6. Summary Minutes of Meeting of the Interdepartmental Committee of Under Secretaries on Foreign Economic Policy0
[Here follow a list of those attending the meeting and some announcements Ball made concerning the Common Market, textiles, and the next meeting.]
Balance of Payments and Related Problems. Mr. Ball introduced the main topic by noting that it cuts across the activities of all the agencies represented, and that our ability to solve this problem will largely determine the extent to which we may be committed to lines which are contrary to those that we wish to pursue at home and abroad.
Mr. Fowler then developed the points made in the Treasury paper, “The Balance of Payments and our Foreign Economic Policy.”1 The basis for balance-of-payments actions is the President’s message of February [Page 13]6, which outlined in broad form U.S. policies for dealing with the problem. Quarterly reports from the various participating agencies have been compiled into one over-all report to the President. An attempt will be made to put the next report, due the latter part of October or first of November, in a form that would be available for widespread official distribution so that all agencies can see what is going on.
Treasury expects to initiate a series of small task force meetings on particular phases of the problem and the Secretary will sit down with the two or three Departments or Agencies concerned to discuss what more should be done. This is a device to keep the program moving and up-to-date.
Mr. Roosa then discussed the problem of short-term capital movements under conditions of currency convertibility and the measures being taken and considered to deal with this problem. He said that the Vienna negotiations represented substantial progress although they might be less ambitious than some people might hope for. He pointed out that we are limited by what other countries are prepared to accept.
In the discussion that followed the Treasury presentation, Mr. Tobin warned that, even though our position may be improving, we must bear in mind that in the next one to three years the balance almost inevitably will worsen because our domestic recovery will cause imports to increase faster than exports. It may be a few years before the measures we are taking now improve our basic position. The important question is whether we are able to protect the dollar from runs during the transition period when things get worse before they get better.
On the multilateral aspects of the currency question, he continued, there is a question of how much we should rely on bilateral transactions and how much we should use international organizations like the IMF or the OECD.
Mr. Tobin also warned that while implementing the short-term measures, we must keep in mind the long run. We must remember that in the long run if we get back in balance and the UK does also, and if we haven’t a new reserve currency, we have the question of the mechanism for supplying liquidity thereafter.
Mr. Hansen asked if it isn’t possible that we could deal with the short-term problem in ways which we will not like in the long term. In foreign aid, for example, we have gone into the consortium approach and we are thereby setting up trading patterns which are not in our long-term interest. He cited the case of Pakistan and the tying of purchases to countries furnishing aid.
Mr. Fowler said that, with the exception of the Buy American meas-ures, he felt all of the short-run actions in the financial field undertaken to contend with the balance-of-payments problem are not only consistent with but promote the kind of liberal foreign economic policy we are committed [Page 14]to. Mr. Coppock observed that the February 6 Message puts a great burden on export expansion and domestic monetary restraint, since devaluation, exchange controls, and new restrictions on imports were ruled out as measures for correcting the payments imbalance.
Mr. Gudeman noted what Commerce is doing in the way of export and travel promotion, and called attention to the importance of trade centers abroad such as we have in London. One thing Commerce wants to work on with the State Department is obtaining better Commercial Attaches who will seek out opportunities for American goods rather than just taking care of the material that comes over their desks. In this regard, there will be a meeting of European Commercial Attaches in London soon and we will give them suggestions. Also, we must keep prices down so our goods will be competitive. Mr. Gudeman hopes for modernization of equipment so that manufacturing can be more efficient and prices reduced. We also need to give more attention to research and development, and Mr. Gudeman suggested Treasury might consider tax incentives so more would be spent on research and development. Mr. Fowler suggested that Mr. Gudeman talk with Assistant Secretary Surrey about this. Mr. Gudeman also mentioned the need for export guarantees and lending terms comparable to those offered by Europe so that we can support our exporters. He mentioned particularly lending to finance exports to an American subsidiary abroad for re-export.
Mr. Hansen said the Budget Bureau had started a review of military policy statements. A major question this poses for our balance of payments is the movement and placement of troops. He suggested that Treasury might keep in close touch with this.