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That reminds me of the statement made yesterday on the floor of the Senate by the distinguished Senator from Alaska [Mr. GRUENING], when he said that more than a billion dollars had been loaned for three-quarters of 1 percent interest, and that we would lose, on the basis of the difference between what we paid and what we would get back, nearly $1 billion before the loan would become due.

The Senator also quoted the Foreign Minister of Costa Rica as saying that his country had received a 40-year loan, but with the understanding that it would never be repaid.

I continued, in my letter:

We should make every effort to establish satisfactory trade with India, from which country we can receive acceptable imports in exchange for surpluses we need to dispose

of.

In the interests of a more stable world we should urge all nations who hold British war debts to refund those debts on a longtime basis and at an appropriate rate of interest. The labor government of Great Brit

ain will never realistically face the problem of competition in world markets so long as she can keep members of the labor unions employed in the production of high-priced goods for sale to sterling areas.

Spain desperately needs our wheat, cotton, and machinery, and never in her history has Spain defaulted on a debt. I would like to see Spain given an Export-Import Bank loan with a gentleman's agreement that the funds would be expended for the items mentioned.

When you have had an opportunity to reflect upon these suggestions, I shall welcome your reactions. As I said in the outset, they are merely surface impressions based upon an inadequate study, but I don't

believe all of them can be wrong.

Cordially yours,

A. WILLIS ROBERTSON,

U.S. Senator.

I, of course, do not know what efforts

Mr. Hoffman made to carry out my sug

gestions about freer trade and currency

convertibility among the nations of Western Europe. All I know is that nothing worthwhile in that behalf was accomplished. I also know that as a member of the Appropriations Committee in 1950, I participated in the fight to cut the foreign aid program by a billion dollars as I had recommended during the previous December. And, it was then clearly understood that the program would end on June 30, 1951.

Mr. President, that was 12 years ago. Since that time, the program has had first, and then another, name, and the annual expenditures under it have been increased instead of decreased and the total of expenditures now amounts to something over $100 billion.

Senators will observe that in my letter of December 4, 1949, to Paul Hoffman I said that our national debt was approaching $260 billion. In the morning papers of October 30, I read that the Ways and Means Committee of the House, which in many respects is the most vital committee of the entire Congress, voted to increase the ceiling on the national debt to $315 billion because the debt now stands at $308 billion and there are those who believe that it will go to $320 billion, should an $11 billion tax cut be added to a possible $8 billion

deficit in the current fiscal year. And, as our national debt goes to astronomical proportions, the foreign holders of nearly $26 billion of our dollars which they are entitled to have converted into gold are becoming more and more uneasy about the ultimate value of those dollars. As I have indicated, I made an effort 14 years ago, first to reduce and then to end completely, our foreign aid giveaway program because over 90 percent of the aid had been in grants and the other in low-interest loans, many of which will never be repaid. When I proposed a billion dollar cut in the program in 1950, Administrator Hoffman said that I was proposing to cut the heart out of the program. There has not been an administrator of the program since Hoffman who has not yelled long and loud that any substantial cut of an ever-increasing budgeted amount would cut the heart out of the program. Yielding to such importunities, Congress has given away and loaned such tremendous sums, under the pleasing name of foreign aid, that what was termed in the Paul Hoffman days "a dollar shortage" has in this good year of our Lord become for us a dollar drain on our rapidly diminishing gold supply. So we have pending on the Senate side two bills, which are closely related: first, a bill proposing an $11 billion cut in taxes, which will entail a temlion cut in taxes, which will entail a temporary cut in a similar amount in revenue; and second, a bill calculated to further increase the acute balance-ofpayments problem by authorizing the administration to lend and give away an additional $4 billion of taxpayers' money and that spending plan is presented to us with the insistent claim that it would cut the heart out of the measure even to agree to the cut carried in the House au

thorization bill of $500 million, which

would still leave nearly a billion more

than we appropriated for foreign aid 14 years ago when the need for our aid was at its peak.

