Country

INVESTMENT GUARANTIES-PENDING APPLICATIONS, AS OF MAY 31, 1954-Continued

Product

Convertibility Expropriation

There are some 86 applications being processed, and, as indicated in the above table, they cover a variety of business activities.

5. Lack of progress in Latin America

Agreements have been concluded with 19 countries to institute the program, only one of which is a Latin American country, Haiti. Last year in its report on the Mutual Security Act of 1953, the committee stated:

"The progress of the guaranty program in the underdeveloped areas, particularly in Latin America, has, in general, been disappointing. It is to be expected that the broader coverage required by this bill, coupled with an imaginative and realistic approach to the guaranty program by the executive branch, will strengthen the role of guaranties in the mutual security program not only in the underdeveloped areas but elsewhere as well (H. Rept. 569, 83d Cong., 1st sess., p. 58)."

The difficulty with the program in Latin America was brought out during the following colloquy between the Hon. E. Ross Adair and Mr. Steuart L. Pittman, Assistant General Counsel, Foreign Operations Administration, during the latter's testimony before the committee:

“Mr. ADAIR. It is my understanding that one of the fields in which this program had been expected to operate, or it was hoped it would operate most effectively, would be South America and possibly Central America. I understand it has not been as effective as hoped in that area. Would you address yourself to that point? "Mr. PITTMAN. What you say is perfectly true. The program is in operation in only one Latin American country, which is Haiti. The difficulty has been that we have felt it necessary and desirable to enter into agreements with each country that participates in this program, agreements dealing generally with-well, first of all, expressing a willingness on their part to have the United States insure its citizens against possible contingencies in their country, and secondly to deal with the problem of how this Government will handle claims against that foreign government and currencies of that government in the event that it becomes subrogated to those claims and currencies, if it pays off on a guaranty, which I think is more accurately thought of an insurance policy.

"The Latin American countries that have been approached-and the principal ones in which investor interest in guaranties have been shown have been approached-have not responded. think it is fair to say that the approach was made some 18 months or 2 years ago and we have recently come to the conclusion

in the State Department and in FOA that the Latin American Republics may not have a full appreciation of what this program might do for them, and we propose to find ways, in the case of particular countries, to make sure that they do understand its potentialities. We have so far approached them primarily from the point of view of negotiating an international agreement rather than in terms of specific proposed investment. The agreement contains in it a requirement that if a claim against that country, in the event of expropriation of an American citizen by them is taken over by the United States Government, the United States may deal with that country on a diplomatic level, and if no settlement is arrived at, it can resort to international arbitration. This runs into conflict with certain basic policies and constitutional provisions of some of the Latin American countries. Some way to adjust the program to this situation in Latin America is yet to be worked out.

"Mr. ADAIR. From what you say I take it there is an awareness that the program is not doing well in Latin America?

"Mr. PITTMAN. Absolutely, and the reason is the one I am giving I believe. We have built up acceptance in 19 countries of the world of this system whereby the United States would become subrogated to claims of this character, and acceptance of international arbitration. We think there is some value in this and we don't propose lightly to abandon it.

"On the other hand, we think in the course of negotiations with particular Latin American countries-if we can bring those negotiations about-we might find ways of adjusting to their policies and still retain the essence of the present method of operating this program (hearings, pp. 1041–1042).”

While the committee recognizes that problems have been encountered in adjusting and substantially extending the program to Latin America, it is not satisfied that more could not be done to this end. Again it seems possible that some Latin American Republics might be prepared to give the necessary undertaking with respect to individual prospective investments the value of which can be clearly seen, whereas an international agreement with blanket application to a long-range program of investment promotion may be initially unacceptable. While the committee has been informed that these possibilities are included in various proposals under consideration in FOA to move the program forward in Latin America, the fact remains that practically nothing has been accomplished in 2 years. Accordingly, the committee feels it necessary to again emphasize that it is the intention of Congress, expressed in that provision of the guaranty legislation carried over in the present bill as section 414(b) (3) (G), that the guaranty program

"shall be used to the maximum practicable extent and shall be administered under broad criteria so as to facilitate and increase the participation of private enterprise in achieving any of the purposes of this Act."

In order to insure that nothing in the guaranty legislation can be counted among the obstacles to extending the program to new countries, section 414 (b) (3) (A) has been so worded that there be a maximum of flexibility in the evidence required to establish that the investment is acceptable to the foreign government concerned. The committee reemphasizes its expectation that ways and means will be found by the executive branch to achieve substantial progress in Latin America within the broad legislative mandate and framework contained in this section. The committee also expects that the United States delegation to the inter-American economic conference scheduled to be held in Rio de Janiero next November will take these views into account.

6. The guaranty fund

The guaranty fund is available to the investment guaranty program and, subject to a statutory limitation of $10 million per year, to the informational media guaranty program, which is separately administered by the United States Information Agency. (See sec. 544 (a)). The guaranty fund is revolving only in a very limited sense in that funds released from guaranty commitments can be used for new guaranties. This happens as the face amounts of guaranties are reduced from time to time (either by withdrawals from the investment or because the guaranteed investor has become acclimatized and no longer feels the need of insurance protection). The source of the guaranty fund is four notes which have been issued by the Administrator of the Economic Cooperation Administration to the Secretary of the Treasury before 1951 in varying amounts aggregating $200 mililon. As has already been stated, the United States Govern

ment has collected close to $1 million in fees, and no guaranties have been paid by the Government under the investment guaranty program.

