in the past but need to be carried on on an enlarged scale; second, the establishment of a joint export association plan under which the Department of Commerce would provide funds to firms associated for the purpose of cooperatively expanding, either entering into or expanding existing export operations. The examples of the kind of expenditures that we would have in mind on a contract-by-contract basis with the Government providing part of the outlay and the companies providing the rest, the examples of what is in mind are on page 72 of the blue book; then the area covered by Ambassador Roth in his statement on keeping world markets fair and the various elements of that program that he alluded to; that is all in the area of what I would call one phase of the program, the trade surplus. Then there is a program to moderate the foreign exchange costs of Government expenditures abroad and that is developed, what has been done, what is being done and what we intend to do is developed in chapter V of this book. Mr. BYRNES. What page is that, 77? Secretary FOWLER. That begins on 77 and concludes on 89, and there are several tabs to this, Mr. Byrnes, in which tab B beginning on page 133 summarizes the actions of the Department of Defense, to date, to reduce net foreign exchange costs. In other words, it describes the actions that have been taken up to now which is the backdrop against which further actions will be taken, and a similar tab C on AID and the balance of payments which begins on page 149 and carries through page 155. Mr. BYRNES. Mr. Secretary, I don't want to interrupt you, but I think you would be more helpful to me if you could tell me which ones of these programs are new action programs. I think many of the programs to which you are referring have been under consideration at least since our 1960 hearings on balance of payments. We also considered some of these programs as well as our overall balance-of-payments problem when you came in on the interest equalization tax. At that time the focus of our attention was the reduction of foreign exchange costs, particularly in connection with military operations. You will recall that you were negotiating with Germany to buy more of their military requirements here and that those negotiations apparently fell through. Then Germany was going to loan us money, so that the costs of our military operations in Germany wouldn't currently affect our balance of payments. Now I understand that that has fallen through. Secretary FOWLER. No, it hasn't. That has not fallen through. Mr. BYRNES. I would like to know what really is new in what you are now proposing so that we can at least envision the possibility of getting some action-and I underline the word "action." How do your proposals focus in on the current emergency? I think you said that we really have two problems. One problem was the immediate worsening of the situation that occurred in this last year-a worsening which you view as an omen of what might happen in calendar 1968. The other was the long-range problem of continuing substantial deficits. As I understand it, the tour ist thing is supposed to be only temporary and is aimed at the immediate short-range problem. I don't know about the Commerce Department's program for controlling investment abroad and repatriation. Is it to be permanent or temporary? Secretary FoWLER. That is temporary. Mr. BYRNES. My impression is that most of your proposals are tem porary. Secretary FOWLER. That is temporary. Mr. BYRNES. What else are we doing in focusing on this current emergency that requires temporary actions of some magnitude? Secretary FOWLER. Well, I think perhaps to answer the question now as you pose it, if you would turn back to the message itself, which is in the beginning of the book, in Roman XII, having outlined the first line of defense which has to do with the management of the domestic economy, we turn on Roman XII to the programs. Under the heading "Temporary Measures" there is the direct investment program which is an evolution from a voluntary program to a mandatory program in dealing with outflows of capital for direct investment and repatriation of earnings. There is then an intensification of the lending program of financial institutions which has been administered by the Federal Reserve Board. That is an existing progrgam which again is being intensified. The travel abroad program we have outlined this morning in both its short-term aspect, which is the expenditure tax program that I discussed in detail, and the longer term measure of encouragement of tourism abroad; and then under item 4, Government expenditures overseas, the three steps that the President had directed be taken are similar in their fashion to steps that have been taken before, but designed to be more intensive than before: The initiation of prompt negotiations with all of our NATO allies, not just Germany, to minimize the foreign exchange costs of keeping our troops in Europe, also directing three Secretaries, State, Treasury, and Defense to find similar ways of dealing with this problem in other parts of the world, particularly the Far East. Second, instructing the Director of the Budget to find ways of reducing the number of American civilians; that is, Government employees working overseas. That is not covered in the book, but I have here a memorandum addressed to the heads of executive departments and establishments on reduction of overseas personnel and official travel which I will submit for the record. (The following material was received by