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Department of State bulletin (Volume v. 22, Apr- Jun 1950) online

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a better job done in a particular country.

Finally, there is the general problem of recruit-
ing capable and effective personnel. This means
individuals possessing not only the necessary tech-
nical competence but the personal qualifications
necessary for doing this kind of work in the for-



May 1, 7950



679



eign field. This will be the principal problem
that will have to be met by both the United Na-
tions and United States agencies. From the point
of view of this general problem, it would appear
that the United Nations has a certain advantage in
view of the fact that it will be in a position to
draw upon experts from all parts of the world,
while United States bilateral operations will rely
predominantly, if not entirely, on United States
citizens. On the other hand, the United States bi-
lateral operations may be benefited by the fact
that there is a tremendous variety of technical
expertness in United States Government and
United States private organizations which can be
drawn upon for such bilateral projects.

BILATERAL EXAMPLES

So much for a brief survey of the principal prob-
lems that are likely to be encountered. I should
like now to turn to a discussion of the kind of
results that may be expected in the carrying out
of this program. Fortunately, this is not entirely
a matter of guesswork. The United States Gov-
ernment has had considerable experience in Latin
America with bilateral technical cooperation proj-
ects which gives us a very good idea of the kind
of results that can be obtained.

Mexican Corn Commission. — I should like to
start first with a project with which I happen to
be most familiar. And one wliich, incidentally,
does not involve directly either the United States
Government or the United Nations. This is a
cooperative project between the Rockefeller Foun-
dation and the Mexican Department of Agricul-
ture for the selection and breeding of better seed
corn with special emphasis on hybrid seed. This
project has been going on in Mexico for 8 Or 9
years. It has involved a tremendous amount of
work in the field of seed selection and breeding.
It has achieved practical results in producing
seed that yields substantially more per acre than
the indigenous varieties. It has also involved the
establishment of a new governmental organization
in Mexico — the Comision del Maiz or Corn Com-
mission — which has the responsibility for distrib-
uting to the farmers the seed which has been
produced by the technicians of the Rockefeller
Foundation. Technicians are also working on im-
proved seed for wheat and beans and are well on
the way to the development of a first-class agri-
cultural experiment station associated with the
principal agricultural college of Mexico. At pres-
ent, farmers throughout the higher zones in Mexico
are beginning to receive and to use these improved
seeds, and definite results are appearing in the
form of much higher yields. Beyond that I think
it is significant that the Corn Commission is mak-
ing an effective start toward the development in
Mexico of an agricultural extension service, be-
cause the work done by the Commission deals not
only with distribution of seed but also gives farm-



ers advice as to cultural practices and as to disease
and pest control.

Sanitation for Chile. — An excellent example of
wholly bilateral technical cooperation with an-
other government is the sanitation work carried
on by the Institute of Inter-American Affairs in
South America. A good water supply and sani-
tary sewage system are, of course, particularly J
important for sound health and human efhciency. \
Yet, even in North Santiago, Chile, a section of
the city with 200,000 people has been without
adequate sanitation. Most of those in this section
are workers who have suffered from disease and
malnutrition.

In 1944, the Institute and the Chilean Depart-
ment of Public Works began to construct a sewage
system here. The total cost of the project will be
some 60 million pesos, more than half furnished
by the Chilean Government. It will involve about
144 miles of sewers with 27 miles of house connec-
tions. It is being built in four sections. When
completed it will not only improve living condi-
tions of the people but will also redeem a large
area for industrial purposes, as well as reclaim
100,000 acres for gardens and vegetable growing
which contamination of the irrigation water has
hitherto made worthless.

Incidentally, upon completion of one of the sys-
tem's sections not long ago, the people arranged a
popular demonstration without consulting their
own government or our Embassy. They erected
a stone monument with a marble inset explaining
their debt to the United States. A demonstrative
crowd then held an impressive ceremony at which
military bands played and a lai'ge Chilean choir
sang the Star Spangled Banner in perfect English.
In other words, these people understood the bene-
fits which can be obtained when democratic nations
work together.