7. Importance of section

This section represents an important aspect of the mutual security program, and it is intended that it be implemented. That there is an awareness of its im portance by the executive branch is indicated by the interchange between Hon. Jacob K. Javits and Mr. Stassen during the latter's testimony:

"Mr. JAVITS. Governor, is there any optimum figure which the Administration has for overseas private investment, per year, and can we be helped to attain that figure by broadening the investment guaranties under the Mutual Security Act to include war, revolution, and civil disorder?

"Mr. STASSEN. You can be helped by doing that, and I believe that is also a recommendation in the President's message on the Randall Commission report, and our observation is that, in a broad way, every dollar of United States private funds invested abroad takes the place of at least $3 of governmental grants and gets the same results. We would hope that over a period of the next 5 years, the rate of United States private investment abroad would double (hearings, p. 58)."

O. EMIGRATION TO U.S.S.R. (SEC. 415)

This section authorizes the use of funds available under any provisions of the bill to pay the expenses of travel of any resident in the United States to the Soviet Union for the purpose of establishing permanent residence there on condition that such person shall not be readmitted to the United States. The author. ity is discretionary. It is not anticipated that many people in the United States will want to take advantage of this opportunity. To the extent that there are such people, the committee believes that money used for this purpose would be well spent.

P. MUNITIONS CONTROL (SEC. 416)

This section has been included at the request of the executive branch in order to tighten the control on exports and imports of munitions and to relieve commercial enterprises of the burden of unnecessary detail and red tape required under existing legislation. The section contains the essential provisions of H.R. 6344, a bill introduced by the Honorable Albert P. Morano, which, after hearings by a special subcommittee, had been approved by the committee March 16, 1954. The basic law regulating the export and import of arms, ammunition, and implements of war is section 12 of the joint resolution approved November 4, 1939 (the Neutrality Act, Public Res. 54, 76th Cong.). In addition, the Export Control Act of 1949, as amended (Public Law 11, 81st Cong.), which expires June 30, 1956, gives the President broad authority to control all kinds of exports for a variety of purposes. Exports of helium are controlled by the act of March 3, 1925, as amended (Helium Act) and exports of atomic energy materials, by the Atomic Energy Act of 1946, as amended (Public Law 585, 79th Cong.).

The Neutrality Act established a National Munitions Control Board under the chairmanship of the Secretary of State, who also is executive officer, together with the Secretary of the Treasury, the Secretary of War, the Secretary of the Navy, and the Secretary of Commerce. The law assigns to the Secretary of State responsibility for the registration of persons manufacturing, exporting or importing arms, ammunition, and implements of war, and for the issuance of licenses for the export and import of these items. This Board, together with the Secretary of the Interior, must recommend the approval of exports of helium. The administration of the Export Control Act of 1949 has been assigned by the President to the Department of Commerce.

Under the Neutrality Act licenses for imports and for exports can only be denied when a shipment would violate a law or treaty of the United States. The Export Control Act of 1949 authorizes the denial of export licenses which do not further the foreign policy of the United States or are not in the interest of national security. This authority is used by the Secretary of State to control the export of munitions. There is no corresponding authority available for limiting the import of munitions.

The Neutrality Act provides that everyone manufacturing, exporting, or importing munitions must register, that every export or import, even if it consists only of a single screw for replacement, must be licensed, that the terms of each sale must be submitted, and that the Board must report to Congress the details

of each license including the terms of sale. There is little opportunity for the Secretary of State to adopt simplified procedures or the new licensing techniques which have been developed as a result of United States experience with controls since 1939.

This section replaces the following provisions of existing law for the reasons enumerated.

Section 12 of the joint resolution approved November 4, 1939 (the Neutrality Act), is repealed in order to eliminate the National Munitions Control Board, to eliminate the burdensome reporting requirements and to provide greater administrative flexibility as outlined above.

Section 4 of the act of March 3, 1925, as amended (the Helium Act), is repealed. This section deals with exports of helium and assigns certain responsibilities to the National Munitions Control Board which will be eliminated by this bill. This bill gives the President adequate authority for controlling the export of helium by including it among arms, ammunition, and implements of war.

Section 968 of title 18, United States Code, is repealed. This section deals with control of exports of war materials to Latin American countries in which the United States exercises extraterritorial jurisdiction and where conditions of domestic violence exist. The provisions of section 416 are broad enough to include these specific cases while the retention of this legislation creates an unfavorable impression among other nations.

Repeal of these provisions is provided in subsection (a) of section 542. Section 416 is designed to strengthen United States controls over the export and import of arms, ammunition, and implements of war. It is assumed that these responsibilities will continue to be performed by the Department of State with appropriate coordination with the Department of Defense.

