift of emphasis to underdeveloped countries
52
D. Current preparation of investment guides
52
E. Office of International Trade
53
IX. Related activities as part of total program
53
A. General.53
1. Necessary base for capital
53
2. Broader objectives
53
3. Inconvertible currencies and exchange control
54
4. United Nations
54
5. Elimination of bond defaults
55
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IX. Related?activities as part of total program?Continued
B. Examples of interrelationship of broad policies and capital
Page
investment_
55
1. The Foreign Service and private foreign investment_
56
2. Relationship of IMF and GATT to flow of private
capital
56
(a) International Monetary Fund
56
(b) General agreement on Tariffs and Trade
57
3. Export-Import Bank and flow of private capital_ _
58
4. Effects of restrictive business practices on investment
capital flow
60
5. International Bank for Reconstruction and Develop-
ment
61
X. Acceleration of investment opportunity reporting
62
A. Brazil
62
B. India
64
C. France
64
D. Belgium
65
E. Egypt
65
F. Turkey
66
G. Netherlands
66
XI. United States tax incentives
67
A. Importance of incentives
67
B. Western Hemisphere trade corporations
68
C. Treasury attitude
68
D. Some tax incentive precedents
69
1. Exemption from tax on income derived from United
States possessions
69
2. Exemption of compensation for personal services_ _ _
69
3. Postponement of tax on profits
69
4. Excess profits tax exemption
69
5. Depletion allowance for oil
69
E. Justification
70
XII. Recommendations
70
A. Tax incentives
70
B. Joint ventures
71
C. Centralized supervision and direction
72
D. Guaranties
72
E. Publicizing economic and social benefits
73
F. Special envoy
74
G. Treaties of friendship, commerce, and navigation (FCN)
74
H. Balancing the needs
74
I. Wider use of International and Export-Import Banks
74
J. Cooperation between private enterprise and foreign coun-
tries
75
K. Overall policy
76
Appendix:
I. Department of State?Foreign Service: Economic Reporting
Circular No. 31, July 20, 1951
77
II. TCA Circular Airgram, October 23, 1952
79
III. Sample Guaranty Agreement (Philippines)
82
IV. United States direct investment overseas:
A. Value
84
B. Net movement
87
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FOREWORD
SUBCOMMITTEE ON FOREIGN ECONOMIC POLICY,
FOREIGN AFFAIRS COMMITTEE,
HOUSE OF REPRESENTATIVES,
Washington, D. C., May 27, 1958.
The Foreign Affairs Committee wrote into the Mutual Security Act
of 1951, section 516, which constitutes the basic charter of private-
enterprise participation in the mutual security program. This con-
cept was broadened and made more definitive by the committee in the
1952 amendatory act. Indeed, section 516 represents a major step
taken legislatively toward a positive position of enlisting the partner-
ship of private enterprise to a significant degree in implementing
United States foreign policy in general.
The Subcommittee of the Foreign Affairs Committee on Foreign
Economic Policy deals with "all matters affecting our foreign relations
that concern trade, international financial and monetary organi-
zations, foreign loans, and technical and economic assistance."
The subcommittee has been engaged in taking testimony from the
Government and interested private groups on the whole range of
United States foreign economic policy. One of the elements of that
policy is the question of stimulating a greater participation by Ameri-
can private enterprise as an arm of American effort in making our
foreign policy work.
This report gives an account of the implementation by the executive
branch of section 516 and related sections of the Mutual Security Act,
together with a statement of the major recommendations submitted
to the subcommittee. The report is preliminary. It is the intention
of the subcommittee upon the completion of its study to issue a report
covering other facets of American foreign economic policy. Since the
question of private enterprise overseas connot be considered by itself,
separate and distinct from other programs, only the major recommen-
dations made or brought to the attention of the subcommittee are
included, in consolidated form.
JACOB K. JAVITS, Chairman.
Ix
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THE MUTUAL SECURITY ACT AND OVERSEAS PRIVATE
INVESTMENT
I. INTRODUCTION
A. COMMITTEE REPORT ON ACT FOR INTERNATIONAL DEVELOPMENT
The House Foreign Affairs Committee in reporting favorably the
Act for International Development emphasized that there were two
equally important parts of the technical cooperation program?tech-
nical assistance and investment capital:
Technical cooperation programs and methods to encourage the flow of invest-
ment capital are the means available. They are mutually complementary and
indispensable to economic development. Section 302 emphasizes this point, and
section 303 embodies it in policy instructions to United States Government
agencies.
Economic development cannot be achieved in underdeveloped areas simply by
providing dollar aid to purchase equipment, food, or raw materials. Funds
spent for these purposes in these areas would not go to the root of the matter.
They could not be efficiently utilized in many cases. To a large extent they would
be wasted. The problem is primarily one of assisting peoples to make more
effective use of their own resources, human and physical, than they have up to
this time. This will require capital in the beginning or later, in the form of
loans or investments.
Two of the most effective means to achieve economic development are technical
assistance and a greater flow of investment capital. Both are necessary if levels
of national income, as measured by economic productive power, are to be
raised. The cold figures of energy consumption, health conditions, life expectancy,
and the like, show that until some improvement can be effected, productive
power will remain low no matter how much capital flows in. At the same time,
it is footless to embark on a program of utilizing resources more efficiently if the
flow of investment capital is not encouraged (H. Rept. No. 1802, pt. 4, 81st Cong.,
pp. 4 and 7).
B. COMMITTEE REPORT ON MUTUAL SECURITY ACT OF 1952
In reporting out H. R. 7005, amending the Mutual Security Act of
1951 (which later became Public Law 400, 82d Congress, Mutual
Security Act of 1952), the Foreign Affairs Committee further stated:
One of the basic principles which the Congress has emphasized in the statutes
governing the mutual security program is the importance of private capital
investment as a potent force in raising the economic and social standards of
underdeveloped areas. Not only does private investment bring capital, but it
also brings with it technical knowledge and management experience, so sorely
needed. Further, it relieves the American taxpayer, in the long run, of the burden
of governmental foreign aid where cooperative aid can be appropriately handled
by private sources. Moreover, private capital offers a natural vehicle for close
cooperation between private citizen and private citizen rather than between
government and government, and hence is of special importance. There are
several provisions in the law which deal with this principle, notably sections 516
and 520 of the Mutual Security Act of 1951, sections 403, 405 (e), 407, 409, and
410 of the Act for International Development, and sections 111(b) (3) and 111
(c) (2) of the Economic Cooperation Act of 1948, as amended. They were
seriously and carefully written by the legislative branch. It was, and is, intended
that they be implemented. The committee is not satisfied that the Director for
Mutual Security has exerted all the reasonable effort possible to implement those
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provisions. In amending section 516 of the Mutual Security Act, the committee
makes more explicit in this bill its intent with respect to the role of private enter-
prise in building mutual security. It is not, of course, the objective of this pro-
gram to benefit private capital. The point is that private capital has a definite
place in the program which should be recognized by the executive branch and our
partners in mutual security (II. Rept. 1922, 82d Cong. 2d sess., p. 62).
C. PURPOSE OF SUBCOMMITTEE REPORT
The purpose of this subcommittee report is to give an account to
the committee and to the Congress of the implementation by the
executive branch of section 516 of the Mutual Security Act of 1951,
as amended,?
(1) Taking into consideration the two complementary methods to
achieve economic development, laid down in the Act for International
Development;
. (2) In the light of the legislative intent of section 516, above; and
(3) In view of the statement by the Honorable Jacob K. Javits,
sponsor of section 516, during the debate on the conference report on
H. R. 7005 that?
it is the intention of our committee to follow through and see that the various
Government departments concerned implement those sections and do sonP,thing
about them as a very sure way of seeing that our burdens from the Government
side are reduced.
D. PRESIDENT'S STATE OF THE UNION MESSAGE (FEBRUARY 22 L953)
The part of free private enterprise in foreign economic policy -akes
on added importance in view of the President's state of the Union
message to the 83d Congress, February 2, 1953, in part, as follows:
Our foreign policy will recognize the importance of profitable and equitable
world trade. A. substantial beginning can and should be made by our friends
themselves * * * Action along these lines can create an economic environment
that will invite vital help from us. Such help includes * * * doing whatever
our Government can properly do to encourage the flow of private American
investment abroad. This involves, as a serious and explicit purpose of our
foreign policy, the encouragement of a hospitable climate for such investment in
foreign nations.
II. DIVISION OF FUNCTIONS
Section 516 of the Mutual Security Act of 1951, as amended by
section 7 (k) of the Mutual Security Act of 1952, recognizing that
different agencies of the Government have different functions to
perform, divides the responsibilities as follows:
A. MUTUAL SECURITY AGENCY
(b) To accomplish the purpose of clause (1) of subsection (a) of this section,'
under the coordination of the Director for Mutual Security, the Mutual Security
Agency, cooperating with private business groups and governmental agencies to
the fullest extent possible, shall encourage a greater participation by private
capital in the guaranty program and shall develop broad criteria to facilitate such
participation, including programs consistent with the purposes of the Act for
International Development.
'This clause provides: "It is hereby declared to be the policy of the Congress that this Act shall be admm-
istered in such a way as (1) to eliminate the haulers to, and provide the incentives for, a steadily increased
participation of free private enterprise in developing the resources of foreign countries consistent with the
policies of this Act."
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B. DEPARTMENT OF COMMERCE
(c) The Department of Commerce shall, in cooperation with such groups and
agencies (including the International Bank for Reconstruction and Development),
conduct a thorough study of the legal and other impediments, foreign and local,
to private investment abroad, and the methods and means whereby those impedi-
ments can be removed or decreased and shall make recommendations thereon to
the Director for Mutual Security.
C. DEPARTMENT OF STATE
(d) The Department of State, in cooperation with other agencies of the Govern-
ment concerned with private investment abroad, and taking into account the
study and recommendations described in subsection (c) of this section, shall
accelerate a program of negotiating treaties of commerce and trade, or other
temporary arrangements where more suitable or expeditious, which shall include
provisions to encourage and facilitate the flow of private investment to countries
participating in programs under this Act.
D. TECHNICAL COOPERATION ADMINISTRATION
(e) The Technical Cooperation Administration, taking into account the study
and recommendations described in subsection (c) of this section, shall encourage
and facilitate a greater participation by private industrial groups or agencies in
private contracts awarded by the Administration, and shall, in cooperation with
the Department of Commerce and the Mutual Security Agency, find and draw
the attention of private enterprise to opportunities for investment and develop-
ment in underdeveloped areas.
E. OVERALL SUPERVISION BY DIRECTOR FOR MUTUAL SECURITY
It is to be noted that section 501 of the Mutual Security Act of 1951,
as amended, places upon the Director for Mutual Security overall
responsibility for continuous supervision and general direction of the
mutual-security program. The stated purpose is to fix responsibility
for the coordination and supervision of the various aspects of the
program in a single person so as to give unified direction to the
activities authorized. Insofar as agencies participate in the program,
they, of course, come within the purview of this overall responsibility.
Moreover, during the debate on the conference report on H. R. 7005,
the sponsor of section 516 made it clear that the agencies concerned
"should work closely together and with the Director for Mutual
Security."
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1.-1.0001.1.00ZOOON?91700-89dCIN-V10 92/80/000Z aseeieN .10d peAORldV
III. MECHANICS OF ORGANIZATION
A: STRUCTURE
CHART
THE ORGANIZATION OF THE EXECUTIVE BRANCH FOR ENCOURAGEMENT OF PRIVATE INVESTMENT ABROAD
THE PRESIDENT
NATIONAL ADVISORY COUNCIL
ON
INTERNATIONAL MONETARY
AND FINANCIAL PROBLEMS
r
?
T'
-T
---I
II I
FEDERAL
RESERVE
BOARD
EXPORT IMPORT
BONN
TREASU Y AND
U.S. REPRE-
SENTATIVE
INTERN TIONAL
BANK FOR RE-
CONSTRUCTION
AND
DEVELOPMENT
COMMERCE
STATE
DIRE TOR
FOR
NUT AL
SECURITY
DEFENSE
LABOR
OUR
INTERIOR
SEWN TIES
AND EXCHANGE
COMMISSION
OFFICE OF
DEFENSE
INDBILIZATiON
DOPE SE
MATER ALS
PRECAREFIENT
AGENCY
TECHNICAL
COOPERATION
ADmINISTRATION
MUT AL
SEER ITV
AGENCY
mum; INDICATES SINE OF AUTHORITY FDA COOL/WOOS SUPERVIOON
AND GENERAL DIRECTION OF THE ASSISTANCE PROGRAMS NKR
THE MUTUAL SECURITY ACTOR 1951.
DOES NOT INDICATE AUTHORITY BUT INDICATES ONLY INTEREST
AND COOPERATION IN THE PROGRAM OF ENCOURAGING PRIVATE
INVESTMENT.
J.
N..
COOPERATIVE ACTIVITY IN THE ENCOURAGEMENT
OF PRIVATE INVESTMENT ABROAD
THE CCNOTTEE OR PRIVATE PARTICIPATION IN
FOREIGN ECONOMIC DEVELOPMENT
a.
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CHART 2
THE ORGANIZATION OF THE OFFICE OF THE DIRECTOR FOR MUTUAL SECURITY AND THE MUTUAL SECURITY AGENCY
FOR THE ENCOURAGEMENT OF PRIVATE INVESTMENT ABROAD
DIRECTOR
DEPUTY DIRECTOR
ASSISTANT DIRECTOR, RESOURCES AND REQUIREMENTS
PRIVATE INVESTMENT
COORDINATING STAFF
SPECIAL ASSISTANT,
EXECUTIVE RECRUITMENT AND
PRIVATE INVESTMENT'
PUBLIC ADVISORY
BOARD
CONSULTANTS
(Private lAvostivant)
OFFICE OF TOE GENERAL
RoORIEL_
SPECIAL ASSISTANT FOR
SMALL BUSINESS
AMSTRIT DIRECTOR
FOR FAR EAST
ACTING ASSISTANT DIRECTOR
FOR ESROPE
CHIEF, EUROPEAN
REGIONAL STAFF
INVESTMENT AND
TRAK PROBLEMS
CHIEF, OVERSEAS
TERRITORIES STAFF
FIELD OPERATIONS
ACTING ASSISTANT DIRECTOR
FOR SUPPLY
ACTINO DIRECTOR,
INDUSTRY DIVISION
INDUSTRIAL
DEVELOPMENT
STAFF
CHIEF OF MISSION
INDUSTRY ADVISORS
INVESTMENT
GUARANTIES
STAFF
DIRECTOR, PRODUCTIVITY
AND TECHNICAL
ASSISTANCE DIVISION
3/18/53
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CHART 3
THE ORGANIZATION OF THE DEPARTMENT OF STATE FOR ENCOURAGEMENT OF PRIVATE INVESTMENT ABROAD
SPECIAL ASSISTANT
MUTUAL SECURITY AFFAIRS
THE SECRETARY OF STATE
INTERNATIONAL DEVELOPMENT
ASSISTANT SECRETARY FOR ECONOMIC AFFAIRS
DIRECTOR,
' OFFICE OF FINANCIAL AND
DEVELOPMENT POLICY
SPECIAL ASSISTANT,
PRIVATE INVESTOR
CHIEF, INVESTMENT
AND ECONOMIC
DEVELOPMENT STAFF
ASSISTANT CHIEF,
PRIVATE INVESTMENTS
DIRECTOR,
OFFICE OF ECONOMIC DEFENSE
AND TRADE POLICY
CHIEF, COMMERCIAL
POLICY STAFF
CHIEF, ECONOMIC
TREATIES ORAN=
FIELD OPERATIONS
ADMINISTRATOR FOR TECHNICAL COOPERATION
DIRECTOR,
FROMM PLANNING STAFF
CONSULTANT -
ACTING SPECIAL ASSISTANT
FOR
PRIVATE INVESTMENTS
DIRECTOR, INDUSTRY
AND COMMERCE STAFF
ASSISTANT ADNINI-
STRATOR, NEAR EAST
AND AFRICAN DEVELOP-
MENT SERVICE
CHIEF, COMMERCE
AND INDUSTRY
AMBASSADORS
ECONOMIC COUNSELLOR
AND STAFF
DIRECTOR OF TECHNICAL
COOPERATION
INDUSTRY ADVISORS
ACTING PRESIDENT,
INSTITUTE OF INTER -
AMERICAN AFFAIRS
DIRECTOR, DIVISION
OF INDUSTRY, GOVERN-
MENT AND TECHNICAL
SERVICES
ASSISTANT ADMINI-
STRATOR, ASIAN
DEVELOPMENT SERVICE
ACTING INDUSTRY
ADVISOR
Jod pe4oRldv
001.1.00ZOOON?9170
S
CHART 4
THE ORGANIZATION OF THE DEPARTMENT OF COMMERCE FOR ENCOURAGEMENT OF PRIVATE INVESTMENT ABROAD
THE SECRETARY OF COMMERCE
ASSISTANT SECRETARY
FOR INTERNATIONAL AFFAIRS
DIRECTOR,
OFFICE OF INTERNATIONAL TRADE
ASSISTANT DIRECTOR
FOR ECONOMIC AFFAIRS
INVES1VENT STUDY
STAFF
ASSISTANT DIRECTOR
FOR INTELLIGENCE AND
SERVICES
1
ASSISTANT DIRECTOR
FOR FOREIGN ECONOMIC
DEVELOPMENT
ASSISTANT SECRETARY
FOR DOMESTIC AFFAIRS
DIRECTOR,
OFFICE OF ROSINESS ECONOMIC
CHIEF,
SALINCE OF PAYMENTS
DIVISION
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OVERSEAS PRIVATE INVESTMENT
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8 OVERSEAS PRIVATE INVESTMENT
B. INTERAGENCY MECHA.NISNI
The Mutual Security Act of 1951 assigned to the Director for
Mutual Security "primary responsibility for continuous supervision
and general direction" of the programs of military, economic, and
technical assistance authorized in the act. The Director thus acquired
responsibility to coordinate the efforts under the Act for International
Development to encourage "the flow of investment capital" and
under the Mutual Security Act of 1951 "to eliminate the barriers to,
and provide the incentives for increased participation of free private
enterprise." (sec. 516). The Mutual Security Act of 1952 amended
section 516 of the 1951 act by adding the specific references to the
responsibilities of MSA, TCA, State, and Commerce in encouraging
private investment, quoted above. It required the Mutual Security
Agency (MSA) under the coordination of the Director for Mutual
Security (DMS), to "encourage a greater participation by private
capital in the guaranty program."
1. Establishment of Inter-Agency Committee
The Director for Mutual Security, after consultation with the
National Advisory Council, established in February 1952 an. Inter-
Agency Committee on Private Participation in ? Foreign Economic
Development in order to provide a common forum in which all
agencies whose operation in any way could encourage private invest-
ment abroad were represented. In addition to MSA and TCA,
other member agencies, not under the coordination of the Director,
included State, Defense, Treasury, Interior, Agriculture, Commerce,
Labor, Export-Import Bank, Defense Materials Procurement Agency,
Securities and Exchange Commission., and, in an associate capacity,
the International Bank for Reconstruction and Development. The
committee served as a facility to make possible greater interagency
exchange of information and ideas. It has not served as an inter-
agency coordinating body.
2. Establishment of steering group
In July 1952, there was established a steering group, consisting of
the agencies most concerned. The group included MSA, TCA, State,
Treasury, Commerce, and, on some matters, the Export-Import Bank.
Through weekly meetings with this group during the early months
of the fiscal year, the Director kept himself informed of the activities
of the principal agencies concerned: For example, the group pro-
vided a forum for formulating comments and recommendations for
the United States representatives at the meeting last summer of a
group of experts requested by the Organization for European Eco-
nomic Cooperation (OEEC) to study private investment in dependent
territories in Africa. In July 1952, the Director issued a document
prepared cooperatively with the agencies, setting forth their policies,
program plans, and organizational responsibilities relating to section.
516, as amended. Directives were issued MSA and TCA to under-
take intensive programs as rapidly as possible in certain specified
countries that the agencies might deem most appropriate for initial
effort and experimentation. This is being pursued by both agencies.
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3. Agency-to-agency contact
More recently, direct agency-to-agency contact has been maintained
with TCA, MSA, State, and Commerce on their various specific
assignments in section 516. In particular, there have been meetings
every 2 weeks between DMS and Commerce concerning the progress
of the investment study being conducted pursuant to section 516 (c).
DMS has also been in touch with problems which have arisen in
extending the investment guaranty program to the underdeveloped
areas and in initiating experimental investment programs in particular
Countries.
4. Preliminary work pending Commerce study
During October 1952 it became apparent that the Commerce study
would not be available in time to be a basis for fundamental discus-
sions in early 1953 on the future activities concerning private invest-
ment under the Mutual Security Program. The course of the study
indicated that it would be concerned principally with investment
conditions and the nature of investment deterrents in foreign countries,
with recommendations for improving such situations, and would not
result in extended treatment of financial inducements which the United
States Government might wish to consider as measures capable of a
significantly early increase of the rate of new private investment
abroad. Therefore, the Director for Mutual Security with the aid
of a small temporary staff drawn from MSA and TCA, and supple-
mented by several part-time consultants, has been preparing prelimi-
nary material to assist the Director concerning various forms of
inducements to encourage a greater amount of private investment
abroad. It was hoped that this work would form a useful comple-
ment to the Commerce study.
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IV. INCREASING INTEREST IN THE PROGRAM
A. IMPACT OF MUTUAL SECURITY PROGRAM
The problem of private enterprise in the context of the foreign
economic policy of the United States has received attention and
study since the authorization of the Mutual Security Program by the
Congress. With the passage of the Mutual Security Act of 1952 the
process was accelerated. It may be stated that this is due in large
measure to the efforts of the House Foreign Affairs Committee in
this respect, manifested in section 7 (k) of the 1952 act drafted in
committee, which expanded and made more definitive the intent of
the Congress contained in the original section 516 of the 1951 act.
B. THE DOUGLAS APPOINTMENT
On March 19, 1953, the President announced the designation of
Lewis W. Douglas, former Under Secretary of the Treasury and former
Ambassador to Great Britain, as head of a study group to reexamine
United States foreign economic policy. It is expected that Mr.
Douglas will confine his study to financial subjects growing out of
the United States-United Kingdom economic discussions held in
Washington in February and March.
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C. PRESIDENT'S MESSAGE TO CONGRESS (MAY I, 1953)
On May 1, 1953, the President in a message to the Congress recom-
mended that a commission be established to make a review and
thorough reexamination of our foreign economic policy (H. Doe
No. 138, 83d Cong.). In this message the President again stressed
the role of private enterprise as an arm of United States foreign
economic policy:
As I indicated in my previous message, the achievement of a strong and self-
supporting economic system in the free world, capable of providing adequate
defense against aggression and of achieving rising standards of living, must be a
cooperative effort. Through increasing two-way international trade and stimu-
lating in every practical way the flow of private investment abroad we can
strengthen the free world, including ourselves, in natural and healthy ways. By
so doing, we can lessen and ultimately eliminate the heavy burden of foreign
aid which we now bear. Both we and our friends abroad earnestly desire to see
regular trade and investment replace grant assistance.
D. UNITED NATIONS
1. Economic and Social Council
Various bodies of the United Nations have frequently discussed the
subject of private investment, usually as part of the broad problem of
financing the economic development of underdeveloped countries.
In 1950, for example, the Economic and Social Council adopted a
resolution: which stressed the duty of governments of the underde-
veloped countries to take domestic measures, and to negotia t,e inter-
national agreements, for the encouragement of private investment.
A further resolution adopted by the Council the following year went
into greater detail. Specific steps were recommended to underde-
veloped countries, such as the institution of programs of education
and domestic reforms to attract private capital, the preparation of
information for foreign investors, the avoidance of double taxation,
negotiation of commercial treaties which include provision for duty-
free importation of capital equipment, guaranties against nonbusiness
risks, reexamination of local investment laws, assurances that foreign
investors may manage and expand their enterprises, provision of
compensation in the event of nationalization, and the like.
At the request of the Economic and Social Council of the United
Nations, the Secretary General appointed a group of experts to study
the problem of reducing unemployment and underemployment in
underdeveloped countries. The expert group presented a unanimous
report on Measures for the Economic Development of Underdeveloped
Countries, which was published in May 1951 under U. N. a..ispices.
In the section of the experts' report dealing with external capital from
all sources, a very rough estimate is given of the amount of capital
required by underdeveloped countries (including the Republic of
China) to raise their national income per capita by 2 percent per
annum. The calculation is necessarily crude but is included in the
report to give some notion of the substantial magnitudes involved.
Total capital needed is estimated at $19 billion per annum (about 20
percent of the national incomes of these countries) of which the annual
capital required from external sources is in excess of $10 billion.
A
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2. General Assembly Resolutions (December 1952)
The most recent U. N. action was the adoption of a resolution by
the General Assembly last December, which will set the stage for an
extensive discussion 111 the Economic and Social Council at an early
session of the steps the United Nations, the specialized agencies and
Member Governments might take to stimulate the steady flow of pri-
vate capital in adequate amounts into underdeveloped countries.
Sections B and C of the resolution read as follows:
a
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SECTION B
The General Assembly,
1. Taking note with satisfaction of the preliminary report by the Inter-
national Bank for Reconstruction and Development which had been re-
quested by the Economic and Social Council, in its resolution 368 (XIII)
of 22 August 1951, to consider the potential contribution an international
finance corporation could make to promote economic development through
the financing of productive enterprise in under-developed countries,
2. Recalling that the Economic and Social Council, in its resolution
416C (XIV), requested the International Bank for Reconstruction and Devel-
opment to continue its examination of the proposal and, in the light of
that further examination, to seek the views of its member governments on
the desirability of establishing such a corporation, and to inform the Council
during 1953 of the results of its further examination of the proposal and the
action it has taken concerning it,
3. Considering that the questions relating to the establishment of an
international finance corporation have been discussed by the Economic and
Social Council at several sessions, and that consultations are in progress
with a view to defining more clearly in what respects this proposal can
be made practicable with the object of providing greater facilities for financing
the development of under-developed countries,
4. Looks forward to the early completion of their tasks by the International
Bank for Reconstruction and Development and the Economic and Social
Council;
5. Requests the Secretary General to place at the disposal of the Inter-
national Bank the records of the discussion of this subject at the seventh
regular session of the General Assembly; and
6. Requests the Economic and Social Council to report to the General
Assembly at its eighth regular session on the progress of the proposal regard-
ing the establishment of an international finance corporation.
SECTION C
The General Assembly
1. Considering
(a) the importance of stimulating the international flow of private capital
for the economic development of the under-developed countries,
(b) the work which has already been done in this field by the Economic and
Social Council, by its regional commissions, and by the specialized agencies;
and the various studies on this question which have been prepared by govern-
ments of various Member States, by the Secretary General and by a number
of non-governmental organization,
(c) that certain governments have taken action designed to stimulate the
flow of private capital for economic development purposes, and
(d) that despite the efforts which have Already been made in this regard,
the flow of private capital is not yet adequate to cover the need of the under-
developed countries;
2. Requests the Secretary General
(a) to include in an early future world economic report an analysis of the
international flow of private capital including the volume and direction of
that flow as well as the types and the fields of application of such investment
and any reasons for the continued inadequacy of such investment in under-
developed countries so as to facilitate the Council's efforts in its formulation
of constructive proposals, and
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(b) to prepare a memorandum for the Economic and Social Council sum-
marizing the work done, the studies conducted and actions taken, as referred
to in sub-paragraphs (b) and (c) of paragraph 1 above; and
3. Requests the Economic and Social Council, in the course of its considera-
tion of the question of financing economic development in the light of the
analysis and the memorandum referred to in paragraph 2 above, to give
attention at an early session to the steps the United 'Cations, the spe:Aali zed
agencies and Member Governments might take to stimulate the steady flow
of private capital in adequate amounts into under-developed countries.
In December 1952, the General Assembly of the United Nations
adopted a "nationalization'" resolution, over the objection of the
United States delegate, concerning the right of member states freely
to exploit their natural resources. The text of the resolution is as
follows:
The General Assembly,
Bearing in mind the need for encouraging the underdeveloped cournrics in
the proper use and exploitation of their natural wealth and resources,
Considering that the economic development of the underdeveloped Coun-
tries is one of the fundamental requisites for the strengthqning of universal
peace,
Remembering that the right of peoples freely to use and exploit their
natural wealth and resources is inherent in their sovereignty and is in accord-
ance with the Purposes and Principles of the Charter of the United Nations,
1. Recommends all Member States, in the exercise of their right freely to use
and exploit their natural wealth and resources wherever deemed desirable by
them for their own progress and economic development, to have due regard,
consistently with their sovereignty, to the need to maintain the flow of capital
in conditions of security, mutual confidence and economic cooperation among
nations:
2. Further Recommends all Member States to refrain from acts, direct or
indirect, designed to impede the exercise of the sovereignty of any State over its
natural resources.
