particular companies have been approached, care is taken to assure that at least a few other concerns have the information in order to avoid any embarrassment from appearing to favor a single company. Also the embassy staffs, including commercial attachés in the field, pass along specific investment information to interested American businessmen who are traveling in their area. On occasion, Commerce officials have been visited by foreign businessmen seeking sources of capital or a continuing business relationship. The response has been to set up conferences with interested Americans, usually arranged through the Commerce field offices in that part of the United States where there is likely to be some interest. The commodity experts on the domestic side of Commerce are frequently brought in to such consultations and their industry contacts generally play a part.

The Foreign Commerce Weekly, published and sold by Commerce, contains thumbnail identifications of foreign business opportunities under the headings: (a) export opportunities, (b) import opportunities, (c) licensing opportunities, and (d) investment opportunities. The investment opportunities are reported after screening by the embassy staff in the country concerned. They are generally several months old at the time of publication.

5. Budget

All of the foregoing activities are apparently proceeding modestly for lack of funds. During the several years preceding FOA, funds were obtained from TCA appropriations for a part of these activities. At the moment, FOA and Commerce have been unable to agree on their respective responsibilities in the investment activities field, and FOA is currently suspending fiscal contributions which it formerly made to support the function. Commerce requested sufficient funds from Congress this year to carry on more active efforts in the foreign investment field but failed to obtain them.

C. Proposed International Finance Corporation

In his messsage to Congress concerning foreign economic policy on January 10, the President said in respect to the proposed International Finance Corporation:

As a further step to stimulate investment abroad, I recommend approval by the Congress at the appropriate time of membership in the proposed International Finance Corporation, which will be affiliated with the International Bank for Reconstruction and Development. This corporation will be designed to increase private investment in less developed countries by making loans without Government guarantees. Although the corporation will not purchase stock, it will provide venture capital through investing in debentures and similar obligations. Its operation will cover a field not dealt with by an existing institution.

This proposal originated in a report in March 1951 of the International Development Advisory Board, a body appointed by President Truman and headed by Nelson Rockefeller. The main purpose of the original proposal was to promote economic development by channeling private capital to productive investment in underdeveloped countries, both through equity participation and by means of direct loans to private enterprises for development purposes without Government guarantees. The International Bank is now prevented by its statutes from taking such measures.

On November 11, 1954, Secretary Humphrey stated that the administration would ask congressional approval for United States participation in a proposed International Finance Corporation which would be organized as an affiliate of the International Bank. The Corporation would be an inter-governmental body created by agreement open to signature by any member of the International Bank. Its initial capital would be provided by member countries through subscription to its stock, but would be empowered to sell its obligations and its portfolio securities in private capital markets to raise additional funds. Its authorized capital would be $100 million. The subscription of each member country would be in relation to its stock in the International Bank. The United States subscription would be approximately $35 million. IFC's charter would not come into effect until $75 million had been subscribed by 30 countries. The proposed organization would not directly provide equity financing.

In discussing the proposal at the United Nations, the U. K. delegate pointed out that while attraction of private capital is one of the proposal's main aims, private capital can only be attracted ultimately by appropriate internal policies of the governments concerned. While the proposed IFC may have a valuable function as a channel for conveying private capital to countries in need of it, it will not direct capital to any particular area unless there is a sense of confidence, stability, and fair treatment of the investors.

When put to a vote, a draft resolution concerning the proposal passed the Economic Committee of the U. N. by a vote of 44 to 0, with 5 abstentions (the Soviet bloc). At the plenary session of the U. N. on December 11, 1954, the resolution was approved 50 to 0, with only the 5 Soviet-bloc members abstaining.

Further action by the United States depends on the will of Congress before which the matter now rests.

III. Questions for Consideration

The foregoing discussion of our public lending activities, and the encouragement of private investment abroad, give rise to several general questions of public policy, and to several further questions which relate to the responsibilities and operations of the FOA, the ExportImport Bank, and the Department of Commerce.

A. General Questions

Several important general questions of public policy emerge from the field as a whole. These are:

(1) Should we continue our Government program of investment guaranties? Has the function been justified by results to date? If generally justified, should it be continued on a broader more restricted scale?

(2) Should we continue our policy of making loans which are repayable in the local currencies of the borrowing countries?

(3) Should we take special steps to foster the international flow of portfolio capital?

B. Questions Concerning FOA Operations

1. FOA Lending Activities

(a) Is there any need for such an organization as the FOA to play a major part in the development of loan policy, or in applying it to economic assistance?

(b) Should foreign currencies deriving from surplus sales be used for development banks?

(c) What should be the relation of any future management for economic aid to the Export-Import Bank?

2. FOA Activities To Encourage Private Investment Abroad

(a) Why is a special agency needed to publicize economic opportunities abroad when other agencies of Government are in the field that bear statutory responsibilities to discharge the functions of commercial intelligence and calling the attention of United States citizens to such opportunities?

(b) How can we avoid discrimination among business firms in the United States, while maintaining an effective and limited program of informing them of investment opportunities abroad?

C. Export-Import Bank Lending Activities

It is assumed, as a matter of general principle, that only United States security or defense objectives should justify financing foreign economic development at the American taxpayer's expense. Expressions of the administration's position over the last 3 years, particularly to Congress, have been in line with this principle. The main qualification has been that

(1) The defense-security objective has been given a broad meaning, including economic and social stability in key areas (Iran, India, Pakistan, Egypt, Guatemala, etc.); and

(2) Foreign economic development has been financed on a loan basis through the Export-Import Bank without any clearly expressed defense or security justification.

Application of this principle to the lending activities of the Export-Import Bank raises certain questions. There are other fundamental questions about Government lending which should also be considered, including the extent to which United States objectives can be met by relying on the International Bank's lending activities, and the desirability of using loans rather than grants to finance aid programs essential for United States security in countries not qualifying for Export-Import Bank loans (e. g., Formosa).

The questions are these:

1. Is there a place for loans justified primarily by the objective of maintaining or expanding world trade and economic development, as distinct from security-defense objectives?

(a) Are such loans justified by the interests of that segment. of the United States economy (and taxes derived therefrom), which has grown dependent on foreign markets during the last 15 years of high United States Government expenditures abroad?

(b) Is the United States' stake in a stable world economy such that dollar credit facilities must be provided by the Government on a minimal, selective basis until conditions at home and abroad permit private United States lenders to step in?

(c) Is the answer affected by prospects for the bank to continue its consistent record of profitable operations and, if so, what are those prospects?

(d) Can it be assumed that the bank's activities are, or can be, so administered as to stimulate the investment of private loan