Since the beginning of the foreign aid program, the American taxpayer has shown remarkable restraint and unprecedented generosity in providing funds not only for the reconstruction of war-torn Europe through the Marshall plan, but also through various grant programs to many nations for such humanitarian purposes as food for the starving, malaria control, assistance for education, and other humanitarian programs to assist in defending many nations from the harsh burdens of poverty and in providing a sine qua non for economic growth. I have recognized the I have recognized the contribution of foreign aid to the basic national interests of the United States in a world of independent, peace-loving nations, each pursuing its own national goals and all together engaging in trade and investment among each other in the great tradition of private enterprise and unrestricted exchange of goods and services. Yet the current debate on the pending $4.2 billion foreign aid bill before the Senate requires me to speak out in the name of fiscal soundness and plain commonsense to urge upon Senators that now is the time for a searching reappraisal of the entire foreign aid program.

More and more we hear from every side concerned about the level of our foreign aid in the light of the confusion and maladministration of that program in country after country. The President's own foreign aid adviser, General Clay, after a careful review of the program, declared in his report to the President:

We are trying to do too much for too many too soon, that we are overextended in resources and undercompensated in results, and that no end of foreign aid is either in sight or in mind.

Moreover, the foreign aid program in many ways has failed to foster our traditional values of free enterprise in the countries to which it is directed. While free world private trade and investment totals have expanded to unprecedented levels in the postwar period and promise under wise policies to grow even more vigorously, our own foreign aid efforts have, except in Western Germany, failed to enlist the support of this vaunted system that has brought our country to unparalleled prosperity and material strength.

But a critical examination of the foreign aid program is long overdue not only for the above reasons but also, and most importantly, because there are clear signs in our balance-of-payments problems that the Federal Government is overextending its resources in foreign aid spending. Those resources might better be devoted to putting the Government's budgetary programs in order, and thereby-through both reducing the balance-of-payments deficit and reducing the Government's budget deficit―restore business confidence and provide business incentive for the further expansion of economic activity at home

and expansion through private channels

of our foreign trade. There is a danger

that in our preoccupation with Government programs labeled "foreign economic aid," we overlook the historic and continuous revolution taking place in the world through private trade and investment. The time has come when we should concentrate on our policy to the world the American revolution of technological progress, increased technical competence of labor and management, and the resulting rising material living standards which we in this country have come to expect as a matter of course.

As I have said, the administration proposes another $4 billion plus in foreign aid spending and at the same time proposes a tax cut of $11 billion with a resulting budget deficit variously estimated between $8 and $10 billion, and acknowledged by Secretary Dillon to be likely to continue for several so-called "transition years" during which the economy is expected by the administration to experience an increase in its growth rate. Thus, under the administration program, we are to expect to be faced with a balance-of-payments deficit that so far has been little, if any, reduced, and also with a Government budget deficit that is expected to continue for several years.

There is no question that the balanceof-payments problem facing the United

States today is of serious proportions. The Secretary of the Treasury himself testified before the Joint Economic Committee earlier this year that even at a rate lower than the present one, we cannot afford this international payments imbalance for more than a year or two. The foreign aid program cannot soundly be considered apart from this balance-of-payments problem. I need not review for Senators today the history of the balance-of-payments deficit. Suffice it to say that claims of foreigners and international agencies on our gold stock now total $25.5 billion. Over the past 13 years the balance-of-payments deficits have amounted to $26 billion. To finance them, we have sold about $8 billion of gold, and foreigners have taken the rest in an $18 billion increase in their short-term liquid claims on us. The current gold stock of about $15.6 billion leaves less than $3.5 billion of free gold above the $12.2 billion required to back our money supply. This in the face of foreign short-term claims totaling more than $25 billion.

A pamphlet entitled "Gold," recently released by the Federal Reserve Bank of Philadelphia, says:

A continuing loss of gold by the United States could disrupt international trade and the monetary systems of friendly nations, impair the Federal Reserve's ability to fight domestic recessions and "shake confidence in our political leadership of the free world."

Several possible ways to lessen foreign purchases of the Nation's gold are listed by the Fed. These are to:

Increase foreigners' dollar payments to us by selling them more goods and services.

Decrease U.S. dollar payments to foreigners by cutting back investments, purchases, and aid payments abroad.