This resolution developed from a draft resolution presented by the
Uruguayan representative on the Economic and Financial Committee
of the Assembly. In its original form, the draft resolution called
upon the U. N. to recognize the right of states to nationalize domestic
resources and implied that this right needed protection and that the
General Assembly favored nationalization as a matter of policy.
Action on the resolution was opposed by the developed countries
and by some of the underdeveloped countries such as the Philippines.
This opposition was based on (1) the fact that the problem of the
right to dispose of natural resources was already before another body
of the United Nations; and (2) the unfavorable impression such a
resolution would make on private investors, since it contained no
reference to the obligations of states to respect the rights of foreign
investors in connection with nationalization. The resolution, how-
ever, was forced to a vote and carried in the Committee after rejection
of a series of United States amendments designed to set forth in
general terms the obligations toward private investors in cases of
nationalization.
The unfavorable response to the resolution by the United S.-Ates
financial press and by business groups interested in foreign investment
had an effect upon some delegates who were supporting the resolu-
tion. In the Assembly the Indian delegation proposed an amendment
calling upon countries which nationalized to bear in mind?
the need to maintain the flow of capital in conditions of security, mutual cowl
dence, and economic cooperation among nations.
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Although this amendment considerably improved the resolution,
the United States delegate felt it did not go far enough and hence
could not support the amendment. In the plenary session of the
Assembly the amended resolution was adopted by a vote of 36 to 4
with 20 abstentions. The United Kingdom, South Africa, and New
Zealand joined the United States in voting against it. The United
States delegate stated that the resolution was still unbalanced since
it did not give adequate attention to the obligations of governments
which nationalized. A number of countries abstained on the grounds
that the resolution was unnecessary (in that the right to nationalize
is well recognized under international law) and might have harmful
repercussions on the flow of private investment into underdeveloped
areas.
3. Fiscal Commission
The Fiscal Commission of the U. N., which met in New York
? April 27?May 8, 1953, had before it the question of fiscal incentives
to increase the international flow of private capital for the economic
development of underdeveloped countries. The basis for the inclu-
sion of this item on the agenda was a resolution adopted by the
Economic and Social Council last July calling upon the Fiscal Com-
mission to:
give further consideration to the problems of taxation in relation to foreign invest-
ments . . . [and] to examine further the proposal that, through bilateral agree-
ments or unilateral measures, income from foreign investments in under-developed
countries should be taxed only in these countries, with such income being exempted
from taxes by countries other than those in which the foreign investments are
made . . .
4. Secretariat report
In preparation for this discussion the U. N. Secretariat prepared
reports on the Taxation of Foreign Investment in Mexico, and on
United States Income Taxation of Private United States Investment
in Latin America. The latter report was largely, the work of certain
American experts, including Mr. Dan Throop Smith, formerly of the
Harvard Business School, who did this work for the U. N. before his
recent appointment as assistant to the Secretary of the Treasury.
5. Fiscal Commission resolution
During its session the Commission adopted the following resolution
for inclusion in its report to the Economic and Social Council:
FISCAL INCENTIVES TO INCREASE THE INTERNATIONAL FLOW OF PRIVATE CAPITAL
FOR THE ECONOMIC DEVELOPMENT OF UNDER-DEVELOPED COUNTRIES
The Economic and Social Council,
Recognizing'
(a) The great importance of finding means to stimulate the flow of private
investment from the highly developed to the under-developed countries, in
6 order to accelerate the economic development of the latter,
(b) That the present flow of capital exported to the under-developed
countries is insufficient for their development needs,
(c) That relatively lower taxation in force in the under-developed countries
is one of the attractions which such countries can offer to foreign capital as an
incentive to investment.
(d) That this incentive becomes less effective?although international
double taxation is avoided?if the capital-exporting countries apply to the
income from investments in under-developed countries any further taxation
beyond that already paid in the latter,
(e) That favourable tax treatment is one of the many factors affecting th-
flow of foreign capital,
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1. Reaffirms that the country in which income arises has as a general principle
an undoubted right to tax that income;
2. Recommends that the highly developed countries acting unilaterall7 or when
concluding tax agreements should give sympathetic consideration to the 'feasibility
of taxing such income only or primarily in the country in which the income was
produced.
In supporting this resolution in the Commission Mr. Smith made
the following statement concerning the attitude of the new adminis-
tration: ?
Attention is now being given to possible additional tax incentives to foreign
investment. The proposals under consideration include extension of the Western
Hemisphere trade corporation treatment to other sections of the world; a further
reduction in rates applicable to income received from such special corporations;
a liberalization of the application of the foreign tax credit; a provision under
which the income of foreign branches of United States corporations w 11 :not be
taxed until it is brought into the United States (as is now the case with the income
of foreign subsidiaries); and, finally, some form of tax exemption or special low
rate of tax applicable to foreign income. The examination of this subject by the
present administration has not progressed to the point where any indication can
be given as to the recommendations which will be made to the Congress. Such
recommendations as are made must, of course, be consistent with the maintenance
of a sound domestic tax system.
Some loss in revenue, if it can be really effective in stimulating international
capital movements, will of course be acceptable, but it should be incurred only
when there are reasonable prospects for desirable incidental results arie ng there-
from. The importance
is to maintain a balance among objectives, with full recogni-
tion of the of encouraging international capital movements
6. Other activities
The foregoing is by no means complete insofar as U. N. activities
are concerned. Various reports and studies have been issued from
time to time, for example? by the Economic Commission for Latin
America and the Economic Commission for Asia and the Far East.
Both Commissions have produced studies, country by country, on the
economic and legal status of foreign investments in their member
countries, and have publicized the legal requirements of capital
exporting countries.? However, the December assembly resolution,
and the Fiscal Commissions work, best illustrate the current attention
of the U. N. to this subject, and will provide the basis for such further
activities by the TJ. N. as may be agreed in the Fiscal Commission or
in the Economic and Social Council.
E. EXECUTIVE BRANCH
I. The President's Materials Policy Commission
In its report Resources for Freedom, the Commission in June 1952
recommended:
(a) That executive resource agreements with other governments
should be negotiated when there are clear indications that new invest-
ment in minerals enterprises would take place in a particular country if
legal and administrative deterrents were lifted.
(b) That the taxpayer be permitted to elect annually whe ther the
"per country" or "overall limitation" will apply in computing credits
for taxes paid abroad.
(c) That deferral of reporting income from overseas branches until
the income is remitted to this country be permitted, as is the case
with subsidiaries.
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(d) That domestic corporations with foreign subsidiaries be given
the same rights to file and obtain the benefits of consolidated returns
as affiliated domestic corporations have.
(e) That taxpayers be permitted in computing the portion of their
dividends that represents taxable earnings to make a deduction corre-
sponding to their share in the foreign corporation of the same outlays
of the corporation for exploration and development as domestic pro-
ducers are permitted to make and to treat that deduction as a return
of capital rather than as taxable earnings. On the question of
broader tax exemption, in the opinion of the Commission, the weight
of the argument is clearly against unilateral tax exemption by the
United States for income received from abroad. On guaranties, the
Commission believes that the present guaranties against inconverti-
bility and expropriation should be viewed as experimental pending
longer and geographically more extended experience.
?
2. The International Development Advisory Board ?
As part of his testimony before the subcommittee, the Honorable
Eric Johnston, Chairman of the International Development Advisory
Board, included a statement with respect to measures to create a
favorable climate for American capital abroad, which involve action
by other governments:
* * * very little has been done beyond identifying the factors which contribute
to an unfavorable climate in many of the countries concerned. Recommendations
have been made regarding the necessity of eliminating those factors, but virtually
nothing has been done to implement the recommendations.
The question thus arises as to how we can best pursue the "serious and explicit
purpose" of encouraging "a hospitable climate for such investment in foreign
nations."
The problem calls for direct action. It ha s not yielded to the conventional
approach through diplomatic channels; it cannot wait for the normal lengthy
processes of treaty negotiation.
We must make a dramatic new approach. It might be said that we need to
do a more effective job of public relations vis-a-vis the governments of these
countries than we have done or even tried to do thus far.
As a start in this direction, Mr. Johnston proposes:
The President of the United States might appoint a special envoy as his personal
representative to visit and consult specifically on this matter with the heads of
government and ranking officials of the several underdeveloped countries. (The
President might prefer to name several such representatives--e. g., 1 for Latin
American countries, 1 for African and middle eastern countries, 1 for Asiatic
countries.)
The special envoy should be selected from the ranks of American business or
industry?a recognized leader who is fully aware of the implications of United
States economic policy, sympathetic to its aims, and conversant with the attitudes
of American capital. His mission should be prefaced by an intensive study of
the "investment climate" in the countries he would visit.
In his conversations in these countries, the special envoy would undertake to
emphasize the importance which the United States, as a matter of its own self-
interest, attaches to the sound and rapid economic development of all of the nations
of the free world. He would state our national and international aims and
motivations in the frankest terms, making it clear that our interest in promoting
American investment abroad derives from our conviction that enlightened
American capital can make a material and constructive contribution, technical
as well a.s financial, to economic progress in other countries.
The special representative might find it helpful to explain how normal it is,
under our system, for private enterprise to participate in the execution of public
policy; and to emphasize our certainty that our self-interests and the self-interests
of all nations in the free world are, in the long run, synonymous.
If he felt that preliminary conversations held sufficient promise, the special
representative should be empowered to say that the Government of the United
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States would be prepared, at the country's request, to send a special working
party of American businessmen and Government experts to the country to carry
the discussions further with a comparable group to be appointed by the Govern-
ment of that country.
If this suggestion met with favor, the special representative would recommend
that the Secretary of State appoint a special mission, composed of carefully
chosen representatives of banking, industrial, and business interests, st%ffed by
experts from the United States Government, and headed by an outstanding
industrialist, preferably one familiar with the country concerned. The members
of the mission should enjoy high diplomatic status.
The specific aim of each mission would be to explore practical ways and means
of creating a more conducive climate for American investment. As the President
implied, this is the crux of the whole problem of getting more Americar, money
to work abroad,
Sitting at the same table with businessmen and officials of the host country,
United States industrialists composing the special mission would engage in a
free exchange of views on expropriation risks, currency convertibility, tax and
tariff discriminations., labor and social security requirements, and similar matters
which create an unfavorable climate from the viewpoint of the America.n investor.
Out of such a discussion, conducted with a serious purpose of finding mutually
acceptable solutions, practical and constructive proposals might be expected.
Other useful results might also be anticipated. Many of the underdeveloped
countries?Brazil, Pakistan, Iraq, to mention only a few?have embarked on
comprehensive economic and social development programs. American indus-
trialists on the special mission would be in a position to indicate points in these
programs at which American private capital might be available to meet a par-
ticular need. They would be able to bring to bear upon the industrial problems
of the host country some of the experience American industry has gained in
decades of industrial pioneering around the globe.
Even more important, perhaps, the members of the mission would be able, upon
their return to this country, to interpret and explain the problems which have led
many of the underdeveloped countries to take an attitude apparently inimical to
American capital.
Each mission would be expected to make a report to the Secretary of State,
which could be circulated widely through the business community.
This proposal, in the final analysis, involves no more than an application of an
old American custom in the time-tried tradition of talking things over. If we
believe that a good deal of the present unfriendly "climate" in the underdeveloped
countries is due to unreasonable fears or to misunderstanding of our aims and
methods, the sensible thing to do is to try to put the thinking of those countries
right. There is no better way of doing that than sitting down with them to talk
matters out, freely, frankly, and in friendliness.
This approach would give American business a direct and important re-sponsi-
bility in trying to deal with what is essentially a business problem.
Simultaneously, of course, measures calculated to offer American capital greater
incentives, greater security, and more specific information with respect to invest-
ment in the underdeveloped countries should be pressed by the various agencies
concerned.
But the value of incentive measures will depend upon the extent to which we
can improve the "climate" in those nations toward which our policy of encouraging
constructive and beneficial private investment is directed.
An unmistakable and emphatic manifestation of our earnestness and goodwill
might go a long way, in the opinion of this observer, toward creating the kind of
"climate" we need.
3. The Maffry report
August Maffry, of the Irving Trust Co., in a report prepared for the
Technical Cooperation Administration (Program for Increasing Pri-
vate Investment in Foreign Countries, dated December 18, 1952),
recommended:
(a) All agencies of Government concerned should join in an effort
of total diplomacy directed toward improving the climate of invest-
ment in friendly foreign countries.
(b) The work of the Department of Commerce in assembling and
disseminating information on investment conditions abroad should be
continued and extended.
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(c) The program of the Department of State for the conclusion of
additional bilateral treaties containing assurances of fair treatment of
American investors should proceed in regular course. The "screen-
ing" issue should not be allowed to block the conclusion of treaties
which are otherwise satisfactory. [This refers to the policy of some
countries of selective entry of foreign business enterprises.]
(d) The United States Government should assist in every way pos-
sible the efforts of individual private investors to obtain concessions
from foreign countries with a view to getting them extended to other
private investors.
(e) The dissemination of information on specific investment oppor-
tunities abroad is useful but should be concentrated in one agency and
kept within the bounds consonant with the limited results to be ob-
tained by this means.
(f) Industry advisers should be assigned without delay to key dip-
lomatic missions.
(g) The Export-Import Bank should aggressively extend its activ-
ities by (1) providing loan capital on attractive terms to domestic
corporations willing to extend their operations in foreign countries
and (2) making loans to foreign corporations for economic develop-
ment without the requirement of government guaranties.
(h) Every effort should be made by suasion and tangible induce-
Monts to secure the creation of international mutual funds, to induce
the purchase of foreign securities by investment trusts and insurance
companies, and in this way to assist in reestablishing a broad market
in the United States for foreign securities.
(i) The competent committees of Congress should be fully informed
regarding the elements of an investment-guaranty system which would
effectively stimulate private investment abroad and be fully self-
supporting. However, it should also be made clear to the Congress
that there are alternative ways of accomplishing the same purpose,
such as by extending the operations of the Export-Import Bank.
(j) The Treasury and the executive branch should decide promptly
whether tax measures to stimulate foreign investment are to be recom-
mended to the Congress. If so, the emphasis should be on measures
designed to encourage investments abroad by individual and institu-
tional investors through the purchase of foreign securities and on
measures designed largely or exclusively to attract new investment
rather than to give tax relief to existing investors.
In line with this principle, the partial tax exemption now accorded
to Western Hemisphere trade corporations should be extended to
qualified corporations operating anywhere in the free world, and tax
inducements should be offered to individual and institutional pur-
chasers of foreign securities.
(k) Government responsibility for promoting private investment
abroad should be fixed at some point in the executive branch in order
to secure coordination of the activities of various agencies concerned
with different phases of the problem.
(/) TCA. and MSA. should contribute to the stimulation of private
investment?
(1) By joining in the total diplomatic effort of the United
States to improve investment climates in foreign countries;
(2) By promoting in every way possible the mobilization of
local capital for productive invbstment;
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(3) By identifying areas of private investment, especially in
the industrial sphere, and assisting potential private inves'nrs to
explore specific opportunities within these fields.
4. The Sawyer report
In his report to the President of the United States, Economic
Survey of Europe (December 1952), the then Secretary of Commerce,
Hon. Charles Sawyer, made a number of comments with resr ect to
investment capital:
(a) Investment capital is a commodity which will go to the highest bidder.
It will go to those countries which most desire it and which, accordingly, offer
the most attractive possibilities. When appropriate conditions, or so-called good
climate, prevail, investment will follow. These conditions include both political
and economic stability.
(b) American businessmen still have the courage, initiative, industry, and the
desire to make money which has characterized their pioneer efforts in the past
both at home and abroad. They will not, however, move in force to other areas
in the absence of a clear indication that they are wanted. American business-
men are not undertaking to force their way into any part of the world nor do they
wish or intend to establish any sort of imperialism wherever they may go.
(c) In England it was suggested that one possibly fruitful area for exploration?
assuming an attractive climate for investment?would be combined private-
Investment ventures in which British experience with some capital world be
combined with United States capital and experience. There is, of course, no
reason why such a project, if it meets with approval among private investors in
the United States and other countries, should not be equally feasible and attrac-
tive as between the United States and any other country of Western Europe.
5. The Bell report
In a report to the President by the Public Advisory Board for
Mutual Security, A Trade and Tariff Policy in the National Interest,
submitted February 15, 1953, the Public Advisory Board stressed
that?
(a) American investment abroad is a supplement to rather than a
substitute for an increase in imports and that, if foreign investment is
to be true investment, the United States must be willing to import on
a sufficient scale to enable other countries to meet dividend, interest,
and amortization requirements.
(b) The underdeveloped regions must accommodate their develop-
ment programs to their needs. What is required is a balanced
development?balanced between agriculture and industry, doniestic
financing, and in foreign investments. Such a policy will be possible
only with more foreign capital for development.
(c) The United States should help and encourage the International
Bank to extend its important operations in mobilizing private capital
for international investment in development.
F. LEGISLATIVE
In addition, several legislative measures have been introduced dur-
ing the present session of the Congress dealing with the subject:
1. House Resolution 96 and Senate Resolution 25
HOUSE RESOLUTION 96
(Introduced by Mr. Smith, Mississippi, January 16, 1953)
Resolved, That the Committee on Banking and Currency, or any duly author-
ized subcommittee thereof, is authorized and directed to make a thorough study
of means and methods for increasing and expanding our international trade,
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through the operations of the Export-Import Bank, the International Bank for
Reconstruction and Development, and such other agencies and devices as would
facilitate increasing American investment abroad and expanding international
trade. The committee shall report to the House of Representatives at the earliest
practicable date the results of its study, together with such recommendations as
it may deem advisable.
(Also, S. Res. 25, a similar measure, relating to the Senate counter-
part committee, introduced by Senator Capehart, January 7, 1953.
This resolution was reported favorably by the Senate Committee OD
Banking and Currency on April 30, 1953. (See S. Rept. No. 208
and also S. Rept. 310, 83d Cong.))
2 . S. 849
S. 849
(Introduced by Mr. Murray, February 10, 1953)
A BILL To encourage fuller participation by small business concerns in soundly expanded foreign trade
through Government insurance for United States exports
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That the Export-Import Bank of Washington is
authorized through a Foreign Trade Insurance Division, which is hereby created
as a division within such bank, subject to the direction and control of such bank
to insure and reinsure either directly or in participation with other insurers,
payment of moneys due United States residents or partnerships or corporations
organized under the laws of the United States or of any State, Territory, or pos-
session from foreign debtors for the export sale of goods (including services and
charges related thereto) to such foreign debtors.
SEC. 2. There is authorized to be appropriated, out of any moneys in the
Treasury not otherwise appropriated, a sum not to exceed $300,000 for the
administrative expenses of such Foreign Trade Insurance Division.
SEC. 3. In addition to the regular capital stock of the Export-Import Bank of
Washington authorized under the Export-Import Bank Act of 1945, as amended,
the said bank shall have an insurance capital stock of $100,000,000 subscribed
by the United States. The funds derived from such insurance capital stock
shall be used solely to finance the insurance operations of the Foreign Trade
Insurance Division. Such insurance capital stock shall be subject to call at any
time in whole or in part by the Board of Directors of the bank. For the purpose
of making payments of such insurance capital stock, the Secretary of the Treasury
is authorized to use as a public-debt transaction the proceeds of any securities
hereafter issued under the Second Liberty Bond Act, as ainended, and the purposes
for which securities may be issued under that Act are extended to include such
purchase. Payment under this section of the subscription of the United States
to the bank and repayments thereof shall be treated as public-debt transactions
of the United States. Certificates evidencing stock ownership shall be issued by
the bank to the President of the United States or to such other person or persons
as he may designate from time to time, to the extent of the payments made for
the insurance capital stock or the bank under this section.
Sac. 4. (a) It is the policy of Congress that the insured policyholder shall
retain a substantial interest in the discharge by his foreign customer of the terms
of the contract of sale. In insuring or reinsuring against the risk of nonpayment
for any reason other than the imposition by a foreign government of exchange
block or other regulation preventing the foreign purchaser from securing dollar
exchange to pay his obligation, the insurance written by the Export-Import Bank
of Washington shall not extend to more than 90 per centum of the total contract
price.
(b) In insuring or reinsuring against the risk of nonpayment by reason of the
imposition by a foreign government of exchange block or other exchange control
preventing the foreign purchaser from transferring funds to the United States
to make the payment due, the insurance written by the Export-Import Bank of
Washington may extend to 100 per centum of the total contract price.
(c) As used in this section "contract price" shall include any insurance, freight,
or other charge paid or to be paid by the exporter, and charges for services
furnished by the exporter as an incident of the export sale.
SEC. 5. The total value outstanding at any one time of insurance issued by
the Export-Import Bank of Washington as authorized under this Act shall not
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exceed five times the amount of insurance capital stock authorized under sectwn 3
of this Act.
SEC. 6. Subject to the limitations provided in sections 4 and 5 of this Act, the
Export-Import Bank of Washington through its Foreign Trade Insurance Division
shall from time to time determine the conditions under which it will extend
insurance, either directly or in participation with other insurers, as authorized
under this Act, and shall establish from time to time reasonable premiums to be
charged for such insurance. It is the policy of the Congress that insurance or
reasonable terms shall be made available to exporters of all the classes of com-
modities in United States exports on reasonable terms and as expeditiously as
possible.
SEC. 7. The authority granted under this Act shall be in addition to and not in
replacement of any authority granted to the Export-Import Bank of Washington.
SEC. 8. The Export-Import Bank of Washington shall include in its semi-
annual report to Congress as required under the Export-Import Bank Act of 1945,
as amended, a separate section giving a complete and detailed report of the opera-
tions of the Foreign Trade Insurance Division created by this Act.
Sno. 9. The Export-Import Bank of Washington shall, so far as practicable,
maintain in the major export centers of the United States regional or district
representatives who shall be qualified to advise exporters on its policies and
practices.
SEC. 10. The manager of the Foreign Trade Insurance Division shall appoint
an advisory committee composed of persons experienced in United States export
policy and practice. The membership of the advisory committee shall, so far as
practicable, be broadly representative of the various types of United States ex- r
porting concerns, large and small. The manager of the Foreign Trade Insurance
Division shall consult with the advisory committee from time to time concerning
the broad policies programs, and insurance policy provisions of the alT1S1.011.
SEC. 11. This Act may be cited as the "Export Insurance Act of 1951".
3. H. R. 4199
H. R. 4199
(Introduced by Mr. Meader, March 25, 1953)
A BILL To establish a Commission on Overseas Investment and Trade
Be it enacted by the Senate and Rouse of Representatives of the United States of
America in Congress assembled,
FINDINGS AND DECLARATION OF PURPOSE
SECTION 1. The Congress finds that the dynamic competitive free-enterprise
system which has flourished in the United States can raise standards of living and
promote internal strength and stability in other free countries, thereby in creasing
their capacity to resist aggression, stimulating international trade, and contributing
to the growth of free economic and political institutions. These goals can be
achieved in large measure through encouraging and facilitating the investment of
private capital in other free countries to develop their resources and improve their
productivity. Numerous impediments now exist, however, which inhibit the
investment of private capital and the conduct of trade and commerce throughout
the free world. It is the purpose of this Act to discover ways to overcome these
obstacles and make the fullest use of free private enterprise, subject to proper
restraints to prevent overreaching and unfair exploitation, in promoting mutual
security, economic vigor, and individual liberty in the free world.
ESTABLISHMENT OF COMMISSION; DUTIES
SEC. 2. (a) ComnissioN ESTABLISHED.?There is hereby established it, bi-
partisan commission to be known as the Commission on Overseas Investment and
'Trade (in this Act referred to as the "Commission").
(b) DUTIES or COMMISSION.-- In conformity with the findings and in fur -,her-
ance of the purpose declared in section 1, the Commission, after a complete study
and investigation, shall formulate and recommend to the President and the Con-
gress specific programs and policies calculated to encourage and facilitate tha in-
vestment of private capital in free countries outside the United States, and the
conduct of trade and commerce in such countries, and between such countries
and other free countries, including the United States. The Commission shall
give particular attention to developing programs and policies calculated to chat:
Mate or minimize the restrictions, hazards, and other impediments, foreign and
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domestic (including monopolistic and restrictive trade practices) which inhibit
such investment, trade, and commerce, and to provide incentives for such invest-
ment, trade, and commerce.
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MEMBERSHIP OF THE COMMISSION
SEC. 3. (a) NUMBER AND APPOINTMENT.? The Commission shall be composed
of fourteen members as follows:
(1) Ten appointed by the President of the United States, four from the
executive branch of the Government and six from private life;
(2) Two Members of the Senate appointed by the Vice President; and
(3) Two Members of the House of Representatives appointed by the
Speaker.
(b) POLITICAL AFFILIATION.?Of each class of members, not more than one-half
shall be from each of the two major political parties.
(c) VA CAN CIES.?Any vacancy in the Commission shall not affect its powers,
but shall be filled in the same manner in which the original appointment
was made.
ORGANIZATION OF THE COMMISSION
SEC. 4. The Commission shall elect a Chairman and a Vice Chairman from
among its members.
Q (TORTJM
SEC. 5. Eight members of the Commission shall constitute a quorum.
COMPENSATION OF MEMBERS OF THE COMMISSION
SEC. 6. (a) MEMBERS OF CONGRESS.?MenlberS Of Congress who are members
of the Commission shall serve without compensation in addition to that received
for their services as Members of Congress; but they shall be reimbursed for travel,
subsistence, and other necessary expenses incurred by them in the performance
of the duties vested in the Commission.
(b) MEMBERS FROM THE EXECUTIVE BRAN-Cm?The members of the Commis-
sion who are in the executive branch of the Government shall each receive the
compensation which he would receive if he were' not a member of the Commission,
plus such additional compensation, if any, as is necessary to make his aggregate
salary $12,500; and they shall be reimbursed for travel, subsistence, and other
necessary expenses incurred by them in the performance of the duties vested in
the Commission.
(C) MEMBERS FROM PRIVATE LIFE. --The members from private life shall each
receive $50 per diem when engaged in the performance of duties vested in the
Commission, plus reimbursement for travel, subsistence, and other necessary
expenses incurred by them in the performance of such duties.
STAFF OF THE COMMISSION
SEC. 7. The Commission shall have the power to appoint and fix the compensa-
tion of such personnel as it deems advisable, without regard to the provisions of
the civil-service laws and the Classification Act of 1949, as amended.
CERTAIN LAWS INAPPLICABLE TO COMMISSION AND ITS STAFF
SEC. 8. The service of any person as a member of the Commission, the service
of any other person with the Commission, and the employment of any person by
the Commission, shall not be considered as service or employment bringing such
person within the provisions of sections 281, 283, or 284 of title 18 of the United
States Code, or of any other Federal law imposing restrictions, requirements, or
penalties in relation to the employment of persons, the performance of services,
or the payment or receipt of compensation in connection with any claim, pro-
ceeding, or matter involving the United States.
EXPENSES OF THE COMMISSION
SEC. 9. There is hereby authorized to be appropriated, out of any money in the
Treasury not otherwise appropriated, so much as may be necessary to carry out
the provisions of this Act.
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POWERS OF THE COMMISSION
SEC. 10. (a) COMMITTEES.?The Commission may create such committees of its
members with such powers and duties as may be delegated thereto.
(b) HEARINGS AND SESSIONS.?The Commission, Of any committee thereof,
may, for the purpose of carrying out the provisions of this Act, hold such hearings
and sit and act at such times and places, and take such testimony, as the Com-
mission or such committee may deem advisable. Any member of the Commission
may administer oaths of affirmations to witnesses appearing before the Commission
or before any committee thereof.
(e) OBTAINING OFFICIAL DATA.--The Commission, or any committee thereof, is
authorized to secure directly from any executive department, bureau, agency,
board, commission, office, independent establishment, or instrumentality informa-
tion, suggestions, estimates, and statistics for the purpose of this Act; and each
such department, bureau, agency, board, commission, office, establishment, or
instrumentality is authorized and directed to furnish such information, suggestions,
estimates, and statistics directly to the Commission, or any committee thereof,
upon request made by the Chairman or Vice Chairman of the Comtnissior. or of
the committee concerned.
