Foreign Relations of the United States, 1950, National Security Affairs; Foreign Economic Policy, Volume I

A/MS Files, Lot 54D291, Drawer 21²

Memorandum Prepared in the Department of State

[Washington,] June 20, 1950.

Legislative Background of Point Four Program

summary

The Point IV Program as outlined in the President’s Inaugural speech on January 20, 1949, consists of an endeavor on our part to cooperate with other countries in assisting the efforts of the people of underdeveloped areas to improve their economic conditions. Two methods of cooperation were set forth: (1) sharing technical knowledge and skills and (2) fostering the flow of capital investment.

The basic legislation on this program is contained in Title IV of Public Law 535, 81st Congress, approved June 5, 1950.³ This Title sets forth certain findings and policies of the Congress which coincide with the original proposal of the President and indicate our common interest and concern in the economic and social progress of all peoples. It outlines the conditions considered essential if technical assistance and capital investment are to make their maximum contribution to economic development. It states our intent to assist underdeveloped areas through the two methods proposed by the President and lays down certain policies to guide the activities of financial agencies of the United States Government in order to achieve the maximum effect for economic development.

The Act also authorizes the President to administer a program of bilateral projects and to delegate his authority for carrying out the program to the Secretary of State. It authorizes contributions to the United Nations and to other international organizations for technical cooperation programs “which will contribute to accomplishing the purposes of the Title as effectively as would participation in comparable programs on a bilateral basis.” A total of $35,000,000 is authorized for the technical assistance program during the next fiscal year including amounts needed to carry on the existing work being done by the Institute for Inter-American Affairs and activities pertaining to economic development now being conducted under Public Law 402 (Smith–Mundt Act).⁴ The full amount authorized has been requested and hearings have been held before the Senate Appropriations Committee. It is anticipated that an appropriation will be included in the omnibus appropriation bill now under consideration in the Senate.

legislative background

1. On July 12, 1949 Judge John Kee, Chairman of the House Foreign Affairs Committee, introduced a Bill, H.R. 5615, to authorize participation in a technical cooperation program as one method of carrying out the Point IV objective outlined by the President in his Inaugural speech.⁵ Shortly thereafter Representative Herter, Republican, introduced a bill emphasizing the role of private capital in the economic development process and authorizing a very limited range of technical assistance activities on a purely bilateral basis by the United States Government. Assistance would have been available only to countries which signed rigid investment treaties with the United States, assuring our investors of favorable treatment in those countries. Hearings were held on both bills during the latter part of the first session of the 81st Congress. The hearings developed an almost unanimous support of the general concept involved in Point IV but considerable differences as to the best method of achieving the objectives. Representatives of a number of business groups, especially the Foreign Trade Council, felt that primary reliance should be placed on the provision of capital and that technical assistance in all but a few fields should be supplied by private investors. Witnesses testifying on behalf of the administration and other groups took the position that the Government itself could usefully undertake a considerable amount of technical assistance and that there were many important fields such as public health, agriculture, education and public administration, where Government agencies were particularly equipped to participate. They emphasized, however, the importance of utilizing private organizations, both profit and non-profit, to the maximum extent possible.⁶

2. The House Foreign Affairs Committee took no action by the end of the first session of Congress. In the intervening period representatives of the Government met with business and philanthropic groups and members of Congress. As a result of these discussions a new bill was developed which had wide acceptance and on January 18, 1950 Judge Kee and Representative Herter introduced identical bills in Congress.⁷ Further hearings were held by the House Foreign Affairs Committee on this “compromise” bill and after some additional modifications the bill was favorably recommended as a part of the Foreign Economic Assistance Act of 1950.⁸ The Bill was passed by the House with two or three minor amendments and one amendment reducing the amount authorized for technical assistance programs in the first year from $45,000,000 to $25,000,000.

3. The Bill as finally passed by the House dealt with both technical cooperation and with the problem of fostering capital flow. The principal provisions contained in the Bill are as follows: 1. A finding on the part of the Congress (a) that the United States and other nations have a common interest in the freedom and economic and social progress of all people, (b) that the efforts of people living in economically underdeveloped areas of the world to develop their resources can be furthered through a cooperative endeavor of all nations to exchange technical knowledge and skills and (c) that technical assistance and capital investment can make maximum contribution only where there is mutual confidence and respect for the legitimate interests both of the investor and peoples of the underdeveloped countries. 2. A declaration of policy on the part of the United States to aid the efforts of the people of economically underdeveloped areas to develop their resources through technical assistance and fostering the flow of capital investment “to countries which provide conditions under which such technical assistance and capital can effectively and constructively contribute to raising standards of living, creating new sources of wealth, increasing productivity and expanding purchasing power”. 3. A declaration of policy that financial agencies of the Government in reviewing requests for assistance should take into consideration whether assistance will contribute to a balanced and integrated development of the requesting country, whether facilities projected “are actually needed in view of similar facilities existing in the area” and whether private capital is available to finance the projects. 4. An authorization to the President to make contributions to technical cooperation programs of international agencies “which will contribute to accomplishing the purposes of this Title as effectively as would participation in comparable programs on a bilateral basis.” 5. An authorization to the President to participate in bilateral programs providing that (a) the participation of private agencies and persons is sought to the greatest extent practicable, (b) due regard is given to the fact that the country being assisted takes steps “necessary to make effective use of assistance made available, including the encouragement of the flow of productive local and foreign investment capital where needed for development,” (c) the country being assisted pays a fair share of the cost of the program, provides necessary information, seeks to the maximum extent possible full coordination and integration of technical cooperation programs, and endeavors to make effective use of the resources and cooperates with other countries in the exchange of technical knowledge and skills. 6. A direction to the President to establish an advisory board “broadly representative of voluntary agencies and other groups interested in the program, including business, labor, agriculture, public health and education.” 7. An authorization for the establishment of joint commissions for economic development with countries requesting such commissions, which among other things may examine the country’s requirements for technical cooperation, its potential resources and policies which will encourage its development. 8. A requirement that programs be terminated upon concurrent resolution of both Houses of Congress and where the President determines that they no longer contribute effectively to the purposes of the Act, are declared by the General Assembly of the United Nations to be unnecessary or undesirable or are not consistent with the foreign policy of the United States. 9. An authorization to the President to delegate his authority to the Secretary of State or to any other United States official and directs him to appoint, subject to Senate confirmation, an administrator at a salary not exceeding $15,000 per annum for the program. 10. Authority for making contracts and hiring personnel subject to Federal Bureau of Investigation investigation.

