DEVELOPMENTS IN THE INTERNATIONAL TRADE FIELD

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75-00149R000800020021-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: November 11, 2016
• Document Release Date: January 29, 1999
• Sequence Number: 21
• Publication Date: April 24, 1959
• Content Type: PREL

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EXPORT-IMPORT BANK OF WASHINGT
For The Press
For Release at 1::00 P.M. EST
April 24, 1959
REpublic 7-7890
ress by Samuel aug. _? resent
Export-;Import Bank of Washington
cit luncheon sponsored by the
Foreign Trade and Investment Committee of the
Chamber of Commerce of Greater Philadelphia
Apiril24? 1959
Developments in the International Trade Field
CPYRGHT
Nearly two years ago you invited me to Philadelphia to talk before your annuab
World Trade Dinner. I chose-for my subject, the role of the Export-'Import Brink. under
the title ??The President Reports to his Stockholders. ??
Inasmuch as the Export--Import Bank's $1 billion capital stock, author1zed by the
Congress, is owned entirely by its stockholders, the United States taxpayers, `st is
proper that periodic reports be given publicly in addition to the Bank's comp, ehensive
-semiannual reports made to the Congress
The average annual bank report has not in the past been classified as either
light or interesting reading0 It has been encouraging to see the changes that have been,
taking place in the field of fir^,anciai reporting. We at the Export-Import Balk hope
that we have improved the reporting of our own activities and are today cone entrati?y
on a report to be issued at the close of our fiscal year commemorating the Baiik's 25th
anniversary.
During the Bank's 25 year history there have been many changes in it; organiza-
tion, but the three basic objectives enumerated by the Congress a quarter of o century
ago remain unchanged. The primary objective of the Export-Import Bank is to aid in
financing the foreign trade of the United States; second, the Bank should suF'plemer+
and encourage and not compete with private capital; and third, loans made hould, +n
the judgment of the Board of Di rectors, offer reasonable assurance of . repayment
In the ensuing twenty-three months since my lost visit to Philadelphir the Bark
has approved 515 loans in 39 cou+ntries under credits totaling about $1.8 bill on. T is
is evidence that your Export-Import Bank,, making loans at the rate of one every
working day for nearly two years, has continued to be active in supporting a ?d facil-
itating the trade of the United States with other friendly countries throughou the
world.
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Inasmuch as this is an anniversary year, it should be recorded that in the Bank"~
istory, from 1934 through :/larch 1959, loans have been authorized in excess of $10
billion Of this total, approximately $2 billion have been taken over b~+~othe~s at
their own risk or canceified for various reasons. The Bank has disbursed S5 .7 billion
and has obtained' payments approximating 50%0 This leaves loans outstanding today
of $304 billion. In addition, the Bank has current commitments, that is, loom author-
ized where shipments have not as yet been made, of $1 ,4 billion.
During the Bank .'s 25 year history it has paid interest on all monies bar owed at
the rate asked by the U. S. Treasury. For' several years it has paid dividends If
$2205 million per year to the U.S. Treasury on its capital stock -- the total amount of
dividends is $19509 million and it has also paid every dollar of its administ?ative
expense out of earnings o After paying these costs of operations the Bank has occumu
Rated in excess of $540 million as a reserve for contingencies.
During the past two years there have been many moves which, in varying
degree, have affected our foreign trade and, therefore, the operations of your wholly-
owned U. S. bank. Each of these moves is, in itself, of sufficient importance to be
the subject of extended discussion and debate. In fact, the International Chanber of
Commerce has been spending the entire week in Washington discussing certain phases
of the current problems. I will review four of the current developments but without
attempting to evaluate their relative importance.
We have experienced in the United States a sharp recession and an um
precedented record recovery. During this period our imports held up but them was
a marked decline in exports, with the result that we experienced a substantial
reduction in our gold and dollar reserves and corresponding increases in the reserves
of our friendly trading partners..
There has been a decline in worldwide prices of the basic commodities and
this has had a marked effect on the economies of our allies, notably our Latin American
friends, This price decline has been attributed by some to the aforesaid reces ions
The income of more than half of the Latin American countries depends upon the price
of coffee; the economy of a half dozen countries depends upon bananas; in Cliie it is
copper; in Boiivla,, tin; in Uruguay, wools And this week, during the visit of Prime
Minister Fidel Castro of Cuba, the subject of sugar has been uppermost in the minds
of many interested in that basic commodity.