(d) SUBPENA POWER.?The Commission, or any committee thereof, shall have
power to require by subpena or otherwise the attendance of witnesses ar d the
production of books, papers, and documents; to administer oaths; to take testi-
mony; to have printing and binding done; and to make such expenditures as it
'deems advisable within the amount appropriated therefor. Subpenas shall be
issued under the signature of the Chairman or Vice Chairman of the Commission
or committee and shall be served by any person designated by them. The pro-
visions of sections 102 to 104, inclusive, of the Revised Statutes (U. S. C., title 2,
secs. 192-194), shall apply in the case of any failure of any witness to comply
with any subpena or to testify when summoned under authority of this section.
EXPIRATION OF COMMISSION
SEC. 11. The Commission shall cease to exist on June 30, 1955.
4. H. R. 4465
H. R. 4465
(Introduced by Mr. Wolcott, April 2, 1953)
AN ACT To amend the Export-Import Bank Act of 1945, as amended
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That section 2 of the Export-Import Bank Act
of 1945, as amended, is hereby amended by inserting the following as subsection
(0)`(c) (1) The Export-Import Bank of Washington is further authorized, in
the manner and to the extent herein specified, to provide insurance in an aggre-
gate amount not in excess of $100,000,000 outstanding at any one time for the
benefit of citizens of the United States, including corporations, partnerships, and
associations organized and existing under the laws of the United States or any
State, district, Territory, or possession thereof, against the risks of loss of or
damage to tangible personal property of United States origin which is exported
from the United States in commercial intercourse and is located in any friendly
foreign country, to the extent that such loss or damage results from hostile or
warlike action in time of peace or war, including civil war, revolution, rebellion,
insurrection, or civil strife arising therefrom, or from an order of any government
or public authority confiscating, expropriating or requisitioning such property
and to the extent that such property is owned in whole or in part by the assured
or constitutes security for financial obligations owed to the assured.
"(2) Insurance may be provided pursuant to this subsection only to the Extent
that it cannot be obtained on reasonable terms and conditions from companies
authorized to do an insurance business in any State of the United States and to
the extent that it cannot be obtained from any agency of the United States Gov-
ernment providing marine or air war-risk insurance.
"(3) In providing insurance pursuant to this subsection, the Bank may reinsure
in whole or in part any company authorized to do an insurance business in any
State of the United States or may employ any such company or group of com-
panies to act as its underwriting agent in the issuance of such insurance and the
adjustment of claims arising thereunder.
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"(4) Subject to the limitations herein provided, the Bank shall from time to
time determine the terms and conditions under which it will provide insurance
pursuant to this subsection: Provided, however, That such insurance shall be based,
insofar as practicable, upon consideration of the risk involved: And provided
further, That the term of coverage of any such insurance shall not exceed one year,
subject to renewal or extension from time to time for periods of not exceeding one
year as may be determined by the Bank."
SEC. 2. Section 7 of the Export-Import Bank Act of 1945, as amended, is
amended by substituting in lieu of the words "leans and guaranties" the words
"loans, guaranties, and insurance."
(Approved by the President May 21, 1953 (Public Law No. 30).
5. Senate Joint Resolution 78
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S. J. ltEs. 78
(Introduced by Mr. Millikin, May 15, 1953)
JOINT RESOLUTION For the establishment of the Commission on Foreign Economic Policy
Resolved by the Senate and House of Representatives of the United States of America
in Congress assembled, That there is hereby established a bipartisan commission
to be known as the Commission on Foreign Economic Policy (in this Act referred
to as the "Commission").
MEMBERSHIP OF THE COMMISSION
SEC. 2. (a) NUMBER AND APPOINTMENT.?The Commission shall be composed
of eleven members as follows:
(1) Five appointed by the President of the United States, of whom no snore
than three shall be appointed from the executive branch of the Government;
(2) Three appointed from the. Senate by the Vice President of the United States;
(3) Three appointed from the House of Representatives by the Speaker of the
House of Representatives.
(b) POLITICAL AFFILIATION.?Of the first class of members mentioned HI sub-
section (a), no more than three members shall be from the same political party.
Of the second and third class of menThers mentioned in subsection (a), no more
than two members from each class shall be fronl the same political party.
ORGANIZATION OF THE COMMISSION
SEC. 3. The Commission shall elect a Chairman and a Vice Chairman from
among its members.
QUORUM
SEC. 4. Six members of the Commission shall constitute a quorum.
COMPENSATION OF MEMBERS OF THE COMMISSION
SEC. 5. (a) MEMBERS OF CONGRESS.?Members of Congress who are members
of the Commission shall serve without compensation in addition to that received
for their services as Members of Congress; but they shall be reimbursed for travel,
subsistence, and other necessary expenses incurred by them in the performance
of the duties vested in the Commission.
(b) MEMBERS FROM THE EXECUTIVE BRANCH.?The members of the Commis-
sion who are in the executive branch of the Government shall each receive the
compensation which he would receive if he were not a member of the Commission,
but they shall be reimbursed for travel, subsistence, and other necessary expenses
incurred by them in the performance of the duties vested in the Commission.
(C) MEMBERS FROM PRIVATE LIFE.?The members from private life shall re-
ceive not to exceed $75 per diem when engaged in the performance of duties
vested in the Commission, plus reimbursement for travel, subsistence, and other
nec3ssaty expenses incurred by them in the petformance of such duties.
STAFF OF THE COMMISSION
SEC. 6.. The Commission shall have power to appoint such personnel as it deems
advisable, without regard to the civil-service laws, and to fix the compensation
of such personnel in accordance IA ith the Classification Act of 1949, as amended
The Commission is further authorized to employ experts and consultants for
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temporary and intermittent personal services, but at rates not to exceed $75 per
diem for individuals. The Commission is authorized to reimburse employees,
experts, and consultants for travel, subsistence, and other necessary expenses
incurred by them in the performance of their official duties and to make reasonable
advances to such persons for such purposes.
EXPENSES OF THE COMMISSION
SEC. 7. There is hereby authorized to be appropriated, out of any money in
the Treasury not otherwise appropriated, so much as may be necessary to carry
out the provisions of this Act.
REPORT?EXPIRATION OF THE COMMISSION
SEC. 8. (a) REPORT.?Within sixty days after the second session of the Eighty-
third Congress is convened, the Commission shall make a report of its :hidings,
and recommendations to the Congress.
(b) EXPIRATION OF THE CommtssroN.?Ninety days after the submission to,
the Congress of the report provided for in subsection (a) of this sectior. 8, the
Commission shall cease to exist.
DUTIES OF THE COMMISSION
SEC. 9. The Commission is directed to examine, study, and report on the sub-
ject of international trade and to recommend policies, measures, and practices
for stimulating its sound enlargement.
Without limiting the general scope of this direction, the work of the Commis-
sion shall include consideration of, and report, on the following matters:
(1) (a) Applicable provisions of the Constitution of the United States;
(b) Laws, regulations, and practices of the United States relating to inter-
national trade, including such matters as tariffs, customs, customs administra-
tion, trade agreements, peril point and escape procedures, opinions and decisions,
thereon of the United States Tariff Commission and the President, import and
export quotas, monetary licenses, countervailing duties, and procurement pref-
erences;
(c) Departments, agencies, boards, commissions, bureaus, and other instru-
mentalities of the United States having jurisdiction over, or dealing with, these
matters;
(d) Laws, regulations, and practices and official instrumentalities of other
nations concerned with similar subject matters;
(e) Pertinent statistics on international trade;
(f) Balance of payments, nation by nation, excessive imbalances, causes, effeats,
proposed remedies.
(2) Relationship of our foreign economic policies to, and their influences on,.
our total foreign policy, proper relationship of each to the other.
(3) Effect of our foreign aid and military defense programs on international
trade and international balance of payments.
(4) Foreign markets of trading nations?extent and nature?effect thereon of
wars, other emergencies, technological advances, international relations, and other
pertinent factors.
(5) International instrumentalities, organizations, agreements and practices
affecting trade such as General Agreement on Tariffs and Trade, Customs unions,
Organization for European Economic Cooperation, International Wheat Agree-
ment, cartels, European Payments Union, European Coal and Steel Community,.
International Monetary Fund.
(6) Foreign investment capital, flow of investment capital between nations?
need thereof?restrictions thereon---inducements necessary to encourage. role of
Export-Import Bank and International Bank for Reconstruction and Develop-
ment.
(7) Effects on international trade of factors such as costs of productior. mid
pricing, labor practices and standards, general living standards, currency manipu-
lation, inconvertible currencies, official inflationary policies, currency devaluation.,
exchange controls and licenses, quotas, embargoes, dumping and pricing practices,.
multiple currencies, bilateral trade agreements, barter arrangements, customs pro-
cedures, marking and transit problems, concealed regulation of exports and im-
ports, preferential tariff systems, most-favored nation treatment, government.
monopolies, State-controlled economies, State trading, State-subsidized trading.
(8) Effect. of existing and proposed trade policies on promotion of peace and
security and betterment of political, social, and economic life.
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POWERS OF THE COMMISSION
SEC. 10. (a) The Commission or, on the authorization of the Commission, any
subcommittee or member thereof, shall have power to hold hearings and to sit
and act at such places and times, to require by subpena or otherwise the attend-
ance of such witnesses and the production of such books, papers, and documents,
to administer such oaths, to take such testimony, and to make such lawful expend-
itures, as the Commission or such subcommittee or member may deem advisable.
Subpen.as shall be issued under the signature of the Chairman of the Commission
and shall be served by any person designated by him-.
(b) The Commission is authorized .to secure from any department, agency, or
independent instrumentality of the Government any information it deems neces-
sary to carry out its functions under this Act; and each such department, agency,
and instrumentality is authorized and directed to furnish such information to the.
Commission, upon request made by the Chairman or by the Vice Chairman whelk
acting as Chairman.
(Passed the Senate, without amendment, on May 19, 1953.)
G. PRIVATE BUSINESS
During its hearings on foreign economic policy, the subcommittee
took testimony from many of the private agencies who have been
actively interested in the problems of stimulating the flow of private
American capital abroad. These agencies, because of their firsthand
knowledge and vast experience in the field, have much to contribute.
The subcommittee includes at this point some of the recommendations
previously made by some of these organizations.
1. Commerce and Industry Association of New York
The association recommends (World Trade Bulletin of the Com-
merce and Industry Association of New York, February 9, 1953):
(a) Defer income from foreign operations of domestic corporations from United
States taxation until the proceeds of operation are remitted to this country.
(b) Eliminate the dual ("per country" and overall) foreign tax credit limitation
in favor of a single limitation. The association is inclined to favor elimination of
the "per country" limitation and retention of overall limitation.
(c) Restore the principle of a complete surtax exemption for Western Hemis-
phere trade corporations.
(d) Extend the treatment of Western Hemisphere trade corporations to corpo-
rations doing business in foreign countries.
2. The National Foreign Trade Council
The Council recommends (Final Declaration of the 39th National
Foreign Trade Convention, New York, November 1952):
(a) That our Goverrunent should Take it clear that it regards foreign economic
development as the function of private enterprise; that it will rely on private
enterprise for the accomplishment of the economic aims our national interests
require, and that it will seek, by every feasible means, to broaden and extend
the opportunities available to private enterprise in all fields of international
endeavor.
(b) That our Government exert itself to the utmost in securing the creation of
conditions, both here and abroad, which are conducive to the investment of
private capital and to the attraction of its attendant resources, skills and tech-
niques.
(c) That our Government should pursue a vigorous program looking toward
the conclusion of treaties of friendship, commerce and economic development,
tax treaties, and other agreements conducive to laying the groundwork for the
creation of environments abroad favorable to the investment of private capital.
(d) That our Government make clear, by word and action, that American
public funds will not be available for projects which, under proper conditions,
could be financed by private capital.
(e) Adoption of the principle that business income should be taxed only in
the country in which it is earned. Until this principle has been made fully
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effective as an integral part of the United States tax policy, the convention urges
that Congress adopt all feasible interim measures to minimize the burden of the
United States income tax on American business operating abroad. A useful
measure to this end would be to apply to all business income arising from, a
foreign source, including income derived from foreign subsidiaries, the tax rate
now available to Western Hemisphere trade corporations, and to eliminate the
"per country" limitation in the computation of foreign tax credits.
(f) Disapproval of the proposal for the creation of an international finance
corporation, whether as an affiliate of the International Bank for Reconstruction
and Development or otherwise.
3. National Association of Manufacturers
The board of directors recommends (Policy Statement on Foreign
Investment, approved by the board of directors, October 30, 1952):
(a) Efforts should be continued to extend the network of bilateral treaties
providing for equitable and nondiscriminatory treatment of foreign investment
on a basis of equality with domestic investment, for opportunities for the remit-
tance of earnings and the repatriation of capital, and for prompt, complete, and
effective compensation in the event of expropriation.
(b) Efforts should also be accelerated for the elimination of double, extra-
territorial and discriminatory taxation of American citizens and business enter-
prises through internal legislation and international treaties and assuring com-
petitive equality in foreign countries from a tax viewpoint.
(c) That the policy of United States lending agencies, as well as the policy of
the United States in international financial agencies in which it participates,
should make clear that public funds should be available only in limited amounts
and only in the fields of basic productive works. Only in rare instances, unattrac-
tive to private capital, where some United States strategic interest is clearly
paramount, should public funds be used to finance investment in manufacturing
or mineral industries.
4. Detroit Board of Commerce
The board recommends (A Statement of Policy on United States
Foreign Trade and Foreign Aid Policies, approved by the Detroit
Board of Commerce and announced in the November 1952 issue of
Inside Michigan magazine):
(a) That appropriate tax inducements be given to firms and individuals
investing their capital abroad?for example, accelerated amortization * " and
the adoption of suitable legislation freeing all private United States overseas
investments from taxation when profits are returned to the United States.
(b) That a system of broad guaranties be available covering risks of loss from
nonconvertible currencies, confiscation, riot, revolution, war or any act o=f any
foreign government in which an American investment is located that would
preclude the continuation of business upon the sound principles of private
enterprise.
(c) Believes there is also a semigovernmental field for action along the lines
developed by such organizations as the International Bank for Reconstruction
and Development, and the Export-import Bank.
(d) Believes that much more can be done in encouraging private enteiprSe to
extend its investment to less developed areas of the world * * *. Industry and
Government must go hand in hand if our leadership in world affairs is ;o be
successful.
V. DEPARTMENT OF STATE
A. COMMERCIAL TREATIES
1. General assurances
The mandate of section 516 (d) with respect to commucial treaties
refers to the executive branch program of negotiating modern trea-
ties of friendship, commerce, and navigation containing provisions to
assure the security of economic enterprises operating in foreign coun-
tries. In general, these treaties secure for United States investors
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assurances of nondiscriminatory, reasonable, fair, and equitable treat-
ment no less favorable than that accorded nationals of the foreign
country or of third countries. Such assurances include reasonable
freedom to operate, control, and manage enterprises; prompt, ade-
quate, and effective compensation in the event of expropriation of the
investor's property; the withdrawal of earnings and reasonable
amounts of the principal of an investment; absence of tax discrimina-
tion against foreign investors; and other assurances important to the
private investor.
2. Recent negotiations
During the past year the Department of State has carried on
FCN 2 treaty negotiations with several countries, particularly India,
Egypt, and Japan. A treaty was signed on April 2, 1953, with Japan,
ana the negotiations with the other two countries?Egypt and India?
give promise of early results. During the summer of 195'12 the Chief
of the State Department's Economic Treaties Branch visited India
and Japan to assist our Embassy offices in their negotiations with
representatives of these two countries. At the same time, preliminary
discussions have taken place with several other countries, including
Ecuador, Pakistan, Haiti, Afghanistan, Peru, and Turkey. In addi-
tion formal negotiations are under way with Australia and are
scheduled to commence with Paraguay in the near future.
In addition, modern FCN treaties are in effect with the Republic of
China (1946), Ireland (1950), and Italy (1948). A treaty concluded
with Uruguay in 1949, which received the United States Senate's
consent to ratification in 1950, is awaiting action by the Uruguayan
Legislature authorizing ratification by that country. This treaty
is considered the model in the field.
3. Hearings before Senate Foreign Relations Committee
In May 1952, during the second session of the 82d Congress, hear-
ings were held before a subcommittee of the Senate Foreign Relations
Committee concerning the ratification of six FCN treaties previously
signed?with Colombia, Denmark, Greece, Israel, Ethiopia, and a
supplementary agreement with Italy. (The latter brings the 1948
treaty up to date, particularly the provisions relating to the encourage-
ment of private capital investment.) At the hearings it developed
that there was sentiment adverse to continuance of the long-standing
treaty policy of according national treatment with respect to the
practice of professions, which was embodied in the provisions of
several of the treaties before the Senate. (The provision in question
provides that "nationals of either party shall not be barred from prac-
tising the professions within the territories of the other party merely
by reason of their alienage; but they shall be permitted to engage in
professional activities therein upon compliance with the requirements
regarding qualifications, residence, and competence that are applicable
to nationals of such other party.") The committee did not make a
final decision on the policy in question and accordingly the treaties
and supplementary agreement were passed over to the present session
of the 83d Congress.
The initials "FON" will henceforth be used in reference to recent treaties variously entitled treaties
of "Friendship, Commerce, and Navigation," "Friendship, Commerce, and Economic Development,"
or "Amity and Economic Relations."
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4. Impetus of treaties on future negotiations
? The impetus which. resulted from the conclusion of six treaties in
-1951 has stimulated the program of FCN treaty negotiations, although
the delay in the Senate's advice and consent to their ratification has
retarded the functioning of the program. The Department has pur-
posely- concentrated attention upon certain countries, where the suc-.
-cessful conclusion of a treaty might have considerable influence upon
-other countries in the area. The signing of an MN treaty with
India, for example, should provide a significant stimulus for the treaty
program elsewhere in Asia; likewise, an Egyptian treaty should affect
the receptivity of the other Arab countries to treaty proposals.
5. Establishing the proper climate
An FeN treaty is an important element in establishing the proper
"climate" abroad for United States private investment. This is the
basis of its emphasis in section 516 (d) of the Mutual Security Act.
Not only is it a public pronouncement of policy toward United States
investors, but also a legal basis for business and commercial relations
between the two countries. In some cases the treaty is little more than
a formal expression of existing policies, which, nevertheless, provides
assurances against adverse changes over a long period. However, in
other cases, the treaty negotiations are resulting in substantial changes
in foreign legislation and administrative practices designed to attract
foreign capital.
6. Limitations
There are limitations upon what can be accomplished through.
treaties of this kind. Many of the important impediments to the
international flow of private capital are outside the control of particular
countries, or are inherent in the factors of distance, lack of knowledge,
and competitive conditions in third countries such as the United
States and Canada, or are otherwise not amenable to treatment
through the treaty process. Recent events in Bolivia and Iran, for
example, tend to deter foreign investment generally?particularly
elsewhere in South America and the Middle East. However, the
Department of State states that it will press forward with its .FON.
treaty program, and will stress its importance in the context of Uaited
States foreign economic-development objectives. In countries where
we are extending economic or technical assistance, either in the form
of grants or loans, the objectives of the treaty program will he related
to the objectives of the assistance in terms of overall United States
policy interests. More specifically, United States economie or
technical-assistance missions, -where they exist, will be utilized to the
maximum extent feasible in furthering the treaty program.
7. Temporary arrangements
Section 516 (d) refers also to "temporary arrangements", where more
suitable or expeditious. So far the Department of State has not
entered into such arrangements. As viewed by the Department,
this effort is primarily important in terms of its long-run effects,
where progress must be based upon a genuine desire on the part of the
foreign country for increased foreign investment. Hence, temporary
arrangements can be misleading, and are to be considered with
caution. Moreover, it is precisely the provisions for encouraging
and facilitating the flow of private investment that usually cause the
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niost difficulty in treaty negotiations. These provisions are nonethe-
less considered as the most significant sections of the FON treaties,
and in at least one case negotiations are now proceeding on the
basis of agreement to delete certain important articles not relating
directly to investment because disagreenient on them threatened to
stalemerit a treaty otherwise considered . very desirable. Thus, the
possibility of treaties or other arrangements limited to the investment
and related provisions is by no means precluded at the present time.
8. Field instructions
The Department of State has recently instructed all of its diplomatic
missions abroad (except those in the U. S. S. R. and its satellites) to
reexamine, jointly with TCA and MSA missions, the possibility of
concluding an FCN treaty with the country in which they are located.
The instruction asks the missions to discuss the matter informally with
appropriate Government officials and local businessmen, stressing the
importance of encouraging foreign private investment and of offering
reasonable assurances to investors such as those normally contained
in FCN treaties.
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B. DEPARTMENT OF COMMERCE STUDY
It should be noted that section 516 (d): requests the Department of
State to take into account the study and recommendations of the
Department of Commerce pursuant to section 516. (c). ? This study
has not yet been completed. (A discuSsion of the project will be
found on pp. 51-53.) The Department of State states that it intends to
give that study the careful attention and consideration that it deserves,
and will take its recommendations into . account in connection with
the treaty program discussed above. The Department of State was
consulted with respect to the Organization of the study, and later
detailed an officer temporarily to the Department of Commerce to
work on certain sections of the report. The Department has also
supplied material on specific subjects as requested by Commerce,
and is reviewing many sections of the report, particularly the series
of country studies.
C. ACCOMPLISHMENTS
?
Favorable measures have been taken by certain countries to stimu-
late foreign investment. Some of them have resulted from the FCN
bilateral agreements and some, undoubtedly spurred on by the impact
which such a treaty in one country has :upon the general area, have
been taken unilaterally by the countries themselves. Illustrative are
the following:
1.. Republic Qf China
In N ovember 1946 a treaty of friendship, commerce, and navigation
was signed with the United States by the Chinese Nationalist Govern-
ment and entered into force 2 years later. On June 25, 1952, an ex-
change of notes took place under the MSA. investment guaranf,ee
program whereby American investors can be guaranteed against risks
of - loss resulting from inconvertibility of local currency earnings and
from nationalization or expropriation. In October 1952, the Govern-
ment on Formosa took measures to encourage foreign investment in
productive enterprise by regulating the importation of capital goods
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and raw materials for new industries, and offering guaranties for the
remittance of profits and amortization of capital.
2. Colombia
In the course of the past 3 years the Colombian Government has
taken a series of steps to encourage foreign private investments with
striking results. Foreign investments have increased not only in the
field of extractive industries but most notably in manufacturing and
other fields as well. The first of these measures was the promulgation
of a decree in November 1950 amending petroleum laws and removing
obstacles to further exploratory activities of foreign oil companies.
On March 6, 1951 a census of foreign capital investments was initiated
to enable all foreign investors to clarify and establish the legality of
their capital importations. In the following month of April a treaty
of friendship, commerce, and navigation was signed with the United
States (not yet in force). In the period August 3, 1951, Cirough
July 13, 1952, various laws and decrees were issued clarifying and
liberalizing foreign-exchange restrictions to encourage foreign invest-
ment. In March of this year, a decree was issued to encourage invest-
ment in power development..
3. Egypt
With the advent of the new Egyptian Government, a rapid 'series of
measures and policy proclamations was introduced reversing previous
trends and promising a more favorable climate to foreign investment.
To correct one of the most unsatisfactory legal provisions for foreign
enterprise, a decree was promulgated on August 4, 1952, amending
Egyptian company law by reducing the minimum Egyptian participa-
tion required in joint-stock companies from 51 to 49 percent, and there
is now under consideration a draft decree which if promulgated would
reduce this requirement still further to 40 percent. This was followed
up in February 1953 by a second decree eliminating an old provision
that oil and mineral leases could be granted only to Egyptian. com-
panies. And it was reported in March that a set of regulations has
been approved providing for the orderly repatriation of profits and
capital of foreign enterprises.. Negotiations are currently in progress
with the United States on a treaty of friendship, commerce, and
navigation.
4. Ethiopia
In July 1950 the Govermnent of Ethiopia issued a statement of
policy setting forth that new enterprise would be free from profits tax
for 5 years, that necessary machinery imports would be free from
customs duties, and that generally the Government would not require
participation of Ethiopian capital in new enterprises, although it
would require such participation in special cases. To further en-
courage the expansion of old and the establishment of new enterprises,
both industrial and agricultural, there was established in March 1951,
with assistance of the International Bank for Reconstruction and
Development, the Development Bank of Ethiopia. And in September
of the same year a treaty of amity and economic relations was signed
with the United States. (This treaty, the first of its kind, is an
abridged version of the standard FCN treaty, developed with specific
reference to the requirements of Ethiopia. It is not yet in force.)
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5. Japan
Having regained its full sovereignty the Government of Japan has
continued to encourage private foreign participation in its economic
development. In particular, it resumed service on its prewar debts
to American and British investors during 1952. In September a new
law was enacted liberalizing regulations on the repatriation of capital
and switching of investments, and providing protection of foreign
investors in new security issues affecting equity rights. An FCN
treaty was signed with Japan on April. 2, 1953, and is awaiting
ratification.
6. Israel
From the beginning the Government of Israel pursued policies to
encourage the establishment of private enterprise, and gave early
recognition to the importance of foreign private participation in the
development of its economy. In mid-1949 investors were granted a
number of tax reliefs and other facilities incorporated in the law for
the encouragement of capital investments enacted the following
April. This law among other things established an investment center
to encourage and expedite approved investment, foreign as well as
local, in priority fields of development. It also provided certain
privileges and benefits to such investments, relating to transfer of
dividends, profits, and interest into foreign exchange, relief from cer-
tain taxes and excises, and other inducements to investment. These
measures were followed by the signature on August 23, 1951, of a
treaty of friendship, commerce, and navigation (not yet in effect),
and later by an agreement with ,the United States under the invest-
ment guaranty program whereby MS.& can guarantee American
investors against risks of loss from expropriation and the inconverti-
bility of local currency earnings. In August 1952 a law was passed
for the purpose of promoting petroleum development, open to par-
ticipation by foreign enterprise, as well as local.
7. The Netherlands
Recognizing shortly after the war the need for attracting foreign
private capital and other resources to participate in revamping and
modernizing its industries and in establishing new enterprise, a special
section was established in the Directorate-General for Industrialization
to act as central point of contact with the Government for foreign
enterprise. Parallel to this, and established at the instigation of the
Ministry of Economics, is a private, organization, the Institute for
Netherlands-American Industrial Cooperation, which has a branch
office in New York. Together these agencies have been highly suc-
cessful in encouraging the establishment of more favorable laws to
foreign investment, in cutting redtape and expediting license approvals
to establish new businesses, preparing basic surveys on investment
opportunities and in gaining the attention and consideration of these
opportunities by the American business community. The Nether-
lands has never defaulted on its dollar bonds; in fact, it marketed a
$20,000,000 issue in 1947 on which it has., maintained full service. A
treaty for the avoidance of double taxation is in effect between the
Netherlands and the United States, as is an agreement under the
investment guaranty program. r.17he Netherlands has expressed inter-
est in a friendship, commerce, and. navigation treaty; however, nego-
tiations have not yet begun.
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8. Pakistan
Since its inception the Pakistan Government has steadily pursued
a policy of encouragement to the establishment of private industry,
foreign and local. An industrial finance corporation has been estab-
lished to provide low-interest loans to expand existing industry and
an industrial development corporation is organized to participate
with private capital where desired as an incentive to the establish-
ment of new industries of importance in the development of tha
economy. It has also established a research institute to assist pri-
vate enterprise in its operations. Among other things it has reduced
import duties on capital equipment and given concessions in the matter
of depreciation for the purpose of tax reduction. It pursues a pro-
tective tariff policy with regard to new and nascent industriep.
9. Southern Rhodesia
The Government of Southern Rhodesia is actively interested in
attracting investors, and foreign enterprise generally enjoys the same
benefits, rights, and privileges as local enterprise. Foreign capital
accepted for approved investment can be repatriated, if desired, to-
gether with any bona fide capital accretion accrued. Legitimate
profits, dividends, and interest from all types of dollar investment are
automatically remittable without limitation. There are no restric-
tions on management or directorship of an enterprise. The Govern-
ment stands ready to give advice and encouragement and, in certain
cases, assistance through suspension of the customs tariff, but funda-
mentally it believes in creating the basic favorable conditions, leaving
the rest to private enterprise and initiative. For instance, net with
the object of displacing private enterprise, but for the purpose of
laying the basis for encouraging and increasing the range and number
of fabricating concerns by private enterprise, the State undertook to
develop iron and steel production. To promote the textile industry
an experimental cotton mill was established. In these cases the State
has been prepared not only to sell its products to private enterprise
but also to admit private capital to partnership, even to sell the enter-
prise to private interests after the feasibility of the project has been
proved. Through public policy pronouncements, printing and dis-
semination of attractive brochures on opportunities for investment in
Southern Rhodesia, and other means, the Government has tried to
make abundantly clear that foreign (and especially American) par-
ticipation is welcome in the development of its growing economy.
