Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

256. Report by the Cabinet Committee on Balance of Payments to President Kennedy⁰

Washington, January 24, 1963.

SUBJECT

• Program for Expansion of U.S. Commercial Exports

The Committee has reviewed all of our programs designed to achieve a reasonable equilibrium in the balance of payments of the United States. It concludes that good progress has been made in our programs for reducing or offsetting U.S. Government expenditures abroad and for strengthening the international monetary system so as to protect the dollar against strains arising from large international movements of short-term funds. These programs must be vigorously followed up.

In the Committee’s judgment, however, we must look mainly to exports for substantial further reductions in our basic payments deficit. Government and business together must make vigorous efforts to increase our commercial surplus—the excess of exports of goods and services over imports—to a level adequate to cover our necessary net payments abroad for defense, economic assistance, and private investment. This task is not easy. It can only be accomplished through a broad and determined national effort.

At present, our exports account for only 4 percent of our gross national product, whereas Italy exports about 12 percent of GNP, Germany about 15 percent and the United Kingdom over 16 percent.

Our businessmen must do more. But government can in many ways provide leadership, point out export opportunities and help sales. We have established new, and have expanded existing, programs—notably in the Department of Commerce and the Export-Import Bank—to do this. However, the Committee has concluded that additional sales promotion efforts by the business community and the U.S. Government are now required if we are to achieve our goal of balance of payments equilibrium within a reasonable period.

These efforts must, of course, occur against the backdrop of continued policies to ensure that our products are competitive with those of other nations and have fair access to their markets. This means continued price stability, as well as continuous improvement of our products. It also means vigorous negotiations on tariff and non-tariff barriers to trade with other nations—particularly those of the European Common Market. Especially important over the long run will be a successful outcome of negotiations under the Trade Expansion Act.

An Action Program to Promote Exports

Bearing in mind that government cannot itself increase exports, but can only lead the way and provide assistance to the thousands of U.S. businessmen on whose efforts achievement of balance of payments equilibrium depends, the Committee recommends adoption of the following action program:

1. Export financing.

Pursuant to your directives at the beginning of your administration, the Export-Import Bank has improved existing facilities and, in cooperation with a large group of private insurance companies, has formed the Foreign Credit Insurance Association (FCIA), which provides completely new export-credit insurance facilities.

These programs must be and are being continually reassessed to assure their maximum effectiveness and their continued adaptation to changing circumstances. During recent months, the Bank, in cooperation with Treasury, Commerce, and the FCIA, has sought out and carefully reviewed comments and specific suggestions from major commercial banks and exporters as to the adequacy and usefulness of these programs, and a number of significant improvements in the coverage and administration of the programs have been adopted. The latest such improvements, announced early in January, are a general reduction in rates charged for FCIA coverage combined with a revised classification of countries for rate-fixing purposes and the offering of an optional coverage for political risks only.

Accordingly, American exporters now enjoy credit facilities which are believed to be the equal of those anywhere in the world.

In addition, the Bank and the FCIA, in cooperation with the Department of Commerce, must now make a major and continuing effort to bring these facilities to the attention of banks and businessmen throughout the country. This effort is already under way, but must and will be further broadened and intensified. Effective promotion of these new facilities will do more than simply inform businessmen of the export-financing aids now available: it can also be a major tool for making them better aware of the potentialities of foreign markets.

2. Export promotion.

The Department of Commerce and American embassies and consulates abroad have long provided an array of different types of services designed to aid individual American exporters in locating potential foreign markets and successfully selling their products abroad. Among these are the development of U.S. export opportunities, the preparation of general and specific market analyses, the provision of credit information, and help in contacting foreign business firms.

Broader and more intensified efforts are now called for in these areas, as well as to get companies already exporting to do a better job; to persuade top management that exporting should become one of its major concerns; to interest new firms in the potentialities of the export market; and to intensify our marketing efforts.

A. Promotion at home.

The first task is to see that top management gives greater attention to exports. This is a task to which the Administration at all levels must devote itself. Major responsibility must rest with the Department of Commerce, particularly with its Bureau of International Commerce. The export expansion activities of this Bureau and other parts of the Department of Commerce must be substantially increased in strength. It is also proposed that the Office of the Export Coordinator be strengthened, that a number of export sales promotion officers be appointed, and that the Department of Commerce field staffs devoted to trade promotion be doubled in strength. The roving export sales promotion officers should supplement the efforts of the expanded Commerce field offices in bringing to the attention of every exporter and potential exporter the profit and growth opportunities to be found in exporting.

Information on potential export markets has been available, but not in the depth businessmen require. Much more detailed surveys of markets for particular products are needed. Trade associations and industry groups could supplement the efforts of individual government experts in evaluating the markets for a particular product in a number of countries, with a portion of the expense borne by the Government. These studies need to be sharply and rapidly expanded.