The decline in prices paid for these raw materials has had a restrictive effect
on the development plans of the various Latin countries as well as on their purchasing
power for the imports desired from the United States. This decline in income kogether
with the continuing desire to import both hard and soft goods plus their understandable
desire to industrialize and to raise living standards has resulted in a marked imbalance
in the financial position of several of our important trading partners in Latin lmerica
Here it should be emphasized that in accordance with our basic polic) the
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CPYRGHT
Bank has made an effort to facilitate the flow of trade. We have made severa loans
to assist in improving the exchange position of certain countries. In this connection
we have worked closely with our private banks and international organizations,
notably the International Monetary Fund. These loans were made only after extended
negotiations with the authorities of various countries in a combined effort to improve
fiscal and trade policies to the end that imbalance would be corrected.
The preceding comments have referred to Latin America, but it should -also
be recorded that the Export-, Import Bank was called upon by and responded to the
United Kingdom following the Suez crisis and to France during its most recent finan-
cial difficulty.
Other and most important developments are being witnessed today on the
European scene. On January 1, 1958, the European Economic Community, better
known as the European Common Market, came into being. This treaty calls for the
gradual elimination of trade bar. viers among France, Germany, Italy, and the three
Benelux countries -- Belgium, Luxembourg, and the Netherlands along with the
gradual alignment of their economic, financial, agricultural, and social policies.
Under study throughout all of the past year has been a plan sponsored "y the
other eleven European nations comprising the Organization for European Economic
Cooperation (OEEC), spearheaded by the United Kingdom, to form what has been
referred to as a Free Trade Area to permit a free flow of trade among all seventeen
of the OEEC countries. Despite extensive negotiations, which have sometimes
become heated, the trade problems of the six countries comprising the Common
Market and the eleven countries sponsoring the Free Trade Area remain unsoIN ed.
Also on January 1, 1958, the European Economic and Atomic Energy
Community came into existence to control the development and research of nuclear
energy inLthe six-country Community. The creation of the Common Market arid
Euratom follows the pattern established in 1952 of the European Coal and Steel
Community. All these developments point toward a. Western Europe economi-: ally
unified which, if successful, may prove to be the outstanding achievements o? the
current century.
The Export-Import Bank is fiscal agent for the United States Government
in connection with the $100 million basic loan made to the European Coal and
Steel Community in the year 1953? This loan has been heralded as the basis for
subsequent financing by the Community in the private markets of the United c,tates
and Europe
More recently the U. S. Atomic Energy Commission and the Export- iraport
Bank, with the approval of the Congress, are joining in an extensive program for
the development of nuclear energy throughout the six-country area. Negotictions
are currently under way for the signing of a contract whereby the Export-,imp=art
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Bank will loan $135 million of a proposed $340 million over-all program for the
establishment of basic nuclear energy plants and for research.
A new challenge developing in the international trade field has become more
acute since I spoke in Philadelphia two years ago the growing economic thrust of
the Soviet Union. This is a challenge to establish concepts and standards of trade
and finance in the newer expanding countries of the world in a manner for different
from, and inimical to, our western ways. There can be no doubt but that a serious
challenge to the free economic system of the United States is coming from the state
monopolistic system of the Soviet Union.
We have two authorities for this prediction m- the leader of the Communist
Party in Russia and the head of their government, Mr. Nikita Khrushchev, and Mr.
Allan W. Dulles, Director of the United States Central Intelligence Agency, who
is one of our best informed citizens on the subject of the Soviet Union.
Recently Mr. Khrushchev stated;
"The Soviet Union intends to outstrip the United States
economically . . . . to surpass the level of production
in the United States means to exceed the highest
indexes of capitalism."
And what this means, Mr. Dulles said in a recent speech, is that Khrushchev
is convinced that the final victory of Communism can be achieved mainly by non-
military means." "Here," Mr. Dulles continues, "the Soviet economic offensive
looms large." Mr. Dulles went on to state, and with permission I quote from his
manuscript;
"The proceedings of the recent twenty-first party
congress laid out what we might call the Soviet
economic order of battle.
"Khrushchev explained it in these words, . . . .
" 'The economic might of the Soviet Union is based
on the priority growth of heavy industry; this should
insure the Soviet victory in peaceful economic
competition with the capitalist countries; develop-
ment of the Soviet economic might will give
communism the decisive edge in the international
balance of power.' "
Russia's economic offensive began in 1954 with an $11 million credit to
Afghanistan. It has been increased, largely in the countries of the Middle East,
year by year. But it was not until 1958 that the Soviet program of economic and
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military aid, and technical assistance, began to cause concern in the capitals of the
West; and it was not until that year that Mr. Khrushchev bean to be explicit about
future cold war plans, laying more and more emphasis upon the economic offensive.