10. Peru
Beginning in 1949, the new Government of Peru initiated an ener-
getic policy of encouragement to private foreign and local enterprise.
Changes in fiscal and monetary policies were introduced to stabilize the
currency. A "hands off" policy toward private business was pro-
claimed and has been implemented since. An "open door" poli,cy was
presented to foreign enterprise, with particularly strong incentives to
the development of Peru's natural resources by the promuleAtion of a
new mining code in May 1950 and by the enactment of a new petro-
ieum law which went into operation in October of last year. Both
have proved highly successful in attracting new foreign investments.
Since the end of 1951 a series of tariff measures have also been intro-
duced to encourage investment in new industries. Negotiations with.
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the Foreign Bondholders Protective Council for the readjustment of
service on Peruvian dollar bonds resulted in 'a formal offer to bond-
holders in January 1953.
11. Turkey
In mid-1951 a law was passed by the Turkish Parliament to promote
foreign capital investments, which among oth'er things guaranteed the.
export of annual profits, interest, and dividends up to 10 percent of
the capital invested, set forth provisions on the withdrawal of capital,.
and simplified procedures for establishing a business. Since then the
Turkish Government has moved steadily in the direction of encourag-
ing private enterprise and shown growing recognition of the importance
of foreign private participation in the development of its economy.
Under the sponsorship of the International Bank, an industrial de-
velopment bank was established to encourage private industrial
development and individual security ownership. And in November
1952 a decree was promulgated announcing the desire of the Gov-
ernment to push the development. and exploitation of its oil resources
by utilizing foreign technical advice and encouraging the _participa-
tion of foreign capital. An agreement with the United States has
been concluded under the investment and guaranty program, cover-
ing the risk of loss from inability tO convert local currency earnings
into dollars.
12: Venezuela
Foreign enterprise enjoys a favorable climate for investment in
Venezuela; generally speaking, it has the same benefits, rights, and
privileges as local enterprise. The Venezuelan Constitution provides
that property or rights may only be expropriated in the public or social
interest, with prior indemnity and due legal hearings. For over a
decade the Government has found it unnecessary to resort to restric-
tions on the transfer of funds abroad. The development of petroleum
and mineral resources has gone forward under progressive laws and
regulations. Government supervision over, business operations has
been at a minimum. To further the objective of creating a diversifi-
cation of industry, thus reducing the country's dependence on oil,. the
Government grants additional protection to national industry by the
imposition of higher duty rates on certain commodities and by the
exoneration of import duties on installations, equipment and raw
materials in the establishment of new local industries.
VI. MUTUAL SECURITY AGENCY (MSA)
A. REQUIREMENTS OF SECTION 516 (B)
Through the MSA investment guaranty program, the United
States Government offers, for a fee, a form of insurance protection
to new American investments abroad against the risks of currency
inconvertibility and loss through confiscation or expropriation.
Protection against currency inconvertibility was authorized by the
Economic Cooperation Act of 194S. Protection against confiscation
and expropriation was authorized by the Economic Cooperation Act
of 1950 and made available in June 1951.. All of the countries for
which aid is authorized by the Mutual Security Act of 1951, as
amended, are eligible to participate in the program'.
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Section M6 (b) of the act stresses the importance of a greater
participation by private capital in the investment guaranty program.
This responsibility is placed in the Mutual Security Agency. it is
obviously impossible to compel American business to participate in
the guaranty program. But it is the job of MSA to develop broad
criteria, to render the requirements less onerous?in short, to make it
as easy as possible to get a guaranty, consistent with the p arpose and
objectives of the particular country's Mutual Security Program. It
will be noted that section 516 (b) requires the Mutual Security Agency
to cooperate with private business groups to the fullest extent possible
in this whole. process.
B. INDUSTRIAL GUARANTIES ISSUED
Through March 31, 1953, a total of 46 industrial guaranties in
the amount of $39,618,248 had been issued under section 111(b) (3)
of the Economic Cooperation Act of 1948, as amended, for investment
in European countries and Turkey. Of these, 43 guaranies in the
amount of $38,044,017 covered the risk of inconvertibility of foreign
currency receipts (including 2 forward contracting guaranties in the
amount of $1,504,000) and 3 guaranties in the amount of $1,574,231
covered the risk of loss through expropriation or confiscation. As of
March 31, 1953, there were pending 52 completed applications for
convertibility guaranties in the approximate amount of $41,000,000
and 21 applications for expropriation guaranties in the approximate
amount of $17,000,000. Guaranties have been issued to protect new
investments in a variety of manufacturing industries in England,
France, the Netherlands, Germany, Italy, and Turkey; in two con-
struction engineering firms in France, an agricultural project in Italy,
and a pharmaceutical plant in Turkey. No disbursements have been
made pursuant to contracts issued and through March 1933 fees in
the amount bf $700,000 had been received.
C. BILATERAL AGREEMENTS
All the former Marshall-plan countries have agreed, through a
provision in the ECA bilateral agreements, to participa1x3 in the
guaranty program and, except for Turkey, the United Kingdom, and
Portugal, all those countries for which there has been any United
States investor interest in guaranties have given the necessary assur-
ances with, respect to treatment to be accorded currency acquired by
the United States Government upon the invocation of convertibility
guaranties and the treatment of claims to which the United States
Government may become subrogated when expropriation guaranties
are called upon. This group consists of Austria, Belgium, Denmark,
France, Germany, Greece, Italy, the Netherlands, and Norway.
Turkey and the United Kingdom have given the necessary assurances
with respect to convertibility guaranties only; no assurances have
been obtained from Portugal, although an agreement is expected to
be signed by Portugal shortly. In addition to the former Marshall
plan countries listed above, agreements covering both convertibility
and expropriation guaranties have been concluded witn China
(Formosa), Haiti, Israel, the Philippines, and Yugoslavia. Negotia-
tions are in process with a number of other countries.
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Countries with which agreements for the guaranty program have been signed through
April 1953
Country
Kind of guar-
anty covered
Country
Kind of guar-
anty covered
Austria
Convertibility,
expropriation.
Italy
Convertibility,
expropriation.
Belgium
Do.
The Netherlands
Do.
China (Formosa)
Do.
Norway
Do.
Denmark
Do.
Philippines
Do.
France
Do.
Turkey
Convertibility.
Germany (Federal Republic)
Do.
United Kingdom
Do.
Greece
Haiti
Do.
Do.
Yugoslavia
Convertibility,
expropriation.
Israel
D.
?
D. MUTUAL SECURITY AGENCY DESCRIPTIVE RELEASE
A statement des.3ribing the guaranty program and the broadening
of its program coverage resulting from the Mutual Security Act of
1952 was prepared and, after clearance by other interested agencies,
released to the press on June 19, 1952. This release contained a
statement to the effect that the guaranties staff is prepared to initiate
negotiations for guaranty agreements with all countries eligible to
participate in the program but not yet participants, either as investor
interest developed or as individual countries indicated a desire to
participate. As a result of the release, the guaranty program received
publicity in both general news publications and business publications
and a considerable number of inquiries were received from prospective
investors. Interest in the possible guaranty of investment in Latin
American countries was particularly prominent. By early September
1952, some 100 inquiries indicating investor interest in various Latin
American countries had been received.
E. LATIN AMERICA
On the basis of the expressed intent of the Congress that the
guaranty program should be vigorously prosecuted, and the apparent
widespread investor interest, discussions were begun with respect to
initiating negotiations with Latin American countries. A message
dated October 2, 1952, was sent by the State Department to American
diplomatic officers in the Latin American capitals describing the
guaranty program and asking for expressions of opinion as to the
appropriateness of attempting to initiate the program in the several
countries. Identical memoranda dated October 20, 1952 were given
by the State Department to the diplomatic representatives in Wash-
ington of seven countries. These memoranda described the guaranty
program and asked whether the governments approached would be
agreeable to entering into discussions looking toward the initiation of
the program in their countries. Thus far, only one has responded; it
has opened discussions on the initiation of the program in that country.
The possibility of instituting the program in Mexico was discussed with
representatives of the Mexican Government who stated that, although
interested in encouraging United States investment, they did not feel a
need for the guaranty program; they were also concerned about
complications raised by provisions of the Mexican Constitution. It
is apparent, therefore, that extension of the program to Latin America
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has made but little progress as yet. The first guaranty agreement
with a Latin American country was signed recently with Haiti, which
may arouse interest in the program on the part of other governments
in the area.
F. WEAKNESSES IN EXISTING LAW
1. Time factors
Dr. D. A. Fitzgerald, Associate Deputy Director of the Mutual
Security Agency, in his testimony before the subcommittee pointed
out two time-factor weaknesses in existing legislation:
At the present tiTne the authority to write guaranties exists only through
June 1954. It usually takes anywhere from 6 months to a year from he time
of application for a guaranty to its issuance, depending on the progress made in
negotiating the investment arrangements. We will be coming up against a
deadline fairly soon on our negotiating range unless the Congress sees fit or feels
it proper and appropriate to extend the period during which these guaranties
can be written. The present legislation likewise provides that the duration of
the guaranties themselves cannot run beyond April 2, 1962. In some instances
we have had inquiries on the part of investors for more forward coverage. Some
suggestions have been made that it might be desirable to go as far as 25 years
from the date of issuance' rather than put a specific date of April 2, 1962, or any
other specific date in the legislation.
It has therefore been recommended that these weaknesses should be
eliminated from the mutual security legislation and that authority
to write guaranties should be extended beyond the present legislative
deadline of June 1954. Accordingly, the executive branch recom-
mends the enactment of section 607 (a), contained in the draft bill on
the Mutual Security Program for the fiscal year 1954, amending
section 111 (b) (3) of the ECA Act, as follows (amending language
.shown in italics and deleting language shown in brackets):
(3) by making, under rules and regulations to be prescribed by the Adminis-
trator, guaranties * * * (which guaranties shall terminate not la,:er than
fourteen years from the date of enactment of this Act] which guaranies shall
be limited to terms not exceeding twenty years from the date of issoance: Pro-
vided, * * * That
2. Need for broader coverage
The Mutual Security Agency has informed the subcommittee that
discussions with guaranty applicants have demonstrated the need for
complete coverage of the risks of war, revolution, and civil disorder.
Further, MSA has been advised by a number of private individuals
and groups that the risks of war and revolution are important deter-
rents, and must be among the insurable risks in an effective system
against risks peculiar to foreign investment (e. g. MSA Advisory
Committee on Guaranty Policy chaired by Thomas H. MeEittrick,
senior vice president, Chase National Bank; recommendations to
TCA by August Maffry, vice president, Irving Trust Co.). To this
.end, section 607 (b) of the draft bill on the Mutual Security Program
for fiscal year 1954 made available by the executive branch, would
amend section 111 (b) (3) (v) of the Economic Cooperation Act as
follows (amending language shown in italics):
(v) the guaranty to any person shall be limited to assuring one or both of
the following: * * * (2) the compensation in United States dollars for loss
of all or any part of the investment in the approved project which shall be
found by the Administrator to have been lost to such person by reason of
expropriation or confiscation by action of the government of a participating
con ntry or by reason of war, revolution, or civil disorder.
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It is hoped that the proposed legislative amendment will cure a
defect in existing law which will offset certain of the more prominent
foreign risks impeding the flow of American capital abroad.
G. REMAINING FUNDS FOR NEW USES
Funds remaining for new uses for the guaranty of investments and
informational media (excluding applications received for Latin
American countries for which no funds have been set aside) may be
estimated at approximately $92,600,000. The statutory authorization
of $200 million, together with some $700,000 of fees collected under
the investment guaranty program, constitute the gross amount
available for guaranties. Presently outstanding liabilities a(ra nst
the guaranty fund total $39,300,000 and payments (all under informa-
tional media guaranties) total $7,600,000, leaving $153,800,000
uncommitted. Roughly, $61,200,000 (including $8 million for in-
formational media guaranties) should be earmarked for pending appli-
cations; some of these may be expected to be dropped, but the total
amount will probably be maintained by currently developing applica-
tions. Since the program is not operative in Latin America (except
Haiti), most prospective investors who have indicated an interest in
that area have not developed their proposals with the guaranties staff
to the point of stating the value of the investments contemplated.
However, it is possible to identify some $35 million of proposed in-
vestment: in Latin America; had MSA accepted applications for
current processing, it is believed that that figure would be substan-
tially larger and the amount of funds reniaining for new uses corre-
spondingly reduced.
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H. TABULATION OF GUARANTIES ISSUED AND PENDING
1. Industrial investment guaranties issued, cumulative Apr. 8, 1948--Dec. 81, 195k1
?
Total
Italy
Germany
(Federal
Republic)
France
Netherlands
Turkey
U. nited
Kingdom
Total industrial guaranties issued
$39, 567, 248
$20, 887, 300
$3, 634, 931
$4, 537, 489
$175, 000
$2, 808,313
$7, 524, 215
Industrial investments
38, 513, 248
20, 887,800
3,634, 931
3, 488,489
175,000
2, 808,313
7, 524, 215
Manufacturing projects
37, 960, 248
20, 799, 800
3, 634, 931
3, 017, 989
175, 000
2, 808, 313
7, 524, 215
...
19, 117, 500
19, 117, 500
Petroleum refining
California Texas (Caltex)
4, 630. 000
4, 630, 000
Standard Oil Co. (New Jersey)
14, 487, 500
14, 487,500
Chemicals
8, 205, 313
1, 602, 000
300,000
2,808,313
3,495, 000
Boiler compounds (National Aluminate Corp.) 2
1, 602, 000
1, 602,000
Carbon black (Godfrey L. Cabot)
2, 025, 000
2,025, 000
Medicinal and pharmaceutical preparations
4, 578, 313
300,000
2, 808, 313
1, 470,000
Parke-Davis & Co
735,000
735,000
E. R. Squibb & Sons
3, 446, 450
2, 711, 450
735,000
Charles Lockton
96,803
96,863
Heyden Chemical Co
300, 000
300, 000
Machinery and equipment
3, 907, 965
140, 000
1, 121,500
2, 646, 465
Earth-moving equipment (Euclid Road Machinery)
857, 500
857, 500
Sewing-machine parts (Singer Manufacturing)
717, 000
717, 000
Drill chucks (Jacobs Manufacturing)
584, 150
584, 150
Dictating machines (Dictaphone Corp.)
350, 000
350, 000
Regulating instruments (Minneapolis-Honeywell Regulator Co.) _ _ _
300, 000
300,000
Metalworking machinery (The Yoder Co.)
204, 500
204, 500
Miners safety lamps (Thomas A. Edison)
250,000
250,000
Mine car-loading equipment (Gardner-Denver Co.)
140,000
140,000
Metal-sprayirg equipment (Metallizing Engineering Co.)
103. 750
103, 750
Machine parts (Dana Corp.)
900, 900
200, 000
Materia l-loading equipment and road-building machinery (Barber-
Greene Co.)
47, 565
47, 565
Stainless steel valves (Cooper Alloy Foundry Co.)
153,500
153, 500
_ -
214
?
Transportation equipment
Diesel trucks (Ford Motor Co.)
Railway equipment (Westinghouse Air Brake Co.)
Truck trailers (Fruehauf Trailer Co.)
Consumer goods
Low-cost books (Pocket Books, Inc.)
Soluble coffee (Standard Brands, Inc.)_
Cooking, lighting, and heating appliances (S. F. Appliances, Ltd.) _
Public, technical, and educational books (McGraw-Hill Interna-
tional Corp.)
Slide fasteners (National Fastener Corp.)
Industrial equipment
Elevators and equipment (Otis Elevator Co.) 3
Clay refractories (Corhart Refractories)
Electrical insulating materials (Dow Corning Corp.)
Building materials
Asphalt tile (Joims-Manville Co.)
Concrete ingredients (Concrete Chemicals Co.)
Stone cutting (Joseph Pacifico)
Venetian-blind materials (25.35. Sonnenberg)
Other
Watches and clocks (General Time Instruments)
Rubber tires and tubes (Firestone The & Rubber Co.) 2
Agricultural projects: Vegetable-seed cultivation (Associated Seed Growers)_
Construction engineering-technical assistance
Foster-Wheeler Corp
Morrison-Knudsen
Forward contracting: Petroleum refining (Standard Oil Development Co.) 4_ _
lor4
1, 417, 908
60, 300
1, 357, 608
920, 108
60, 300
437, 500
60, 300
920, 108
437, 500
400, 250
17, 500
382, 750
218,750
218,750
75, 000
75, 000
49, 000
49,000
40,000
40,000
17, 500
17, 500
382,212
250,831
131,381
250,835
250, 831
72,000
70,000
61, 381
61, 381
635, 000
20,000
350. 000
90, 000
175, 000
350, 000
350, 000
90,000
90,000
20,000
20,000
172, 000
175, 000
3. 594,100
2, 894, 100
1, 000, 000
_
1, 000, 000
1, 000, 000
2, 894, 100
2, 894, 100
87,500
87,500
465, 500
465, 500
213, 500
213, 500
252, 000
252,000
1, 054, 000
1,054, 000
1 Guaranties of convertibility, except as otherwise noted.
2 Covers 2 contracts, 1 for convertibility and 1 for expropriation,
3 Expropriation only.
I Covers 2 separate projects.
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2. Industrial investment guaranties pending as of Dec. 31, 1952
Industrial guaranties
Total
Belgium
ChinaNether-
(Taiwan)
Denmark
France
Germany
(Federal
Republic)
Greece
Italy
lands
Philip-
pines
Turkey
U. lilted
Kingdom
?
T A'l applic dims pending
$53, 206, 267
$1,
293, 500
$3, 680,
000
$182, 500
$5,
241,z,00
$2, 313. 555
38,003, 550
318, SSA, 831
54,430 018
$795, 000
$3,
452,
213
$4,
129, 300
Industri I investments
44, 739, 467
1,
293, 500
3, 680,
000
182, 500
4,
941, 800
2, 313, 555
3, 636. 750
,
18, 884, 831
4, 430, 018
795, 000
452,
213
4,
129, 300
40. 772, 617
1,
203, 503
---
3.080
000
182,500
4,
-
890, 800
---
1,972, 705
3, 636, 750
18, 809, 831
1, 430, 018
795,000
452
213
3,
629, 300
Minufacturing projects
-
14822, 000
--
-
14,822, 000
Petroleum refining
7, 175, 072
1,
056, 500
-
1, 125, 755
-
554,000
3. 136, 536
29,318
452,
213
820, 750
Chemicals
29, 315
-
29,318
Fertilizers
Fungici lee.
932, 500
962,100
Industri I ohmic Is
1, 125, 755
1, 125, 755
Me ficin-1 and pharmaceu-
tic'l preparitions
2, 767, 749
554,000
1, 761, 536
452,
213
PI stic mated. Is
2, 239, 750
-
94,000
1, 375, 000
820.750
M zchinery and eduipment .____
3,797, 500
205,000
1, 212, 500
.
2,
350, 000
Office m?tc?i Ines
785.000
235,000
---550,000
Oil t inks and pimps .
562,54)0
562,500
Oil well drilling m ichinery_
2 000.000
2,
000, 000
M-C:-ine t )-is _
103,000
100,000
Regal --Ong instruments_
350, 000
350, 000
--
2, 509, 900
208,800
1,
666, 800
97, E00
113,600
107.200
255, 500
Transportation equipment
Automotive replacement
parts
2, 034, 900
208,500
1,
291, 800
97,800
13, SOO
167,200
255100
Brake b ind ing inateri- Is
and equipment
100,000
100.000
Trailers
375, 000
375, 000
Consumer goods
282, 000
102,000
180,000
Package soups
92, 000
92, 000
Publishing enterprises 180, 000
180, 000
Mile fasteners
10.000
-
10, 000
ory
-11
0
Electrical machinery equipment
CD and supplies
CT) Electrical generating equip-
ment
(i) Electrical insulating ma-
terial
CD Radios and radar
Storage batteries
Welding materials
CD
CD Industrial equipment
Elevators and equipment _ _
Filters
Materials handling equip-
ment
Fabricated metal products:
Metal drums

-
Other: Sugar refining. _
Agricultural projects: Seed cul-
tivation _
Financial: Commodity financ-
ing
Services: Hotel operation
Water-well drilling
Construction engineering-tech-
nical assistance
Forward contracting
Chemical engineering
Coal mining engineering
Electric-power engineering
AAA, A
6, 009, 200
3, 680,000
182,500
1, 315, 500
119,150
509,000
203,050
3, 680, 000
3, 680,000
261,500
265, 500
831, 200
119,150
509,000
203, 050
182, 500
182, 500
1, 050, 000
1,050, 000
-
2, 299, 195
849, 700
_
750, 000
450, 000
228, 495
21,000
642, 495
450,000
192, 495
21,000
21,000
1, 635, 700
849,700
750,000
_.
36,000
---------------------------------
795, 000
_ 795, 000
3, 082, 750
3. 082 750
75,000
_
_ _
75,000
3, 000,-000
_ ____ _
_ _______ _
_ __ , _ _ _ _ . _ - __ -
___ - ____ -
_
3 000, 000
500,000
__ _ _ _._ _ _.
_ _ _ I ________ 500,000
51,000
_ ____ _
51,000 __ . _ _ ________ _.
340, 850
--------------------------------------------340,850

_ _
_ __________ _ _ _______ _... _ _. _ _.
8, 466, 800
300,000 -------------5,166,800
-----------------------------------3,000,000
300,000
300,060
I
3, 466, 800
466, 800
3, 000.000
4, 700,060
4, 700, 000
1
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VII. TECHNICAL COOPERATION ADMINISTRATION (TCA)
A. OVERALL RESPONSIBILITIES
1. General objectives of program
The TCA, under the act for International Development has the
responsibility for aiding the efforts of the peoples of economically
underdeveloped areas to develop their resources and improve their
working and living conditions by encouraging the exchange of tech-
nical knowledge and skills and the flow of investment capital. If the
TCA fulfills its responsibilities, its programs can help to create the
basic conditions necessary for successful private enterprise and invest-
ment. The program has as its objective not only economic develop-
ment per se, but the improvement of the "human capital" without
which genuine development cannot be brought about or sustained.
The expert assistance and financial contribution to projects in the
fields of agriculture, health, sanitation, education, housing, transport,
power, irrigation, communications, and the like, are calculated to
build the human, social, and economic foundations which should make
possible a higher level of private economic enterprise.
2. Responsibilities under section 516 (e)
TCA is specifically responsible under section 516 (e) of the Mutual
Security Act of 1951, as amended, for finding and drawing the atten-
tion of private enterprise, in cooperation with the Department of
Commerce and the Mutual Security Agency, to opportunities for
investment and development in underdeveloped areas; and for seeking
the participation in its program of private agencies and persons,
especially private industrial groups, to the greatest extent practicable.
3. Pooling of resources with Department of Commerce
TCA and the Department of Commerce have pooled their resources
to carry out an intensified program consisting of the following three
principal parts:
(1) The encouragement of conditions favorable to private
investment, both local and foreign;
(2) The identification of specific opportunities for investment
and location of interested investors;
(3) The assembly and dissemination of country background
necessary to foreign investors.
Missions in the field were instructed to work with the host govern-
ment, local business groups, and individual businessmen, to accomplish
these objectives. Each TCA Country Director was instructed to
appoint a member of his staff to be responsible for the private invest-
ment phase of international development activities, supplementing the
work of the economic section of the Embassy or Legation. (For text,
see appendix.)
B. LOCATING OPPORTUNITIES FOR PRIVATE INVESTMENT
The staff was instructed to help in the reporting of specific oppor-
tunities for private investment and patent licensing under Foreign
Service Economic Reporting Circular No. 31 of July 20, 1951. (Text
will be found in appendix.) The circular prescribes the methods of
handling requests of private persons and firms desiring to obtain
4
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(a) private investment funds from United States sources and (b) license
to utilize United States patents, trade-marks, copyrights, or technical
knowledge (know-how); or conversely, to convey the rights to their
own patents or formulas to an interested United States licensee.
The information received is transmitted to the Commercial Intelli-
gence Branch of the Department of Commerce and disseminated
throughout the United States. A concise account of each investment
and licensing opportunity is published in the Foreign Commerce
Weekly by the Office of International Trade of the Department of
Commerce, and, secondary publicizing takes place through the 42
regional offices of the Department. The_ regional field offices also
contact private individuals and business firms in the United States
who are potential foreign investors, licensors or licensees.
Types of opportunities to be reported cover?
Investing in new plants abroad; full or partial purchases of new
foreign enterprises such as plants, utilities, mines, plantations, etc.,
existing or projected, incorporated or unincorporated;
Licensing to foreign firms of American-owned patents, trade-
marks, secret formulas or copyrights, with or without a share in
management by the American owners;
Licensing to United States firms of foreign-owned patents,
trade-marks, formulas or copyrights;
Supplying American know-bow regarding industrial processes
and techniques, as distinct from the grant of patent rights. This
may involve the hiring of American engineers and technicians,
for long or short periods; it frequently is tied in with the purchase
of American machinery and equipment. Many American proc-
esses are not patented abroad, their protection being assured by
the experience, skill and special equipment of the manufacturer.
To supplement Foreign Service Economic Reporting Circular 31 and
to emphasize the special responsibilities of TCA in the area of private
investment, the Agency issued its own instructions in the form of a
circular airgram, dated October 23, 1952. The circular airgram is
reproduced in the appendix.
TCA missions were instructed to report all background information
which would be valuable to United States agencies in Washington
and to private businessmen in connection with the investment program,
and to explore all means of furthering private enterprise through
jointly agreed technical assistance projects. Special regard was to
be given to projects of long-range importance designed to facilitate
private investment through advice in such fields as government
fiscal policies and administration, mining and corporation laws, etc.,
and through advice and possibly joint action with respect to improve-
ment of credit facilities and establishment and strengthening of
institutions directed at channeling private capital into approved
development enterprises.
Even though the conditions at the outset in a given country offer
little hope for early results, the missions were instructed that the
program should nonetheless be carried forward in an effort to amelio-
rate present unfavorable conditions.
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Approved Fur Release 2013411118125,11C4A-RDE5&A0453R000200110001-1
The responses from the missions to the circular airgram on private
investment program in TCA . countries are of mixed character. A
few indicate understanding and enthusiasm for the program, a larger
number that little more than what is already being done is possible
under existing conditions, and some the need for further discussion
and clarification. This project is, of course, only in the beginning
stages of development. It will require the continued joint a-Aention
of TCA and other interested agencies in Washington and of missions
in the field in the process of developing the program so as to meet the
particular problems and needs of individual countries.
C. SERVICE TO BUSINESS PROJECT
As a means of promoting United States private foreign investment,
TCA has given financial assistance to the Department of Commerce
(1) to prepare a series of investment guides; (2) to extend invastment
counseling services by members of the staff of Office of International
Trade (OTT) and (3) to prepare a census of United States direct
investment abroad.
D. EXTENSION OF THE INVESTMENT GUARANTY PROGRAM
The MSA investment guaranty program, which had been limited
to ECA areas in the past, was extended to all countries covered by
the Mutual Security. Program. ? It was implemented in a TCA area
for the first time when I$ra,e1 concluded negotiations for the program
on August 8, 1952. Preliminary discussions have been held with 12
other countries in Asia and Latin America.
In administering this program. with respect, to TCA countries,
MSA relies on TCA for policy determinations and recommendations
concerning specific guaranty applications.
This program is a facet of TCA's program for industrial develop-
ment and the stimulation of private investment.
E. INDUSTRIAL DEVELOPMENT-PRIVATE INVESTMENT PRO GRAM
The greatest opportunity for the stimulation of private capital
investment is the field of industrial development. Althoug a other
fields such as agriculture, natural resources, and transportation also
offer opportunities for private capital investment, they are not
usually attractive for such investment. TCA activities in this area
involve planning and carrying out?
(1) Industrial development projects appropriate for inclusion in
a regular program of technical cooperation financed jointly by the
United States and the host government;
(2) Projects designed to stimulate the investment of local
private capital in industrial development;
(3) Projects designed to stimulate the investment of foreign
private capital (especially United States capital) in industrial
development?
as illustrated below.
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Approved For Release.
.1. Productivity centers
In response to requests, the Institute of Inter-American Affairs
(IIAA) has participated in organizing national productivity improve-
ment centers in Chile, Brazil, and El Salvador, while similar pro-
grams are under consideration in Uruguay, Colombia, and other
countries. The overall objectives for these jointly managed coopera-
tive services in the field of industrial methods will be to provide
medium and small industries with a practical grasp of efficient basic
techniques of industrial operation adapted to their particular needs.
