Foreign Relations of the United States, 1955–1957, Foreign Economic Policy; Foreign Information Program, Volume IX

11. Minutes of a Meeting of the Subcommittee on Soviet Economic Penetration, Executive Office Building, Washington, March 26, 1957¹

Washington, March 26, 1957

PRESENT

• Forest D. Siefkin, CFEP, Chairman
• Harold C. McClellan, Assistant Secretary of Commerce
• Thorsten V. Kalijarvi, Assistant Secretary of State
• Carl Flesher, International Cooperation Administration
• C. Dillon Glendinning, Treasury Department
• Omar Pancoast, Central Intelligence Agency and their assistants

1. The Subcommittee considered the report of the Working Group and its recommendations for actions to increase the efforts of private enterprise in underdeveloped areas so as to strengthen such areas against Soviet Economic Penetration. The report and recommendations, which were distributed to members of the Subcommittee on March 15, 1957, are attached as Tab A.²

2. The Working Group recommended 30 specific actions. These actions were, for the most part, expansions or variations of programs already in effect. In general, the actions recommended would increase informational interchange with underdeveloped countries, encourage increased foreign trade and investment, and expand foreign trade fair and mission activities.

3. The Subcommittee agreed that the actions recommended by the Working Group are desirable in principle, subject to the following understandings:

a. The proposal to reduce the corporate tax rate by 14 points on income derived from investment abroad, or some similar measure to stimulate U.S. investment abroad is under study by the Department of Commerce. The study will include consideration of the views of American business with respect to the effectiveness of the proposal as a measure to stimulate additional foreign investment. (The Treasury Department is opposed to any special tax relief before provision has been made for a general tax reduction.)

b. The proposal that the Department of Justice develop and publish some basic principles on the antitrust aspects of foreign trade and investment should be explored informally by the Chairman of the Council on Foreign Economic Policy with the Attorney General, in the light of the latter’s reluctance to implement a similar proposal made last year by a task force of the Council.

c. The agreement by the Subcommittee that the recommendations of the Working Group are desirable in principle does not carry with it any implication of approval of any appropriations which may be required to implement such recommendations.

4. The Subcommittee also considered three additional recommendations of the Department of Commerce which had been considered by the Working Group but which had failed of approval. These recommendations and the action taken by the Subcommittee are as follows:

a. The Subcommittee disapproved a proposal that a larger percentage (in the order of 35%) of P.L. 480 local currencies loaned to foreign countries should be directed to private industry. It was the Subcommittee’s view that it would be harmful to the P.L. 480 program and to foreign relations to fix any arbitrary percentage, and that the existing policy of allocating as large a share for private enterprise purposes as is negotiable represents a more advisable course of action.

b. The Subcommittee saw merit in a proposal that economic aid be employed so as to stimulate the joint participation of private enterprise in economic aid projects, but took no action because a similar recommendation in both the Fairless³ and Johnston⁴ reports is under study by the Council on Foreign Economic Policy.

c. The Subcommittee disapproved a proposal that rapid tax write-offs should be offered to encourage United States private investment in underdeveloped areas. It was the view of the Subcommittee that this proposal should not be adopted because the domestic rapid tax write-off program is drawing to a close and because of the doubtful effectiveness of the proposal. It was also the view of the Treasury Department that the proposal would be contrary to the present position of the Treasury Department that there should be no special tax relief or benefits until a general tax reduction has been provided. The Commerce Department’s view was that such a program would be effective and that the closing out of the domestic program was not relevant since that program had accomplished its purpose.

5. The Subcommittee also agreed that the Working Group should continue in operation for the purpose of studying questions to be referred to it from time to time by the Subcommittee.

Paul H. Cullen
Lt. Col., USA

1. Source: Washington National Records Center, ICA Director’s Files: FRC 61 A 32, Box 35, Finance–Investments. Confidential.
2. Supra.
3. The Report to the President by the President’s Citizen Advisors on the Mutual Security Program, popularly known as the Fairless report after its chairman, Benjamin F. Fairless, was submitted to President Eisenhower on March 1, 1957.
4. On March 4, 1957, the International Development Advisory Board (IDAB) submitted to President Eisenhower a report commonly called the Johnston report after IDAB chairman Eric Johnston. Entitled A New Emphasis on Economic Development Abroad, the report contained recommendations concerning U.S. technical assistance and development aid in underdeveloped nations.