Thus f ar the total amount of assistance which the Soviet Union has pledged -- and
not all that has been promised, incidentally, has yet been provided -- is small when
compared to the United States program.
Indeed, the communist bloc of countries last year - Russia, the Eastern
European satellites, and China -- made aid agreements with 18 countries totaling
approximately the equivalent of $1 billion. In that some period your Export-Import
Bank, which is primarily a financial institution and not a foreign aid agenc , made
credits in some 24 countries abroad for approximately $1 billion,, And the Eximbank
is but one of several agencies at the service of the U. S. Government to promote
economic development abroad. So the United States today remains in a strong
position as a source of assistance for economic development by other countries.
But as to the future, in this competition with communism;, we must look to
our laurels. Regardless of what may transpire, we at the Export-import Bank
believe the United States must not be stampeded into lending practices which are
contrary to principles upheld within our own country. Unquestionably, the Soviet
Union and its bloc can give us strong economic competition. For the Kremlin
leaders direct a far higher proportion of total resources to national policy purposes-
such things as defense and investment in heavy industry -- than does the United
States. As Mr. Dulles said, and I use his words, the Russians
""are, in effect, plowing back into investment
a large section of their production, thirty
percent, while we in the United States are
content with 17-20 percent."
What does this forecast for the future mean? Referring to the prospects of
Mro Khrushchev's present 7-year plan, Mr. Dulles says.
"...the Soviet Seven Year Plan, even if not fully
achieved, will provide the wherewithal to push
the expansion of trade and aid with the uncommitted
and underdeveloped nations of the Free World. By
1965 Soviet output of some basic raw materials and
some industrial products will be approaching, and
in a few cases exceeding, that of the United States.
Most prominently, these products will be the kind
that are needed for industrialization in the less
developed countries.
The outcome of this contest -- the Communist
challenge in underdeveloped areas is crucial
to the survival of the Free World."
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CPYRGHT
There you have the challenge. Who will it affect first? Of course, he
newer countries, and the so-called underdeveloped countries, a label not entirely
to my liking. Speaking generally, all countries of the world are underdeveloped
in some way. None of us is complete, and all have something, either in the way
of industry or-the cultural arts, to contribute to his neighbor. What John Dor=ne
wrote in the late 16th century remains true today. Here are his immortal words;:
"No man is an island, entire of itself; every man
is a piece of the continent, a part of the main; if
a clod be washed away by the sea, Europe is the
less, as well as if a promontory were, as well as
if a manor of thy friends or of thine own were;
any man's death diminishes me, because I am
involved in mankind; and therefore never send
to know for whom the bell tolls; it tolls for thee."
In this rather kaleidoscopic resume of current trade problems, this brings
me to a discussion of an important factor affecting U. S. business and finance and
therefore the Export-Import Bank. During the past two years there has been
increased activity in Washington in the field of international finance. Upon
recommendation of President Eisenhower, and with the approval of the Senate and
House Banking and Currency Committees as well as the Congress, the loaning
authority of the Export-Import Bank was increased by $2 billion.
There are pending before the present Congress bills to authorize increased
participation by the United States in the International Monetary Fund and the:
International Bank for Reconstruction and Development. Due to the increase in
world trade these increases are to be desired. At the some time it is understood
that there will be a more equitable readjustment of country quotas plus an increased
effort to obtain payment of outstanding subscriptions of certain countries.
Two years ago this month former Secretary of State Dulles recommended to
Congress the establishment of a Development Loan Fund which was done. At the
present time there is before Congress a request for a supplemental appropriation
for this current fiscal year for the Development Loan Fund as well as a request for
an additional sum for operations during fiscal year 1960. The low clearly stctes
that the Development Loan Fund shall be operated so as not to compete with private
investment capital, the Export-Import Bank or the International Bank for
Reconstruction and Development, or other financing sources.
In August of last year the decision was made at the highest levels of our
government that the United States would participate in a Mid-East Development
Fund as well as an Inter-American Development Bank. Within the past few nays
a majority of the twenty-one Latin American countries and the United States
signed an agreement which, when ratified by the respective governments, will
bring into being an inter-American institution with an initial capitol of $1 billion..
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CPYRGHT
Here again statements have been made that this new bank will supplement the
activities of the existing financial institutions.
In the fall` of 1957, in extending for another year the Agricultural Trade
Development and Assistance Act of 1954 (POLO 480) the Congress made the E.?:port-
Import Bank responsible for lending certain foreign currencies to private enterprise.
