FOREIGN ECONOMIC AND COMMERCIAL POLICY


835


  and services will remain. The countries of the free world will still
  require from us a volume of exports which they will not be able to pay
  for if -their exports to the United States remain at present levels. Put
  in its simplest terms, the problem is this: as ERP is reduced, and after
  its termination in 1952, how can Europe and other areas of the world
  obtain the dollars necessary to pay for a high level of United States
  exports, which is essential both to their own basic needs and to the
  well-being of the United States economy ? This is the problem of the
  "dollar gap" in world trade.
  In answering this problem basic policy decisions will be required
  with reference to:
  1) The level of American exports which we regard as vital to our
  political, economic and security interests.
  2) The degree to which the United States should be prepared to
  increase its imports of goods and services.
  3) The role of foreign assistance.
  4) The contribution of public and private foreign investment to
  the foreign trade problem.
  The economic strength of the free nations of the world, and the
  preservation of their hope for economic progress, are among the
  strongest forces that can be brought to bear against Soviet communist
  aggression. Our present economic policies are designed in the long
  run to build this strength and provide this hope. Existing plans are
  inadequate to meet the needs of the present situation. If nothing else
  is done, the efforts being made through the United Nations, the North
  Atlantic Pact, European Recovery Program,2 Point Four and the ITO
  will be jeopardized. The political consequence will be a substantial
  shift of power from the democratic to the Soviet sphere. This possi,-
  bility gives real urgency to the problem of the dollar gap.
  I suggest, therefore, that the Administration needs soon to affirm
that the importance to the United States of a successful economic
system among the free nations is so great that the United States is
determined to do its full part to achieve it--even if this involves
adjustments and sacrifices by particular economic groups in the
United States in the interest of the nation as a whole-even if it
requires some modification of current domestic policies-and even
if it requires more time than was orginally contemplated by the
Foreign Assistance Act of 1948. The imagination and energy with
which the United States develops and carries through a program of
action will stem directly from this affirmation and determination.
  I believe that the new pattern of our economic relations must be
developed before the end of the ERP period. The immediate neces-
sity is the determination of the broad lines of policy, the develop-
  2Doumentation on these mat-ters is f4und in the relevant volumes of this
series.