(The cooperative service, called a servicio in Latin America, is a
device for the joint conduct of technical cooperation programs which
is used by TCA in many countries and program fields. Essentially,
the cooperative service is an agency established by the host govern-
ment under an agreement with the United States which is jointly
managed by United States and host goVernment technicians and
financed by contributions from both governments.) The program
is intended to increase production and lower costs, through better
utilization of available manufacturing equipment, existing raw mate-
rials, and present labor force. Technical assistance activities will
deal primarily with fundamental engineering techniques associated
with effective productivity, production planning and control systems,
plant layout, materials handling, methods engineering, process
methods, personnel practices, and labor-management relations. Over
a long period the benefits to each country in the general use of efficient
production procedures will undoubtedly be of very great consequence
to the living standards of the people.
Similar projects are now under consideration for Asia, the Near
East, and Africa.
2. Latin America and small industries
A number of Latin American countries, including Colombia,
Panama, the Dominican Republic, and El Salvador have requested
assistance in the development of small industries. New industries
would provide not only employment, but a more balanced economy
and an opportunity to obtain exchange for the purchase of capital
items and raw riaterials. The Institute is now making arrangements
with several private industrial and investment firms to undertake pre-
liminary suveys in several of the Latin American countries which
have requested this technical aid through Embassy channels.
3. South and southeast Asia and industrial development
TCA countries in south and southeast Asia are receiving help in
urban and industrial development. TCA has cooperated with Paki-
stan by providing technical assistance in the development of small
industry. In Indonesia detailed studies are being made on railway
and harbor improvement, mechanical industries, and machine-shop
production, chemical industry, power and communications develop-
ment. During fiscal year 1953, 30 Indian trainees have been study-
ing at American schools and laboratories in the effort to assist in
India's technological growth by creating a body of skilled managers
and technicians. In India, the Damodar Valley project has the
service of a TCA small industries adviser. Burma is being helped
to complete its plans for the development of the teak industry, food
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Approved or Release 2008/
processing,- textile and cordage industries, bamboo, paper, jute,
ceramics, glass, refined minerals, and chemical production. These
are but a sampling of projects underway in the area of industrial
development.
4. Latin America and flow of capital
It has been proposed to undertake a small program of technical
assistance for increasing private investment in Latin America. This
project attempts to deal directly with certain factors retarding the
flow of investment capital. One is the lack of experience and know--
how on the part of Latin American industry in the 'preparation of
adequately documented prospectuses upon which American investors
can rely in confidence. Another is inadequate machinery for bringing
together investment opportunities which now exist in Latin America
with potential sources of investment funds within this country. The
proposal attempts specifically to meet such problems as these on an
experimental basis, utilizing methods and personnel suggested by
investment authorities with whom these problems were discussed.
5. Asia Development Service
The Asia Development Service of TCA is also studying the possi-
bility of entering into contract with an established investmert house
to undertake studies of investment possibilities in certain under-
developed countries, provided such a service is believed to be useful
in the field and if a request for such service is received from the host
government.
r:
5m-CIA-RIEW5840453R000200110001-1
F. PROMOTING PARTICIPATION OF PRIVATE AGENCIES BY CONTRACT
1. Mandate of section 407 (a)
In accordance with the legislative mandate in section 407 (a) of the
Act for International Development, TCA contracts with pr'ivate
agencies, organizations, and persons for the furnishing of technical
assistance and the conduct of demonstration projects in these areas.
It employs such private contracts both as an effective means of
making available to the underdeveloped countries the technical and
organizational skills possessed only by private organizations and
business enterprises, and as a way of acquainting private business on
the one hand, and the governments and peoples of the underdeveloped
areas on the other, with further opportunities for mutually advan-
tageous cooperation. TCA enters into contracts both with private
business enterprise (under sec. 516 (e) of the Mutual Security Act)
and with nonprofit educational, research, and welfare orgarizations
and institutions for services in connection with all major phases
of its program. TCA has found, however, that nonprofit educational
and welfare institutions are the principal private source for technical
skills in education, public health, and agriculture of the type most
suited to the underdeveloped areas, while private business enterprise
is the chief reservoir of skills in the field of industry, natural resources
development, and the engineering and economic phases ,3f Com-
prehensive development planning. It is expected that the number of
contracts with business enterprises will increase as present TCA
efforts to expand technical cooperation programs in the fields of
industry and nonagricultural resources development bear fruit.
It is hoped that this phase of the program will be accelerated.
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2. Summary of contracts and amounts
The total amount of contracts for services with United States
private agencies and persons financed by TCA from the inception of
the program through February 28, 1953, is $19,521,533 of which
$11,169,236 represents contracts with private business organizations
and $8,352,297 contracts with non business organizations.
The total amount from the inception of the program through
December 31, 1951, is $7,079,901, of which $3,994,808 represents con-
tracts with private business organizations and $3,085,093 contracts
with nonbusiness organizations. For the period. January 1, 1952,
through February 28, 1953, the total amount is $12,441,632, of which
$7,174,428 represents contracts with private business organizations
and $5,267,204 'contracts with nonbusiness organizations.
Contracts with private business organizations represent 56 percent
of the total in the period from the inception of the program through
December 31, 1951; 58 percent of the total in the period January 1,
1952, through February 28, 1953.
The summary above does not include contracts for the procurement
of commodities. Procurement of commodities from private supplies
in the United States under TCA programs was authorized in the
amount of approximately $60 million in fiscal year 1952.
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Business contracts for participation of private agencies in TCA programs1
FROM BEGINNING OF PROGRAM THROUGH DEC. 31, 1951 (PART I)
Contractor and address
Amount
Country
Type of work
Adams, Harvard & Greeley, Boston, Mass,
$15,000
India
Preparation of town plan.
Aero Service Corp., Philadelphia, Pa
200, 000
Liberia.
Aerial photographic mapping.
8, 767
Saudi Arabia
Furnishing of prints, etc.
54, 348
do
Aerial photographic mapping of a defined area.
Armour Research Foundation of Illinois Institute of technology,
Chicago, Ill.
48, 000
Latin America
Survey of plans for construction materials demonstration and
training center.
160, 000
Pakistan and India
Provision of technical advice in several industrial fields.
Architects Collaborative, Cambridge, Mass
15,000
Costa Rim
Supplying technical assistance in housing.
Aviation International Delivery Service, Inc., Washington, D. C_
41, 600
Pakistan
Aerial antilocust spraying.
Black Star Publishing Co., New York, N. Y
1,600
Liberia.
Photographic report of projects.
Columbia Federal Savings and Loan Association, Washington,
D. C.
15, 000
Latin America
Preparation of study on mobilization of local capital for agricul-
tural investment.
General Railway Signal Co., Rochester, N. Y
11,865
Pakistan
Conduct of field survey and making of recommendations on
railway signaling and traffic control system.
Gibbs & Hill, Inc., New York, N.Y
100,000
Brazil
Advisory and engineering services for joint commission in power
development and transportation.
Haimes, Sidney S., and Associates, Washington, D. C
10,000
Latin America and TCA/W___
Preparation of exhitits and graphic arts presentation.
Harland Barthalomew and Associates, St. Louis, Mo
20,000
Pakistan
Provision of technical advice on municipal water supply and
sewage systems.
Knappen Tippetts Abbett Engineering Co., New York, N. Y
10,000
Ecuador
Preparation of survey of proposed port improvements.
39, 840
Jordan
Construction and restoration of cisterns and irrigation works.
29,000
do
Additional repair of equipment.
1, 500, 000
Burma
Services as technical secretariat to Burma Economic Council,
including economic advice, consultation, engineering, super-
vision, and procurement.
Little, Arthur D., Inc., Cambridge, Mass
20, 000
Egypt
Survey of low-cost-housing materials and construction.
3, 000
Costa Rica
Preparation of recommendations on technical assistance in
private industry development.
Mitchell, James T., Oklahoma Agricultural and Mechanical
3, 165
TCA/W
Consulting servies as audiovisual specialist.
College.
2,940
TCA/W
Consulting photo editor.
955
TCA/W
Do.
Richards, Louis J., Washington, D. C
230, 000
Iran
Drilling of 20 water-supply wells and installation of pumps.
Rochmont L., de Corp. New York, N. Y
264,000
Burma
Production of motion pictures and training and advice.
Southwest Research Institute, San Antonio, Tex
45, 818
Latin America.
Preparation of study and recommendations on the babassu nut
industry.
Springfield, Lawrence, Philadelphia, Pa
2, 910
TCA/W
Consulting services on visual education in Washington.
Stryker, Roy E., New York, N. Y
6,000
TCA/W and all TCA coun-
tries.
Provision of technical advice in Washington on visual education
program.
United States Overseas Airlines, Wildewood, N. J
White, J. G., Engineering Corp., New York, N. Y
21,000
tion non
India
infiniyac4,
Aerial antilocu?t spraying.
Advice and consultation on planning of balanced economic devel-
opment, design and engineeriny services, supervision of con-
struction and purchasing sec vices.
I.- 1.000 1. 1.00ZOOON?9
CD
Weod, Richardson & Co., New York, N. Y
15, 000
All TCA countries__ Report on investment opportunities for use in promoting private
business participation.
CD
a.
11
0
CD
CD
6
a
cri
a
a
a
a
a
a
0-
11
0
CD
(7)
a )
Cn
CD
1?3
a
a
Total
3, 994, 808
FROM JAN. 1, 1952, THROUGH FEB. 28, 1953 (PART II)
Aero Service Corp., Philadelphia, Pa
Airform International Construction Corp
Ala 'Ilium, Fay Calkins, Arlington, Va
American Express Co., New York, N. Y
8534, 000
38, 889
96, 359
30, 009
85,960
1,260
7, 700
93,539
195,000
3,000
1,500
13, 700
1. 160
27,000
33, 750
6, 000
250, 000
9,070
15, 000
154, 700
26, 050
15, 000
22, 500
6, 883
6,723
8,852
16, SOO
300, 000
175,000
15,1300
330,000
8, r..00
Liberia
Saudi Arabia
Jordan
Liberia
Jordan
T CA/W
Saudi Arabia
Pakistan and India
Burma
TCA/W
TCA/W
Pakistan
Ceylon
Pakistan
Latin America
TC Ar1V-
Lebanon
Jordan
Brazil
Iraq
do
Egypt
Pakistan
do
do
Israel
Haiti
Brazil
do
Latin America and T CA/W_
Saudi Arabia
Burma
Aerial survey of certain areas for use in planning economic
development.
Furnishing of mosaics, topographic maps, and prints from existing
aexial pnotogra_pbX.
Aerial survey of river valley.
Aerial photographic mapping.
Construction and installation of grain handling and storage
facilities.
Consulting services.
Escorting Saudi leaders in inspection of United States reclama-
tion, irrigation, education, and health programs.
Provision of technical advice in several industrial fields.
Advice in reorganization of State Industrial Research Institute,
Rangoon.
Preparing general study on point 4 program.
Expansion of above study.
Tranting of pilots in aerial antikenst spraying.
Exhibit of Piper Cub plane in Ceylon exhibition, Colombo.
Aerial antilocust spraying and training.
Research on recovery of Kenai fiber.
Photographs and report of point 4 programs.
Geologic exploration of Litani River Basin.
Advice in olive-oil production.
Advice on storage facilities.
Advice and preparation of surveys on road-system development.
Provision of laboratory director to roads project.
Advice in grain storage,.
Provision of special adviser to State Bank of Pakistan.
Increase to preceding contract.
Technical advice on health and sanitation in Washington and
Pakistan.
Technical advice and supervisory services in irrigation.
Consulting services in social insurance.
Advisory and engineering services for joint commission on power
development and transportation.
Do.
Preparation of exhibits and graphic-arts presentation.
Conduct of railroad-construction survey.
Preparation of complete plans for construction of motion-picture
laboratory, recording and preview facility and sound stage.
Co
01
. .
0
Co01
6
4=k
cri
K.)
Armour Research Foundation of Illinois Institute of Technology,
Chicago, Ill.
Aswell, James R., Arlington, Va
Aviation International Delivery Service, Inc
Bollman, Geo. W., S.r Co., Adamstown, Pa
Chapelle, Anthony and Dickey, New York, N. Y
Continental Drilling Co., Los Angeles, Calif
Drobish Smith Olive Oil Co., Oroville, Calif
Drying, Plant Engineers, Inc
Edwards, Kelcey and Beck, New York, N. Y
Ehasz, Frank L.' and Associates, New York, N. Y
Federal Reserve Bank of Dallas, Dallas, Tex
Feemster, Roy F., Brookline, Mass
Flannelly, Walter, New York, N. Y
Galbraith, Dr. Douglas J., Toronto, Canada
Gibbs & Hill, Inc., New York, N. Y
Hairres Sidney S., and Associates, Washington, D. C
International Engineering Co., San Francisco, Calif
Johnson, Robert, Inc., New York, N. Y
See footnote at end of table, p. 50.
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Business contracts for participation of private agencies in TCA programs 1--Continued
FROM JAN. 1, 1952, THROUGH FEB. 28, 1953 (PART II)?Continued
Contractor and address
Amount
Country
Type of work
Klemme, Randall T., Stillwater, Okla
Knappen Tippetts Abbett Engineering Co
$6, 135
2, 250
2,200
Pakistan
do
Jordan
Services as economic consultant and preparation of report.
Do.
Repair of equipment?restoration of cisterns and irrigation works.
7, 500
Paraguay
Provision of technical advice on hydroelectric-power develop-
ment.
Litchfield, Whiting, Panero Severud and Associates
848, 562
Burma
Services as architeet, engineer, and consultant in hospital and
health-center construction.
Little, Arthur D., Inc., Cambridge, Mass
35, 000
Egypt
Testing and demonstration of construction machinery.
Richards, Louis J., Washington, D. C
240, 000
110,000
do
Iran
Survey of basic economic potential.
Drilling 10 water-supply wells.
Smith, Harold T., Inc., Washington, D. C
830, 606
India
Drilling and equipment of tube wells for irrigation.
1,059, oaa
do_
Do.
1, 245, 909
do
Do.
Springfield, Lawrence, Philadelphia, Pa
7. 383
TCA/W
Consulting services in visual education.
United States Overseas Airlines, Wildwood, N. J
218,000
Iran
Aerial antilocust spraying.
Whiting, Edmund Jay, New York, N. Y
22. 300
6, 000
do
do
Instruction of Iranian personnel in spraying.
Advice on hospital health-center construction.
The William Hood Dunwoody Industrial Institute, Minneapolis,
Minn.
Total
2, 505
Indonesia
Training of 3 technicians.
7, 174, 428
I Exclusive of contracts for procurement of supplies and equipment and of contracts with nonbusiness private agencies.
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G. THE MAFFRY REPORT
In addition to the activities mentioned above, TCA requested
August Malfry, a vice president of the Irving Trust Co. and a former
member of the Board of Directors of the Export-Import Bank, to
examine the problem of encouraging private foreign investment from
the point of view of the banker outside Government. The report
envisages a program of action by all agencies of Government concerned
with promoting private investment abroad. It recognizes the difficul-
ties involved in increasing the flow of capital abroad and sets forth
extraordinary measures considered necessary to produce a substantial
increase in foreign investment by individuals and institutions. Parti-
cular attention is given to the potential role of the Export-Import
Bank in providing loan capital, and the ways in which the United
States Government can assist in improving the climate of investment.
A summary of the major provisions of the report will be found on
page 6 above.
H. NEED FOR ACCELERATED ACTION
'While there has been an improvement in the implementation by
TCA of its responsibilities to encourage the flow of private investment
Into host countries, it is hoped that this implementation may be
considerably accelerated. In this regard, the remarks of the Hon.
Karl NC LeCompte during the subcommittee hearings are pertinent:
In the long-range view, we can accomplish much more with private capital in
point 4 than we could possibly by sending Government-paid technicians, if we
can interest enough different private investors.
The Hon. Eric Johnston, in response to these remarks, had this to
say during his appearance before the subcommittee:
The natural resources of those areas, in my opinion, can be better developed
by private funds. Private capital carries with it its own technicians. They
stay longer and have a greater incentive to produce. There are many reasons
why it is preferable. I think we should encourage more private capital to go
into these areas for industrialization and thereby promote trade, and that, of
course, means less aid.
VIII. DEPARTMENT OF COMMERCE
A. REQUIREMENTS OF SECTION 516 (C)
Section 516 (c) of the Mutual Security Act of 1951, as amended,
requires the Department of Commerce, in cooperation with private
? business groups and governmental agencies, to conduct a thorough
study of legal and other impediments, both foreign and United States,
to private investment abroad. The Department is also required, as
part of such responsibility, to conduct a thorough study of the
methods and means whereby those impediments can be removed or
decreased. Finally, it is required to make recommendations on the
whole subject to the Director for Mutual Security.
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B. NEED FOR BASIC INFORMATION
Investing abroad involves more than simply investing in a business;
it involves also investing in a country. Conditions affecting business
in a foreign country differ from those in the United States. Persons
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considering an investment abroad must have available to them not
only specific data as to the project or enterprise in question, but also a
considerable range of general background commercial and economic
information having a bearing directly and indirectly upon the pros-
pects of an enterprise in the particular country in view. A second
segment of the program for the promotion of private inve3tment
abroad consists of the assembly and dissemination of this essential
material. The necessary information includes such things as popula-
tion data, income data, full information about business laws and
regulations, knowledge of tax laws and tax rates, financial and mone-
tary data, information concerning transportation and communica-
tions, facts as to labor supply and labor costs, and information about
natural resources and such basic industrial resources as electric power,
fuels, iron and steel, and other basic industrial materials. Investors,
both large and small, need to have such information in order to assess
investment opportunities abroad.
C. SHIFT OF EMPHASIS TO UNDERDEVELOPED COUNTRIES
Until the introduction of the technical assistance program, effort in
this regard was directed primarily toward those countries with which.
the United States has its most extensive and important economic
and commercial connections. With the institution of the program
emphasis has been shifted to the underdeveloped countries. As a
result of efforts expended to date, the Department of Commerce points
to two accomplishments: First, information for most of the under-
developed countries needed to service current requests from the
business community has been gathered and, second, for some of the
underdeveloped countries there has been assembled a full body of.
information which should be adequate to meet almost any kind of
need.
D. CURRENT PREPARATION OF INVESTMENT GUIDES
A feature of this segment of the program is the current preparation
of so-called investment guides. These guides or manuals, to be issued
country by country in book form, will contain general information
of primary interest to traders and investors abroad. These guides
constituteonly one of the ways in which the material contained may
be conveyed to those interested. It can be publicized, and it regularly
is, through pamphlets, through the periodical Foreign Commerce
Weekly, and through bulletins issued by Department of Commerce.
field offices.
E. OFFICE OF INTERNATIONAL TRADE
During 1951 and 1952 work was done by the Office of International
Trade toward the preparation of investment guides for nine countries.
Several of these guides should be available by July 1953 in published
form. The volume dealing with Venezuela is already in press to be
followed shortly by one for Colombia. It is hoped before the end of
the present fiscal year that the volumes for India, Mexico, and
possibly Pakistan likewise can be completed.
The Office of International Trade has been entrusted with the-
responsibility of conducting the study required by section 516 (c) of
the Mutual Security Act. The Department of Commerce states that
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it has taken full advantage of the informational resources of the several
geographical and functional divisions of the Office in carrying out the
study. The problems of foreign investment have been approached
by Commerce in two ways: First, an analysis of factors impeding
investment has been made through a series of country studies, each
one designed to give in summary form a view of the main pertinent
factors in that instance. Review of this series of studies presents
the composite picture. Second, consultations have been held with a
number of American firms already established in foreign operations or
in a position to consider the undertaking of operations abroad. The
firms consulted include a number of different fields of business of vary-
ing importance in foreign operations and they include firms having
interests in virtually all of the foreign countries in which United.
States capital is known to be engaged. This is in keeping with the
mandate of section 516 (c) that the Department of Commerce, in
conducting its study, should cooperate with business groups.
The Department of Commerce states that the results of this study
will be ready for issuance very soon. This study is now long overdue.
The subcommittee realizes that the study required by section 516 (c)
involves a heavy workload and that the task is a complex one.
IX. RELATED ACTIVITIES AS PART OF TOTAL PROGRAM
A. GENERAL
The encouragement of American private investment abroad is, as
has already been indicated, the day-to-day business of such agencies
as the Department of State (including the Foreign Service and the
diplomatic establishments abroad), TCA, MSA, and the Department
of Commerce. Their functions include advice and assistance to
American businessmen concerning their operations abroad, obtaining
and publishing foreign economic and investment information, and
discussing these matters with foreign government representatives.
1. Necessary base for capital movement
International private capital movement must have for its base
mutual confidence in peoples and governments, and of knowledge and
understanding of problems and opportunities. The total foreign
policy of United States is, of course, directed toward these objec-
tives. Thus, the development of our strength, and that of our friends,
so as to deter the forces of aggression and promote the conditions of
peace, is directly related to securing the kind of a world in which
?
private enterprise can function effectively. As President Eisenhower
said during the course of his inaugural address on January 20, 1953:
Recognizing economic health as an indispensable basis of military strength
and the free world's peace, we shall strive to foster everywhere, and to practice
ourselves, policies that encourage productivity and profitable trade.
2. Broader objectives
It is impossible within the compass of this report to illustrate all
the specific ways in which the achievement of this broad objective is
being sought. It is not the purpose of this report to review all the
means whereby United States foreign economic policy is being carried
out, nor to summarize all aspects of our total diplomatic effort in that
regard. It is the expectation of the subcommittee to perform that
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task in a future report. Some activities relate directly to foreign
economic development, with which State, MSA, TCA, and Eximbank
and other Government agencies are directly concerned. This in-
cludes the area of private capital movement, already discussed above.
Others may be found in such closely related fields as international trade
and financial policy, where the United States is pursuing various
measures for expanding the world economy. Because, for example,
restrictive business arrangements can both impede the flow of invest-
ment capital and reduce the benefits of investments that are made, the
United States has supported action to reduce such restrictions and to
stimulate free, competitive enterprise. The United States is, to cite
ancither example, a strong supporter of the International Monetary
Fund and the General Agreement on Tariffs and Trade (GATT),
both of which have among their objectives the lowering of trade
barriers and payments restrictions so as to encourage fuller use of the
world's resources and expansion of the production and exchange of
goods.
3. Inconvertible currencies and exchange control
Not only do these organizations contribute to our broader objectives,
but they also have a clear relationship to the efforts being made to
stimulate the flow of American private capital abroad. One of the
significant deterrents to American investment abroad, for example, is
the problem of inconvertible currencies and exchange controls. If
investors are to risk their capital abroad they must have a reasonable
chance of transferring their capital and earnings to the United States
in dollars. The guaranty program under the Mutual Security Act,
which has been. described above, takes this reality into account and
makes provision for it. The International Monetary Fund is work-
ing to maintain orderly exchange arrangements among its members,
and to minimize exchange restrictions?and eventually to eliminate
them. At the same time, it is stated, exports to the United States
from the countries in which in vestments are made should be encour-
aged if countries are to earn the foreign exchange to enable earnings
and capital to be transferred to the United States. The stimulation
of United States imports is, therefore, directly related to the inter-
national flow of private capital. The orderly and mutually advanta-
geous flow of private capital cannot be considered in a separate
compartment.
4. United Nations
Mention should also be made of United States participation in the
United Nations, which is concerned not only with political and military
action designed to promote world peace and security, but with a
variety of economic measures including some related directly to the
flow of private capital for economic-development purposes. The
United States, for example, supported a resolution during the last
session of the Assembly, in December 1952, which recognized the
importance of stimulating such a flow into the underdeveloped
countries and requested the Economic and Social Council to consider
ways and means by which the United Nations might assist in this
process. At the same session the United States opposed a resolution
which, in effect, confirmed the right of governments to nationalize
property within their jurisdiction but omitted specific mention of the
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accompanying obligations such as that of compensation to former
owners. (These resolutions are discussed above on pp. 11-13.) (Like-
wise, the efforts of this Government to resolve the disputes over specific
nationalization measures in Iran and Bolivia, for example, are moti-
vated in large part by the adverse effects of such measures upon the
future flows of international private capital.) The United States has
also encouraged the Council (and its regional commissions) to study
the subject of foreign private investment and to publish material
concerning such matters as the laws and regulations of member
countries concerning foreign enterprises. Foreign Investment Laws
and Regulations of the Countries of Asia and the Far East (U. N.
Doc. ST/ECAFE/1, January 1951) may be cited as one example.
5. Elimination of bond defaults
The Johnson Act of April 13, 1934, ,prohibited private American
loans to governments in default on their obligations to the United
States Government (48 Stat. 574). However, this act was amended
by the Bretton Woods Agreements Act of July 31, 1945, to permit
governments in default to the United States Government to borrow
in the private capital market of the United States provided they are
members of the International Bank for Reconstruction and Develop-
ment and the International Monetary Fund (59 Stat. 516). More-
over, the Export-Import Bank Act of 1945 removed the previous pro-
hibition on loans by the bank to governments in default to the United
States Government and, insofar as participation with the Export-
Import Bank is concerned, lifted the prohibition of the Johnson Act
on loans by private persons to such governments (59 Stat. 526).
Where foreign governments have been in default on their dollar
bonds originally sold in the United States, the Department of State
has supported action by them to resume service on their obligations
and thus eliminate the default situations. The negotiations for ad-
justed settlements on defaulted obligations of this kind are normally
undertaken with the foreign government by the Foreign Bondholders
Protective Council, a private independent organization founded in 1933
at the request of the Government to protect the rights and interests
of American holders of publicly offered dollar bonds of foreign govern-
ments and their political subdivisions? direct and guaranteed. The
Council has recently negotiated settlements with Costa Rica, Japan,
Peru, and the Federal Republic of Germany. In the latter case, due
to the complexities of the situation and the special status of the United
States Government as an occupying power, this Government did
participate directly in the negotiations. The effect of these measures
is to reestablish confidence in the foreign-security market in the United
States as well as to prot,%?et the rights and interests of American
bondholders.
B. EXAMPLES OF INTERRELATIONSHIP OF BROAD POLICIES AND
CAPITAL INVESTMENT
The following examples, which are by no means exhaustive, will
illustrate the relationship between activities to stimulate private
investment abroad and the range of American diplomatic efforts as
expressed in numerous ways and through many instrumentalities.
81156-53--5
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1. The Foreign Service and private foreign investment
The promotion of foreign trade has always been a major respon-
sibility of the Foreign Service, and Foreign Service establishments are
also under general, long-standing instructions to assist American busi-
nessmen in the consummation of legitimate business transactions
as well as to report sound opportunities for trade and investment as
they arise. In the period between the two World Wars emphasis was
primarily on promoting American exports. During World War II
the need for raw materials resulted in equal emphasis being placed on
the encouragement of imports into the United States.
It was not until the postwar period, however, that the Foreign
Service has assumed as one of its primary duties the encouragement of
:American investment abroad which will mutually benefit the investor
and the recipient country. This is done in day-to-day advice and
assistance to American enterprises and businessmen, in obtaining
foreign economic and investment information, and in discussing these
and related matters with foreign government representatives--
including appropriate formal approaches and negotiations where
necessary and desirable. Such approaches and negotiations have
sometimes resulted in changes in the local laws, regulations, and
attitudes affecting foreign investment. Such specific unilateral reforms
have been indicated above. In the identification and reporting of
sound investment opportunities, the Foreign Service is guided by the
instructions contained in Foreign Service Economic Reporting Cir-
cular No. 31 of July 20, 1951 (prepared by the Department of Com-
merce?for text, see appendix).
These basic instructions have been reinforced in recent months by
circular communications concerning the promotion of private invest-
ment in particular world areas, e. g., countries included in the Mutual
Security Program.
2. Relationship of IMF and GATT to flow of private capital
The desire of the United States to encourage foreign investment
finds support in the objectives of the IMF (International Monetary
Fund) and GATT (General Agreement on Tariffs and Trade), as well
as in those of other international organizations.
As has already been pointed out, one of the main deterrents to an
expansion of foreign investment is the inability of investors in many
countries to transfer earnings freely into dollars, and also to with-
draw the principal of their investment should they desire to et, so.
Investors ask: "What good is it to earn profits abroad if the funds
become frozen there and cannot be brought home?" Even though
transfers of funds in whole Or in part may be permitted by the for-
eign government, the uncertainties regarding possible future limita-
tions, and the administrative requirements for obtaining a license for
transfers, do not inspire confidence in investors. They see attractive
opportunities for investing their funds at home or in Canada where
no currency-conversion problems exist.
