236. Memorandum From the Deputy Director of the Office of International Trade and Resources (Frank) to the Under Secretary of State for Economic Affairs (Dillon)1
SUBJECT
- Attitude of U.S. Business Toward Common Market and Free Trade Area
I attended a closed session in New York on this subject sponsored by Business International. The international divisions or affiliates [Page 556] of some forty major American companies participated in the round-table discussion, including such firms as Borg-Warner International, The Chase Manhattan Bank, Dupont, Ford Motor, Standard Oil of New Jersey, Westinghouse, etc. Two major conclusions emerged:
- 1.
- Practically all firms expected that the impact of the common market and free trade area, both short-run and long-run, would be to discourage rather than encourage U.S. exports of manufactured products to Europe. This view was based only in part on the discrimination against the U.S. inherent in these arrangements; mostly it was based on the expectation of a tremendous impetus to European productivity and a consequent lesser need to rely on manufactured goods from this country.
- 2.
- The group was virtually unanimous in the view that the common market and free trade area will encourage the trend already under way for U.S. manufacturers to invest abroad through branches and subsidiaries. Some planning is already under way on this basis. The representative for Ford International, for example, pointed out that of their one billion dollars of sales in Europe the vast bulk results from production by Ford in Europe. Apparently the long-term planners in the company are already thinking in terms of a tremendous increase in the potential demand for their products once the impact of the new developments has worked itself out. The prospect of a high income market of over 250 million people unimpeded by internal trade barriers and surrounded by barriers against outsiders is apparently looked upon as a juicy opportunity for direct investment abroad by U.S. manufacturers.
In a talk with Robert Marjolin yesterday, I mentioned the stimulus that the new developments have given to the long-range thinking of U.S. industry with respect to the establishment abroad of new branches and subsidiaries. Mr. Marjolin said he was quite unaware of the extent to which American industry was thinking in these terms and that such an accelerated flow of American capital to Europe (with its attendant technology and expansionist business policies) could well be one of the principal forces making for increases in European output and productivity. He said he was quite sure that the Europeans with whom he was closely associated in drafting the treaty did not adequately appreciate this point. While himself reacting enthusiastically to this prospect, he pleaded that we refrain from giving any publicity prior to French ratification to American industry’s anticipations with regard to new investment in Europe. He was sure French business would be frightened by this prospect and that other groups in France would be convinced that American firms establishing new plants within the common market and free trade area would be apt to favor investments in countries other than France.
- Source: Department of State, RA Files: Lot 60 D 402, Common Market—U.S. Business Attitude. Official Use Only. Also addressed to Kalijarvi.↩