Q. ASSISTANCE TO INTERNATIONAL ORGANIZATION (SEC. 417)

Plans are under consideration in NATO for the possible strategic stockpile of foodstuffs. Should this plan become a reality, it would be desirable for the United States to render assistance for this purpose to NATO in this endeavor. This section provides authority for direct assistance (including by transfer of funds) to NATO and permits the use of funds available under the provisions of this bill dealing with defense support (sec. 131) and special assistance in joint control areas (sec. 403). While the primary purpose of this section is to provide authority for assistance to NATO in connection with the foodstuffs stockpile, it is recognized that assistance may also be desirable for other related purposes. R. FACILITATION AND ENCOURAGEMENT OF TRAVEL (SEC. 418)

This section finds its origin in section 117(b) of the Economic Cooperation Act of 1948 and in House Joint Resolution 350, to promote the foreign policy of the United States by fostering international travel and the exchange of persons, introduced on January 14, 1954, by the Honorable Jacob K. Javits, chairman of the Subcommittee on Foreign Economic Policy. The subcommittee, the other members of which are Messrs. Donald L. Jackson, Karl M. LeCompte, Laurie C. Battle, and Burr P. Harrison, held extensive hearings on the resolution, during which widespread support was given by the Federal Government, the travel industry, trade unions, farm and civic organizations and publications. Travel is the single greatest contribution the United States can make to "trade, not aid." International travel by United States residents aggregates 1 million persons who spend $1,300 million a year abroad. The potential increase of international travel is estimated to aggregate $2,400 million annually. As Wallace J. Campbell, president of the American Travel Association, told the subcommittee:

"International travel is the most painless way to provide a partial answer to the dollar gap and yet give America its money's worth in foreign expenditures (hearings of the Subcommittee on Foreign Economic Policy on H. J. Res. 350, p. 90)."

2. Removal of impediments and restrictions

The impediments to travel include cumbersome documentary requirements, currency, restrictions, and other vexatious restrictions. While other governments take an active interest in promoting and facilitating travel, the United States Government does practically nothing. It is the purpose of this section to announce

the policy of the United States to fill the vacuum presently existing in our Governments relations with other friendly countries and with the travel industry and other organizations in the United States vitally interested in travel. The removal of impediments and restrictions requires in many cases government-to-government representations, with the active cooperation and assistance of private industry.

3. Cooperation with private enterprise

It is the intent of this section, as is the intent of House Joint Resolution 350, to make possible cooperation, and in no case competition, with the private domestic travel industry and other private agencies established for that purpose. 4. Randall Commission

This section gives legislative sanction to the findings and recommendations of the President's Commission on Foreign Economic Policy (Randall Commission) on the subject of travel:

"It is clearly important to the economic and social development of the free world that the United States Government promote foreign travel. Increased travel abroad by Americans can make a substantial contribution over a period of time to increasing the dollar earnings of foreign countries. While tourist promotion should be primarily a private responsibility, the Commission appreciates that the Government cannot exercise its appropriate functions in respect to foreign travel to no cost whatsoever. There are many actions which the Govern ment might take.

"The Commission recommends consideration of means of facilitating the issurance of passports and visas to tourists, and close cooperation with foreign governments through our missions abroad to insure ease of entry and adequacy of accommodation for travelers abroad. The duty-free allowance for tourists which, in effect, now amounts to $500 exercisable once every 6 months, should be increased to $1,000. The President should direct the appropriate departments of the Government to encourage the promotion of tourism (H. Doc. 290, 83d Cong., 2di sess., p. 71)."

V. TITLE V-MISCELLANEOUS PROVISIONS

A. CHAPTER 1-GENERAL PROVISIONS

1. Transferability of funds (sec. 501)

The provisions of section 106 (d) of this bill permit transfers of military sums between the several geographic areas. Section 501 complements those provisions by allowing the President to transfer money made available under any provision of this bill to funds made available under any other provision of the bill. The committee recognizes that the President must have some flexibility in the use of the money appropriated under this bill to take care of unforeseen contingencies. At the same time, it does not favor a complete distortion of congressional intent in authorizing the money. Under this section an appropriation (including any unexpended balance carried over) for any part of this bill may be increased or decreased within a range of 10 percent. In the case of transfers into title II (development assistance), 50 percent of the sum transferred must be furnished on a loan basis in accordance with the utilization of funds under that title. Funds transferred under this section to furnish military assistance may be expended without regard to the area ceilings imposed by 106 (c). 2. Use of foreign currency (sec. 502)

The availability is continued by subsection (a) of this section, without reimbursement to the Treasury, of local currency proceeds of surplus agricultural commodity sales made under section 550 of the Mutual Security Act. The purposes for which such currencies were originally usable under that section are continued in this bill. There is also contained an additional purpose to cover international educational exchange under the Fulbright Act.

Subsection (b) requires that local currency owned by the United States shall be made available to appropriate committees of the Congress engaged in carrying out their duties under section 136 of the Legislative Reorganization Act of 1946, for their local currency expenses. This provision is carried over from existing legislation. There is also incorporated in subsection (b) the substance of H.R 7908, introduced February 16, 1954, by Hon. Karl M. LeCompte,