59. Letter From Secretary of Commerce Connor to President Johnson1
Dear Mr. President:
I am pleased to report to you that the business community, in response to your appeal for voluntary cooperation, will substantially increase its contribution to the balance of payments during 1965. The preliminary evidence suggests that this improvement will probably exceed $1.2 billion. This amount would represent an increase of about 14 per cent compared with the companies’ performance in 1964.
Before I comment further on the voluntary cooperation program with the business community, let me stress the necessity to view the performance as part of your overall effort to reduce the nagging deficit in our balance of payments. You undoubtedly are getting reports on that part of your program being conducted by the Treasury Department, Federal Reserve System and other agencies of the Federal government. Moreover, I know you are also following the “See the USA” effort which private industry is making under the leadership of the Vice President.
If you would permit me, I would like to make a cautionary comment which might be helpful in appraising the following account of progress which is indicated under the voluntary program with industry. First of all, the expected improvement of around $1.2 billion does not mean that [Page 151] we can count on reducing the deficit by that amount—independently of other factors affecting the balance of payments. Because of rising production and incomes in the United States, we should expect an increase in the level of imports, and this will partly off-set the improvement anticipated. Moreover, we may also expect a further rise in travel expenditures by Americans going abroad which probably will be matched by the increase in expenditures of foreigners coming to our shores. The reports in hand reflect the companies’ first estimate of the improvement they believe they can achieve in 1965. During the course of the year many of them may find it necessary to make modifications.
On the other hand, the increase of $1.2 billion expected for the business community does not by any means include the substantial contribution which the commercial banks will undoubtedly make toward improving the balance of payments in 1965. In addition, nonbank financial institutions will also register gains.
These cautionary comments aside, I think the anticipated improvement does reflect an extra effort, and the business community should be commended for the contribution they are making.
I thought it was vital that we give you an early report of the progress that is being made under the voluntary program. You may recall that I asked the chief executives of the companies cooperating with us to give me by April 15 their estimate of the expanded contribution they think they can make to the balance of payments in 1965. By the end of last week, we were able to tabulate replies from 344 companies. Responses are still coming in, and we expect to receive estimates from over 500 companies. The general comments have been highly favorable and they strongly endorse the voluntary approach to the program. About one half of the companies have made some form of explicit endorsement—either of the program or of the method of carrying it out. About two-thirds of the replies include some explanation as to how the 1965 improvement will come about.
While most of the improvement during 1965 will reflect export expansion, indications are that restraint will also be exercised on direct investment. In most cases where companies feel that for orderly business development they must proceed with direct investment projects, they propose to rely on foreign borrowing to finance a large proportion of the planned capital outlay. While a few companies, especially some of the newcomers to international business, may encounter difficulties in raising money, it appears that most companies who plan to borrow abroad will be able to do so.
The business community has made a vigorous response to your call for their assistance in improving the balance of payments. Nevertheless, we are faced with a deficit of considerable magnitude, and its reduction to manageable size will also require a sustained effort on the part of all of [Page 152] us throughout the rest of this year. We must be constantly on guard against a hasty acceptance of signs of improvement as evidence that the basic problem has been solved.
Finally, I would like to acknowledge the valuable assistance I have received from the Department of Commerce’s Advisory Committee on the Balance of Payments under the Chairmanship of Mr. Albert L. Nickerson, Chairman of the Board of Socony Mobil Oil Company. I am confident that the members of that Committee, along with the rest of the business community, are prepared to continue making a concerted effort to improve the balance of payments.2
I am sure you will agree with me that the response so far to your voluntary balance of payments program demonstrates the willingness and ability of American business to join with the government in a combined effort to cope with a critical national problem.
Respectfully yours,
- Source: Washington National Records Center, RG 40, Records of the Executive Secretariat, Office of the Secretary, 1965–1966: FRC 71 A 6617, Balance of Payments Committee for the Department of Commerce, Meeting April 28, 1965. No classification marking.↩
- For a complete list of members, see Document 44.↩