B. Promotion abroad.

Related both to the task of promotion abroad, and to that discussed above, is a proposed increase in the budget for the overseas commercial services. It is on our commercial officers overseas that the continuing, day-to-day, responsibility of reporting on export opportunities and market potential rests. It is they who must lay the groundwork and establish contacts for the special teams of Washington experts or businessmen who come to seek out specific export opportunities.

When firms have been interested in exporting, the task remains of actually getting American salesmen overseas with samples and order books, and foreign buyers here with check books. To this task, existing programs can make a direct contribution, and should be expanded.

Through participation in trade fairs, the dispatch of trade missions, and the establishment of trade centers, a wide variety of American goods can be shown abroad to the maximum number of potential buyers.

(a) Trade Fairs. Up until now, trade fairs have been utilized primarily to sell the United States, rather than to sell our products. Only in FY ‘63 has the Department of Commerce been given money for trade fairs specifically planned to sell U.S. goods and services. The $1.6 million granted by Congress will permit Commerce to mount or prepare for pavilion-type exhibits in seven major cities, selected on the basis of probable export opportunities. More American business firms can be persuaded to exhibit at trade fairs on a continuing basis, provided government initially assumes a share of the expense. (For example, the first year the government might pay 75% of the cost of participation by a particular firm, the second year 37-1/2%, and the third year nothing. This procedure would encourage a maximum number of U.S. companies to explore the market.) The amount provided for this program next year should be more than doubled.

In addition, a small appropriation should be provided to pay for mobile trade fairs, as recently authorized by the Congress.

(b) Trade Centers. Trade centers (miniature merchandise marts) have already been set up in London, Bangkok and Frankfurt. A fourth will be opened in Tokyo this spring. The trade center makes it possible for an American manufacturer to test the sales appeal of his goods in a foreign market at relatively low cost, serves as a magnet to attract potential buyers, distributors and agents, and can bring about direct sales far in excess of the government’s expenditures for the trade center.

But the significance of the trade center is not to be measured in terms of on-the-floor sales. Properly programmed, it generates continuing interest in U.S. goods by month-after-month demonstration of the fact that “there is always something new and wonderful” coming from America. With proper follow-up by the exhibiting exporter, the volume of repeat sales should substantially exceed the initial orders taken in the center.

It is important to establish trade centers in another seven top export opportunity markets, in addition to the five already authorized, as soon as practicable.

(c) Trade Missions. An increasing number of specialized trade missions are necessary. Such missions are composed of business people representing one industry or segment of industry seeking export opportunities in their own particular field in places which market surveys have determined to have the highest potential. Some missions will also be needed to introduce U.S. businessmen to growing markets in newly-independent countries. In these missions, industry supplies the men but the government pays their travel expenses. With the funds appropriated, Commerce has been able to mount about a dozen such missions annually.

In the fall of 1962 Commerce sponsored the first industry-organized trade mission. This differs from previous missions in that the industry selects the mission’s members, and it or the members pay their own expenses. The mission is briefed in Washington by the Department of Commerce, the facilities of the Foreign Service are utilized to make appointments and plan itineraries overseas, and a Commerce represent-ative accompanies the group. On its return, the mission reports to the Department of Commerce, with the understanding that its findings will be used for the benefit of all in the industry, whether they are members of the sponsoring association or not.

The cost of such missions to the government is substantially less than that of an official government mission. Two other trade associations have already taken the initiative to form missions, others have expressed interest. It is hoped that as many as sixteen of these missions might be formed through industry groups, and the National Association of Manufacturers and the U.S. Chamber of Commerce have already agreed to help Commerce in doing so.

(d) Foreign Buyers Program. Another technique of export promotion which has proved successful in many other countries is to bring foreign buyers to the exporting country. Selected foreign buyers should be brought to this country for such events as the furniture show, the housewares show, the appliance show, etc. The American businesses which will benefit should bear all of the costs of such a program, although in certain cases it may be desirable for the government to pay part of the costs. Particular efforts will be made to get American business to advertise its shows overseas. A major part of the modest cost of this operation lies in determining what items should be promoted, where they should be promoted, and following up to ascertain the exports resulting.

Conclusion

The budgetary costs of the program outlined above are very small when contrasted to the importance of achieving equilibrium in our balance of payments. A table showing the amounts which have been included for this program in the Budget is attached as Annex I.¹

Adopting the above recommendations will not guarantee the increased export effort we need—only American business can do that; but failure to adopt them would be to avoid a small cost and accept a high risk—one that we should not and need not take.

Douglas Dillion

0. Source: Kennedy Library, Herter Papers, Balance of Payments. Official Use Only. Copies were attached to a January 29 memorandum from Dillon to members of the Cabinet Committee on Balance of Payments. For further documentation on the balance-of-payments problem, See Documents 1 ff. and 40 ff.
1. Not printed.