Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

120. Remarks by the Assistant Director of the Budget (Reid) Before the 101st Meeting of the Council on Foreign Economic Policy⁰

CFEP 554/info

April 14, 1960.¹

Mr. Chairman: There are two things I would like to do today:

1) to summarize a bit of the background of the so-called “Buy American” legislation and the types of problems it has posed over the last quarter of a century; and

2) to review briefly the study now being undertaken by the Bureau of the Budget to review current differentials under the Buy American Act with respect to their impact on American industry and our fiscal and balance of payments positions.

[Here follow sections I. “Buy American Legislation,” II. “Administration of the Buy American Act of 1954,” III. “Reviews of the Buy American Act,” and IV. “Executive Order 10582.”]

V. Current Problem Areas.

There are some five types of problems which relate to the question of whether we should now seek to modify the arrangements under which the Buy American Act is now being administered or, indeed, seek to modify or terminate the Act itself.

1) There is, for example, the continuing realization that the Act is inconsistent with the basic philosophy of our foreign economic policy. For over a quarter of a century the United States Government has been in the embarrassing and inconsistent position of discriminating against foreign goods in its own purchasing activities, while at the same time urging an expansion and liberalization of international trade on a nondiscriminatory basis.

2) There is the question of whether the Government should continue to penalize itself by paying a premium of 6 to 12 percent more for its purchases of materials of foreign origin than would a private purchaser. The staff of the Randall Commission,² for example, estimated that the application of the Buy American Act as of 1954 added approximately $100 million to the cost of operating the Government and reduced tariff receipts by another $100 million by barring certain potential foreign imports. In fiscal 1958, it was estimated that the Berry Amendment³ alone cost the Department of Defense $70 million in additional expenditures.

3) A third area of some concern relates to the question of whether inflationary pressures at home are accentuated to the extent that we fail to take advantage of the leveling influence of lower cost foreign goods.

4) A fourth area of concern at the moment is, of course, the question of whether the administrative arrangements might be further tightened to reduce foreign imports and thus possibly to ameliorate our balance of payments position.

5) A fifth problem—which would call for further tightening of the arrangements—is the argument that present procedures do not fully recognize problems of U.S. industry and the need for maintaining our mobilization base. The following are typical examples:

a) Heavy Electrical Equipment Imports.

On complaint of the domestic industry that imports of heavy electrical equipment were threatening the national security, the OCDM last year conducted an exhaustive investigation to determine the facts. In brief, on the basis of the facts brought to light, it was determined that imports of the equipment involved are not threatening to impair the national security.

b) Machine Tools.

The National Machine Tool Builders Association recently complained informally to the OCDM that imports of machine tools appear to be threatening the national security. An interagency group headed by OCDM was set up to study the complaint. The conclusion of this group was that it is the continued and growing utilization of obsolete tools in the U.S. which appears to be the threat to the national security, and that improvement in the welfare of the metal-working industries must come from the industries’ own efforts to “progress, excel and conquer competition.” The group further suggested, however, the desirability of review of the present differentials under E. O. 10582 in the light of current circumstances.

c) Japanese Locomotives.

Another case mentioned in the press in recent days has been the low Japanese bid for locomotives for the Panama Canal Company, which is still under consideration in the Department of Defense.

In connection with all of the above, the Administration has been asked by Congressional committees to comment on 13 separate bills, every one of which is designed further to restrict administrative discretion under the Buy American Act. Some would, in effect, require that all foreign purchases be concurred in by Congress; others that such purchases be certified by OCDM as not being detrimental to national security; others that a minimum of 25 percent price differential be required. At least one bill would remove cost differentials entirely from the realm of consideration, and another would prohibit any purchases of items the Tariff Commission had found were being imported in quantities such as to cause injury to U.S. business.

VI. Current Bureau of the Budget Survey.

At the request of the Chairman of the CFEP, the Bureau of the Budget is conducting a review of recent agency experience under the Buy American Act and Executive Order 10582. In order to assist us in evaluating the Order, a comprehensive questionnaire has been developed and sent to all major procuring agencies requesting detailed data by May 16 on their procurement under Buy American provisions.

We are hopeful that the collected information will provide us with an up-to-date and detailed picture as to the actual quantities and dollar volume of Federal procurement of foreign materials for domestic use, as well as current agency views on how Executive Order 10582 is working.

We anticipate the information will be helpful to us in three ways:

1) In connection with the review of Executive Order 10582;

2) In connection with review of the impact of current policies on our balance of payments position; and

3) In connection with the Administration position on the bills before Congress.

In consequence, Mr. Chairman, when your minutes of this meeting are prepared, I trust they will reflect our fervid plea that the questionnaires be returned to us by May 16 in order that we may move ahead with the above studies as speedily as possible.

0. Source: Eisenhower Library, CFEP Records, Office Series, Council Minutes, 1960 (2). No classification marking. Attached to the minutes of the 101st CFEP meeting.
1. These remarks were made at a meeting held at the Executive Office Building.
2. On August 14, 1953, Eisenhower appointed Randall Chairman of the Commission on Foreign Economic Policy, which was to review U.S. foreign economic policy, recommend policies and practices for the future, and report its findings to the President and Congress.
3. Section 733 of the Department of Defense Appropriation Act, 1955; P.L. 458, June 30, 1954. (68 Stat. 356)