800.50 TA/2–849
Mr. Robert F. Loree, Chairman of the Board, National Foreign Trade Council, Inc., to the Secretary of State
Dear Mr. Secretary: We have noted with great interest the President’s remarks in his Inaugural Address regarding the economic development of underdeveloped areas.1 We are not entirely clear as to some of the statements made by the President in discussing this subject. We assume, however, that in due course further public elucidation will be made of the President’s views.
We are especially concerned that any program to foster capital investment in underdeveloped countries shall not operate in such way as to injure present or future American private investments in such countries, and thus prevent or retard the flow of private investment capital abroad. Since its formation thirty-five years ago the National Foreign Trade Council has taken an active interest in securing the removal of barriers to international trade and investment. In this connection the Council has, over the years, formulated principles and policies which, if adopted and implemented, would provide the necessary safeguards to stimulate the flow of American private capital investments abroad. These safeguards should embrace:
1. Rights of establishment.
These should include the right of nationals of the United States to enter capital-seeking countries (including dependent areas under their administration) and to engage in industrial and business activities permitted to nationals of such countries or of third countries, except in cases where such activities are restricted to nationals of the host country because of security reasons; and the right of nationals of the United States to reside and travel in such countries, to own, sell, lease and control property, and to enjoy the same protection of the laws, access to and equality before the courts and privileges respecting the [Page 632] conduct of business activities as are accorded the nationals of the host country or of third countries.
2. Rights relating to employees.
Nationals of the United States engaged in business in other countries should have the right to select agents of their own choice and to employ, without regard to nationality, such managers, technicians, foremen, and confidential and key workmen as they deem necessary for the proper operation of the business; and alien employees of enterprises operated within such countries by nationals of the United States should be accorded the same rights regarding residence and amenities of life as are enjoyed by nationals of the host country or of third countries and should not be subject to restrictions on the amount of salaries, wages or other income which they receive from such enterprises, nor to discriminatory or unreasonable taxes or other exactions respecting such income.
3. Rights pertaining to operation of business.
American enterprises in other countries should be assured the right of access to raw materials and markets and to labor supply of the host country on the same terms as business enterprises operated therein by its citizens or by citizens of third countries; should be accorded access on nondiscriminatory terms to the capital markets and other facilities of the host country for obtaining funds essential for short-term and long-term business requirements; and should be assured the right to use on nondiscriminatory terms, communications, transportation and other facilities of the host country required in carrying on business operations.
4. Protection of property rights.
American properties situated in other countries should be guaranteed against expropriation or nationalization or other governmental acts impairing their value without provision for prompt, adequate and effective compensation in the currency of the country of the owner of the property or in a currency acceptable to him. Such guaranties should include assurances of protection to nationals of the United States against misappropriation or misuse in the host country of their inventions and patents, trade-marks and trade names, and other proprietary rights.
Assurances by other countries respecting property rights of nationals of the United States should provide that, in case the government of the host country decides to engage in competition or to sponsor an enterprise to compete with an American enterprise in such country, the American enterprise will be given the option of selling its business to the government of such country or to the enterprise sponsored by it at a fair price including compensation for goodwill.
[Page 633]American enterprises in other countries should also receive assurance that no provision will be adopted by the host government requiring the participation of local capital in such enterprises or that a specified proportion of the directorate shall be citizens of the host country. Any participation of local capital in such enterprises should be entirely optional with the owner, depending upon the merits of the case as he may appraise them.
5. Tax treatment.
American enterprises in other countries should receive assurance of tax treatment no less favorable than that accorded to domestic and other competitors, and of freedom from extraterritorial and double taxation and from unduly burdensome, discriminatory or other unfair tax practices. There should also be assurance that, in no event, will American enterprises in other countries be subject to any capital levy.
6. Transportation and other facilities.
Assurances should be sought providing that American transportation, communications, banking, insurance and other trade-facilitating services will receive nondiscriminatory treatment within other countries and that such American facilities will be accorded the right to participate on a fair basis in the movement and servicing of cargo and passenger traffic flowing to and from such countries. Such American services should not be subject to discrimination by other countries with respect to tax and other charges or with respect to use of facilities, such for example, as the establishment of priorities hi favor of domestic ships in the use of harbor facilities for the loading and unloading of ocean vessels. In particular, American transportation services should be assured of the opportunity to participate on a fair basis in the transportation of all forms of international commerce and American insurance firms should have the right to compete in the writing of insurance on all cargo and passenger traffic between the United States and other countries.
7. Foreign exchange regulations.
Assurances should be obtained from other countries that they will not apply controls over foreign exchange in an unfair or discriminatory manner against nationals of the United States and that private trade will not suffer in the application of such controls as compared with trade conducted by governments or by government trading agencies. There should also be assurances that claimants for exchange to meet interest, dividend and capital repayment requirements will share equitably in the allotment of available exchange with applicants for exchange to cover commercial and government transactions. Assurances should also be obtained that other countries will not apply discriminatory [Page 634] taxes on exchange remittances by nationals of this country.
8. State trading.
Assurances should be sought providing that countries engaging in state trading will conduct their state trading operations in such way as to permit competition by private traders and to promote expansion of international trade on a nondiscriminatory most-favored-nation basis.
The foregoing outline of assurances necessary to stimulate the flow of American private international investments is not intended to be all inclusive. It does, however, indicate the kinds of assurances that must be provided if American and other private investors are to place their funds in economic projects abroad.
The principles outlined above for the protection and safeguarding of American capital investments abroad are not merely principles that are of interest to American enterprise alone. They are basic to any program which will encourage international investment on the scale necessary for reconstruction of war-devastated nations and development of economically backward countries, and for the promotion of international trade to the level required for an expanded world economy and rising standards of living for the peoples of all nations.
Assurances of the kind indicated above, where not now provided by existing arrangements, should be sought through the medium of modern and up-to-date Treaties of Friendship, Commerce and Navigation, tax treaties and other appropriate types of agreements. It is respectfully urged that, where necessary, the Government of the United States employ all the bargaining power it possesses by virtue of the Trade Agreements Act, present and prospective foreign aid programs of this country and through other means, to induce foreign nations to enter agreements of the above character with this country.
Apart from efforts to secure the creation of a favorable international environment for private investments, there are certain measures which the United States can take to encourage the investment of American private capital in countries needing such capital. Tax laws of this country should be revised so as to foster capital formation, with a view to providing additional funds for capital investment both in the United States and abroad; and a provision should be adopted stipulating that income earned by American enterprises in other countries shall not be taxed by this country until such income is actually brought home in dollars.
In this connection, the Council has been especially interested in the development of measures for implementation of the transfer guaranties provided for in the Foreign Assistance Act of 1948. It has [Page 635] recently adopted recommendations for broadening of the facilities of the ECA transfer guaranties. Attached is a copy of these recommendations as transmitted to Mr. Paul G. Hoffman, Administrator of the Economic Cooperation Administration.
The Council would welcome the opportunity to discuss with appropriate officials of the Department the matters dealt with in this letter.
Very sincerely yours,