1. Memorandum From the Secretary of the Council on Foreign Economic Policy (Cullen) to the Members of the Council 2

SUBJECT

  • Progress Report on the President’s Foreign Economic Program

Forwarded for your information is a copy of a report prepared by Mr. Clarence B. Randall, Special Consultant to the President, concerning the progress that has been made towards adoption of the President’s Foreign Economic Program since March 30, 1954.3 This is a record of completed legislative and administrative action only and does not reflect matters which are presently pending in Congress.

Paul H. Cullen
Lt. Col., USA
[Page 2]

[Enclosure]

PROGRESS TOWARDS ADOPTION OF THE PRESIDENT’S FOREIGN ECONOMIC PROGRAM SINCE MARCH 30, 1954

Since the President’s message of March 30, 1954, recommending the adoption of certain measures to further the foreign economic policy of the United States, the following legislative and Executive Branch actions have been taken.

1.
The Trade Agreements Extension Act of 1954 (P.L. 464, 83rd Congress)4 was passed extending for one year (to June 12, 1955) the existing authority of the President to reduce tariff rates through reciprocal trade agreements. This one-year extension was needed to afford the Congress sufficient time to study the President’s request for new authority.
2.
Under the authority granted by the Trade Agreements Extension Act of 1954, a trade agreement was negotiated with Japan providing for reciprocal tariff concessions. Negotiations were also completed with Switzerland, Canada, and Benelux (Belgium, The Netherlands, Luxembourg) providing tariff concessions as compensation for concessions previously withdrawn by the United States from those countries.
3.
As a result of a thorough-going review by the 34 contracting countries, the General Agreement on Tariffs and Trade was revised and improved in a number of respects, and a new agreement was negotiated to establish an Organization for Trade Cooperation (OTC)5 for the more effective administration of the General Agreement. United States membership in the OTC awaits Congressional approval.
4.

Supplementing the Customs Simplification Act of 1953,6 which has resulted in considerable improvement of customs administration, is the Customs Simplification Act of 1954 (P.L. 768, 83rd Congress).7 It directs the Tariff Commission to make a complete study of all provisions of the customs laws of the United States under which imported articles may be classified for customs purposes, and to compile for further Congressional consideration a revision and consolidation of such provisions of the customs laws [Page 3]which, in the judgment of the Commission, would accomplish to the extent practicable the following purposes:

(1)
establish schedules of tariff classifications which will be logical in arrangement and terminology, and adapted to the changes which have occurred since 1930 in the character and importance of articles produced in and imported into the United States and in the markets in which they are sold;
(2)
eliminate anomalies and illogical results in the classification of articles; and
(3)
simplify the determination and application of tariff classifications.

The Act incorporates two other recommendations embodied in the President’s message of March 30, 1954. It amended the anti-dumping laws to transfer the injury determinations from the Treasury Department to the Tariff Commission and to provide that dumping duties would not be levied against importations made more than 120 days before the question of dumping was raised. The latter amendment will help to reduce interference with trade during the investigation of suspected dumping. The Act also amended the procedures for the classification of articles not enumerated in the Tariff Act by providing that, to the extent possible, such articles should be classified at the rate applicable to the enumerated article which they most resemble in use.

The Act also contains a number of minor provisions to facilitate trade. For example, certain metal products sent abroad for repairs or alterations may now be returned to the United States with payment of duty only on the value of such repairs or alterations. Uniform tariff status is established for importations from insular possessions.

