142. Letter From the Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Chairman of the Council on Foreign Economic Policy (Randall)1

Dear Mr. Randall : As Chairman of the Council’s Subcommittee to prepare for the Economic Conference of the Organization of American States, convening in Buenos Aires on August 15, 1957, I am pleased to report that the Subcommittee is nearing completion of its deliberations. In accordance with your request,2 there is attached for consideration by the Council a brief memorandum about (a) the major issues which we expect to be discussed at the Conference and (b) the suggested position of the United States delegation on each.

We believe that the leading topics of the Conference will be the same as, or very similar to, those that persistently recur at inter-American meetings on economic subjects.

The United States policies on major issues in inter-American economic relations have become well established and widely known. The recommended United States positions for the Buenos Aires Conference follow the familiar lines.

The attached memorandum by no means contains a complete list of topics, but only those that we believe will be the principal and possibly the most controversial ones. Also, the indicated United States positions are no more than the essence, for in the preparation of position papers careful attention is being given to an elaboration explaining our policies and describing accomplishments to date.

The Subcommittee has not had an opportunity to read the attached memorandum, but the statements of United States positions [Page 514] do, I believe, faithfully reflect the substance of the Subcommittee’s opinion.

Under Secretary Burgess and Deputy Under Secretary Dillon have been kind enough to go over the memorandum, and they have expressed their general concurrence. Any observations or directives that you or members of the Council care to make will be most welcome.3

Sincerely yours,

R. R. Rubottom, Jr. 4



Proposed General Inter-American Economic Agreement

Draft Agreement: At the 10th Inter-American Conference (Caracas, March 1954) and at the Meeting of Ministers of Finance or Economy (Rio de Janeiro, Nov.–Dec 1954) resolutions were passed (the US approved) to provide for the preparation of a draft Economic Agreement, and the Rio Resolution specified that this draft would be considered at the Buenos Aires Economic Conference. A draft has been written in the Secretariat of the Inter-American Economic and Social Council, and, as might be expected, it contains much which is advocated by the consensus of Latin American states but which the US does not accept. Some of the differences are on the choice of language or relatively minor topics. Some of the differences, however, are on subjects of major importance, such as price stabilization for Latin America’s primary exports; price parities between Latin America’s exports to and its imports from the US; for surplus disposal international agreements administered by intergovernmental agencies; the complete subjection of private foreign investment to local laws and constitutions (Calvo Doctrine); taxation of income [Page 515] only in the country in which it is earned; lengthy, detailed stipulations on economic relations during emergencies.

US Position: In view of the Caracas and Rio Resolutions and because of the importance many of the Latin Americans attach to an Economic Agreement, we plan to discuss the draft earnestly at Buenos Aires. In preparation for such discussions we have already conveyed our tentative views on the entire text to the other American Governments. It is hoped that at the Conference US-Latin American divergencies may be alleviated and general harmony maintained by accord on a shorter, more general document, possibly in the form of a resolution or declaration. We are drafting such a document.

Economic Development

Financing: Many Latin American officials have long and vigorously demanded a larger share of US public capital going to foreign countries, and at Buenos Aires they will, no doubt, reiterate past proposals for some kind of inter-American fund or credit institution.

US Position: Private capital, domestic and foreign, should be the primary source of development financing; the Latin American countries should strive to improve their investment climate by such means as curbing inflation, achieving monetary stability, mobilizing domestic savings, encouraging private enterprise; the US strongly supports bilateral tax agreements to eliminate tax obstacles to the formation and flow of capital. The US has a broad and positive policy toward public investment in Latin American economic development. A new institution is not necessary; the Export-Import Bank, the IBRD, and the IFC can meet all demands for ordinary, conventional dollar loans. The Smathers’ Fund, PL–480 lending,6 and the new Development Loan Fund are additional sources of public financing. Because of the limited resources of the Fund, however, it will be generally necessary to relate its loans to the relative priority needs on a world-wide basis.

Foreign Trade

Regional Market: The Latin Americans are expected to suggest, and to ask for US concurrence in, regional markets, free trade areas, or regional trade agreements as ways of promoting economic development.

US Position: When specific proposals are made, the US will examine each on its merits.

Prices and Parities: The Latin Americans will probably renew requests for US cooperation in schemes (for example, commodity agreements) (a) to “stabilize” prices for primary Latin American [Page 516] exports and (b) to insure a “fair and equitable” relationship between the prices of Latin America’s exports and imports.

US Position: The US is opposed to such schemes. The US does not, in general, favor international commodity agreements (wheat and sugar are exceptions) but will consider with other governments commodity problems on an ad hoc basis and will continue to participate in international study groups (such as the existing groups for cotton and rubber) for which there is an established and continuing need. Means to moderate price instability are diversification of Latin American economies, for which the US provides technical and financial assistance, and the maintenance of a high and rising level of economic activity in the US which is US policy and which facilitates a profitable market for Latin American exports.

Trade Policy: A large number of Latin Americans are painfully aware of US actions adversely affecting their export sales, and a troublesome issue will be actual or potential US restrictions on imports (such as wool tops, tung oil, lead and zinc, petroleum).

US Position: Despite aberrations emphasis can be given to (a) the continued basic liberal trade policy of the US (reciprocal, gradual, selective reduction of tariffs and other barriers) and (b) low or non-existent US duties on major Latin American exports.

Surplus Disposal: Latin American countries have complained of US surplus disposal practices and policies, and this question may arise.

US Position: The US continues to seek orderly disposals that do not disrupt normal markets. Encourage delegations of countries that have benefitted from PL–480 transactions to make statements offsetting adverse comments. Point out the good US record on PL–480 consultations to safeguard usual marketing of other countries, and cite the economic development benefits of PL–480 loans.

Technical Assistance

OAS Program: The Secretariat of the Organization of American States (OAS) has prepared a number of recommendations, perhaps the most important of which call for making the OAS technical assistance program “permanent” and with “compulsory” contributions (the US contributes 70 percent).

US Position: The US cannot agree to a “permanent” program (we consider it a “continuing” activity) or to compulsory contributions, although we believe the Secretariat’s recommendations require further study.

  1. Source: Department of State, Central Files, 365/7–2457. Official Use Only. Drafted by Sanders.
  2. The request was conveyed to Rubottom by Randall during a meeting at the Department of State on June 12; a memorandum of conversation of the meeting is ibid., 365/6–1257.
  3. The attached memorandum, designated CFEP 535/1 and distributed to Council members on July 25, was approved at the Council’s 61st meeting, held in the Executive Office Building, August 1.
  4. Printed from a copy which bears this typed signature.
  5. A much more detailed paper, entitled “Proposed U.S. Position on Subjects That Might Come up at the Buenos Aires Conference”, keyed to the Conference agenda, was also prepared in the Department of State. An undated copy, with no drafting information, is in Department of State, OAS Files: Lot 60 D 665, BAEC—Pending File: Memos to Rubottom.
  6. Agricultural Trade Development and Assistance Act, enacted July 10, 1954; for text, see 68 Stat. 454.