840 FOREIGN RELATIONS, 1950, VOLUME I

objectives if directed toward removing obstacles to, and encouraging
the development of, multilateral trade and exchange convertibility.

6. The need for extraordinary assistance. will be further lessened
if our economic programs are successful in expanding world trade.
On the other hand, it is clear that a low level of United States foreign
trade and investments would put additional strains upon foreign
countries which would be so dangerous to our political and security
interests as to necessitate additional foreign assistance programs.
Much would depend upon the country distribution of our imports and
exports, but in the case of a reduction in trade, those countries which
constitute the hard-core of foreign assistance programs would prob-
ably need some further assistance, and additional countries would be
unable to sustain tolerable levels of economic activity without assist-
ance as well. On the other hand, if United States foreign trade and
investments were to rise to substantially new levels, the needs of even
the special hard-core cases would undoubtedly be reduced.

7. In addition, if there should be further deterioration of relations
with the Soviet bloc, this would probably necessitate larger foreign
assistance programs than otherwise. A substantial amount ‘of the con-
templated hard-core assistance requirements is attributable in part to
the inability of various countries (e.g., Austria, Western Germany,
Japan and Korea) to re-establish normal economic trading relation-.
ships with areas under Soviet domination. Should the Soviet bloc
bring concerted economic pressure upon these and other countries,
their trading position with the Soviet bloc would become dangerously
weak unless they could look to some alternative source of supply and
financing.

8. Public and private investment can scarcely | be , expected to make
up for the probable reduction in extraordinary financial assistance.
Private investment cannot be revived to the necessary scale rapidly
enough even though substantial progress may be made in removing
existing obstacles to investment. Loans from public funds, although
they may be expected to continue on a substantial scale, must be re-
lated to soundly-conceived projects and kept within the capacity of
foreign countries to service. Normally, capital flow tends to increase
the element of capital goods in the commodity export total, and is not,
therefore, a gross offset against whatever trade deficit may already
exist. Nevertheless, because of the priority given to capital goods by
many countries, an increase in foreign investment at the present time
would contribute substantially to supporting the export level, making
possible the release of foreign exchange of the capital importing
countries for : consumption imports.

9. An increase in United States imports of gold would be undesir-
able because foreign gold and dollar reserves are at dangerously low