5.
A number of administrative actions were taken by the Bureau of Customs to reduce paper work and to speed clearance of goods and persons through customs. Among these are the following:
(1)
New customs regulations were issued to exempt all imports not exceeding $500 in value from the requirement to have the invoice certified before the nearest United States consul. The value of shipments exempted from certified invoice requirements when not imported for sale was increased to $1,000.
(2)
Examination of passengers’ baggage has been reduced to a minimum consistent with the adequate enforcement of the laws.
6.
Two revisions of the tax laws were enacted to help stimulate private capital investment abroad.
(1)
One revision removed the over-all limitation on foreign tax credits with the result that full credit, up to the United States tax, can be obtained for income taxes paid to a foreign country even though losses in another foreign country completely offset the income in the first country and there is no net taxable foreign income.
(2)
A second revision provides that a regulated investment trust with more than 50 percent of its holdings in foreign securities may pass on to shareholders the credit for income taxes which it has paid abroad and cannot use here because of its non-taxable status.
7.
The Board of Governors of the Federal Reserve System modified Regulation K relating to banking corporations authorized to do foreign banking business (Edge Act corporations). This change broadens the powers of Edge Act corporations to raise funds and to increase the amount of credit that can be extended to a single borrower. The Chase Manhattan Bank, in association with four other banks, has taken advantage of this change to set up an American Overseas Finance Corporation to provide medium-term credit facilities for the expansion of exports.
8.
The Export-Import Bank Act of 1954 (P.L. 570, 83rd Congress)8 was enacted to improve the management machinery of the Export-Import Bank, to provide for the representation of the Bank on the National Advisory Council on International Monetary and Financial Problems, and to increase the lending authority of the Bank by $500,000,000.
9.
The Export-Import Bank has expanded its financial assistance to United States exporters of capital equipment as a means of enabling these exporters to compete more effectively in foreign markets. This assistance is in the form of the establishment of lines of credit for exporters who can qualify. Under this new arrangement the exporter himself is expected to carry not less than 20 percent of the invoice value of the exported goods. Another 20 percent must be received in cash by the exporter from the buyer by the time the goods are shipped. The Bank thus participates with private capital in the financing of export sales.
10.

An Executive Order establishing uniform standards and procedures to be applied in administering the Buy American Act was issued by the President.9 The Buy American Act, which became law in 1933,10 provides that preference in the award of Federal Government contracts shall be given to domestic suppliers, as against foreign suppliers, unless the domestic supplier’s bid or offered price is unreasonable or the award to him would be inconsistent with the public interest.

The Order was designed to bring about the greatest possible uniformity among executive agencies applying the basic legislation. [Page 5]It provides methods for determining whether a domestic supplier’s price is unreasonable as compared with the price of a foreign bidder.

11.
An international trade fair program has been undertaken by the Government in cooperation with industry. The purposes of this program, initiated in August 1954, are twofold: to tell the story of our free enterprise system to the people of other nations, and to provide effective cooperation with United States business and industry in international trade promotion. This country is now actively participating in most of the international trade fairs throughout the free world.
12.
The President has appointed a Special Assistant to advise and assist him in accomplishing an orderly development of foreign economic policies and programs, to assure the effective coordination of foreign economic matters of concern to the several departments and agencies of the Executive Branch, and to bring about improvements in the organization of the Executive Branch for the development and coordination of foreign economic policy. The Special Assistant for Foreign Economic Affairs was authorized to establish and serve as Chairman of a Council on Foreign Economic Policy through which executive agencies can participate effectively in this undertaking.11 The Secretaries of State, Treasury, Commerce, and Agriculture, or their principal deputies, and the Director of the International Cooperation Administration comprise the basic membership of the Council. In addition, the President’s Administrative Assistant for Economic Affairs, his Special Assistant for National Security Affairs, and a member of the Council of Economic Advisers, are ex officio members. Heads of other departments or agencies are invited by the Chairman to participate in meetings of the Council when matters of direct concern to them are under consideration.
13.

The Trade Agreements Extension Act of 195512 continues the trade agreements program for three years and provides new authority to the President to reduce tariffs through trade agreement negotiations. In return for tariff concessions granted to the United States, the President is authorized to reduce tariff rates over the three-year period by 5 percent per year. Likewise he is authorized to reduce tariffs in excess of 50 percent to that level. No more than one-third of such reduction, however, may be made in any one-year period.

This extension of the trade agreements program represents a most important step forward in the achievement of the President’s foreign economic program. The enactment of this legislation by an overwhelming vote in both Houses of the Congress reflects the [Page 6]strength of the support in this country for the program to expand trade with the free world. The three-year period provided by the Act (for the first time since 1948) will give the stability and assurance as to United States foreign trade policy needed here and abroad for the development of expanded trade.

14.
The United States has pressed forward vigorously its participation in technical cooperation programs, through both the United Nations Expanded Program of Technical Assistance and bilateral arrangements. At the request of the President, the Congress has appropriated funds for a substantially larger technical cooperation program for 1956. Participation has been concentrated on providing experts and know-how rather than large funds or shipments of goods except for necessary demonstration equipment, and has been related to development programs of the assisted countries.
15.

The Executive Branch has been striving vigorously to stimulate international travel in various ways, especially through simplifying governmental procedures relating to customs, visas, passports, exchange or monetary restrictions and other regulations that may harass the traveler. An International Travel Staff was established in the Department of Commerce in the latter part of 1954 to work with other agencies of this government, with national and international travel organizations, and with agencies of other governments. Its activities are designed to encourage foreign countries to improve their facilities for accommodating tourists, to urge them to eliminate unnecessary restrictions applying to tourists and to encourage an increase in their sales and promotional efforts within the United States. Other activities include the encouragement of increased travel to the United States through reduction of U.S. Government restrictions and through provision of international marketing data and other information required by private firms and companies in this field. This program has achieved a number of beneficial results.