Induce foreigners to keep more of their excess dollars invested here, instead of buying gold with them. This can be done through higher interest rates and by dispelling fears that the United States will increase the dollar price of gold-in other words, devalue the dollar.

Mr. MORSE. Mr. President, will the Senator from Virginia yield?

Mr. ROBERTSON. I yield to the Senator from Oregon.

Mr. MORSE. I commend the Senator for his able presentation of the gold problem and the balance-of-payments problem connected with the bill. I agree with him; it is one of the unanswerable propositions that we who are opposed to the bill are presenting. It is an issue that the administration and the proponents of the bill are not willing to face, and never have faced, in the consideration of the bill.

Mr. ROBERTSON. The Senator from Oregon is eminently correct. I have been worrying with this problem since the speech I made on it on the floor of the Senate last March.

Mr. MORSE. The administration and the proponents of the bill want to sweep under the rug the balance-of-payments argument in its relationship to foreign aid.

Mr. ROBERTSON. The Senator is correct.

Mr. MORSE. We cannot spend and continue to spend for foreign aid with such a large percentage of grant money and such a large percent of three-fourths

percent, 10 years'-grace, no-payments- gram. Mr. President, that would be at-all loans without doing severe damage to the gold structure of the United States and without intensifying the balance-of-payments problem.

No matter how unpopular it may be at the moment, we must say to the American people, "You are being taken for a ride."

If we continue foreign aid at the level at which we have been providing it and on which we have been asked to continue it in connection with this bill, we shall continue to weaken the gold structure of the United States, endanger its economy, and commit a great wrong against the people of the United States.

I will not vote for the bill until the adoption of some amendments which deal with the basic issue the Senator from Virginia is raising. I know of no more basic issue.

The Senator from Virginia and I and others who take this position are dealing for the most part with economic abstractions and economic abstract principles; but those abstract principles determine the economic level of living of the American people. So we must try to make them understand the relationship between these economic laws and their own economic security. It is difficult to do that, and it calls for a very large amount of objective thinking. That is why we find it difficult to make ourselves understood.

So we must continue to talk and talk and explain and explain, as the Senator from Virginia is doing so ably today, so the American people will realize that we are really fighting for the preservation of their security, because we are fighting to keep the U.S. economy strong. It is clear that our Nation's economy is its greatest defense weapon.

We must stop weakening the national economy, and we must stop supporting inefficiencies and shocking wastes in the inefficiencies and shocking wastes in the foreign aid program-inefficiencies and wastes which we have been trying to point out in the course of the speeches we have been making on the foreign aid program.

We must say to the administration, "You should be supporting the amendment which proposes to bring the entire existing program to an end by the end of 1965, and then begin it over again, but do so on the basis of the guidelines for which we have been pleading, whereby the countries to be aided will have to express their willingness to meet the terms and conditions which should be laid down, before they will receive $1 from us."

That is what the administration should accept; and I am at a loss to understand why the administration does not do so.

The Foreign Relations Committee has brought in a report which accepts the principles we stress; and in its report the Foreign Relations Committee warns the administration that it should do it should do something about this matter before the end of 1965. However, as I have said, although the Foreign Relations Committee admits the justification for our major criticisms of the program, the committee asks the Senate to support the administration's desire to continue the pro

nonsense. The time has come to correct the program before we authorize or appropriate one more dollar for it.

Mr. ROBERTSON. Mr. President, I thank the Senator from Oregon. At the conclusion of my remarks, I intend to state that I will support his motion to recommit the bill, for further study and for necessary revision.

I have not gone into all the details of the waste involved; but before the Senator from Oregon entered the Chamber, I referred to a study I made of 14 European countries in the fall of 1949, in connection with the Marshall plan. When I returned, I was greatly discouraged by the waste and inefficiency I saw at that time so much so, that I called them to the attention of Paul Hoffman, the Administrator, in a long letter I wrote to him. I said to him, "We are appropriating too much; we should cut it to $2,500 million"-a $1-million cut. He replied, "Any cut at all would take the heart out of all of these countries."

We cut the program to $2,500 million in 1950, at the peak of the need to rehabilitate the war-torn countries.

But now, 14 years after I made that report, we are asked to appropriate $4,200 million in addition to a pipeline of $8 billion of unexpended funds.