(a) International Monetary Fund.?One of the main purposes of
the IMF, as set forth in its articles of agreement, is "to assist * * *
in the elimination of foreign-exchange restrictions which hamper the
growth of world trade." To realize this purpose it is the fund's job,
among other things, to aid countries in correcting maladjustments in
their balance of payments. It seeks "to promote exchange stability,
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(and) to maintain orderly exchange arrangements among members."
A purpose set forth in the articles of agreement is?
to facilitate the expansion and balanced growth of international trade, and to
contribute * * * to the development of the productive resources of all members
as primary objectives of economic policy.
Both the objectives, and the activities of the fund to realize them, are
clearly in the interest of foreign investors. So far, only a few of the
members of the fund have found it possible to meet completely the
fund's objective of operating without restrictions on current exchange
transactions. The remainder are availing themselves of the privilege
of maintaining exchange restrictions during the transitional period.
The fund, however, has endeavored through its consultations with the
member countries to limit the application of exchange restrictions to
the extent that is consistent with their balance-of-payment problems.
The fund has also guided members in the application of restrictions
so that they would have the least undesirable effect on international
trade and finance. Moreover, by encouraging members to take
measures to deal with the fundamental causes of balance-of-payments
difficulties, the fund is helping to create the conditions under which
exchange restrictions can ultimately be removed.
In addition, the financial resources of the fund are designed to serve
as a second line of reserves for its members in meeting temporary
balance-of-payments difficulties. The resources of the fund are not
large when viewed against the total volume of international trans-
actions carried on in the currencies of its members, and the fund
cannot meet the developing requirements of a world situation in
which persistent financial disequilibrium is the rule rather than the
exception. Recent developments in the fund's policies on the use of
its resources, however, give members somewhat greater assurance than
before that they will be able to call on the fund when they encounter
balance-of-payments deficits. Under these circumstances, the mem-
bers may consider that they can take greater risks both in relaxing
restrictions and in refraining from intensifying or introducing exchange,
restrictions.
Durin.g the hearings before the subcommittee, it developed from
the testimony of the Honorable Frank Southard, Jr., United. States
Director of the International Monetary Fund, that the fund takes
every precaution to maintain the liquidity of its assets and does not
allow countries to draw where the difficulties of such countries are long
range or fundamental rather than temporary. This was brought out
during the following colloquy between the chairman of the subcom-
mittee, the Honorable Jacob K. Javits, and Mr. Southard, during
the latter's explanation of this point:
Mr. JAVITS. 1\1r. Southard, is it your opinion that the purposes which the fund
was designed to deal with, that is, seasonal, cyclical and emergency fluctuations,
balance of payments, are pertinent to the world today and what you see ahead for
some years; isn't this a very different kind of world and a very different kind of
situation than was contemplated when the fund was set up?
Mr. SO UTHA RD. It has turned out that the disequilibriums in balances of pay-
Monts have been much more stubborn than I think was hoped for and contem-
plated. So far we must admit that there has been less room for the kind of short-
term operation the fund was planned for. * * *
(b) General Agreement on Tariffs and Trade.?The General Agree-
ment on Tariffs and Trade (GATT) also is designed to promote con-
ditions for increased international trade, investment, and economic
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development. The agreement, to which 34 countries accounting for
some four-fifths of world trade are parties, aims to reduce trade
barriers and to reestablish trade on a multilateral, nondiscriminatory
basis. Under the agreement, countries negotiate for tariff reductions
and, subject tospecified exceptions, undertake obligations to eliminate
quantitative restrictions and reduce or eliminate discriminatory and
preferential practices. In addition to setting forth widely accepted
rules for conduct for international trade, the agreement provides a
forum for handling problems affecting the trade of participating
countries.
The purposes of GATT, like those of the IMF, to the extent they
are achieved, are of some benefit to foreign investors. The reduction
of trade barriers and the establishment of conditions of freer intrna-
tional trade provide the circumstances where in an expansion of world
trade and investment can take place. An increase in international
economic relations, as sought by GATT, creates opportunities for
new investment, facilitates the servicing of investments, and promotes
generally the establishment of productive enterprises and the invest-
ment of funds across national boundaries.
3. Export-Import Bank and flow of private capital
Established in 1934, the Export-Import Bank Act of 1943, as
amended, states that?
The objects and purposes of the bank shall be to aid in financing and to facilitate
exports and imports and the exchange of commodities between the United states
or any of its Territories or insular possessions and any foreign country or the
agencies or nationals thereof.
The act further states:
It is the policy of the Congress that the bank in the exercise of its functions
should supplement and encourage and not compete with private capital, and that
loans, so far as possible consistently with carrying out the purposes of subsection
(a), shall generally be for specific purposes, and, in the judgment of the 'Board of
Directors, offer reasonable assurance of repayment.
During its existence, the bank has made many types of loans in
most of the free countries of the world. Some of these, particularly
following the war, have been to foreign governmental agencies for
basic economic facilities such as roads, dams, irrigation developments,
etc. These are prerequisites to the advent of private investment.
Principally, however, the bank's activities, as directed, have been
for the stimulation of United States exports and imports and the
investment of United States private capital abroad. Since it is a
banking institution, proposed projects are judged in the light of their
worthiness as to self-liquidation and their benefits to the recipient
foreign economies in respect to dollar earnings or savings. Projects
have been financed in three broad categories: (1) exporter loans;
(2) loans for foreign projects in which the United States investor has
an interest; (3) loans made in which United States commercial banks
participate with Export-Import Bank for their own account and risk.
(1) The exporter loan is the means by which many United States
manufacturers and service organizations finance the sale of their
products or services in countries on credit extended by the bank.
In these instances, the bank purchases the dollar obligations of the
foreign purchaser so that the latter may promptly pay the United
States supplier in dollars for his goods or services. It is usual for the
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United States supplier to carry a share of the foreign paper for his
own account and risk.
(2) Loans for foreign projects in which the United States investor
has an interest, ranging from complete ownership to a minority
position, are particularly attractive to the bank. These loans
serve the dual purpose of aiding in the export of American know-
how techniques as well as capital. The bank undertakes to have the
United States interests, as well as local interests, invest in the needed
equity. The bank supplies the appropriate debt financing.
(3) Loans made by the Export-Import Bank in which United States
commercial banks participate by purchasing certain maturities for
their own account and risk are those where the Export-Import Bank
has initiated the loan to a foreign entity in whose country the invest-
ment climate and security is good but where the terms of repayment
are longer than a private lending institution by law or policy may
extend. By purchasing early maturities of such a loan from Export-
Import Bank, the United States commercial bank may participate for
that period of time feasible for its interests and receive a rate of
interest consistent with the period of its participation.
The first category of financing has been responsible for the export
of many United States products from every manufacturing com-
munity in the United States. Manufacturers of railroad and steel-
mill equipment, airplanes, motorbuses, agricultural machinery, hydro-
electric equipment, and the like, have been the beneficiaries. The
second category has been responsible for the undertaking of perma-
nent foreign investment in mining enterprises for basic metals, com-
munication systems, and public utilities. In June 1952 the bank lent
$41,140,000 to seven Brazilian power and light companies to purchase
United States equipment and services to enhance their services in
various communities in Brazil. The third classification has given
opportunity for private financial institutions to do their part in asso-
ciation with the bank in situations and enterprises appropriate to
their available facilities. Last year, 32 United States commercial
banks participated with the Export-Import Bank in a $50,000,000
loan to Belgium. In this instance the bank notified members of the
Federal Reserve System of its intention to make the loan and invited
participation in or purchase of the entire amount by commercial banks.
$45,000,000 was purchased by the commercial banks for their own
account and risk. The Export-Import Bank retained $5,000,000 in
its own portfolio.
The bank assists in the administration of the Mutual Security
Agency's investment guaranty program, pursuant to an agreement
between the bank and the Director for Mutual Security. The bank
acts as agent for the Director for Mutual Security in entering into
contracts with private American investors, guaranteeing the currency
Z conv-ertibility of receipts from their foreign industrial investments and
guaranteeing against loss from expropriation or confiscation of those
investments. Although the policy direction of the investment
guaranty program and the negotiation of individual contracts there-
under are the responsibility of the Mutual Security Agency?the
bank does not exercise any judgment on whether or not to issue a
guaranty?the bank assumes administration of the individual con-
tracts once they are signed. This would permit a permanent agency,
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the bank, to handle the program should a temporary agency, MSA,
come to an end.
The general value of the bank in the field of private enterprise has
been stated by the European and Near Eastern Subcommittee of
the House Committee on Banking and Currency in these words:
The members of the mission feel that the credits extended by the * *
bank are generally sound and that the projects which they have seen cons.Aute
contributions to the economic stability of the borrowing countries. Perhaps above
and beyond their material benefits, their value lies in the fact that they have made
friends for the United States. (Investigations of Export-Import Bank Loan
Activities by Subcommittees of the Committee on Banking and Currency, com-
mittee print, Dec. 30, 1951.)
4. Effects of restrictive business practices on investment capital flaw
Cartels, monopolies, and other restrictive business arrangements
can both impede the flow of investment capital and substantially
reduce the benefits of investments that are made.
One of the principal objectives of many international cartels :.s to
restrict the establishment of new enterprises in their particular in-
dustries. First, they preclude by agreement the establishment, by
one member company of branch plants in a territory reserved to an-
other member. Second, by dividing or allocating export markets,
they reduce the incentives to secure advantages that might otherwise
be sought under competitive conditions through establishing plants
in such export markets. Third, they attempt to thwart efforts by
noncartel participants to undertake new investments. This may be
accomplished through such means as coercing potential suppliers of
new enterprises to withhold raw materials, threats of dumping Cr
indiscriminate price cutting and monopolization of patents and tech-
nical information.
Cartel-type agreements within domestic industries also have detri-
mental effects on the flow of investment capital. In most European
countries, domestic cartels and trade associations have been success-
ful in restricting the establishment and/or operations of new competi-
tivei enterprises n many fields. Furthermore, in a number of Euro-
pean countries, the associations are favored by national legislation.
Laws in a number of countries require that those seeking to establish
a new business must first obtain a license, securable only after the
Government has consulted with. the would-be businessman's competi-
tors. In some countries there are also regulations applicable to a
number of industries whereby all firms in such industries must submit
to cartel discipline.
It should be noted that monopolies, as distinct from cartels, have
also been successful in restricting the flow of investment capital into
varlous countries. This has been accomplished, as in the case of
cartels, through such practices as threats of discriminatory price
cutting: It should also be noted that in many countries, particularly
in Latin America and Africa, the local governments have given
individual firms monopoly protection by restricting the establishment
of new enterprises and importation of competitive products. Conse-
quently, competitive interests seeking to invest in these areas, either
for manufacturing or sales purposes, have been prevented from doing
so. Even in those cases in which foreign investments are made.
(despite the existence of impediments caused by restrictive and
monopolistic practices) the result is often to limit the potential extent
of such investment or to subject the investor to unusual jeopardy.
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Thus, it is important to examine the activities of the executive
branch in dealing with these restrictive practices. The action which
the United States Government has taken in this field is stated to have
been instituted through enforcement of the United States antitrust
laws, through administration of foreign unilateral programs of the
United States, and through international forums and bilateral nego-
tiations.
Of particular interest for the purpose of this report is clause (2) of
section 516 (a) of the Mutual Security Act of 1951, as amended:
[It is hereby declared to be the policy of the Congress that this Act shall be
administered in such a way as * * *.] (2) to the extent that it is feasible and
does not interfere with the achievement of the purposes set forth in this Act, to,
discourage the cartel and monopolistic business practices prevailing in certain
countries receiving aid under this Act which result in restricting production and
increasing prices, and to encourage where suitable competition and productivity.
The investment guaranty program of the Mutual Security Agency
is operated in line with United States anticartel policy. Applications
for guaranties are screened to see that the proposed investments are
not in conflict with this policy.
The draft treaties of friendship, commerce, and navigation which
the United States has successfully negotiated with Italy, Uruguay,
Ireland, Colombia, Greece, Israel, Denmark, and Japan also include a
provision designed to combat such practices, as do the bilateral
ECA/MSA agreements.
5. International Bank for Reconstruction and Development
The International Bank has concentrated on providing financial
assistance in developing the basic facilities which are necessary for
economic growth and the effective functioning of private enterprise.
During 1952 the bank made loans for railway development and
rehabilitation in Brazil, Colombia, and Pakistan; for electric-power
development in Brazil, Mexico, Turkey, and Southern Rhodesia;
for iron and steel production in India; for agricultural development in
Pakistan and Peru; and for port development in Peru. At the end
of March 1953 the total loans outstanding amounted to $1,378,639,281,
of which the equivalent of $467,123,623 was in currencies other than
dollars.
The bank has relied, in large part, upon private financial markets
as the source of its funds. By the end of March 1953 it had marketed
in the United States six bond issues totaling $500 million in amount.
In addition it has marketed the equivalent of nearly $60 million of its
bonds in the financial centers of Canada, England, and Switzerland.
The bank has also sold from its portfolio of obligations due from
borrowers, securities totaling $65,669,908, of which nearly $20 million
is without the bank's guarantee. These bonds and other obligations
are held by individual and institutional investors, and provide a
channel for the investment of private capital in foreign economic
development projects.
At the same time the bank has undertaken a substantial technical-
assistance program of its own, designed primarily to help its members
to draw up long-term programs of economic development. It is the
bank's conviction that external financing, from whatever quarter,
will be of most value in countries that are already making the best
possible use of all available resources, public and private. In Colom-
bia, for example, the stimulation provided by the bank's survey mis-
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62 OVERSEAS PRIVATE INVESTMENT
sion has resulted in a relaxation of exchange ciontrols and the adoption
of a more liberal and enlightened attitude toward foreign capital. In
July 1952, the bank sent to the Colombian Government the recommen-
dations of a financial expert, jointly retained by the Government and
the bank, for measures to promote investment in industry and to
improve the market for Government securities. Similar assistance
is being extended to several other countries.
Spokesmen for underdeveloped countries have criticized the bank
for the minor part of international financing that it does in the light of
the requirement of these countries for accelerated economic develop-
ment; costs of borrowing are too high (current rate is 4-7/8 percent
for 20-year loans); the bank is "overcautious" in its estimate of
borrowers' debt-servicing capacity; the bank requires excessive docu-
mentation, moves too slowly to constur ate loans, and is generally
unwilling to help finance the substantial local costs of development
costs in underdeveloped countries.
X. ACCELERATION OF INVESTMENT OPPORTUNITY REPORTING
Section 516 (e) of the Mutual Security Act requires the Technical
Cooperation Administration, in cooperation with the Department of
Commerce and the Mutual Security Agency, to find and draw the
attention of private enterprise to opportunities for investment and
development in underdeveloped areas. One of the ways in which
this can be accomplished is by increasing the quantity and quality
of investment opportunity reporting. There follow a few samples
of investment opportunities picked at random from various issues of
the Foreign Commerce Weekly, published by the Department of
Commerce. These opportunities were received, for the most part,
in response to Foreign Service Reporting Circular No. 31 (for text,
see appendix) and, in the main, cover underdeveloped areas. It is
important for American business to receive as much information as
possible before it can consider investing its capital abroad.
A. BRAZIL
[From the Commerce Weekly, October 6, 1052]
UNITED STATES AID SOUGHT FOR DEVELOPMENT OF BRAZILIAN LUMBER
CONCESSION
The Fundacao Brazil Central, Rio de Janeiro, is interested in establishing a
joint United States and Brazil enterprise to develop a lumber concessial in the
State of Para and invites capital and technical assistance from the United. States.
The Fundacao is an independent agency of the Brazilian Govern/nett, whose
function is the economic development of large areas in the interior of Brazil..
.The area specified covers 30,000 square miles along the Tocantins River, 150
miles from the shipping port of Belem. Surveys to determine the location of
'stands of trees, such as mahogany, cedar, sucupira, and other commercial grades,
indicate that minimum output will be approximately 500 cubic feet per hectare
of valuable commercial species. In making the surveys, consideration was given
only to trees of the minimum of 20-inch diameter at breast height, having well-
formed boles, without visible defects, and whose physical and mechanical prop-
erties have been tested by the Yale Forestry School.
The Fundacao reportedly has been operating the concession less than a year,
limiting its production exclusively to mahogany (Swietenia macrophyba) and
red celar (Cedrella oderata). Four thousand logs (70 percent mahogany) were
produced in less than 6 months by a working crew of 60 men.
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COMMERCIAL TIMBERS AVAILABLE
In addition, large stands of the following commercial timbers are said to be
available:
Freije (Cordra goeldiana): Used in the United States for fine furniture under
the name of "jennywood"; used locally for carpentry and as a substitute for
teak in naval construction.
Goncalo alves (Astronium fraxinifolium): Very durable wood used for crossties,
posts, and piling; exported as furniture veneer wood.
Massaranduba (Mimusops species): Known as "beef wood" or "bullet wood"
in export trade; very durable and used for crossties, general construction, and
specialty products; makes excellent charcoal.
Piquia (Caryocar villosum): A large, widely distributed tree; durable hard-
wood used in boat decks and hulls as a teak substitute; fruit yields a grease used
in soap and perfumes.
Sucupira (Bowdichia virgiliodes): A large tree producing very hard wood,
resistant to decay; used for heavy durable construction.
Primitive extraction methods in use have made costs of production of mahogany
and cedar virtually prohibitive, owing to the distance of these stands from water-
ways, reports the Fundacao. Although extraction of the other commercial
timbers is considerably easier because of their close proximity to the rivers, the
Fundacao considers that mobile equipment and machinery is necessary for
efficient and profitable exploitation of the concession.
FOREIGN PRIVATE CAPITAL SOUGHT
Since the Fundacao has neither the technical and commercial organization nor
the funds to permit efficient operation of the concession, it seeks investment of
foreign private capital, and states that any portion or all of the 30,000-square-mile
concession would be turned over to the investing company under conditions to be
determined by negotiation.
Available facilities include the Government railway administered by the
Fundacao and running from the town of Tucuriu (formerly Alcobaca) parallel
with the Tocantins River for 75 miles through the jungle; a 12-ton-capacity
steam crane on the side line at Tucuriu; a small sawmill with equipment consisting
of a circular saw, 2 edgers, and 1 cut-off saw; and a 200-ton-capacity steamboat
which operates on the Tocantins River from Belem outh. The 4,000 logs,
2,000 of which are still in the forest, would be made a part of the initial production.
The Fundacao is unable to specify the amount of investment necessary, but
suggests that the commercial prospects appear to justify a trip to Brazil by an
interested party, at which time requirements could be estimated.
For further information, firms should correspond with Dr. Archimedes Pereira
Lima, president, Fundacao Brazil Central, Service de Exploracao de Medeiras,
Av, Nile Pecanha 23, Rio de Janeiro.
[From the Commerce Weekly, March 0, 1953]
BRAZIL'S POTENTIAL OPPORTUNITIES MAY INTEREST UNITED STATES INVESTORS
The National Economic Council, Rio de Janeiro, Brazil, has issued a list of
manufacturing industries considered to be advantageous to the Brazilian econ-
omy, which may be of interest to United States investors seeking manufacturing
opportunities in Brazil.
Among the industries listed are raw materials, consumer goods, machinery and
appliances, mining, agricultural, and livestock.
Factors considered in preparing the list?determined by the results of a survey
made by the Council to provide information on industries the Brazilian Govern-
ment is particularly interested in developing?include the following:
Volume of imports of the product.
Essentiality of the individual article produced.
Availability of domestic raw materials for the establishment of an industry
producing a specified article.
Existence of know-how, or of services for creating know-how.
Amount of investment involved.
Possibilities of adding to an already established industry, or developing
the proposed industry in combination with other new industrial establish-
ments.
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The list is classified as to industries which could be developed in the near
future and those which do not lend themselves to early development. Inclusion
in the latter category was based on such factors as large amount of investment
required, need for substantial technical services, restricted market for the products
of the industry, and exceptional difficulties with respect to raw material supply.
As specific opportunities are developed, they will be reported in this section of
Foreign Commerce Weekly. Meanwhile, interested United States firms may
obtain copies of a partial list, based on the compilation issued by the National
Economic Council, from the Commercial Intelligence Division, United States
Department of Commerce, Washington 25, D. C., or from the DeFartinent's
field offices.
To assist potential investors in evaluating possibilities for investment in
Brazil, the Department has issued a study entitled "Establishing a Business in
Brazil" (BIS, World Trade Series No. 324) available for 40 cents from the United
States Department of Commerce, Washington 25, D. C., or from the Department's
field offices.
B. INDIA
[From the Commerce Weekly, December 1, 1952]
INDIA PLANS To EXPAND ITS STEEL INDUSTRY
A delegation of Indian Government officials has been in the United States
since early in November for discussions with the International Bank for Re-
construction and Development relating to expansion of India's steel industry.
The group also is exploring the possibilities of interesting United States industrial
and financial circles in establishing a new steel plant in India.
India's steel industry is said to be one of the basic industries accorded highest
priority for immediate development. Expansion plans envisage a better than
50-percent increase by 1955--56 over the industry's present annual output of
1,000,000 tons of steel and 1,800,000 tons of pig iron.
The delegation, with headquarters at the Indian Embassy in Washington,
consists of C. C. Desai, Secretary, Ministry of Works, Production and So-3ply;
S. Bhoothalingam, Secretary, Ministry of Commerce and Industry; and C.
Bhattacharyya, Secretary, Economic Committee of the Cabinet and Joint
Secretary, Ministry of Finance.
C. FRANCE
[From the Commerce Weekly, December 8, 1952]
FRENCH FIRMS INVITE UNITED STATES PARTICIPATION
Three French firms wishing to expand and develop their operations are: inviting
United States investment of capital and equipment. Participation of United
States firms, in the form of patents, processes, and techniques, also is desired.
PACKING-CASE FIRM TO EXPAND
Societe Francaise d'Emballages en Bois Arnie, a French firm engaged in the
manufacture of all kinds of packing cases, invites United States participation in
the form of capital, equipment, patents, processes, and techniques, to permit
expansion of its operations.
The firm presently specializes in packing eases made of wired wood under a
manufacturing license granted by a British firm, and it is particular!'; interested
in enlarging this phase of its production. According to the firm, a large potential
marketing exists for the wired wood packing cases in commercial ane[ industrial
fields, in addition to requirements of the French Army which reportedly is already
purchasing substantial quantities.
Correspondence should be addressed to Societe Francaise d'Emballages en Bois
Arme, 17 Faubourg du Temple, Paris 10e, France. .
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FOOD PRODUUER PLANS TO ENLARGE
Etablissements Houque, a French manufacturer of specialty foods and con-
fectionery, reportedly has unused buildings .and land which the firm desires to
utilize for the production of spaghetti, vermicelli, and other products of Italian
paste, said to enjoy a large demand in France.
To carry out this expanded production, Etablissements Houque invites Ameri-
can participation in the form of capital, equipment, and processes to be provided
under any mutually satisfactory agreement.
Further information may be obtained by corresponding with Etablissements
Houque, 47 rue de l'Arquebuse, Auxerre (Yonne), France.
TEXTILE PRODUCER SEEKS CAPITAL
A French manufacturer of cotton sheeting and toweling wishes to collaborate
for purposes of expansion with an American firm which would supply capital and
modern equipment to produce fabrics suitable for the dress trade. The French
firm would undertake distribution of such lines locally.
Interested parties are invited to communicate with Maison J. Steinitz, Tissage
."France-Tissus," Pouilly-les.Nonains (Loire), France.
D. BELGIUM
[From the Commerce Weekly, December 15, 1952]
BELGIAN FOUNDRY FOR SALE TO UNITED STATES FIRM
A United States firm interested in purchasing and operating an established
-foundry in Belgium is sought by S. A. Normes. This Belgium concern reportedly
is a medium-sized modern factory located in Familleureaux, Belgium, with cast-
-iron foundries, metal foundries, and, large machine shops.
The factory has a high-power electricity transformer station, and is connected
with a large gas line and a railroad. It is fully equipped, having a capacity for
300 to 400 workmen, and includes warehouses and modern offices.
Cast steel, cast iron, and metal valves of all kinds are being manufactured, but
it is stated that installations could readily be converted to permit production of
other industrial items. For instance, the factory has in the past repaired tanks
and trucks and manufactured bedsteads for the -United States Army.
Additional descriptive material, including an engineering survey, together with
inventory and appraisal of the property (all in French), may be obtained for
review purposes on loan from the Commercial Intelligence Division, United States
Department of Commerce, Washington 25, D. C.
Interested persons are invited to correspond with J. 0. W. Achenbach, General
Manager, S. A. Normes, 20 Rue du Luxembourg, Brussels, Belgium, who will
arrange for inspection of the property, if desired.
B. EGYPT
[From the Commerce Weekly, January 26,19531.
EGYPTIAN CHEMICAL FIRM DESIRES UNITED STATES CAPITAL
Capital participation by interested United States firms Or private individuals
is sought by Chemical Industries Development, S. A. E., Cairo, Egypt. The
firm manufactures, imports, exports, and 'distributes pharmaceutical products
and proprietary medicines.
The company now manufactures 12 items and has licenses and permits from
the Egyptian Government to manufacture about 30 more. Products now manu-
factured include sedatives, chlorophyll deodorants, barbiturates, infant's colic
preparations, sulfa drugs, cold and neuralgic medicines, And insecticides. It also
has a license agreement with an American pharmaceutical company to repackage
antibiotics and distribute them under the American name brand.
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It is reported that the firm has a fully paid-in capital of ?E200,000 which has
been invested in a modern new pharmaceutical laboratory located on the Pyra:nids
Road close to Cairo. The plant was built according to American specifications,
using American technicians and equipment.
Present annual capacity is quoted at, 150 million tablets, 10 million ampoulei
(all types), 4 million vials of penicillin and streptomycin, 6 million bottles of sirups
and other liquid remedies, 1 million tubes of unguent preparations, and 3,000
kilograms of alkaloids and active essences of medicinal plants.
The firm also maintains a 90-acre herb farm at Aboul Matamir, near Alexaniria,
where two laboratories extract medicinal and aromatic essences and powders :7rom
which sizable quantities of khellin and chlorophyll are exported.
Interested parties are invited to correspond direct with Chemical Industries
Development, S. A. E., 2 Sharia Naguib El Rilmni, Cairo, Egypt.
F. TURKEY
[From the Commerce Weekly, September 29, 1951
TURKISH PLANT SEEKS UNITED STATES CAPITAL
United States capital and management participation is sought by Makina
ye Kimya Endustri Kurumu (the Establishment for Mechanical and Chemical
Industries), Ankara, Turkey, for the establishment of a nitrogen-fertilizer factory
in Turkey.
Based on a study of the market, availability of raw materials, transport facil ?
ities, and other factors involved in the economical operation of such a plant,
MKEK contemplates manufacturing the following products in annual quantities
as indicated: 6,000 tons of nitric acid, 98 percent pure, for dynamite and ex--
plosives; 2,000 tons of ammonium nitrate, pure, for dynamite; 3,000 tons of
urea, industrial with 46 percent N2, for plastics and garden fertilizer; 75,000
tons of ammonium nitrate and ammonium sulfate, industrial with 26 percent
N2, for fertilizer; and 41,000 tons of ammonium nitrate and calcium carbonate,
industrial with 20.5 percent N2, for fertilizer.
To finance needed equipment, MKEK estimates that US$17,000,000 foreign
capital will be required. An American firm participating in this venture would
be permitted to exercise managerial control, at least until the success of the
operation is assured.
A detailed prospectus for the- proposed plant is available on a loan basis from
the Commercial Intelligence Division, United States Department of Commerce,
Washington 25, D. C.
Interested parties are invited to correspond with Celal Imre, general manager
of MKEK. Mr. Imre reportedly has indicated that MKEK, a Turkish Govern-
ment enterprise, is completely exempt from the adjudication law for sales, :3M-
-
chases, construction, or major repairs, to which other Turkish Government
agencies are subject.
G. NETHERLANDS
[From the Commerce Weekly, February 9, 1953J
UNITED STATES AID DESIRED BY, NETHERLANDS FIRM
United States capital participation is sought by Aluminum-Industrie "Zelime,"
a Netherlands manufacturer of special aluminum products such as folding rules
and milk tanks.
The company states that with the necessary investment it could produce
additional articles.
Present facilities include an eccentric press, air compressor installation for
pneumatic work, and argonarc welding installation.
