39. Paper Prepared in the Department of the Treasury1


The United States seeks over time a pattern of international trade and payments which will serve the basic objective of expanding the multilateral system under which national economies achieve greater efficiency in an atmosphere of fewer and fewer restrictions on the exchange of goods, capital and services. When and if the United States payments position is strong, this type of multilateral system allows our basic foreign policy of peace through partnership to be pursued with less strain on the dollar and the international monetary system.

We require the composition of our international transactions to be such as will preserve world confidence in the U.S. dollar as (a) a vehicle for international transactions; (b) a preferred form in which to hold national reserves and a satisfactory standard for an international payments system conducive to sound economic growth throughout the world. We require a record in our international trade and payments which leaves us free to pursue full employment, a satisfactory rate of economic growth, reasonable price stability and an equitable distribution of income at home, without causing excessive strain on our net liquidity position.

The balance in our goods and services transactions should show a substantial surplus.2 A surplus on merchandise trade and services will in itself be an important factor in preserving confidence in the dollar. To contribute to confidence, however, this surplus would probably need to compare favorably, as a proportion of GNP, with that of other major industrial nations. We can expect income from direct investment to continue to rise, but we must also anticipate that the increase will tend to be offset by rising net tourist outflows and such other invisibles.

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Only by such a surplus can we afford our military and political postures abroad and supply real capital to less developed countries and to other nations requiring foreign capital for the development of their resources. Should we fail to restore and then maintain such a surplus, we would progressively erode the dollar’s role—itself the fulcrum to the monetary system. With a reduction of world confidence in the dollar, public and Congressional support for a liberal trading and investment policy would further diminish, along with support for our military commitments overseas.

  1. Source: Washington National Records Center, Department of the Treasury, Office of the Assistant Secretary for International Affairs: FRC 56 76 108, Commentaries and Reports, Volume 2 1966-71. Confidential. Attached to an April 3 memorandum from George H. Willis to Assistant Secretary of the Treasury Petty, which indicated that the paper originated with Widman. The text printed here is Willis’ suggested revision of that paper.
  2. According to Willis’ memorandum to Petty, Widman and Willis seemed to be favoring a balance of trade surplus of about 1/2 of 1 percent of GNP or a trade surplus of $5 billion in a trillion dollar GNP, and a goods and services surplus, excluding government grant transfers, of $6.5 to $7 billion.