4. Hearings were held before the Senate Foreign Relations Committee commencing March 30, 1950, at which time the Secretary of State urged favorable action on the Bill.⁹ The Foreign Relations Committee took the position that it was not prepared to deal with the investment aspects of the program and reported unanimously a much simplified Bill giving essentially the same authority as that contained in the House Bill in connection with technical cooperation programs.¹⁰ The bill authorized the full $45,000,000 requested by the administration, but made no reference to capital investment. After considerable debate this bill passed the Senate by one vote. The opposition to the bill came both from those who apparently did not desire to participate in the technical cooperation program and those who felt that the bill should be expanded to give emphasis to the investment aspects of the program.

5. After a long discussion in conference between the House and Senate on the bill, the Senate conferees accepted the House bill substantially unchanged except that the authorization was raised to $35,000,000.¹¹ Prior to the Senate’s voting on the conference report Senators Millikin and Taft led a group of Republican senators in a vigorous attack on the bill. The bill was defended not only by the administration leadership in the Senate but by other senators including Senators Saltonstall and Smith, Republicans, who were satisfied with the version of the bill which had now been agreed to by the Senate conferees. The bill was passed by the Senate as Title IV of the Foreign Economic Assistance Act of 1950 and was approved by the President on June 5, 1950.

6. Hearings before the Senate Appropriations Committee took place between the 14th and 19th of June and it is contemplated that the appropriation will be added in the Senate as an amendment to the omnibus appropriation bill which the House passed prior to passage of the authorizing legislation.

7. The long period of time between the initial hearings on the program and the final action of Congress which is the result partly of the crowded Congressional calendar and partly of the delays inherent in developing a bill which would have broad acceptance among various interested groups, has resulted in a greater understanding on the part of Members of Congress of the bill and its purposes.

Note added later: Appropriation in omnibus bill passed September 1950. Senate Committee cut to $10 million and reversed itself. Finally approved at $34,500,000.¹²

2. Consolidated administrative files of the Department of State for the years 1949–1953, as maintained by the Management Staff of the Bureau of Administration.
3. Public Law 535 was captioned “Foreign Economic Assistance Act of 1950”; 64 Stat. 198. Title IV was entitled “Act for International Development”; 64 Stat. 204.
4. “United States Information and Educational Act of 1948” (January 27, 1948); 62 Stat. 6.
5. There is an extensive documentation on the Department of State’s preparation of this legislation in the Consolidated Departmental Committee Lot File, Lot 122, Box 33 (15584). An important collection of background information was assembled in a “Preparation Book on Point IV,” prepared for the Secretary of State at the time that Congressional hearings were initiated.
6. Documentation on this 1949 phase is found in the Department of State central indexed files, series 800.50 TA.
7. For the House Hearings both in 1949 and 1950, see 81st Congress, 2d Session, House of Representatives, Act for international development (“Point IV” program), Hearings, 81st Congress, first and second sessions, on H.R. 5615, H.R. 6026, H.R. 6834, H.R. 6835 and H.R. 7436, before the Committee on Foreign Affairs.
8. In the House phase it was decided to include the Point IV legislation in an omnibus foreign aid bin. There was vigorous discussion both within the Department of State and between the Department and the Economic Cooperation Administration as to the merits or otherwise of such a consolidated economic aid bill. Documentation is found in file series 800.00–TA (1950) and in Lot file 54–D291, Drawer 48. For the House Report, see 81st Cong., 2d sess., Report and Supplementary Report to accompany H.R. 7797, House Report No. 1802, Part 4.
9. See 81st Cong., 2d sess., U.S. Senate, Hearings before the Committee on Foreign Relations on an Act for International Development, March 30, April 3. For statements by Secretary of State Dean Acheson, Assistant Secretary of State for Economic Affairs Willard Thorp, and Ambassador at Large Philip Jessup, see ibid., pp. 3–39.
10. For the Senate Report, see 81st Cong., 2d sess., Senate Report No. 1371, Foreign Economic Assistance, 1950, Report of the Committee on Foreign Relations on S. 3304.
11. For the Conference Report, see 81st Cong., 2d sess., Conference Report to accompany H.R. 7797, Foreign economic assistance act of 1950.
12. This was the general appropriation act for FY 1951, dated September 6, 1950; 64 Stat.595.