Further information may be obtained by writing direct to J. Bakker, Alumi-
num-Industrie "Zelime," B 28-29, Gapinge (Walcheren), the Netherlands.
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XI. UNITED STATES TAX INCENTIVES
A. IMPORTANCE OF INCENTIVES
One of the important means of stimulating American private in-
vestment to take a greater part in the Mutual Security Program
involves the practical inducement made possible by United States
tax meentives. The importance of such incentives was stressed by
the Honorable Samuel W. Anderson, Assistant Secretary for Inter-
national Affairs, Department of Commerce, during his testimony
before the subcommittee:
If we are serious in our belief, and I think we should be, that the interests of the
United States will, in the end, be greatly served if our reservoirs of capital are
increasingly capable of sound investment abroad, then what we can do to stimulate
those seems well worth careful thought in all directions.
The chairman of the subcommittee, the Honorable Jacob K. Javits,
raised the question whether or not some inducements in the way of
tax provisions will have to be made in order to really stimulate
American private investment abroad. In this connection, Mr.
Anderson elaborated upon his previous point during the following
interchange:
I think it might be very helpful. As you know very well, of course, there is
a certain risk of double taxation of income earned abroad which is taxed abroad
and then subsequently, in part, taxed in the United States as well. There is the
question of the definition of income versus amortization and depreciation in the
several countries which, I think, should* carefully restudied. There is even the
rather thought-provoking notion, as suggested by a private citizen the other
clay, that perhaps the instrument which has been so successful here domestically,
namely, accelerated amortization, could be applied, if you chose to do so, to those
American industries and private enterprises which contemplate investment
abroad but who are not able to look very far ahead in their risk thinking. Per-
haps, without ultimate substantial loss to the United States Treasury, it might
be feasible to allow a certain accelerated amortization of that investment balanced
against domestic earnings, thereby paying lesser taxes now. But, if the invest-
ment pans out well over a period of time, the Treasury, through repatriation,
would recoup any losses of the earlier years. It is a rather novel idea, and one,
I think, which deserves to be thought out a little bit.
Mr. JAvims. It is an idea I have been working on myself. It is analogous to
the 5-year amortization we give for defense facilities. This would also require
a certificate that it aided the foreign policy of the United States. I think it
may prove feasible.
The Honorable Eric Johnston in his testimony before the subcom-
mittee also stressed the importance of tax incentives:
We have in the statute books a Western Hemisphere preference on tax rates?
income-tax rates --which gives a corporation investing in enterprise in the Western
Hemisphere a 14-point benefit or credit?approximately 14 points?on earnings
on money thus invested in time Western Hemisphere. in other words, if our normal
tax is 52 percent, corporations investing in the Western Hemisphere have a tax
rate on those investments of 3g percent, which is -a very substantial stimulus to
the flow of private capital abroad. A_ very large percentage of the new money
which went outside the United States last year went into the Western Hemisphere.
Personally, I would like to extend this 14-point tax benefit to American money to
all parts of the free world?not only to the Western Hemisphere. I think that is
one of the things that we can do. Now there are other inequalities in the tax
laws which I think should be remedied, and I believe others in the administration
feel so, also. These are highly technical things, but they are deterrents to the
flow of capital. For instance, a subsidiary of an American corporation abroad
does not need to report its income along with its American earnings, until that
subsidiary repatriates its earnings to the United States. In other words, if the
earnings are left in the foreign country, no tax on them is paid in the United States.
But a branch of an American corporation must report its earnings invested abroad
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in the current income of its parent company., even though those earnings are not.
repatriated. Now that works a material hardship upon branches as against
subsidiary corporations and yet there are various reasons why subsidiaries in
certain areas are not advisable because, in some of these countries, to have a
subsidiary corporation you must have a board of directors composed completely
of natives of the host country. You must do certain other things which sonnetimes
are very difficult for an American corporation to do. So, I think that American
branch corporations should be given the same treatment as subsidiary corpora-
tions abroad
B. WESTERN HEMISPHERE TRADE CORPORATIONS
With respect to such Western Hemisphere trade corporations, in
enacting section 109 of the Internal Revenue Code, the Senate Finance
Committee stated in its report on the Revenue Act of 1942:
American companies trading in foreign countries within the Western Hemisphere
are placed at a considerable disadvantage with foreign corporations under the
tax rates provided by the bill. To alleviate this competitive inequality, the
committee bill relieves such corporations from surtax liability.
Under this law, corporations (1) doing all their business in the
Western Hemisphere, and (2) deriving 95 percent of gross income from
sources outside the United States and (3) deriving 90 percent of gross
income from the active conduct of a trade or business are eligible for a
reduction of tax amounting to 14 percentage points if they are subject
to both normal and surtax. , Small corporations subject only to the
normal tax get reduction of 8 percentage points (sec. 109, Internal
Revenue Code).
The subcommittee was told that it would seem appropriate for the
United States Government to take some action to stimulate foreign
capital investment by an extension to all areas of the world of the
same tax rate now applicable to Western Hemisphere trade corpora-
tions.
C. TREASURY ATTITUDE
The subcommittee has noted, with great interest, recent statements
by officials of the Treasury Department that the tax treatrn en t ,of
business income earned in foreign countries is presently being
reexamined with a view to making specific recommendations to the
Congress. For example, in an address on April 16, 1953, Mr. Marion
B. Folsom, Under Secretary of the Treasury, said:
The proper taxation of income derived abroad raises difficult and important
problems of tax policy. International double taxation should clearly be avo;ded.
The provisions for crediting foreign income taxes against the United States income
tax represents one attempt to remove such double taxation. The present treat-
ment, however, may not be adequate. Modffica'dons of the existing law must
be made with care, however, to prevent the creation of loopholes through which
domestic income is in some way converted into tax-exempt foreign income.
The attitude of the Treasury was further elaborated in the recent
statements of Mr. Dan Throop Smith, assistant to the Secretary of
the Treasury, before the United Nations Fiscal Commission. (See
pp. 13-14, above, for the resolution adopted by the Commission on
this subject, and an excerpt from Mr. Smith's statement in support
of the resolution.)
The subcommittee is particularly concerned that the question of
tax incentives for foreign investment not be approached solely from
the standpoint of the revenue involved, but that foreign economic;
V
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OVERSEAS PRIVATE INVESTMENT 69
policy considerations also be taken into account. It welcomes the
Treasury's reexamination of the subject, and hopes that its recom-
mendations will be forthcoming at an early date.
D. SOME TAX INCENTIVE PRECEDENTS
In addition to the Western Hemisphere trade corporation tax incen-
tive, there have been cited numerous other precedents in United
States law for the granting of tax incentives:
/. Exemption from tax on income derived from United States possessions
Feeling that it was desirable to have American citizens go to United
States Possessions, most of which came under our control after the
Spanish-American War, the Congress passed section 251 of the Internal
Revenue Code, which provides that any United States citizen or
? domestic corporation is completely exempt from United States income
tax derived from and received in such Possessions, or in any foreign
country, if 80 percent of the gross income is derived from sources
within the Possessions and 50 percent thereof from the active conduct
of a trade or business within the Possessions.
A few years ago Puerto Rico passed a law which in effect supple-
ments section 251. It exempts new industries going to Puerto Rico
from Puerto Rican tax for a certain period of years. Accordingly, a
new industry going there is free from both United States Federal
tax and all insular taxes. Current statistics indicate that 200 indus-
tries have established themselves in Puerto Rico as a result of this
combined inducement.
2. Exemption of compensation for personal services
As a result of a recommendation of the point 4 private investment
program, Congress effected a change in the Revenue Act of 1951,
liberalizing the provisions granting tax exemptions to wages, salaries,
and other compensation for personal services received by United States
citizens who establish bona fide foreign residence. At the same time
the 18-month rule was enacted, granting exemption on compensation
for personal services rendered abroad, to individuals who are outside
the United States for approximately 17 out of 18 consecutive months.
3. Postponement of tax on profits
Corporations operating abroad through foreign subsidiaries may
reinvest their earnings abroad without paying any United States tax,
such earnings becoming taxable only to the extent they are returned
through dividends to the parent United States corporation.
4. Excess profits tax exemption
Profits of domestic corporations confining their business activities
largely to overseas operations are completely exempt from excess-
profits taxes, providing they derive 95 percent of their gross income
from sources outside the United States and 50 percent from the active
conduct of a trade or business.
5. Depletion allowance for oil
Oil became very scarce during and after World War I. There
was serious concern in this country and in Congress over the possi-
bility of a shortage. Congress, therefore, amended the income-tax
law granting a depletion allowance to oil and gas companies amounting
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OVERSEAS PRIVATE INVESTMENT
to 27 percent of the net annual income. This was very effective and
successful since the allowance is applicable with respect to prcperties
both in the United States and abroad.
E. JUSTIFICATION
The arguments pro and con for granting tax incentives to stimulate
private capital investment abroad were stated by the Internr,tional
Development Advisory Board during the hearings before the sub-
committee:
Arguments against granting tax incentives to stimulate private capital invest-
ment abroad are usually based upon the theory that it would be inequitable to
tax one citizen in a different manner from another. This, however, is faLacious
since it assumes that all citizens derive their income from sources which enjoy
equal benefits and protection from the United States Government. Or in other
words, that taxation is a duty of citizenship which is equally enjoyed by all. The
fact that must not be forgotten, however, is that investors in the so-called under-
developed countries of the world are subject to many risks not encountered in
domestic investment such as differences in methods of doing business in foreign
countries, unfamiliar laws and customs, frustrating restrictions on management,
restrictions on the number of personnel it can import from outside of the country
where the investment is made, new and increased foreign taxes which, under the
definitions contained in the Internal llevenue Code, may or may not be crcdited
against the United States tax, numerous exchange restrictions, export and import
quotas, controls, risk of expropriation, etc.
The Treasury Department estimates the net amount of tax realized on United
States investments abroad to be approximately $400 million per annum. If the
law were changed to permit total exemption on income derived from foreign
sources, the dividends paid to United States stockholders by corporations operat-
ing abroad would nevertheless be taxed and would therefore most likely re coup
to a considerable degree the original tax loss from this exemption. In addition,
when one considers the benefits that would arise through such tax exempticn in
the way of stimulating foreign investment, which in turn would increase foreign
trade, help to cut down the dollar imbalance, and help to improve the living and
working conditions of the people in the underdeveloped areas, it is a pretty low
price to pay.
XII. RECOMMENDATIONS
There follow major recominendations made in the hearings before
the subcommittee or brought to its attention, which are included in this
report in consolidated form:
A. TAX INCENTIVES
The provisions of section 109 of the Internal Reveriue Code which
established tax incentives for Western Hemisphere trade corporations
should be extended to all areas of the free world. In this way toe
same tax rate now applicable to Western Hemisphere trade corpora-
tions would be applicable to American enterprise in other areas of the
free world.
Corporations operating abroad through foreign subsidiaries may
reinvest their earnings abroad without paying any United States tax,
such earnings becoming taxable only to the extent they are returned
through dividends to the parent corporation. Branches should
receive the same treatment as subsidiaries.
New investments overseas meeting standards to be established b2
the Director for Mutual Security and certified for that purpose should
have the benefit of accelerated amortization over a 5-year term.
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OVERSEAS PRIVATE INVESTMENT 71
B. JOINT VENTURES
American capital should invest abroad in partnership with the
capital of the host country insofar as possible. This decreases the
risk of nationalization or confiscation and at the same time decreases
the very real concern in the minds of people of other countries that the
influx of American capital means economic domination by American
capital.
The joining by American capital with local capital and management
in the formation of jointly owned enterprises, encouraged by the
Governments Of the United States and the local country, offers an
important pattern for the future. In this connection reference is made
to the following quotation from the report of the Inter-American Study
Mission of the Committee on Foreign Affairs undertaken in November
1951 (H. Rept. No. 1454, 82d Cong.):
The presence of numerous American enterprises with large capital investment
particularly in a country with a sensitivity to nationalism, requires that American
business give increased attention to its public relations with the peoples of that
country. The bitter experience of the British in Iran should serve as a warning
that continued governmental and popular support for American enterprises is
dependent upon an acute awareness Of local aspirations and plans. Many Ameri-
can businesses in Venezuela are endeavoring to bring more and more Venezuelans
into participation in their particular enterprises. The study mission believes this
is a desirable trend and should be encouraged.
Along these lines, the American Cyanamid Co. recently announced
the opening of a drug plant in India. Under arrangements with
Indian bankers and businessmen, American Cyanamid put up 10
percent of the paid-in capital while Indian nationals own the rest of
the company. Another example is the recent agreement between
Standard-Vacuum Oil Co. and the Indian Government for construc-
tion of a $35 million refinery in Bombay, where 25 percent of the
capitalization of the new Indian company will be available to Indiai.
private capital on a preference-share basis. Other petroleum com-
panies have negotiated similar agreements.
The Chase Bank of New York and the International Basic Economy
Corp. have organized an investment liank in Brazil, in which a number
of Brazilian banks will subscribe a large share of the total initial
capital of 50 million cruzeiros ($2.5 million). The purpose of the new
institution is largely to stimulate local investment activity through
assisting local enterprises, fostering the sale of securities in Brazil,
and the like. In 1950 American & Foreign Power Co. met unexpected
success in developing an active market in Brazil for the securities of
its subsidiaries there. More than half a million shares in one sub-
sidiary were sold to Brazilians of all economic, levels, who thereby
participate,d in financing the expansion program of the subsidiary.
The American Viscose Corp. recently concluded an agreement with
a Colombian firm whereby it Will offer its technical assistance, training
facilities, and- some capital in the establishment of the Colombian
manufacturing concern.
Similar types of joint arrangements have been found useful by
other American companies throughout the world. United States
firms are finding it to be their advantage, from the standpoint of good
will, familiarity with local customs, and ease in dealing with local
governments, to enlist the participation of local investors in their
projects.
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72 OVERSEAS PRIVATE INVESTMENT
C. CENTRALIZED SUPERVISION AND DIRECTION
There should be established within the Executive, Department. an
agency which will-
1. Be adequately staffed and equipped to maintain a con-
tinuous study of all phases of governmental activity in stimulating
private investment abroad;
2. Serve as a central clearinghouse of information which may
be required by American business and by governments and
business abroad;
3. Be accountable to the Congress with regard to all aspects of
United States activities in the field of foreign investment;
4. Be chargeable with responsibility for implementing executive
and legislative policy regarding American foreign capital
abroad.
Study of the organizational charts on pages 4-7, above, reveals the
large number of executive agencies concerned in one way or aother
with the problems of private enterprise abroad. In no single agency
does there exist an adequate branch, either from the point of view of
personnel, competence, or authority to deal with the total aspact of
private investment abroad as a progressive arm of American foreign
policy. Although the Director for Mutual Security has certain
responsibilities for coordination and supervision, under section
501 of the Mutual Security Act, his activity in this regard is limited
to the Department of State, the Mutual Security Agency, and the
Technical Cooperation Administration. The multiplicity of Govern-
ment agencies concerned with the various aspects of foreign invest-
ment makes a high level focal point of coordination essential. To
list the principal agencies and some of their relevant responsibilities
is sufficient evidence of this necessity:
1. Department of State_
2. Department of Commerce_ _
3. Department of Treasury
4. Securities & Exchange Commis-
sion.
5. Federal Reserve Bank
6. Export-import Bank and 6
agency National Advisory
Council.
7. Director for Mutual Security,
Technical Cooperation Ad-
ministration, Mutual Secur-
ity Agency.
8. Defense Materials Procurement
Agency.
Friendship, commerce, and navigation treaty
negotiations, diplomatic protection and
espousal of claims, plus overall foreign
economic policy implementation.
Relations with, and assistance to, American
businessmen.
Double tax treaties; tax policy concerning
foreign earned incofee.
Regulation of foreign security flotations.
Regulation of foreign banking operatim.s.
Development of foreign lending policy in
ways which give maximum stimulation to
the use of private capital resources.
The formulation anti administration of
economic and technical assistance in ways
which stimulate tnaximum private par-
ticipation in foreign development.
The development by American companies of
foreign sources of basic materials.
D. GUARANTIES
Commendable as may be the activities of the Mutual Security
Agency in publicizing the guaranty program in accordance with legis-
lative mandate, the fact is that not one guaranty has been written for
a Latin American project, despite the strong investor interest in that
area. The Mutual Security Agency maintains that this is due to the
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poor response of the Latin American countries themselves. It does
not appear, however, that the extension of the program to Latin
America has been undertaken with vigor and imagination. Only
seven countries have been approached. There is no evidence of any
efforts to modify the policies under which the program has operated
in Europe to adapt it to the Latin American situation no attempt
to work this out with the Latin American Republics. Insistence by
the executive branch on initiating the program in new countries
through formal international agreements (not required by guaranty
legislation) has been a stumbling block in some countries. It has
been stated that the potentialities of the guaranty program can be
defeated by this lack of flexibility, and that the best way to get
started in the politically sensitive countries is with formal assurances
applicable to specific cases and not necessarily formalized inter-
national agreements. Assurances from foreign governments should
be kept to a minimum, and used primarily te deter voluntary adverse
actions by foreign governments.
Because of the disappointing progress of the guaranty program in
the underdeveloped areas, it has been recommended that new legisla-
tion be enacted expressing congressional intent that vigorous action
be taken by the Mutual Security Agency to make guaranties more
readily available on a wider basis. Accordingly, the proposal in
Mutual Security Program legislation before the full committee
should be endorsed extending the program to countries not directly
participating in the Mutual Security Program (sec. 605 (c)), and the
following amendment to section 516 (b) of the Mutual Security Act
should be adopted:
Add at the end of section 516 (b):
and, in order to make guaranties as widely available as possible, is authorized to
adapt to the circumstances of particular countries any governmental arrangements
which may be deemed necessary to operate the guaranty program.
There should also be adopted the proposals in the Mutual Security
Program legislation now before the house Foreign Affairs Committee
explicitly providing coverage in investment guaranties for war, revolu-
tion, or civil disorder and providing for a 20-year maximum term for
guaranty contracts.
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E. PUBLICIZING ECONOMIC AND SOCIAL BENEFITS
There are many economic and social benefits which American private
enterprise has brought to the countries of the free world. It is part
and parcel of United States policy that this should be so. As a pattern
for the future, consideration should be given to a program, by our
Government and by private enterprise, groups, of publicizing these
benefits, and of stimulating a desire by underdeveloped countries to
take those measures which will encourage private enterprise, both local
and foreign. In this connection, the publication, Sears, Roebuck De
Mexico, S. A., the first in a series of case studies by the National
Planning Association on United States business performance abroad,
is a commendable start in this direction. Objective studies of cases
in which United States business management has taken positive steps
toward raising the living standards of underdeveloped countries can
help dispell the psychological barriers to increased investment of
Private capital.
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74 OVERSEAS PRIVATE INVESTMENT
F. SPECIAL ENVOY
A special envoy should be selected by the President from American
business or industry (which includes management, labor, investors,
and farmers) who is a recognized leader, fully aware of the iimplications
of United States foreign economic policy. It would be his responsi-
bility to visit as many underdeveloped countries as possible and to
emphasize the importance which the United States attaches to a
sound and rapid economic development of the nations of the free
world. It would be part of his responsibility to impress upon the
governments of these countries that enlightened American ,iiapital can
make a material and constructive contribution, technical as well as
financial, to economic progress and the raising of standards of living
in the underdeveloped countries.
G. TREATIES OF FRIENDSHIP, COMMERCE, AND NAVIGATION
The program of the Department of State for the conclusion of
friendship, commerce., and navigation treaties, containing assurances
of fair treatment of American investors and ratification of the five
friendship, commerce and navigation treaties signed with Colombia,
Denmark, Greece., Israel, Ethiopia, and the supplementary one with
Italy, should be accelerated. Problems delaying such actions may
be dealt with by shortening the term of treaties to allow of future
negotiation and including reservations in ratifications.
The Department of State should enlist the support and cooperation
of existing major business organizations as well as labor unions and
farm organizations in emmection with the negotiation of individual
friendship, commerce and navigation treaties. ,This could be done
by the establishment of a Business Advisory Committee for Com-
mercial Treaties. In this connection, American business in a country
with which negotiations are undertaken should be contacted for their
views and guidance well in advance of the actual negotiations. Tho
mechanism of a business advisory committee must not rubberstamp
the work of the Department, but must be prepared and organized for
constructive participation in policy formation and implementation.
H. BALANCING THE NEEDS
Underdeveloped countries should accommodate their development
programs to their needs. This means a balanced development, bal-
anced between agriculture and industry, domestic financing and foreign
investments. Such a policy will be possible only with more foreign
capital for development.
I. WIDER USE OF INTERNATIONAL AND EXPORT-IMPORT BANKS
The United States should help and encourage the International
Bank to extend its important operations in mobilizing private capital
for international investment in development and should consider
methods of increasing the usefulness of the international Monetary
Fund for this purpose.
The Export-Import Bank should be much more closely associated
with our economic, and technical assistance programs, with a view to
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OVERSEAS PRIVATE INVESTMENT 75
its undertaking more initiative in stimulating projects which are
necessary to balanced economic development, but which are inap-
propriate for intergovernmental grant or loan assistance. As Mr.
August Maffry pointed out in his report of December 18 to the TCA
Administrator, we have not begun to use the full potentialities of the
Export-Import Bank?particularly in providing loan capital on at-
tractive terms to domestic corporations willing to extend their oper-
ations in foreign countries, and to foreign corporations, for projects
furthering local economic development.
The Export-Import Bank enjoys a reputation in Congress and in the.
business community which is unique among Government-financing
agencies. Many of its loans at the present time are to private enter-
prises, without foreign government guaranties, and involve joint
financing by the Export-Import Bank and private companies. What
is being suggested here is not more loans involving a higher risk factor,
but rather a much higher rate of the same kind of lending that is
now taking place. Instead of acting only upon loan applications
coming to it, the bank should assume more of the role of an investment
banker, looking.for projects and providing the link between the project
and the private investor, with such financial participation itself as
may be, required to bring the project to fruition. This need not be a
more risky type of operation and, if properly presented, need not
jeopardize the existing prestige and financial standing of the bank.
Moreover, this can be undertaken within the present statutory author-
ity of the bank, except for the additional financial resources that might
be necessary, although obviously full consultation with Congress
should take place before the direction of bank activity is substantially
changed in this regard.
If the business and financial community knew that the Export-
Import Bank was prepared to operate with considerable more flexi-
bility, it would itself undertake more initiative in developing projects
for joint financing with the bank.
J. COOPERATION BETWEEN PRIVATE ENTERPRISE AND FOREIGN
COUNTRIES
As stated in the National Planning Association's recent publication,
The Case Study of Sears, Roebuck de Mexico, S. A.?
A basically private enterprise economy in less developed countries, of which
well-managed United States private enterprises can well be a part, provides strong
insulation against communism and political instability. Therefore, it is to the
national interest of the United States to have "policies that promote enlightened
and well managed United States enterprises abroad. Conversely, it is in the best
interests of all parties concerned that the United States Government use its
influence to promote cooperation between United States private enterprises abroad
and the countries in which they operate.
To the same effect is the recent recommendation made by the
Mutual Security Agency evaluation teams of business executives
appointed by the Director for Mutual Security?
that we cooperate with those countries needing capital in their efforts to create an
atmosphere that, will attract, private investment funds from other countries includ-
ing the United States.
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76 OVERSEAS PRIVATE INVESTMENT
K. OVERALL POLICY
Heretofore business has been considered as a primary means for
producing the goods for our domestic and foreign commitments and
for our defense. Business has rarely been considered as a powerful
arm of our foreign policy both in terms of wealth production and in
terms of improving the standards of living of other peoples we wish
to keep free. Yet the prestige of America has been built upon the
productive power of business. That is the model which all the world
wishes to copy. At a time Nshen an all-out effort during our genera-
tion may well secure the peace and well-being of the world for cen-
turies to come we cannot fail to call for utilization of the instrument
of our greatest power an.d prestige in peacetime--American business
and American production.
JACOB K. .1
AVITS, Cha:rritan.
DONALD L. JACKSON.
KARI, M. LECOAIPTE.
LAURIE C. BATTLE.
BURR P. HARRISON.
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APPENDIXES
APPENDIX I
DEPARTMENT OF STATE?FOREIGN SERVICE
Economic Reporting Circular No. 31, July 20, 1951
REPORTING OF SPECIFIC OPPORTUNITIES FOR PRIVATE INVESTMENT AND
PATENT-LICENSING
.1. Purpose
The purpose of this circular is:
a. To prescribe the methods of handling requests of private persons and
firms for assistance in obtaining:
- (1) Private investment funds from United States sources;
(2). License to utilize United States patents, trademarks, copyrights,
or technical knowledge ("know-how"); or conversely, to convey the
rights to their own patents or formulae to an interested United States
licensee.
b. To guide reporting officers in the preparation and submission of reports
on specific opportunities for private investment and/or licensing of patents,
trademarks, et cetera.
This circular relates only to specific opportunities and does not cover Govern-
ment-sponsored plans and programs for public works, hydro-electric systems, and
other long-range Government development projects.
2. Use
The information received will be used to facilitate the flow of private investment
-.capital abroad, and the exchange of technical processes. It will be disseminated
by the Department of Commerce to private individuals and business firms in the
United States who are potential foreign investors, licensors or licensees. ,
3. Reference or Background Data
Through the negotiation of treaties and trade agreements, the international
technical assistance and other development and assistance programs, and other
means, the United States Government is assisting other countries to improve the
climate for private foreign investment. Primary emphasis is placed on the need
to foster an expanded flow abroad of private investment capital. United States
Foreign Service posts have already received copies of basis publications relating
to the foreign investment program, such as the Foreign Economic Assistance Act
of 1950 (Public Law 535, 81st Congress); State Department publication No. 3719,
"Point Four", released in January, 1950; copies of treaties and agreements; and
copies of the report to the President of the International Development Advisory
-Board, "Partners in Progress", issued in March, 1951.
4. Types of Opportunities To Be Reported
4.1 This circular focuses entirely on the reporting of specific private invest-
ment and patent-licensing opportunities of the type heretofore publicized in the
"New World Trade Leads" section of the Foreign Commerce Weekly, prepared
by the Department of Commerce largely on the basis of information submitted
?
voluntarily by Foreign Service reporting officers. The active cooperation of
Foreign Service personnel in promptly reporting any promising opportunity of
.the following types is solicited:
a. Investing in new plants abroad; full or partial purchases of new foreign
enterprises such as plants, utilities, mines, plantations, et cetera, existing or
projected, incorporated or unincorporated.
b. Licensing to foreign firms of American-owned patents, trademarks,
secret formulae or copyrights, with or without the investment of further
?capital, and with or without a share in management by the American owners.
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c. Licensing to United States firms of foreign-owned patents, trademarks,
formulae or copyrights. (Foreign countries have received considerable dollar
exchange through this medium.)
d. Supplying American know-how regarding industrial processes and
techniques, as distinct from the grant of patent rights. This may involve
the hiring of American engineers and technicians, for long or short periods;
it frequently is tied in with the purchase of American machinery and equip-
ment. Many American processes are not patented abroad, their protection
being assured by the experience, skill and special equipment of the man-
ufacturer.
4.2 If the investment climate in its area is such that any local private invest-
ment or licensing proposals would be voided of real opportunity (for exainple, if
the expropriation of private enterprise is a common act of the existing govern-
ment), the post should report this fact, with an explanation of the situation, as
soon as possible after receipt of this circular.
5. General Instructions
5.1 Assistance to Applicants
Foreign Service personnel are encouraged to lend every possible appropriate
assistance to applicants for private United States capital and patent licenses, and
to potential United States investors visiting the area.
It will be in order for officers to display, to local bankers, commercial lawyers,
selected government officials, and members of the local American business com-
munity, the sample leaflet of example published investment, and licensing oppor-
tunities, or alternatively, the pertinent section of ally issue of the foreign Com-
merce Weekly, and to describe tile facilities available for giving similar publicity
in the United States to meritorious local projects. Efforts should be made to
coordinate the Foreign Service activities with those of the local staff of the
Economic Cooperation Administration, technical advisers and economic devel-
opment personnel, where available. In this connection, it is desirable to point
out that the Economic Cooperation Administration, through its Office of Small
Business, is already engaged in promoting live interest in private foreign invest-
ment and licensing opportunities, working respectively through the Small Business
officers in the ECA Missions abroad and the FCA Small Business counselors who
are located throughout the United States.
When prospective United States investors approach the mission, every effort
should be made to put them in touch with local individuals or groups which
might have an interest in capital or technical assistance in the field which the
visitor represents, and to supply them with pertinent information regarding local
conditions.
