Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 1

Eisenhower Library, Eisenhower papers, Whitman file

Memorandum by the Special Consultant to the President (Randall) to the President¹

Washington, December 7, 1954.

The conclusions on foreign economic policy expressed here have been formed after weeks of discussion with representatives from every department and with many others who have been consulted.

These conclusions are based squarely upon the Special Message of March 30, 1954 which was in turn based upon the conclusions of the Commission on Foreign Economic Policy, but they were not arrived at by any pattern-mindedness. The subject was reopened in every aspect in an endeavor to find weaknesses in that program or important additions to it, but the end of the process has come to substantially the same result.

That there is serious distortion in the world economy is clear, and that the United States should do something about it is equally clear. We are impelled to that viewpoint by the short-term consideration of security, which requires economic strength among our allies, by humanitarian impulses of improving the lot of the underprivileged in the world, but most especially by the long-term consideration that an increasing volume of world production and trade is the best possible assurance for a rising standard of living for our own people.

This program seeks to mitigate the distortions in the world economy by the release of normal forces within the framework of free enterprise and competitive markets, and is the antithesis of global spending. We have ahead of us the best opportunity that has occurred in a generation to move the United States intelligently toward a more liberal trade position.

The whole approach to the subject should be non-partisan, and it is extremely important that foreign economic policy be the first subject taken up in the new Congress. It would seem imperative that a strong note on this subject be sounded in the State of the Union Message, and that in the matter of just a few days thereafter a special message be sent to the Congress outlining the specific legislative proposals. The program recommended is now outlined step by step:

Tariffs

The Kean Bill should be reintroduced. It provides:

1. That the President shall have the power by multilateral negotiations to reduce tariffs on selected commodities by 5 percent per year for three years.

2. That where tariffs exceed 50 percent, they may be reduced through multilateral negotiations to that limit over the three-year period.

3. That where no substantial amount of the commodity is imported, the tariff may be reduced over the three-year period to 50 percent of the rate existing on January 1, 1945, with or without receiving reciprocal concessions.

The present escape and peril point provisions would be preserved.

The hearings on the Kean Bill, which should open the first week in January, should be supported by the marshalling of the largest, most impressive number of witnesses that can be gotten together.

Customs Simplification

1. The Jenkins Bill, revised, should be reintroduced to make intelligent standards for the valuation of imports.

2. The President should say that he is awaiting with interest the report of the Tariff Commission on simplification of the classification of imports for which the Customs Simplification Act of 1954 provided. A preliminary report is due by March 1st. Further recommendations for legislation may follow receipt of this report.

Investments Abroad

The whole world needs capital, and America is its largest source. It is important that the flow of capital abroad from our country be stimulated and under such auspices that it reach private hands as distinguished from government-to-government.

1. The proposed new International Finance Corporation, which will be a medium for providing capital to private enterprise, should receive full Administration support.

2. The proposal that an incentive to cause private American capital to go abroad might be created by a fourteen-percentage-point tax credit on income earned from such foreign investments should be revised to meet the criticisms in the last session and reintroduced in Congress.

3. Further study should be given to find new ways to enlarge the outward flow of capital.

4. The Executive Branch should continue to insist that our diplomatic representatives abroad use every effort to strengthen the private enterprise concept in investment as well as in other economic activity.

Technical Assistance

The Administration should continue to support the principle of technical assistance to underdeveloped countries, meaning by this, “know-how” and not capital. An immediate effort should be made in the new Congress to restore the funds required to support the multilateral technical assistance programs of the United Nations. The bilateral programs of the United States should be pressed vigorously.

Travel

The Frelinghuysen Bill to increase the customs exemption for the incoming tourist from $500 to $1,000 should be reintroduced in the Congress. The amount of money involved here is not large, but the psychological effect would be important in Europe.

Subsidies

The President should again restate the principle that, in his judgment, all costs required for our security should be directly borne to the greatest possible extent and express his disapproval for this purpose of disguised subsidies to American business.

Agriculture

The President should once more make it clear that the necessities of our agricultural program and of our foreign economic policy must be harmonized. We cannot suspend natural economic laws in the field of agriculture without having that cause distortion in our foreign trade.

GATT

A medium for multilateral negotiation with other countries in the field of trade is absolutely indispensable to an intelligent foreign economic policy. Without that, an extension of the Trade Agreements Act for three years with an intention to reduce tariffs gradually would be meaningless. The Administration should therefore give its full support in the presentation of the renegotiated GATT to the Congress.²

Convertibility

Convertibility of exchange, which is so urgently required for the development of a steadily rising volume of world trade, cannot be achieved until the present imbalance in international trade and payments has been corrected. No gold reserves in other countries will stand against the drain if their international payments as a whole are not in balance. That is why the foreign economic program proposed herein would make an important contribution to convertibility.

Japan

The economic plight of Japan is desperate. Unless she can find a way to live, she may be driven into the camp of the enemy. This problem should be solved through multilateral agreement among the free nations, by which each will do its part in opening sufficient markets to Japan to help her to earn her way. The President should fully support that concept.

Organization for the Development and Coordination of Foreign Economic Policy

The proposals on organization recommended to the President by Mr. Joseph Dodge in conjunction with the Advisory Committee on Government Organization and the Director of the Bureau of the Budget are heartily endorsed. Steps taken to improve the development and coordination of foreign economic policy within the Executive Branch would be a significant adjunct to this program.

Public Relations

In terms of public relations, it is important that the President early make clear to our people the essentials of his program for the coming year, and it is equally important that from time to time he re-emphasize the objectives and the steps to be taken.

Buy American

It is important that the Buy American Order³ be cleared at the Cabinet level as soon as possible and be made public.

Clarence B. Randall

1. Distributed to members of the Cabinet as a Cabinet Paper, designated CP–4, under cover of a memorandum by Secretary to the Cabinet Maxwell M. Rabb, dated Dec. 8, 1954, not printed.
2. The GATT was renegotiated at the Ninth Session of the Contracting Parties; for additional documentation, see pp. 114 ff.
3. Reference is to a draft of Executive Order 10582 issued on Dec. 17, 1954, which prescribed uniform procedures for certain determinations under the Buy American Act; for text of the Executive Order, see 19 Federal Register 8723.