National Advisory Council Files: Lot 60 D 137: Box 1
Minutes of the 109th Meeting of the National Advisory Council on International Monetary and Financial Problems, October 26, 19481
- Mr. William McC. Martin, Jr. (Acting Chairman), Export-Import Bank
- Mr. Garrison Norton, State Department
- Mr. J. Burke Knapp, State Department
- Mr. J. J. Stenger, State Department
- Mr. Roswell H. Whitman, State Department
- Mr. Thomas C. Blaisdell, Jr., Commerce Department
- Mr. Frederick Strauss, Commerce Department
- Mr. Winfield Riefler, Board of Governors, Federal Reserve System
- Mr. Lewis Dembitz, Board of Governors, Federal Reserve System
- Mr. Herbert E. Gaston, Export-Import Bank
- Mr. Hawthorne Arey, Export-Import Bank
- Mr. Edward Lynch, Export-Import Bank
- Mr. Wayne C. Taylor, Economic Cooperation Administration
- Mr. James H. McCullough, Economic Cooperation Administration
- Mr. Melville E. Locker, Economic Cooperation Administration
- Mr. James R. Brooks, Economic Cooperation Administration
- Mr. Andrew N. Overby, International Monetary Fund
- Mr. Henry Tasca, International Monetary Fund
- Mr. Eugene R. Black, International Bank
- Mr. John S. Hooker, International Bank
- Mr. Walter C. Louchheim, Jr., Securities and Exchange Commission
- Mr. Frank A. Southard, Jr., Treasury Department
- Mr. George H. Willis, Treasury Department
- Mr. Elting Arnold, Treasury Department
- Mr. Henry J. Bittermann, Treasury Department
- Mr. Robert A. Dillon, Treasury Department
- Mr. Matthew J. Marks, Treasury Department
- Mr. C. Dillon Glendinning (Acting Secretary)
- Mr. Allan J. Fisher (NAC Secretariat)
1. Proposed International Bank Timber Equipment Loans
Mr. Glendinning pointed out that the proposed loan would provide $8.5 million to Austria, Czechoslovakia, Finland, Poland and Yugoslavia for the purchase of timber equipment which would be used to increase timber production for export to Western European countries. The loan would run for two years and repayment would be made out of the proceeds of the sale of timber to Western European countries. It was understood that ECA would facilitate payment for the timber through offshore purchases. The proposed action was that the Council advise the U.S. Executive Director of the International Bank that it approved his consideration in the Board of Executive Directors of these credits (NAC Document No. 7542).
Mr. Blaisdell said that he would be interested in the views of the State Department with respect to the extension of the loan to these particular countries which, if they had applied for a direct loan from the Export-Import Bank, might not receive the same consideration. Mr. Knapp said that the State Department regarded the loan as a very constructive step, primarily because the added timber production would be for consumption in Western Europe. It would promote a constructive flow of East-West trade of mutual advantage which would bring to Western Europe a very real benefit that could not be obtained in any other way. The loan was not only small in amount but short-term so that repayment would be effected in not more than two years, and the benefits to be obtained by the Western European countries far surpassed in magnitude the amount involved. The matter had been given the most careful consideration from the economic and political point of view and the opinion of the State Department was that the loan was justified.
Mr. Blaisdell inquired further as to the political considerations involved. Mr. Knapp said that the political considerations would be overriding if the loan were primarily for the benefit of Eastern European countries, were long-term and included no reciprocal advantages. However, such political considerations as might exist were slight in comparison with the economic merits.
Mr. Gaston asked whether the view was that where a loan can be made that promises to have an important effect in stimulating East-West trade it would be considered favorably. Mr. Knapp said it would be necessary to review each case on its merits but that the foregoing statement could be regarded as a good guiding principle. Mr. Norton [Page 577] added that, while East-West trade was an important consideration, it might be secondary to relieving the critically short timber supply in Western Europe. Mr. Gaston observed that the same consideration would apply to the provision of such commodities as coal to Western Europe. Mr. Knapp agreed.
Mr. Blaisdell said that apparently no distinction was drawn between the loan to Austria and Finland and to the other three countries that are involved. He was not sure whether there was any difference since the economic argument is the same in both cases. As long as we make dollars available for purchases in those countries the dollars will be used eventually for purchases here. He wanted to be sure we had thought through our grounds when we were strengthening the existing governments in those countries. There were some by-products in the form of a return to us in strengthening the Western countries. There was no virtue in East-West trade per se. If the goods were cheaper it would be as good as other trade and no better. The political angle was significant. The Staff Committee had not discussed this point in the paper and he thought that the State Department might well give its thinking with regard to the local situation in these countries in justification of this loan. He could see justification for strengthening the government of Yugoslavia. He was not so sure a case could be made for strengthening the governments of Czechoslovakia and Poland.
Mr. Knapp said that political disadvantages in strengthening Eastern European governments should be weighed against the political advantage we seek to derive from ERP. It was a weighing of factors essentially economic in character. The whole ERP was endowed with tremendous political interest. It was necessary to make a judgment as to where the balance of advantage lay and the State Department thought that the balance lay with going ahead with this project.
Mr. Southard said that it had been understood in the Staff Committee discussions that the Administrator of the Economic Cooperation Administration attached considerable importance to obtaining timber for Western European recovery. The timber would move West and in return not only bulldozers and similar equipment but other goods would move East. He thought that on the economic side we had accepted the proposal on the basis of the balance gained by the West from timber, particularly heavy timber and pit props, which have been badly needed, and we have assumed that the political acceptability of the loan derives from that balance of gain. He pointed out that the newspapers had announced that the balance of trade with Russia was in Russia’s favor. He assumed we had a suitably tight control of exports to the satellite countries and understood that ECA was endeavoring to get the ERP countries to conform to certain categories of export control maintained in this country. He thought we could assume Western Europe was allowing Eastern Europe to obtain the same goods [Page 578] we were allowing them to obtain and for the same reasons. It was a matter of whether we considered it was desirable for Western Europe to get timber for goods making for no greater strengthening of Eastern Europe than the goods we ship. The political acceptability of the loan must depend on the economic gain to the West and thereby to us. He had discussed the matter with Secretary Snyder on this basis, and the Secretary had authorized him to cast his vote in favor of the proposal.
Mr. Taylor said that ECA was very much in favor of the proposal. His personal opinion was that a little judicious fishing in troubled waters is not undesirable in itself.
Mr. Reifler observed that the economic case was clear, since the timber shortage was so acute that to get timber in the quantities contemplated made the project worthwhile. He assumed the State Department was taking care of the political aspects and the military considerations, if any, had been cleared.
The Chairman said that the proposal had to be considered in relation to the Economic Recovery Program and that the balance seemed to favor going ahead with the proposal.
The Council unanimously agreed to accept the recommendation of the Staff Committee.
Action. The following action was taken (Action No. 292):
The National Advisory Council advises the United States Executive Director of the International Bank that it approves his consideration in the Board of Executive Directors of credits totalling approximately $8.5 million to Austria, Czechoslovakia, Finland, Poland and Yugoslavia for the purpose of increasing the production of timber for export to ERP countries.
[The remainder of the meeting was concerned with other questions before the Council.]
- The National Advisory Council on International Monetary and Financial Problems, as established in August 1945 under the terms of Public Law 171, 79th Congress, 1st Session, was charged with the duty of coordinating the policies and operations of the various agencies of the Government engaged in foreign financial, monetary, or exchange transactions.↩
- Not printed.↩