5.2 Briefing of Applicants
At the time of presenting his application, each applicant should be 21early
informed:
a. That while the United States Government is interested in assisting
his country to improve its investment climate, it can assume no sponsorship
of any private application, and no responsibility in connection therewith;
that our Government is merely endeavoring to facilitate the free and unr6-
stricted availability of United States investment capital and technology to
foreign firms through arrangements arrived at by voluntary and unrestrictive
agreements between foreign and United States firms.
b. That the primary function of the Foreign Service in these matters is
to supply to the Department of Commerce in Washington as complete
information as possible regarding each application, for dissemination to
potential investors.
c. That neither the reporting officer, nor the post, can provide any assur-
ance with respect to the successful outcome of the application; and that the
forwarding of the application to Washington in no way ensures favorable
action thereon.
d. That interested potential investors will be requested to get in direct
touch with the applicant, by correspondence or by personal visit, and to
deal directly with him in the actual negotiation of investment terms.
e. That United States Foreign Service personnel wilt not take part in
such negotiations, but desire to be informed of the results of the negotiation,
M order that its consummation may be brought to the attention of all inter-
ested agencies of the United States Government.
f. That any arrangements which may be entered into with United States
citizens are subject to applicable provisions of the anti-trust and other laws
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of the United States; these laws prescribe that no license, made under the
official United States grant of a patent, trademark or copyright, can validly
include terms and conditions that go beyond the original grant in such manner
as to divide sales territory, to limit the prOduction of commodities or their
export from or their import into the United States, or to fix prices. (Eco-
nomic Reporting Circular 29, of January 4, 1951, "Restrictive Business
Practices", should be consulted in this regard.)
5.3 Criteria for Determining Whether Application Should Be Reported
In determining whether an application for an investment opportunity should
be reported, the following should be ascertained;
a. That the proposal is not obviously impracticable in the light of market
requirements, availability of raw materials, level of consumption, et cetera.
b. That there is no substantial evidence of the existence of unfavorable
information on the applicant firm or on the key individuals connected with
the firm.
c. That a reasonably favorable climate for .that particular project would
appear to exist.
5.4 Documentation of Application.
Specific instructions regarding the necessary documentation of each application
are contained in Appendix I to this circular. [Not included in this document.]
5.5 Preparation of Reports
Reports should be prepared in accordance with the basic instructions set forth
in Economic Reporting Circular 22, of August 31, 1950, "General Instructions
Governing Preparation of Economic Reports," and with particular reference to
its sections 5.3, 5.4, and 5.9. The Suggested format is outlined in Appendix I
of this circular. [Not included in this document.] In order to be fully useful,
the reports of this series should contain the greatest possible amount of unclassified
information.
6. Category of Reports
Occasional. That is to say, a separate report should be submitted promptly
for each specific investment or patent-licensing opportunity as it arises and is
judged by the officer to have merit. Reports Should bear title "410319, Invest-
ment Opportunity."
7. Dissemination of Investment Opportunities
The Office of International Trade of the Department of Commerce will continue
to publish, in the Foreign Commerce Weekly, a concise account of the investment
and patent-licensing opportunities reported by the Foreign Service, also to pro-
vide for secondary publicizing through its regional offices. It is arranging also
for: (1) the reprinting of pertinent opportunities in. the accredited periodicals of
certain industrial, trade and banking associations; (2) more direct dissemination
in a new series of regular leaflets to be mailed to all those persons and firms known
or believed to have a specific interest in opportunities of designated types.
APPENDIX IT
TECHNICAL COOPERATION ADMINISTRATION
Circular Airgram, October 23, 1952
To Certain American Diplomatic Officers:
1. It has become increasingly clear that the success of our point 4 efforts in
underdeveloped countries depends in large measure upon increased investments
of private capital from the United States, other capital exporting countries, and
from local sources. There is agreement in the executive branch that a considerable
part of our total effort in the point 4 program must be directed to this end. The
investment of private funds from capital exporting countries, particularly from
the United States, has the added advantage in most cases of providing managerial
and technical know-how to industrial development and will favorably affect the
world dollar situation.
The Congress has recently reemphasized its interest in efforts to make wider
use of private enterprise in the foreign assistance program, and DMS [Director
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for Mutual Security] has asked all agencies concerned to cooperate in an intensi-
fied program. TCA and the Department of Commerce will pool their resources
to carry out a joint program.
This circular airgram should of course be read in the light of activities already
underway in your area, as wellas in the light of local political conditions.
2. It is agreed that in the beginning this intensified program will consist, in
the main, of the following three principal parts:
(a) The encouragement of conditions favorable to private investment,
both local and foreign.
(b) The identification of specific opportunities for investment and location
of interested investors.
(c) The assembly and dissemination of country background information
. necessary to foreign investors.
The various phases of the program must of course be integrated, and the
closest collaboration will be required among the missions, including the point 4
staff, the Department of State, including TCA/W, and the Department al. Com-
merce, and its field offices.
Opportunities for investment abroad must be presented to private business-
men, both local and foreign, in the most specific terms possible. The assembly
of background information on a country-by-country basis will provide potential
United States investors with competent and reliable data as to the conlitions
and circumstances under which a private enterprise can be established and con-
ducted. This information is also useful in efforts to develop a more favorable
atmosphere for private enterprise, and will help in negotiations with the host
country on specific restrictions which adversely affect the investment of domestic.
and-foreign private capital, and in negotiation of international agreements, such
as treaties of friendship, commerce, and development, investment guaranty
agreements, and tax treaties.
3. In the field the mission, working with the host government, local business
groups, arid individual businessmen, will be responsible for identifying and
developing specific information on opportunities for investment, assist.ng in.
supplying background information, and in carrying out negotiations with the
host government in an attempt to make the investment climate more attractive.
To carry out this program, it is suggested that all officials of the mission,
iriclud-
ing point 4 staffs, should be instructed to keep in mind constantly the desirability
of encouraging private participation in developmental activities of all kinds.
? The economic section of the mission should intensify the work it has regularly
carried on in this field. In addition, the Country Director for Technical Coopera-
tion should appoint a member of his staff who will be responsible for the plvate
investment phase of the point 4 activities (ordinarily this will be the industrial
adviser where there is such a position; where there is a definite and active interest
on the part of the country, it may prove desirable to appoint a special assistant
or adviser for this purpose). It is intended that the work of the point 4 staff
in this field should supplement the work of the economic section, but not supplant
or duplicate it. It will be the responsibility of the mission chief to work out
means of coordinating the mission's total activities in this field.
In compliance with Foreign Service Economic Reporting Circular No. 31 of
July 20, 1951, the economic section of the mission, with the assistance cf the
point 4 staff, should report the necessary details of specific opportunities for
private United States investment. The cooperation of local private b?usiness
groups should be solicited for the collection and exchange of information about
investment opportunities. Assistance can and should be provided to officials
and local businessmen in the development of effective methods for presenting
investment opportunities.
Emphasis should be placed upon reporting all background information which
would be valuable to United States agencies in Washington and to private busd--
nessmen in connection with the investment program. The point 4 staff should
contribute to and supplement regular Foreign Service reporting with special
reports covering specific items or factors affecting private investment which
come to their attention in the course of their regular activities. Value of infor-
mation concerning positive achievements of foreign private enterprise for dis-
semination in other areas should be kept in mind.
All means of furthering private enterprise through jointly agreed technical-
assistance projects should be explored. Of particular long-range importance are
projects designed to facilitate private investment through advice in such fields
as government fiscal policies and administration, tax laws, mining and corpora--
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tion laws, etc., and through advice and possibly joint action with respect to
improvement of credit facilities And establishment and strengthening; of in-
stitutions directed at channeling private capital into approved development
enterprises.
Special consideration must be given to the encouragement of private capital
to undertake economic development where feasible and to discourage the use
of public funds, particularly United States public funds, in areas where private
capital can possibly be induced to undertake the development.
The mission may find it possible to work with the foreign government in creating
interest in increasing private investment, foreign and local, directing attenticn
to the benefits, both social and economic, which private enterprise has brought to
other areas and pointing up ways in which private enterprise could further national
policy on terms consistent with the government's objectives.
4. In Washington TCA/W and the OIT [Office of International Trade] in the
Department of Commerce will be responsible for making information supplied
from the foreign missions available to interested business concerns, will assemble
and disseminate background information regarding conditions and circumstances
for investment in specific countries, and will assist in preparing for treaty and
other types of negotiations in the interest of improving the investment climate.
In certain eases Washington staff members may be made available for temporary
work with the country missions in developing background information and other
aspects of the program.
Specific information on investment opportunities and general background
information will be made available to the American business community by a
variety of means. The 43 Department of Commerce field offices provide a
useful facility for this purpose. The various publications of the Department of
Commerce and other means of communication will be fully utilized. It is intended
also to arrange investment clinics and investment institutes on particular countries
or regions and to carry on a substantial program of private consultation and
counseling. This last is to be employed extensively not only in connection 11 ith
investment opportunities reported from abroad, but also in connection with
requests originating from United States businessmen for advice and assistance in
e ntablishii g business abroad.
5. Plans are being made to send a small team of highly qualified exterts com-
posed of Government and private business representatives to 2 or 3 countries
where it appears most feasible to especially emphasize the investment program
to assist the mission in developing such a program.
Consideration has also been given to the possibility of contracting with private
United States firms of consulting engineers or industrial research development
institutes to assist the host Government in the identification and analysis of
specific investment opportunities and the preparation of brochures suitable for
serious consideration by private investors. Such private agencies might also,
in. a normal business fashion, bring this material to the attention of businessmen
and firms likely to be interested.
6. The Department is of course aware of the delicacy of this subject in many
countries. Every effort must be made to avoid giving impression that we are
seeking to force United States capital on unwilling customers. We are certainly
not, nor will we be, interested in doing this. On the other hand, forward steps in
this field must not be suspended simply for fear of attacks from pro-Communists,.
et cetera. In considering steps to be taken, you should bear in mind that the
Congress regards this phase of the point 4 program as of equal importance with
the governmental assistance phase. The possibility that no substantial success
will be achieved along these lines in a particular country is not regarded as a
sufficient reason for taking no action.
7. Comments by the missions OTT the general aspects of this proposal and on
the feasibility of either suggestion in paragraph 5 are urgently requested, includ-
ing an outline of plans for carrying out these activities and suggestions for the
improvement of this proposed joint program.
BRUCE, Acting.
Sent to missions of Addis Ababa, Amman, Asuncion, Baghdad, Beirut, Bogota,
Cairo, Caracas, Cuidad Trujillo, Colombo, Damascus, Djakarta, Gautemala
City, Habana, Jidda, Kabul, Karachi, LaPaz, Lima, Managua, Mexico D. F.,
Monrovia, Montevideo, New Delhi, Panama, Port-au-Prince, Quito, Rangoon,
Rio de Janeiro, San Jose, San Salvador, Santiago, Tegucigalpa, Tel Aviv, Tripoli..
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APPENDIX III
SAMPLE GUARANTY AGREEMENT
AGREEMENT BETWEEN THE UNITED STATES OF AMERICA A ND THE REPUBLIC
OF THE PHILIPPINES
The Acting Secretary of State to the Philippine Ambassador
DEPARTMENT OF STATE
WASHINGTON
Febraary 18 1952
EXCELLENCY:
I have the honor to refer to conversations which have recently taken place
between representatives of our two Governments, relating to guaranties authorized
by Section 111 (b) (3) of the Economic Cooperation Act of 1948, as amenC.ed.
I also have the honor to confirm the understandings reached as a result of these
conversations as follows:
The Governments of the Philippines and of the United States of America
will, upon the request of either of them, consult respecting projects in the Philip-
pines proposed by nationals of the United States of America with regard to which
guaranties under Section 111 (b) (3) of the Economic Cooperation Act of P148,
as heretofore amended, have been made or are under consideration. With re-
spect to such guaranties extending to projects which are approved by the Govern-
ment of the Philippines in accordance with the provisions of the aforesaid Sectipn,
the Government of the Philippines agrees:
a. That if the Government of the United States of America makes paymont
in United States dollars to any person under any such guaranty, the Government
of the Philippines will recognize the transfer to the United States of America
of any right, title or interest of such person in assets, currency, credits, or otter
property on account of which such payment was made and the subrogation of
the United States of America to any claim or cause of action of such person
arising in connection therewith. The Government of the Philippines shall also
recognize any transfer to the Government of the United States of America pur-
suant to such guaranty of any compensation for loss covered by such guaranties
received from any source other than the Government of the United States of
America;
b. That peso amounts acquired by the Government of the United States of
America pursuant to such guaranties shall be accorded treatment not less fav-
orable than that accorded, at the time of such acquisition, to private flu ds
arising from transactions of United States nationals which are comparable
to the transactions covered by such guaranties, and that such peso amounts will be
freely available to the Government of the 'United States of America for adminis-
trative expenditures;
c. That any claim against the Government of the Philippines to which the
Government of the United States of America may be subrogated as the result
of any payment under such a guaranty, shall be the subject of direct negotia-
tions between the two Governments. If, within a reasonable period, tit*,
.are unable to settle the claim by agreement, it shall be referred for final and
binding determination to a sole arbitrator selected by mutual agreement.
If the Governments are unable, within a period of three months, to agtee upon
such selection, the arbitrator shall be one who may be designated by the
President of the International Court of Justice at the request of either Gover
ment.
Upon receipt of a note from your Excellency indicating that the foregoing pr-
visions
-
visions are acceptable to the Government of the Philippines, the Government Of
the United States of America will consider that this note and your reply thereto
constitute an agreement between the two Governments on this subject, the agre :,-
ment to enter into force on the date of your note in reply.
Accept, Excellency, the renewed assurances of my highest consideration.
For the Acting Secretary of State:
.1. M. ALLISON
His Excellency
CARLOS P. RomuLo,
Ambassador of the Philippines.
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The Philippine Ambassador to the Acting Secretary of State
EMBASSY OF TUE PHILIPPINES
WA SHINGTON
February 19, 1952
EXCELLENCY:
I have the honor to refer to your note of February 18, 1952, which is as follows:
"I have the honor to refer to conversations which have recently taken place
between representatives of our two Governments, relating to guaranties authorized
by Section 111 (b) (3) of the Economic Cooperation Act of 1948, as amended.
I also have the honor to confirm the understandings reached as a result of these
conversations as follows:
"The Governments of the Philippines and of the United States of America will,
upon the request of either of them, consult respecting projects in the Philippines
proposed by nationals of the United States of America with regard to which
guaranties under Section 111 (b) (3) of the Economic Cooperation Act of 1948,
as heretofore amended, have been made or are under consideration. With respect
to such guaranties extending to projects which are approved by the Government
of the Philippines in accordance with the provisions of the aforesaid Section, the
Government of the Philippines agrees:
"a. That if the Government of the United States of America makes pay-
ment in United States dollars to any person under any such guaranty, the
Government of the Philippines will recognize the transfer to the United
States of America of any right, title or interest of such person in assets,
currency, credits, or other property On account of which such payment was
made and the subrogation of the United States of America to any claim or
cause of action of such person arising in connection therewith. The Govern-
ment of the Philippines shall also recognize any transfer to the Government
ment of the United States of America pursuant to such guaranty of any
compensation for loss covered by such guaranties received from any source
other than the Government of the United States of America;
b. That peso amounts acquired by the Government of the United States
of America pursuant to such guaranties shall be accorded treatment not less
favorable than that accorded, at the time of such acquisition, to private
funds arising from transactions of United States nationals which are com-
parable to the transactions covered by such guaranties, and that such peso
amounts will be freely available to the Government of the United States of
America for administrative expenditures;
c. That any claim against the Government of the Philippines to which
the Government of the United States of America may be subrogated as the
result of any payment under such a guaranty, shall be the subject of direct
negotiations between the two Governments. .If within a reasonable period,
they are unable to settle the claim by agreement, it shall be referred for final
and binding determination to a sole arbitrator selected by mutual agreement.
If the Governments are unable, within a period of three months, to agree
upon such selection, the arbitrator shall be one who may be designated by
the President of the International Court of Justice at the request of either
Government.
"Upon receipt of a note from Your Excellency indicating that the foregoing
provisions are acceptable to the Government Of the Philippines, the Govern-
ment of the United States of America will consider that this note and your
reply thereto constitute an agreement between the two Governments on this
subject, the agreement to enter into force on the date of your note in reply."
and to state, in behalf of the Government of the Philippines, that the under-
standings between your Government and mine as stated in your above-quoted
note are correct and are hereby confirmed.
Accept, Excellency, the renewed assurances of my distinguished consideration.
CARLOS P. ROMULO
His Excellency
Tar] ACTING SECRETARY OF STATE
Washington, D. C.
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APPENDIX IV-
UNITED STATES DIRECT INVESTMENT OVERSEAS
A.-Value of United States direct investments in foreign countries, by country and type of industry for 1950, and country totals for 1943,
1986, and 1929
[Millions of dollars)
Areas and countries
Canada
Latin American Republics:
Argentina
Bolivia
Brazil
Chile
Columbia
Costa Rica
Cuba
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Panama
Peru
Uruguay
Venezuela
Other Latin American Republics
Total
Agricil
tar e
Mining
and
smelting
Petro-
leans
Manufac-
turin g
Transpor-
tation,
Con;'-
mumca-
tion and
public
utilities
Trade
Finance
and in-
surance
Miscel-
laneous
1950
total
Totals only I
1943
1936
1929
20. 5
334.3
418.1
1, 881. 4
284.4
240.1
313. 2
72.1
3, 564. 1
2, 377. 6
1,
951. 6
2, 010. 3
(2)
(2)
(2)
0)
239. 0
(2)
(2)
(2)
7.9
(2)
3. 0
(2)
(2)
(2)(2)
(2)
(2)
6. 1
(2)
340. 6
(2)
(2)
(2)
(2)
(2)
119. 4
55.1
(2)
48.5
112. 4
(2)
111.7
3.8
20. 4
(2)
(2)
2.3
3. 6
(2)
(2)
12. 7
174. 7
(2)
3. 3
845.6
4.7
146. 0
(2)
270.2
29. 4
24. 8
(2)
71. 8
29.2
.6
(2)
(2)
(2)
(2)
118. 1
1. 7
11.1
33. 1
23.8
5.6
77.0
2.4
137.6
137.0
29. 1
10.8
270. 5
10. 7
5.3
16.8
72.2
2.3
8.8
107. 2
139. 3
4.6
1. 6
10.0
1.1
34. 9
2.0
70.1
14. 5
8.9
2.8
18. 7
.9
1.7
. 5
3.3
(2)
(2)
29. 7
10.6
12.9
4.3
23.6
.6
22. 0
(2)
21.7
1. 5
3.9
(2)
(2)
3.6
(2)
(2)
(2)
2.3
4. 8
(2)
12.4
13.1
7. 6
(2)
7. 0
(2)
3. 0
(2)
9. 8
2.3
0)
(2)
(2)
(2)
6. 2
(2)
.8
. 5
6.7
(2)
354.6
11.4
627.0
529. 9
193.5
62. 1
638. 4
105.7
14.2
18.4
105. 9
12.7
61.9
398. 6
348.7
140.0
55.3
981.4
15.1
0 T, PP 0 PO CP PP CO WP 00 PP
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?
0 C, ,0 0 0 Pr PC I-- 0 0 0 0 C,
Lr, c, 7-1
348.3
18.3
194.3
483. 7
107.5
13.3
666.3
40.7
4.9
17.2
50.4
9.7
36.4
479.5
26.7
96.1
13.0
186.3
9.6
331.8
61.6
193.6
422. 6
124.0
22.2
919.0
69.3
11.8
29. 5
, 70.0
14.2
71.5
682. 5
28.5
122.8
27.9
232.5
25.6
475.6
617.4
1,
390. 0
774.1
1, 044. 1
240.3
85.3 48.2
4,675.0
2, 721. 2
2,
803. 1
3, 461. 9
eSeeleN .10d [DOA
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Eastern Europe:
Belgium
Denmark
France
Germany
Italy and Trieste
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
Other Western European countries
(2)
(2)
(2)
(2)
3.11
(2)
(2)
(2)
(5)
(9)
Total
Eastern Europe
Western European dependencies::
Belgium, Portuguese, and Spanish dependen-
das
British dependencies it Atriett
British dependencies in Western Hemisphere
Other British dependencies
French North Africa
Other French dependencies
Netherlands dependencies
Total
Other:
Aiistralia
Burma, Ceylon, Iran, and Thailand
China
Egypt and Anglo-Egyptian Sudan
Ethiopia, Eritrea, Libya, and Tangier
India
Indochina
Indonesia
Israel
Japan, Korea, and Formosa
Liberia
New Zealand
Pakistan
Philippine Republic
See! ootnotes at end of table, p. 86.
3. 2
.1
17.0
19.7
92. 5
37.8
16.6
42.8
6. 4
3.6
5. 6
24.8
5.8
122.7
23. 5
34.8
7.9
161. 2
121. 0
19.0
22. 7
5. 1
2.2
15. 1
25. 9
10. 1
535.2
10. 1
.4
5.4
3. 6
( )
5
1.0
1.8
(2)
(2)
10. 6
1.2
10, 6
3. 7
5. 9
18.8
1.4
55.2
3.4
5.4
2. 3
5.0
5.7
102.0
10. 6
(3)
11.2
2.6
3. 5
2. 5
(2)
.3 1.8
(2)
5.6
17. 3
1.5
2. 3
.6
.3
5.0
1.8
(2)
16.0 50.0
.9 3.8
(2)
(2)
(1)
.9
64. 9
31. 6
285. 1
202. 1
62.6
84.4
24. 3
16.0
30. 7
57.8
24. 5
839. 7
50. 2
62. 9
21. 9
167.4
512.8
85.0
59.6
30. 1
13. 9
124.1
32.8
43. 7
518.8
112. 5
5 34. 9
13. 8
145. 7
227.8
70. 2
18.8
26.7
5. 7
80. 5
25. 5
8. 6
.9 474. 1
33. 0
64.3
15.8
145.0
216. 5
113. 2
43.2
23.0
11.5
72.2
19.2
16.8
s 485.2
37.9
.8
17.7 440.8
970. 5
28.0
(6)
(6)
186.0
(6)
38.1 92.0 1, 773. 9
1, 785. 5
1, 165. 3
1, 263. 8
(6)
259. 0
93. 2
88. 7
(2)
. 4
3. 0
5.7
(2)
.4
25.2
31.9
23. 4
(2)
6. 3
6. 2
11.4
32.0
148.6
11.0
15. 9
87.3
9,3 87.7 292.4
. 7
1.4
5.0
(2)
. 1
2
14.. 7
2.0
.2
.3
2,0
1.0
2. 7
3.0
.g
1.2
. 3
.2
.4 .7
(3) .2
(3) .1
(5)
-.2 (0)
9.6
40.9
66.8
186. 5
14.5
12.5
94.0
5.8
26.9
36. 6
29.5
8.3
4. 6
12 120. 1
7 10,5
9 44. 0
/0 27.0
1218.8
92 69. 8
7.8
18. 1
1:3. 1 .2 1.2 429.8
231. 8
170.1
13. 5
(2)
15.3
(7) (7)5. 1
(6)
26. 2
5. 1
(5) 13.0
(2)
30. 7
6. 8
12. 5
(2)
(2)
(2)
27.4
(2)
94. 8
16)
8. 0
16.0
(2)
.2
(6)
.5
2.0
13.9 .2
1.6 -.5
(6)
2.8 .1
6.0
9. 7
.9
4:7
9.2
23.3
(2)
. 5
s
(2)
47. 1
1.7 (2)
-2.1 (2) 3.7
.4 .7
(2) (2)
4. 4 (7) .6
4.9 .1 .1
29.6 (2) 1.4
7.8
1.6
(6)2.1
(2)
1.2
(2)
2. 6
117.9
8.0
(6)
39. 7
5.6
37. 7
4. 5
58. 2
12. 4
19.0
82.0
24. 8
7. 8
149. 2
114.1
3. 3
40. 7
16. 8
1. 1
u 41. 3
(19
5, 6. 3
32. 9
17. 5
13. 7
(8)
94. 6
80.0
(8)
90. 6
8. 3
14 29. 7
(9
(15)
17 29. 6
46.7
22. 0
(6)
92. 2
79,9
(6)
57.0 PJ
10 27.1
1199
32 66, 0
160.0 c-4
92 149. 2
(6) CO
113. 8 ??3
6.5
14 32.7 ci
(6)
(J5)
1313, 3
60.7
79. 9
svasuano
Approved For Release 2000/08/25 : CIA-RDP58-00453R000200110001-1
Approved For Release 2000/08/25 : CIA-RDP58-00453R000200110001-1
A.-Value of United States direct investments in foreign countries, by country and type of industry for 1950, and country totals for 1943,
1936, and 1929-Continued
[Millions of dollars]
Areas and countries
Agricul-
ture
Maaid-lig
smelting
PetTG-
Ieum
Mannlac-
Wring
Transpor-
tat ion,
mett?1111ilea- -
tion and
public
utilitliS
Trade
Finance
and in-
surance
?
MiseeP"
laneous
?
195?
total
Totals only
1943
1936
1929
Other-Continued
Saudi Arabia, Iraq,
Syria
Union of South Africa
Total
Total, all areas
Jordan, Lebanon, and
(2)
(2)
32.9
569.9
44. 8
(2)
44.0
1.1
(0)
1.7
13. 5
(2)
. 2
2. 1
574.6
139. 9
0 54.2
49.9
0 17.8
22 55. 1
42 1. 1
22 76. 8
38.7
56.4
895.6
210.7
53.6 79.0
2.9
24.4
1, 361. 3
436.3
481.0
534.0
544.9
I, 113. 5
3, 436. 9
3, $44. 5
1, 428. 2
758.5 439.7 237.9
11, 804. 1
7, 861. 6
24 6, 690. 5
7, 527. 7
1 Sources for the data shown for 1929, 1936, and 1943 are as follows:
1929-American Direct Investments in Foreign Countries, Trade Information Bulletin
No. 731, U. S. Government Printing Office, Washington: 1930.
1936-American Direct Investments in Foreign Countries-1936, Economic Series No. 1,
U. S. Government Printing Office, Washington: 1938.
1943-Census of American-Owned Assets in Foreign Countries, U. S. Treasury Depart-
ment, Office of the Secretary, LI. S. Government Printing Office, Washington: 1947.
The total reported in the Treasury publication was adjusted to exclude nonprofit
organizations and is adjusted upward by 8653 million, entirely in Canada, to make it
comparable with estimates for prior years and the census totals for 1950. This addition
adds back into the 1943 data the United States equity in certain Canadian companies in
which American stockholders owned more than 50 percent of the voting securities.
2 Included in totals.
Less than $50,000.
Includes Luxembourg.
Includes Gibraltar and Malta.
d Valuations for properties in Eastern Europe and China were not generally available
for the end of 1950.
7 Portuguese Africa only.
0 Not separately shown.
O Includes French and Netherlands West Indies.
10 Includes French Indochina, French Oceania, and Thailand.
11 Includes all of French Africa, Belgian Congo, Italian Africa, Spanish Africa,
Ethiopia, Liberia, and Tangier.
22 Includes Netherlands East Indies which appears as Indonesia in 1950.
OS Includes New Zealand.
24 Includes Ceylon and Pakistan.
II Included in Netherlands dependencies.
14 Includes Jordan.
27 Includes Cyprus, Iraq, and Syria.
Includes British Arabia, Iraq, and Syria.
10 Includes Bahrein and Iran.
22 Includes all other British Africa.
25 Includes $26.2 million shown as "International."
Source: U. S. Department of Commerce, Office of ,Business Economics (Survey Of
Current Business, December 1952).
00
OVERSEAS PRIVATE INVESTMENT
Approved For Release 2000/08/25 : CIA-RDP58-00453R000200110001-1
Approved For Release 2000/138/261v.ACIAIRDPW00453R0002a110001
B.?Net movement of United States direct-investment capital, by area, 1,951 and 1952
[Millions of dollars; inflow to United States (?)]
Approve
Area
1951
1952
Area
1051
1952
Total
603
830
Other ependencies
11
4
Other Europe
(1)
26
?21
United Kingdom
Canada
271
403
Iceland, Eire
(1)(I)
Latin America
1$7
244
Western Europe
51
4
All other countries (sterling)
44
110
Sterling dependencies
?6
?25
All other countries
19
111
'Less than $500,000:
Source: U. S. Department of Commerce, Office of Business Economics, June 2, 1953.
For Release 20
0/08/25: CIA-RDP58-00453R000200110001
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