I have not gone into the question of waste, although I know it exists. As I have said, 14 years ago, I convinced myself that there was very great waste; and ever since then I have been advocating economy in the program and ending the program.

But now, as chairman of the committee which administers the laws under which we coin money and fix its value, I have the solemn duty to put the Senate on notice that, on the basis of the information I have received concerning the potential drain on the $3,500 million of free gold over the 25 percent needed to back our currency, if we do not put the soundness of our currency and the protection of our gold supply above playing Santa Claus to 100 nations, we shall go broke.

Mr. MORSE. Mr. President, I am glad the Senator from Virginia has pointed that out, because he speaks as chairman of the Senate Banking and Currency Committee, and I know of no one who is more familiar with all the problems which face the economic structure of the country than is he.

I am also very glad that he has referred to the amount of money in the pipeline, because some powerful lobbies are at work. As I speak, I notice in the galleries representatives of many groups-representatives of the League of Women Voters, the Association of American University Women, and various other groups. They are "putting on the heat"; but, as I have said repectfully and politely to them, they could not pass an elementary examination on the facts involved in our foreign aid program. The sad fact is that these lobbies have accepted dogma, and those who represent the lobbies do not have the facts about U.S. foreign aid. For the most part, they are talking in terms of emotionalism, not facts.

Mr. ROBERTSON. Yes: Yes. They say, "the United States is rich, and the other countries are poor; so why do we not share what we have with them?"

But I point out, as a case in point, that in Africa, under the guise of democracy, we are supporting some of the most outrageous advocates of dictatorship since the days of Hitler.

Mr. MORSE. Yes.

I have talked with some of the lobbyists, and have asked them, "How much is in the pipeline?" Then I found that they did not even know what the pipeline was; they did not know, as the Senator from Virginia has pointed out that there is now $8 billion in the pipeline.

Mr. ROBERTSON. Yes. Mr. MORSE. In short, we could postpone for 6 months or 12 months our action on this bill and do no harm.

However, a "rush act" is on; and those who are conducting it think they will be able to silence our demands to cut the bill by some billion dollars. However, we need to take up the bill section by section and paragraph by paragraph.

I say to the representatives of the League of Women Voters and to the Association of American University Women and to the foreign policy associations, who apparently have been been called here to "put on the heat," that what they need is a seminar on foreign aid, so as to become enlightened in regard to what is involved in the foreign aid program. Before they ask U.S. Senators to vote for their dogmas, they should stop long enough to realize that we have a trust which they do not have; we have the trust of casting our votes here in the Senate on the basis of the facts and the issues as we find them.

I say to the lobbyists, "I am very glad to have any factual information you can give me, but I am not interested in, nor will I ever be deterred by, any suggestion that it might be to my political advantage to follow the dogmas you advocate."

I say good naturedly to the ladies who represent some of these groups that I am moved by the spirit of chivalry when I say that one of the most chivalrous suggestions I could make to them is that they register for a seminar refresher course on what is involved in foreign aid.

Mr. ROBERTSON. Mr. President, I appreciate the contribution to clearer thinking on the subject that has been made by the distinguished Senator from Oregon.

To return to my discussion of the seriousness of the problem of balance of payments, in a speech to the annual convention of the American Bankers Association on October 9, I spoke of my concern that the administration so far has emphasized short-term stopgaps without going to the roots of the balance-ofpayments problem. The President's July 18 statement of administration policy concerning the balance of payments placed major reliance on increased shortterm interest rates and a further export expansion drive. Rising interest rates normally reduce output and employment if pursued to sufficient lengths, but the administration counts upon the proposed tax cut of $11 billion to prevent

output and employment from suffering. There is already some evidence that the increase in short-term interest rates may be spilling over into longer term rate levels. If this tendency persists, the administration may have employed a remedy for the balance-of-payments problem that creates a new malady of increased unemployment and reduced output. The administration further provided more tying of military aid and foreign economic aid spending to purchases in the United States. And it seeks to reduce the balance-of-payments impact of its foreign spending programs by the sale of military assets abroad, such as the sale of land that we have bought in Germany, which we shall sell and buy back again. We shall sell them military hardware from some of our large supply depots in Western Europe. It seeks further to reduce the impact by various prepayment arrangements for foreign loans, and by offset agreements with NATO nations having U.S. troops within their borders. The administration proposes a new tax on foreign securities sales to check private capital outflows.

