EFFORTS TO DEVELOP A UNITED STATES POLICY
   REGARDING THE BALANCE-OF-PAYMENTS PROBLEM
   ("THE DOLLAR GAP"); THE GORDON GRAY REPORT
   TO THE PRESIDENT ON FOREIGN ECONOMIC POLICIES
 Department of State Committee Files, Lot 122, Box 15559
 Background Memorandum on the Dollar Gap Question, Prepared in
                      the Executive Secretariat '

 SECRET
 Background
   The estimated 1949 trade figures of the United States show a gap
 between imports and exports of $5.3 billion. The problem of this
 dollar gap is: As ERP is reduced, and after its termination in 1952,
 how can Europe and other areas of the world obtain the dollars neces-
 sary to pay for the high level of U.S. exports which is essential both
 to their own basic needs and to the well-being of the U.S. economy?
 There has been widespread feeling in the Department that the solu-
 tion of this dollar gap problem will necessitate a comprehensive rather
 than a piece-meal approach.to the many specific commercial and finan-
 cial policy issues involved in increasing the dollar earnings of other
 countries. It is believed that to achieve this comprehensiveness, White
 House direction and coordination are required.
 Status
   1. Substantive
   Last December E and S/P prepared a paper on the dollar gap
 problem which was considered at the Under Secretary's Meeting on
 December 12 and was revised and approved by the Secretary shortly
 thereafter.2 There are no further substantive developments to report
 except that the Department's officials are continuing their efforts to
 implement a consistent economic foreign policy on many individual
 battlegrounds (petroleum, European trade liberalization, import

 This document is dated February 21, 1950, but is inserted ahead of the two
 that follow, which are of earlier date, for general background.
 There welre two papers originally, the basic one being a study prepared
in the
 Bureau of Economic Affairs (E) and submitted to the Under Secretary's meeting
for discussion by Willard L. Thorp, Assistant Secretary of State for Economic
Affairs. (S/S Doe. UM D-70, December 8, 1949, Executive Secretariat Files,
Lot
53D250; the record of the Under Secretary's meeting on December 12 is found
in
this same group.)
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