Foreign Relations of the United States, 1964–1968, Volume VIII, International Monetary and Trade Policy

52. Letter From Secretary of Commerce Connor to Certain U.S. Business Leaders¹

Washington, undated.

The President has asked me to handle the voluntary cooperation program with American industry which is a key part of our overall effort to improve our Nation’s balance of payments situation. Since the success of this program depends entirely on full cooperation and help from the heads of the U.S. corporations doing a significant amount of business internationally, I am writing to you to enlist your personal support.

As you can see from the enclosed press release,² the Advisory Committee for this industry program, chaired by Mr. Albert L. Nickerson, Chairman of the Board of Socony Mobil Oil Company, is composed of outstanding leaders from the business community who have been active in direct overseas investments and international trade. That Advisory Committee met with me on February 26, and strongly urged that our program be set up on as informal and personal a basis as possible, with a minimum of formal reporting requirements and other “red tape.” All members of the Advisory Committee have given me their judgment that the leaders of American industry will respond quickly and favorably to that kind of approach and that, as a result of such leaders taking personal responsibility for this effort, our voluntary program will produce significant reductions in the balance of payments deficit. The Advisory Committee is particularly in favor of a flexible approach that enables each company head to work out his own program, based on the operating facts of his own business, rather than limit the means of meeting each company’s objective by having the government prescribe some formula of general application.

That advice makes sense to me, and the form of the program that we had been planning has been modified along the lines suggested.

Consequently, I ask for your help specifically as follows:

1. Please set up for your company a balance of payments “ledger” for the year 1964 which shows the selected debits and credits. I enclose a summary work sheet to indicate the needed figures, and some instructions to help your technical people in preparing it for you.³

2. After looking at your 1964 results—and we realize in most cases a significant favorable balance will be shown—please consider how that 1964 result can be improved for the years 1965 and 1966. We have been thinking in terms of an average improvement in balance of payments terms, in 1965 of 15–20 per cent over the 1964 results. We realize, however, that any such target will be inappropriate for many corporations—either on the low or high side—but the important thing is to make an extraordinary effort. Therefore, we have concluded that only you are in a position to set up a reasonable but meaningful objective for your own company, in light of your operating facts and problems. The nine suggestions listed on the enclosed press release do not exhaust the list of possibilities that you and your associates can put together in devising an approach meeting the national purpose, yet tailored to your particular circumstances. In short, I am asking you to establish, and then let me know, your best personal estimate of how much of an improvement in terms of net dollars you think your company can make overall in 1965, compared with 1964 by taking all feasible steps to help the Nation deal with this serious problem.

3. It would also be helpful for us to have a few of your summary figures for the year 1964 showing credit and debit items separately. The work sheet referred to in paragraph 1 would be appropriate for your 1964 report and should be returned to us. It may also be helpful in calculating your 1965 target. We understand that for many firms or industries, such as petroleum operations or contract construction, there may be a need to include in their “ledger” other information on foreign transactions in order to show a realistic balance of payments performance. In such situations, we would welcome any supplementary figures you wish to supply, and will take them into consideration in reviewing your results.

4. Because of the unique opportunity to shift short-term assets and make an early improvement in the balance of payments, I would also like to have your figures at the end of 1963 and 1964 for short-term assets held abroad either directly or through U.S. banking or other financial institutions. In addition, we would like to have figures on such assets held in developed countries by your subsidiaries and branches.

5. I would like to receive your first set of figures by April 15, if this is possible, and I hope it is.

6. Thereafter, I am asking you to send me quarterly reports through the years 1965 and 1966 showing the data in paragraphs 2, 3 and 4 above and revisions, if any, in your overall goal for the year. You should also give your personal evaluation of points or problems you consider to be of particular significance.

7. While prior notification regarding substantial new investments or expansions abroad, including information indicating how they would be financed, would be helpful, we have decided against a formalized program asking for such information. It is our hope that the overall estimates and reports that I am requesting will prove to be adequate, and that the results will be clear enough to obviate the need for prior notification of new investments. We, of course, expect that care will be taken to minimize the balance of payments effects of large investments and either we, or the appropriate Federal Reserve officials when their program is involved, would be glad to discuss such situations should you so desire.

8. We shall be very glad to talk on the telephone or meet with you to discuss this or any other aspect of this voluntary program of interest or concern to you as it moves along.

Your company’s report and estimates will be treated by us as strictly “Confidential” and shown only to those few government officials who are working with us directly in this program. We do plan to put together a periodic summary of the reports in aggregate terms for consideration with the Advisory Committee and for reports to the President, the Cabinet, and the public.

There are a few special problems which I would like to call to your particular attention.

• First, we regard the national objective of increasing the contribution by private enterprise to growth in less developed countries of such importance that we do not wish this program to inhibit the flow of these investments.
• Second, while relatively rapid progress in repatriating short-term financial funds invested abroad, wherever appropriate, would be helpful, we request that this be done with caution in the case of balances in countries subject to balance of payments problems. We are naturally concerned not to cause difficulties on the exchanges and it would be desirable for companies with large balances to consider consulting with the appropriate Federal Reserve Bank on this problem.
• Third, we do not anticipate cutbacks in Canadian direct investments, but firms should take particular care to assure that short-term funds put at the disposal of your subsidiaries in Canada serve only to meet operating needs in Canada. Opportunities should be explored for obtaining at least a portion of working capital requirements from the Canadian market. In this process, we hope that short-term investments in Canada by parents or subsidiaries clearly in excess of working requirements will not be increased. No doubt opportunities will arise to reduce these balances, particularly those denominated in U.S. dollars, but this should be done only in a gradual and orderly way.

I am sure you are aware of the vital importance of improving the U.S. balance of payments position. Such improvement is essential to international monetary stability, to this Nation’s economy, and to continued business progress. The capability of this nation to manage its international fiscal affairs is being carefully watched around the world.

President Johnson is confident, as am I, that you will cooperate with us in this extremely important program of serious concern to you and to our country. We urgently need your help.

Sincerely yours,

John T. Connor ⁴

1. Source: Department of State, Central Files, FN 12 US. No classification marking. The source text is enclosure 1 to CA-9786 to all diplomatic posts, March 19. The text of the airgram indicates that the letter was sent to over 600 heads of U.S. business enterprises. Regarding the drafting of and suggested revisions to this letter, see Document 47.
2. The Commerce press release, February 24, announcing the establishment of the Balance of Payments Advisory Committee of the Department of Commerce is enclosure 2 to CA-9786. It is not printed, but see Document 44.
3. The work sheet is enclosure 3 to CA-9786. It is not printed.
4. Printed from a copy that bears this typed signature.