FOREIGN RELATIONS, 19 5 0, VOLUME I


Department of State Committee Files, Lot 122, Box 15559
     Memorandunm by the Secretary of State to the President'

CONFIDENTIAL                      [WASHINGTON,] February 16, 1950.
  The problem I should like to submit for your consideration is how
to develop an Administration policy and program for adjusting the
balance of payments of the United States.
  The time is rapidly approaching when the Government and the
people of the United States must make critical and far-reaching
decisions of policy affecting our economic relationships with the rest
of the world.
   These decisions have to do with the future course of zthe foreign
trade and financial transactions of the United States. The specific
problems involved are economic, but the broad policy decisions as to
the directions in which their solution should be sought, and the speed
with which we act on these decisions, will affect the political and
security interests of the United States throughout the world as well
as our domestic prosperity.
   It is the understanding of Congress and the people that the
 European Recovery Program will be brought to a close in 1952. It
 is expected that unless vigorous steps are taken, the reduction and
 eventual termination of extraordinary foreign assistance in accord-
 ance with present plans will create economic problems at home and
 abroad of increasing severity. If this is allowed to happen, United
 States exports, including the key commodities on which our most
 efficient agricultural and manufacturing industries are heavily depend-
 ent, will be sharply reduced, with serious repercussions on our domestic
 economy. European countries, and friendly areas in the Far East
 and elsewhere, will be unable to obtain basic necessities which we now
 supply, to an extent that will threaten their political stability.
   We are now exporting about $16 billions of goods and services. We
 are importing only $10 billions of goods and services. Of the differ-
 ence of about $6 billions, $5 billions is being paid for by foreign as-
 sistance. In short, about a third of our exports is being financed by
 grants. At the end of ERP, European production will have been re-
 stored and substantial recovery achieved. This will be a tremendous
 accomplishment. But the problem of payment for American goods
    I Signed on February 16 by Secretary Acheson and transmitted to the President
  via the Director ,of the Bureau of the Budget on February 21. in his memorandum
  of February 20 to the Budget Director (Pace), the Secretary of State said:
    "I attach herewith a memorandum for the President proposing an Adminis-
  tration program for adjusting the balance of payments of the United States.
    "I have discussed this memorandum with the Secretary of the Treasury
who
  has indicated his concurrence and with the President who asked that it
be
  submitted to him through you." (Lot 122, Box 15559, "DDG Working
Papers",
  Doe. DDG D-2, March 7, 1950)


834