In my opinion, these measures ease without curing. I am convinced that our balance-of-payments policies require careful reappraisal. They should be accompanied by an equally searching reappraisal of Government spending policies which will, in the current fiscal year, reach an all-time high and include new programs with "escalator" clauses. The two are intimately related. To avoid a needed rethinking of Government spending policies at home, we are letting the balance-of-payments problem push us away from freedom of trade and investment, away from private enterprise in world trade toward more government in foreign economic affairs, and toward more tying of private exports to Government spending abroad, with all the dangers this may bring. Already, instead of reducing Government spending abroad to the minimum, we plan to tax private investment abroad. And the administrator of foreign aid is arguing that we cannot cut foreign aid because that will also reduce our exports.

Take exports, for example, where our promotion campaign has had few concrete results. There is a long list of possible measures. These include cuts in ocean freight rates and export taxes, restudy of our antitrust laws regarding exporters, and increased technical assistance. There is a vast area of nontariff restrictions on trade to negotiate away. There are the restrictions on tourist spending by our trading partners which prevent travel here. It is time to urge and help Europe to develop its own capital markets.

To further the prospect of achieving results in these areas, I have written to the Department of State on the subject of travel restrictions and to the Federal Maritime Commission on the subject of the impact of ocean freight rates. In the face of our freight rates, which are unjustly discriminatory between American exporters and their foreign competitors and are in some cases so high as to be detrimental to the commerce of the United States, we find our ships tied up

by maritime union strikes which occur because of the flimsiest and most puzzling reasons.

Mr. President, I ask unanimous consent to submit for the RECORD at the end of my remarks my correspondence with the Department of State and the Federal Maritime Commission and other documents that relate to our shipping problems.

The PRESIDING OFFICER. Without objection, it is so ordered.

(See exhibit 1.)

Mr. ROBERTSON. To return to the crucial subject of the balance-of-payments problem as a whole and the administration's policy concerning that problem, what is needed is not so much more ingenuity on the part of Government technicians as it is more confidence in the soundness of administration policy both by businessmen at home and by oversea dollar holders. I am convinced that a reduction in foreign economic aid and foreign military aid would make a greater contribution to solving the ballance-of-payments problem than would more complicated and ingenious technical devices such as we have seen in recent years developed by the Treasury.

Despite the administration's ingenious actions to borrow time in which to solve the balance-of-payments problem and to fend off the danger of a crisis of confidence on the part of foreign dollar holders, the defenses of the dollar that have been developed during the past few years are not impregnable and do not solve the pressing problems of policy that we face.

Neither can we solve the balance-of

payments problem by juggling figures. The Wall Street Journal, in its issue of Thursday, October 31, contains an article that describes how the administration is confused about how to calculate the balance-of-payments deficit as a result of the measures which it has taken to reduce that imbalance.

Mr. President, I ask unanimous consent to have printed in the RECORD at the conclusion of my remarks the article, "While United States Wrestles Payments Deficit, Economists Fuss Over How To Figure It," from the Wall Street Journal for October 9.

The PRESIDING OFFICER. Without objection, it is so ordered. (See exhibit 2.)

Mr. ROBERTSON. In brief, the problem arises because the Treasury has negotiated medium-term borrowing arrangements with foreign central banks. Such Treasury bonds of 15- to 24-month maturity which are sold to the foreign central banks, however, must contain a clause that permits the foreign central banks to convert the bonds into dollars on 4 days' notice. The reason for this provision in most cases lies in the monetary laws of the foreign countries, which prevent their central banks from investing in long-term securities in order to assure the liquidity of those vital governmental central banks' assets. Now we find that the administration does not know whether to count the foreign bond sale as shortterm liquid liabilities of the United States because they legally come due on 4 days' notice, or whether to count them

as a long-term foreign capital investment in the United States.