the committee:) REDUCTION OF U.S. PERSONNEL AND OFFICIAL TRAVEL OVERSEAS Subject: Reduction of Overseas Personnel and Official Travel. DEPARTMENTS AND Today I sent the attached memorandum to the Secretary of State and the Director of the Bureau of the Budget directing them to undertake a four-part program to reduce United States personnel overseas. I expect each Department and agency to cooperate fully in this endeavor. In addition, I hereby direct the head of each Department and agency to take steps to reduce U.S. official travel overseas to the minimum consistent with the orderly conduct of the Government's business abroad. I have asked private U.S. citizens to curtail their own travel outside the Western Hemisphere in the interest of reducing our balance of payments deficit. Federal agencies should participate in this effort. The policy applies particularly to travel to international conferences held overseas. Heads of Departments and agencies will take immediate measures to -reduce the number of such conferences attended. -hold out attendance to a minimum and use U.S. personnel located at or near conference site to the extent possible. -schedule conferences, where possible, in the U.S. or countries in which excess currencies can be used. You should present your plans for travel to international conferences held overseas to the Secretary of State, who, with the Director of the Budget, will undertake a special review of this matter. This directive shall not apply to -travel necessary for permanent change-of-station for U.S. employees, for their home leave, and for medical and rest and recuperative leave. -travel made necessary by measures to reduce U.S. employment overseas outlined in the attached memorandum. -travel financed from available excess foreign currencies. You are requested to submit to the Director of the Budget, not later than March 15, a statement on the actions you have taken to reduce all types of overseas travel, the results expected from such actions, and your recommendations as to any additional measures that might be taken. LYNDON B. JOHNSON. NOTE: For the memorandum to the Secretary of State and the Director, Bureau of the Budget to which the President referred, see the following item. REDUCTION OF U.S. PERSONNEL AND OFFICIAL TRAVEL OVERSEAS THE PRESIDENT'S MEMORANDUM TO THE SECRETARY OF STATE AND THE DIRECTOR, BUREAU OF THE BUDGET, JANUARY 18, 1968 Subject: Reduction in U.S. employees and official travel overseas. As a part of my program for dealing with our balance of payments problem, announced on New Year's day, I would like you jointly to take the specific measures to reduce U.S. employment and curtail official travel abroad, as outlined herein. Within the Department of State, the Senior Interdepartmental Group, chaired by Under Secretary Katzenbach, shall serve as the focal point for carrying out this directive. You should make these reductions in a way which maintains the effectiveness of our international programs. I would like you to give particular attention to personnel reductions which can be made through relocation and regrouping of functions, the elimination of overlapping and duplication, the discontinuance of outdated and marginal activities, and a general streamlining of operations. I. Reduction in U.S. personnel overseas This directive applies to all employees under the jurisdiction of U.S. diplomatic missions and includes the representatives of all U.S. civilian agencies which have programs or activities overseas. It also includes military attaches, Military Assistance Advisory Groups, and other military personnel serving under the Ambassadors. It does not apply to U.S. personnel in Vietnam. The Secretary of Defense has already initiated measures to reduce staffing of the military assistance program. I am asking the Secretary to complete these studies in time to support the goals outlined below. You are directed to take the following actions: 1. As a first step, you should proceed, with appropriate participation by U.S. Ambassadors and agencies, to reduce the total number of American personal overseas by 10 percent, with reductions of at least this magnitude applied to all missions of over 100. Similar reductions should be made in employment of foreign nationals and contract personnel. Your decisions on this first phase, which shall be final, shall be completed by April 1. 2. You should also initiate a special intensive review of our activities and staffing in 10 countries with very large U.S. missions. Your objective, in this second step, should be to reduce U.S. employment by substantially more than the 10 percent immediate reduction taken in the first step. Your final decisions should be made on this phase by August 1. 3. As a third step, you should proceed to extend these intensive reviews of U.S. activities to other countries beyond the first 10 as rapidly as feasible. 