As Chairman of the Cabinet Committee on Balance of Payments, I am
forwarding herewith the Committee’s report on its re-examination of the
balance of payments problem in response to your memorandum of March 2.
As you know, the Committee is expecting to meet with you and discuss
this report at 6:00 P.M. on Tuesday, April 9.
Attachment
MEMORANDUM TO THE PRESIDENT
from the
CABINET COMMITTEE ON BALANCE OF PAYMENTS
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INTRODUCTION
The Cabinet Committee on Balance of Payments, assisted by the Long
Range International Payments Committee, has concluded after a full
re-examination that the United States balance of payments deficit is
still a serious threat to national power and security and to
international economic order, and will remain so at least through
1963 and 1964. The means are at hand, however, to hold the deficit
within manageable size during this period. Thereafter, longer range
forces already at work, if reinforced as suggested below, should
begin to provide lasting correction. However, because of the
uncertainty of the timing and magnitude of the correction, the
situation needs to be kept under periodic review to determine the
need for and nature of further actions.
A number of possible actions that might be taken to help meet this
threat during 1963–64 have been reviewed by the Committee and are
discussed in this Memorandum. Some of these promise early results
and we have agreed that they should be put into effect as described
in Sections II and III. Certain other measures having long-range
impact
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or
requiring further study are discussed in Sections V and VI. Many of
them can be initiated now and studies of the others will be pressed
forward promptly.
Some other measures are so drastic and costly in terms of other
policies that we believe no further consideration should be given to
them under present circumstances—these are described in Section VII.
There remains an intermediate group of measures, discussed in
Section IV, as to which we are not in full agreement, but believe
that—unpleasant and unwelcome as they may be—further study of
specific proposals is warranted, leading to another review of needs
and possibilities in July.
If at any stage during 1963–64 or later the pattern of development we
now foresee is disrupted, one or more of these difficult
intermediate measures will have to be used. Each
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would come at a high
cost and involves great risks. But we hope that we may be able to
avoid measures which could gravely impair or destroy one or more of
the major objectives of U.S. policy—a strong defense system for the
United States and its allies, a free and effective system of
international payments, a free and expanding system of world trade.
In the conditions of March–April, 1963, a decision to rely on the
measures discussed in Sections II and III and to delay for the
present any choice among the intermediate measures, is to take a
calculated risk. But against the alternatives, it is a reasonable
risk. The other measures can be taken as readily, and with equal or
greater effect, if and when the risk might become a reality.