Mr. President, these medium-term bonds of the U.S. Treasury, in fact, come due in 4 days at the option of the holder. Whether we now think that foreign nations are going to hold these bonds until maturity or not, the matter is for them to decide and not for us to decide. They are our creditors.

Mr. President, the confusion of the administration over our balance-of-payments statistics is only another example, although it is a vivid one, that what we need to solve our balance-of-payments problem is not more ingenuity but more sound fiscal responsibility on the part of the administration. A part of this fiscal responsibility is to tailor our foreign economic aid program to fit our economic resources and to fashion that program to serve the national interests of the United States and to administer that program with a minimum of confusion, delay, and cross-purposes.

We will imperil the soundness of our own currency and hazard our economic future if we do not reduce our foreign aid spending. I hope the present bill will be cut by at least $1,800 million, as I recommended last March,

Mr. President, the bill should be recommitted for further study and revision.

EXHIBIT 1

FEDERAL MARITIME COMMISSON, Washington, D.C., October 16, 1963. Hon. A. WILLIS ROBERTSON, U.S. Senate, Washington, D.C.

DEAR SENATOR ROBERTSON: This will acknowledge receipt of your letter dated October 10, 1963, in which you discuss the impact of ocean freight rates on the balanceof-payments problem, the need to increase our exports, and in which you request that

Country

I discuss the possibilities of securing reduced shipping rates which would tend to stimulate our exports.

The Federal Maritime Commission is aware

of the vital impact which the level of freight rates in our foreign commerce has upon our export expansion program and balance-ofpayment problem. The Commission is now actively undertaking a program, within its authority and jurisdiction as contained in the Shipping Act, 1916, to eliminate wherever possible freight rates which have an adverse effect upon American exporters. Provisions of the Shipping Act make unlawful rates which are unjustly discriminatory between American exporters and their foreign competitors, or which may be so high as to be detrimental to the commerce of the Unit

ed States. Under the authority of these stat-
utes the Commission has already instituted
a formal investigation into the level of rates
on iron and steel products and is actively
undertaking studies of freight rates on addi-
tional commodities. Whenever it appears
necessary, the Commission will undertake
further formal proceedings and take appro-
priate steps to assure that export freight
rates are not an unreasonable burden upon
our export expansion program.
Sincerely yours,

JOHN HARLLEE,
Rear Admiral, U.S. Navy, retired,
Chairman.

DEPARTMENT OF STATE, Washington, D.C., October 16, 1963. Hon. A. WILLIS ROBERTSON, U.S. Senate.

DEAR SENATOR ROBERTSON: I am glad to be of help on the questions you raised in your letter of October 10 concerning currency restrictions imposed by the more industrialized countries on their residents who wish

to tour abroad.

Over the past several years the United States has pressed both bilaterally and in the forums of the International Monetary Fund and the Organization for Economic Cooperation and Development for the removal of restrictions which have served to limit the numbers of Europeans and others visiting

this country. A large measure of success has been achieved in this area. For example, 5 years ago French tourist expenditures were wholly subject to license, British tourists were limited to an annual expenditure of $334 per person, Italian tourists to $520 per person, and Netherlands tourists to $554 per person, with any additional expenditures abroad by residents of these countries subject to individual licensing. These countries

as well as most of the other industrialized countries have now liberalized these restrictions. In addition to Germany and Belgium, which had no restrictions 5 years ago, the Netherlands, France, Italy, and the United Kingdom currently all permit tourist expenditures freely. In some cases there are checks to verify the bona fides of the case with a view to preventing illegal transactions of other sorts, with actual expenditures for tourism in fact unlimited.

Japan still represents an important exception. Japan grants no automatic allowances for tourist travel abroad at this time. However, it has recently eased restrictions on the use of foreign exchange for business and student travel and there are signs that further liberalization is to come. Japan's announced intention to make the yen convertible for current account transactions beginning sometime in the spring of 1964 should result in further relaxation of existing restrictions. While the achievements in liberalization of controls over tourism to date have been impressive, the Department of State is, of course, continuing to work for the further reduction of remaining restrictions as the improved financial condition of countries abroad permits.