4. Simultaneously, you should initiate special studies from Washington of functional areas aimed at reducing instructions, assignments, and activities which unnecessarily create the need for maintaining or increasing overseas staff, e.g., reporting requirements, consular work and administrative support. Clearly, reductions of this magnitude will involve major changes in agency staffing and personnel plans. I am asking Chairman Macy of the Civil Service Commission to assist agencies in solving attendant personnel problems and in facilitating the reassignment of employees returning to the United States. II. Curtailment in official travel I am requesting all Department and agency heads to reduce official travel outside the U.S. to the minimum consistent with orderly conduct of the Government's business. I would like you to give special attention to measures to minimize travel to international conferences. By April 1, I would like you to report on the actions taken in this regard and to recommend any additional steps required. LYNDON B. JOHNSON. NOTE: For the President's memorandum to heads of executive departments and agencies on overseas reductions, see the preceding item. Mr. FOWLER. Third, an instruction to the Secretary of Defense to find ways to reduce further the foreign exchange impact of personal spending by U.S. forces and their dependents in Europe. Then under the hearding "Long-Term Measures," the export promotion and financing measure that I have already summarized and then looking to the elimination or alleviation of the impact of nontariff barriers on our trade and commerce that Ambassador Roth gave a preliminary statement on this morning, and then finally as a longterm measure the encouragement of foreign investment and travel in the United States, both of which have been on our minds and on which efforts have been made before. But particularly I think the committee will recall the Foreign Investors Tax Act which we have been trying to follow through on, and a much more intensive effort now in the field of promoting foreign tourism in the United States. I think that is a rough outline of an evolving program which involves some new features but in the main is a substantial intensification of some directions of policy that have been taken in the past. Mr. BYRNES. Well, I was impressed by the number of people who have been instructed to try and find some ways of doing different things here and there. You have directions to the Secretary of State, directions to Treasury, and directions to Defense to try and find ways of solving this balance-of-payments problem. You have task forces to see what we can do about encouraging exports and task forces to encourage travelers to come to this country. I was very impressed with the fact that your task force to encourage people to travel to this country has been divided into 12 segments. They are going to have some kind of report in February; are they? Secretary FoWLER. February 19. Mr. BYRNES. In your statement when you were discussing that, I thought you said that some things had already been recommended in that area. There haven't been any preliminary recommendations made? Secretary FOWLER. No; they haven't been submitted, but I think Ambassador McKinney has already been exploring the practicality of effectuating some of the recommendations which have been made from the subgroups to the parent task force. Mr. BYRNES. A few years ago didn't we set up an agency to promote tourism in this country? Secretary FOWLER. Yes; we did in 1961. Mr. BYRNES. Do you know how much money we have spent on that to date? I believe somebody told me about $3 million. Secretary FOWLER. The level of appropriations has been running, I think, around currently $3 to $4 million per year. Frankly, I have felt on that subject that this is a fairly inadequate approach to the program comparing the role of the U.S. Travel Service with the Government travel agencies with the same mission for many other countries. Small countries such as Denmark have a much more substantial effort so that in this one particular aspect which I don't think is in any way the total answer but in terms of the measure of what the Government is trying to do in this field, I think we have not had an adequate measure of effort. But, of course, the real definitive and decisive answer is going to come from the private sector, from those that are engaged in transportation, in providing hotels and resorts and the various services that make travel attractive and inexpensive. This is where the major effort will have to come from. Mr. BYRNES. What intrigues me here, too, is that under the International Travel Act passed in 1961-an act developed and encouraged because we were then also focusing in on a balance-of-payments problem-the Secretary of Commerce was supposed to develop, plan, and carry out a comprehensive program designed to stimulate and encourage travel to the United States, encourage the development of tourist facilities, low-cost unit tours and other arrangements within the United States and encourage the simplification, reduction, or elimination of barriers to travel. The information which I have is that from 1962 to 1967 expenditures under the International Travel Act amounted to about $15 million. Secretary FoWLER. That is correct. Mr. BYRNES. Here is an agency that has been set up and going since 1961, but now all of a sudden we have this task force with 12 specialized divisions-12 working parties—and now they are going to present us with reports next month on what we ought to do in this area. Hasn't this agency that we created n 1961 and whch has spent $15 million come up with anything? Secretary FOWLER. Yes. I think it has had some very productive results, and I think that there is reason to be encouraged that we can do effective work in promoting foreign tourism in the United States, and I think that the figures on the increases in the amount of foreign travel in the United States during this period indicate that it is a promising field, one that really calls for a substantial intensification of efforts both on the part of the Government and the private sector concerned. In other words, it is a productive field with lots of promise. |