The Bureau of Customs, as mentioned above, has adopted procedures for clearing travelers much more rapidly through customs at ports of entry. Studies are under way to improve further the handling of passengers and baggage. To correct a general impression that retail value is used in determining the value of tourists’ purchases for customs declarations, instead of wholesale value as permitted by law, the Bureau’s pamphlet “Customs Hints” is being revised, and customs inspectors have been instructed to use the reasonable equivalent of a wholesale value in making their determinations. Returning travelers may be expected to bring increased quantities of foreign purchases into this country for their personal use.

The Department of State has extended the period of validity of visas for foreign visitors from two to four years, with an unlimited [Page 7]number of entries, and has taken steps to expedite issuance of visas and passports.

16.

Legislation was enacted by the Congress in August 1955 providing for participation of the United States in the International Finance Corporation (IFC),13 which would be affiliated with the International Bank for Reconstruction and Development (IBRD). The objective of the IFC will be to encourage the growth of productive private enterprise in its member countries, particularly the less-developed areas, by investing in productive private enterprise in association with private investors, and without government guarantee of repayment, where sufficient private capital is not available on reasonable terms. The IFC will serve as a clearing house to bring together investment opportunities, private capital and experienced management, and in general to stimulate productive investment of private capital. The IFC is intended to provide venture capital but is not authorized to invest in capital stock or to assume managerial responsibility in an enterprise in which it has invested.

The authorized capital of the IFC is $100,000,000 of which the United States will contribute about $35,000,000.

17.

Renegotiation of the Philippine Trade Agreement of 1946,14 undertaken at the request of the Philippine Government, was successfully completed on December 15, 1954. A bill, the Philippine Trade Agreement Revision Act of 1955, authorizing revisions of the 1946 trade agreement, was enacted by the 84th Congress and became law on August 1, 1955 (P.L. 196, 84th Congress).15

Revision of the 1946 agreement will be beneficial to both the United States and the Philippines and will contribute materially to the improvement of the already friendly political and economic relations between them. This action is further demonstration of the desire and readiness of the United States to cooperate with underdeveloped countries in meeting their problems of economic development.

  1. Source: Department of State, Central Files, 411.0041/11–2155. President Eisenhower established the Council on Foreign Economic Policy on December 11, 1954, appointing as its chairman Joseph M. Dodge, former Director of the Bureau of the Budget. The text of Eisenhower’s letter to Dodge of December 11, 1954, is printed in Public Papers of the Presidents of the United States: Dwight D. Eisenhower, 1954, (Washington, 1960), p. 348.
  2. On March 30, 1954, President Eisenhower submitted to Congress recommendations concerning U.S. foreign economic policy. The text of his message, which was based on the Report to the President and the Congress (January 1954), prepared by the Commission on Foreign Economic Policy, is printed ibid., p. 352. For documentation on the preparation of the President’s message, see Foreign Relations, 1952–1954, vol. I, Part 1, pp. 45 ff.
  3. Enacted July 1, 1954; for text, see 68 Stat. 360.
  4. For documentation on the Organization for Trade Cooperation, see Documents 17 ff.
  5. Public Law 243, enacted August 8, 1953; for text, see 67 Stat. 507.
  6. Enacted September 1, 1954; for text, see 68 Stat. 1136.
  7. Enacted August 9, 1954; for text, see 68 Stat. 677.
  8. Reference is to Executive Order 10582 issued by President Eisenhower on December 17, 1954. For text, see 19 Federal Register 8723 and Department of State Bulletin, January 10, 1955, p. 50.
  9. Reference is to Title III of the Appropriations Act of 1933 (P.L. 428), enacted March 3, 1933; for text of the Act, see 47 Stat. 1489.
  10. See footnote 2 above.
  11. Public Law 86, enacted June 21, 1955; for text, see 69 Stat. 162.
  12. International Finance Corporation Act (P.L. 350), enacted August 11, 1955; for text, see 69 Stat. 669.
  13. Reference is to the Philippine Trade Act of 1946 (P.L. 371), enacted April 30, 1946; for text, see 60 Stat. 141.
  14. Enacted August 1, 1955; for text, see 69 Stat. 413.