We are enclosing two tabulations which will indicate the 1963 and 1958 status of regulations over tourist expenditures practiced by the principal industrial countries. A comparison of these two tables will demonstrate the substantial progress made in removing restrictive regulations. Please do not hesitate to get in touch with us should you require additional information. Sincerely yours,

Tourist allocations for residents of the more industrialized countries

Automatic foreign exchange allocation 1

FREDERICK G. DUTTON, Assistant Secretary.

Additional allocation per journey in domestic banknotes (unless otherwise specified this allocation may be exchanged and spent abroad)

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1963

$577 per journey.

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$500.

$4,400 per traveler per year. Additional amounts are granted subject to the veri- Individual application evaluated for determinafication of the bona fides of the case.

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tion. Unlimited.

Do. Do.

Nil.

$150.

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Unlimited. The equivalent of $1,200 per journey is granted automatically; additional amounts are granted on request subject to verification of the bona fides of the case. There is no restriction for French residents whose foreign tourist expenses are paid on their behalf by travel agencies licensed by the Ministry of Public Works, Transport, and Tourism. Residents may also export the equivalent of $150 in foreign banknotes left over from previous journeys abroad.

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Unlimited..

$266 per journey..

Unlimited. The equivalent of $706 per journey is granted automatically; addi-
tional amounts are granted on request subject to verification of the bona fides of
the case.

Unlimited. $33.

$140, which may not be exchanged abroad.

Unlimited. Additional amounts are granted automatically by local banks for $80 u/a.
legitimate tourism.
Subject to license...
Unlimited....

Unlimited. The equivalent of $830 per journey is granted automatically in
foreign and/or national currency. An additional allocation equal to $42 is also
granted automatically for each additional day after 14 days of travel, up to a
total amount equal to $3,781. Further unlimited amounts are granted on
application.

$1,665 per year. For children under 12 the allocation is reduced to $1,154..

$500 per year. For children under 16 the allocation is reduced to $250.
Unlimited

$275 per year. Additional amounts are granted to Spanish residents whose tour-
ist expenses abroad are paid on their behalf by approved travel agencies.
$2,800 per year. For children under 12 the allocation is reduced to $1,120 per

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Nil. Unlimited.

(See preceding column.)

Individual application evaluated for determination.

$25, which may not be exchanged abroad. Unlimited.

$50.

Unlimited for bona fide tourist use.

(See preceding column.) Unlimited.

$140, which may not be exchanged abroad.

1 Where the amount is limited, the cost of a return or round-trip tricket can usually be paid in national currency to a foreign or domestic air or surface carrier without deduction from the allocation.

EXHIBIT 2

[From the Wall Street Journal, Oct. 31, 1963] FIGURE FEUD: WHILE UNITED STATES WRESTLES PAYMENTS DEFICIT, ECONOMISTS FUSS OVER HOW TO FIGURE IT

(By Richard F. Janssen) WASHINGTON.-AS if the Government's presistent international balance-of-payments problem weren't complex enough, Federal officials now are entangled in an intramural squabble that at least one top Treasury expert considers "damn silly" "damn silly" though, nevertheless, quite pertinent-just how do you figure the payments deficit?

The balance-of-payments problem is one that's never been dismissed as financial child's play, but while the situation itself has become much more difficult this year so has following the statistics by which it is measured. Depending on which set of official Government figures one cares to use, it can be proven that the deficit in the first half this year ran at an annual rate of a ponderous $4.5 billion, or $4.2 billion, or a less worrisome $3.2 billion.

At a time when the degree of the deficit's gravity is a vital consideration in shaping major domestic and foreign policies, the freedom of statistical choice is particularly inappropriate. Unless someone quoting figures hobbles his speech with such awkward qualifications as whether sales of nonmarketable convertible medium-term bonds are treated as a liquid liability or a long-term capital inflow it can be hard to tell if things are getting better or worse. And even then, few find it very easy.

DILLON'S FORECAST

Thus recently Treasury Secretary Dillon estimated the payments deficit for all this year would total roughly $3 billion. That looks fine when matched up against the first-half pace, no matter which set of figures you choose. But because the Secretary didn't specify the basis he used it wasn't clear at the time whether the 1963 outlook was cause for optimism or pessimism. Depending on the statistics, the 1962 payments deficit amounted to either $3.6 billion or $2.2 billion.

