NAC Files, Lot 60D137

Minutes of Meeting (No. 123) of the National Advisory Council, Washington, April 14, 1949


[Here follow list of persons present (15) and discussion of a prior agenda item.]

2. Financial Aspects of Point IV.

Mr. Glendinning1 referred to the fact that the Department of State had requested the Council to make recommendations concerning the financial aspects of the Point Four Program and particularly with respect to encouraging the flow of private capital into foreign investment. Somewhat earlier the Export-Import Bank had requested Council consideration of a proposal that authority be given to the Bank to guarantee the convertibility of foreign currencies resulting from equity or loan investments by United States interests in productive enterprises abroad. He said that a special working group of the Staff Committee had been giving extensive study to these problems over the past six weeks. The working group had in general concentrated its attention on three fields: (1) tax incentives and deterrents to foreign investment; (2) investment treaties; and (3) guaranties. On the question of tax incentives to foster private investment, there was general agreement on the recommendations to the Council. In the main, the changes proposed were not major ones in the tax structure. In reviewing the question of investment treaties there was general agreement that negotiation of meaningful investment treaties would be an appropriate step to facilitate the flow of private investment. There was, however, a substantial amount of additional work to be done on the content of such treaties. In the field of guaranties there was a substantial range of views which were reflected in the rather lengthy recommendations coming up from the Staff. The two main aspects of guaranties explored were: (1) the extent of coverage of risks; (2) additional funds which might be requested in connection with the guaranty program (NAC Document No. 811).2

The Chairman3 indicated that he thought it would be advisable for the Council to devote consideration to some of the broad aspects of the problem prior to detailed examination of the recommendations from the Staff.

Mr. Thorp4 said that inasmuch as the State Department was responsible for bringing this problem before the Council he thought it might be of value if he outlined the developments to date with respect to the Point IV program. He said that the primary emphasis [Page 785] of the program was upon technical assistance and that the Department of State had attempted to draw together and coordinate the views of some twenty-five agencies which were now engaged in activities in connection with this field. He indicated that in connection with the technical assistance program this Government would want to use the UN facilities as far as possible. The Department was about ready to go to the Bureau of the Budget on this phase of the program and the request would probably not exceed $40 million.

With respect to the financial aspects of the program, he said that the President had laid great stress on the importance of private investment and that his directive to the State Department had referred in a general way to guaranties for investors. However, the President had not indicated any definite ideas as to what he expected to be developed in this field.

Mr. Thorp said that the Staff after rather intensive work had blocked out a program which was before the Council for consideration. He thought it was very important that the Council give intensive consideration to the proposals and therefore suggested that the Council not attempt to take final action at this meeting. He also suggested that as we had no clear idea what the President’s reaction might be to some of the proposals, the program might properly be discussed with him before an attempt was made to finalize it.

Mr. Thorp also discussed at some length the importance of establishing a favorable climate for private investment and the significance of investment treaties to this end. He said that the Department had encountered considerable reluctance on the part of governments to enter into reasonable commitments for giving assurance to private investment. He thought that investment treaties were essential to provide the background for any guaranty program which might be undertaken. Relative to guaranties, he said that no one could tell precisely how effective a guaranty program would be or how much private capital it would induce to flow but that the only thing we could do in this field was to start out on a broad basis and experiment.

Secretary Sawyer asked whether the treaties to which Mr. Thorp was referring was those of friendship, commerce and navigation or special treaties,5 Mr. Thorp said that he was referring to the broad types of commitments which we would like to obtain whether they were included in the treaties of friendship, commerce and navigation or in separate investment treaties. Mr. Thorp indicated that he did not feel that we should hold up the program pending conclusion of treaties but that it should be made clear that we should expect any countries receiving guaranties to enter into such treaties with us.

The Chairman indicated that he felt that the Council should study this question very carefully and agreed with Mr. Thorp that action [Page 786] should not be taken at this meeting. He also concurred in Mr. Thorp’s statement that the President had not indicated definite ideas as to how the program should be worked out.

Here follows further discussion, after which it was agreed that NAC members would give further study to the questions raised in the meeting and that further discussion would be undertaken by the Council when appropriate.6]

  1. C. Dillon Glendinning, Acting Secretary of the NAC.
  2. Not printed.
  3. John W. Snyder, Secretary of the Treasury.
  4. Willard L. Thorp, Assistant Secretary of State for Economic Affairs.
  5. For documentation concerning the FCN treaty program, see pp. 631 ff. Charles Sawyer was Secretary of Commerce.
  6. Final and definitive action was taken by the National Advisory Council in two meetings on June 7 and June 8 (meetings 128 and 129), at which time a number of decisions were made concerning a broad gauge foreign investment program which would include the negotiation of investment treaties, the preparation of a background more conducive to foreign investments through a guaranty program, and the correlation of the technical assistance program with the guaranty program (NAC Action No. 332, June 8, 1949). Specifically, regarding the Point IV program the Council’s formal recommendation to the President was that: “In order to encourage the flow of United States private capital into investments abroad as a coordinated part of the Point IV Program, the Export-Import Bank, in consultation with the National Advisory Council, may offer guaranties to United States private capital newly invested in enterprises contributing to economic development in foreign countries.” (For NAC discussion and decisions regarding other aspects of the larger program, see pp. 729 ff.)