Under the so-'called Cooley Amendment, the Bank may receive up to 25% of the
proceeds in foreign currencies of sales of agricultural commodities negotiated
under the new legislation..
The Bank may lend these funds to (1) United States firms or' their branches,
subsidiaries, or affiliates for business development and trade expansion in th,:
foreign country, or to (2) either United States firms or firms of the foreign country
for expanding markets for and consumption of United States agricultural products
abroad.
The law requires that the loans be mutually agreeable to the Export-
Import Bank and the foreign government. The law prohibits loans for the manu-
facture of products to be exported to the United States in competition with
products produced in the United States, or for the manufacture or production of
commodities "to be marketed in competition with United States agricultural tom-
modit.ies or the products thereof.*
The making of sound loans with local currencies in some twenty or more
countries is a new departure from the operation of the Export-, Import Bank,, but
has been carried on, we believe, successfully insofar as U. S. private business
is concerned and has fitted in with certain types of dollar loans the Bank is being
called upon to make to U. S. private business overseas.
A few days ago, on April 16th, Senator Humphrey of Minnesota intro-
duced a bill into the Congress entitled "Notional Food for Peace Act of 195',9:,
This calls for the creation of a Peace Food Administrator, a five year program
of local currency sales, stepping up the sale of agricultural surpluses to $2
billion a year as compared with $1.5 billion under the present Public Law 4E0..
Among other sections the bill provides for the substitution of the U. S
Development Loan Fund for the Export-import Bank in the handling of the funds
described above.
In a letter recently received from Senator Humphrey he states that it
appears that the Export,-Import Bank. has been doing a very responsible job of
administering this program. He adds that considerable doubt has existed as b
whether or not it should be a part of the Export-,import Bank's work. We are
of the impression that he had not been previously fully informed as to the Bank?s
operations in this field and the potential possibilities and therefore we were
encouraged when he added that he wanted our views and advice regarding ary
such transfer and that careful hearings will be conducted before any such change
is made. This suggested change will undoubtedly be of interest to the U. S.
private businessmen who two years ago initiated, and in fact, sponsored this
legislation. The Bank has made. a most satisfactory record in making sound
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CPYRGHT
loans in local currencies, repayable in local currencies, under the Cooley
Amendment. I trust I will not be accused of being immodest in making this
statement
In the international field there has been proposed by Senator Monroney the
creation of an International Development Agency wherein, in cooperation with other
countries, local currencies the United States has received will be turned over to an
international organization for the making of development loans. With proper
authority and management, we believe these local currencies can be advantrageously
loaned by the Export-Import Bank.
After six years of traveling throughout our own country and throughout the
Free World, I firmly believe there is but one concept upon which there seems to be
a complete unanimity of thought, and that is the necessity for maintaining within
our own United States a strong and virile economy.
A protracted recession would materially affect our buying power as well as
our ability to create the capital and credit that is so necessary throughout the world
today.
And it is in support of this agreed premise that we at the Export-Impart Bank
feel that in the consideration of all proposals for the creation of additional
institutions in the aid and financing field extreme care be given to the protection
of our own domestic economy, Most certainly this is not a plea for a Buy American
policy, but rather a suggestion that certain countries, having been gladly aided in
the recovery of their economies should recognize their own greater:responsibiiities
in the field of foreign aid and trade.
During the past few months we have heard from outstanding United Sates
bankers and industrialists to the effect that here in our own country we are
pricing ourselves out of the international market. I suggest that one of the major
factors in the present dilemma is the quantity of dollar financing that is now being
supplied for purchases in the international market,
There seems to be a trend within certain sections of the executive and
legislative branches of our government -- a trend being actively sponsored by
internationally-minded advocates abroad -- to the effect that the United Stctes
should participate more actively, by its financial support, in international oa-
multilateral institutions as opposed to wholly-owned United States, or bilateral,
operations in the aid and finance field.
The U. S. aid and financing programs have admittedly not been perfect,
but some of them have been of comparatively recent origin and I submit that the
errors are of omission and commission in the operations and are not in the basic
principles involved.
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CPYRGHT
In order that there could be no possible misunderstanding as to my
personal position on the question of international cooperation, let me say I an
wholeheartedly in favor of international organizations, especially in the areas
where the responsibilities are assumed proportionately. Based on the past six
years' experience in international trade and finance, I am not ready to
concede that international organizations in the field of economic aid or fins{ice
can better serve the foreign policy of the United States than operations on a
bilateral basis.
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