Paradoxically, it is the administration's effort to deal with the deficit that has brought the Treasury versus Commerce dispute over how to compute it. Basically, the United States incurs a payments deficit when the total dollars that the Government and the private citizens spend, lend or do

nate abroad exceeds the total dollars coming back into the country from all foreign dealings.

The problem is worrisome for many reasons. One is that in order to preserve confidence in the stability of the U.S. dollar, the United States pledges to sell gold to foreign central banks at the fixed price of $35 an ounce. This means that the dollar can be freely used in world trade with the assurance that it is as good as gold. But foreign governments and central banks frequently do exercise this right to buy U.S. gold with the surplus dollars they accumulate. This has brought the U.S. stock down to less than $16 billion, and around $12 billion of that is legally required to back domestic U.S. currency. While no one in Government thinks it likely to happen soon, foreigners could show up with dollars entitling them to buy about $24 billion of U.S. gold-more than exists.

The Government is taking many steps to bring the dollar inflow and outflow into something close to balance. Among them: Requiring that nearly all new foreign aid money be spent for products in the United States, cutting military spending abroad, campaigning for higher exports, and trying to get Congress to pass a tax discouraging U.S. citizens from putting so many dollars into foreign stocks and bonds. But in addition to these longer-term measures, the administration has made temporary moves to ease the bind. And it's the question of whether these steps count as pluses or minuses in the statistics that has multiplied the ways of toting up the deficit.

The knottiest problem is how to count some of the Roosa bonds, dubbed for Treasury Under Secretary Robert V. Roosa who initiated them. The Treasury started offer

ing one type of these bonds just this year to foreign central banks in hopes they'll use their surplus U.S. dollars to buy them rather than U.S. gold. So far, the Treasury has sold $678 million of them.

These bonds mature in from 15 to 24 months, and as such, would qualify as a long-term foreign capital investment in the United States-a clear plus for the U.S. balance of payments. But to comply with foreign laws on the type of securities in which foreign central banks can invest, the Roosa bonds are convertible into dollars on 4 days' notice, and thus quickly into gold. This feature, according to the Commerce Department's top balance-of-payments economist,

Walther Lederer, requires that they should be counted as a short-term liquid liability of the United States-and thus as a minus in this country's accounts, deepening the deficit the same as would an outflow of dollars.

Treasury men chafe at the bind they find themselves in by having a step they devised to save U.S. gold counted by "masochistic statisticians" as a negative factor. Foreign governments buy the bonds to hold them to maturity and then perhaps renew them, they argue, and it's only a technicality that requires the provision for quick convertibility into dollars and gold. "It's not what the other countries say they intend to do, it's what they can do" that counts, replies Mr. Lederer. He finds support for his view in the way the foreign governments tote up the bonds on their payments balance accounts; they usually count them as assets they can quickly turn into dollars, he says.

When the payments balance is computed the way Mr. Lederer prefers (and he's the

one who writes the official Government re

lease on it), the deficit reached a seasonally adjusted annual rate of $4.2 billion in the first half of this year and a $5 billion yearly pace in the second quarter alone. The deficit for all 1962 stood at $2.2 billion by the

Lederer calculation.

THE TREASURY'S PREFERENCE

The Treasury, however, prefers to show the deficit being trimmed by the "Roosa" bonds, running at only $3.2 billion in the first half and $4.4 billion in the second quarter. Because such bonds weren't issued last year and, thus, don't directly affect 1962 figures, this measure also compares with the $2.2 billion deficit for all last year, and makes things look not quite so dark.

Sometimes, though, both the Treasury and the Commerce Department prefer to look at the figures without counting the bonds at all and without counting any of the other "special Government transactions" made to improve the balance or temporarily stave off sales of gold. These other "special" dealings include such things as foreign governments obligingly paying debts to the United States before they're due, and paying for purchases of military equipment in advance.

With the calculations limited only to what takes place without special Government efforts, then, the "regular" deficit ran at an annual rate of $4.5 billion in the first half, and at $5.1 billion in the second quarter. While the figures are bigger this way, they

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