Cuban Agriculture. — Turning again to the field
of agriculture, an excellent example of effective
technical cooperation is found in the work started
7 years ago in a cooperative project between the
United States Department of Agriculture and the
Government of Cuba to develop a new fiber which
could be used as a substitute for jute in the manu-
facture of bagging.

The fiber is called kenaf. In the beginning, the
work was done very largely by two technicians
sent to Cuba by the Department of Agriculture
together with the assistants assigned by the Cuban
Government, but, over the 7 j^ears, the project has
attracted the attention and cooperation of an
American machinery manufacturer, a trade asso-
ciation, and the University of Florida. All of
these working together have achieved practical
results. Last year, several commercial producers
planted about 1,000 acres of kenaf in Cuba. Since
the kenaf growing season is the slack sugar season
it fits very well into the Cuban economy, providing
employment for workers in a season when they
otherwise have little to do. The development of



680



Department of State Bulletin



this fiber has ah-eady spread to El Salvador on a
coninunria! basis and is being tried experimen-
tally in the Republic of Haiti.

I could go on to describe other illustrations of
cooperation in agricultural experiment stations, of
cooi)eration in geological anil minin"; surveys, of
cooperation in the clevelopment of fisheries, and
in other fields. In all of these cases, concrete and
beneficial results have been achieved. The best
indication of this, it seems to me, lies in the fact
tliat the countries concerned have been paying a
steadily increasing share of the expense of this
technical work them.'^elves.

On the basis of this not inconsiderable experi-
ence in Latin America, I venture to draw certain
basic conclusions. In the first place, in order to
achieve results of a practical nature, long-term
effort is needed and by long-term I mean periods
ranging upward from 2 years. In the second
[)lace, it is necessary, if our objective is to be
acliieved, to secure tlie enthusiastic cooperation of
the governments in the countries in which techni-
cal cooperation projects are attempted. AVe must
not lose sight of the fact that the basic aim is to
help others to help themselves. This means that
we must work toward the development of technical



and administrative competence in the citizens of
these countries so that they can carry on (he work
after the foreign technicians leave. In this con-
nection, the sending of trainees to the United
States and to other more developed countries, as
is contemplated in both the United Nations and
United States programs, will prove very impor-
tant. Finally, and perhaps most important of all,
it is essential to secure capable, persevei'iiig experts
who arc temperamentally suited for work in these
underdeveloped countries and who are willing to
work steadily and patiently in not too favorable
environments to get their individual jobs done.
Gencial surveys and short-term visits of liighly
specialized experts may be very useful in getting
particular projects started and in filling in gaps
in technical "know-how" as they appear as the
work develops. But the real results depend on
steady long-term hard work of foreign technicians
in the field.

Indeed, if we get that kind of technicians, we
will get the necessary cooperation of the govern-
ments, and, slowly but surely, the great ideal ex-
pressed in the fourth point of President Truman's
inaugural address will, in fact, be realized on a
workl-wide basis.



The Proposed European Payments Union ^



1. The Use of European Resources
and Intra-European Trade

One of the urgent problems that confronted the
EGA at the very beginning of the jNIarshall Plan
in the summer of 19i8 was that of freeing trade
among the participating countries from the many
restrictions, especially exchange controls of vari-
ous forms, that were strangling it. Only through
an expanded trade could the Europeans make the
fullest possible use of their resoui'ces by supplying
one another with the goods and services they could
produce. Clearly, the moi'e use the Europeans
could make of their own resources the more rapid
could be the pace of recovery and the lighter would
be the burden on the United States.

The most severe restrictions on trade among the
Western European countries grew out of the dol-
lar shortage. Any European country which buys
more from one of its neighbors than it is able to
sell to that neighbor has to find some way of pay-
ing for the difference. Prior to the European Re-
covery Program, this usually meant a payment in
gold or dollars. Practicallj' every country was

' S. Doc. 144, 81st Cong., 2d sess., pp. 1-5.



reluctant to pay out dollars in order to make pur-
chases in Europe and other soft-currency areas.
The result was a general tendency to restrict im-
ports by imposing exchange controls and quantita-
tive restrictions on trade.

For instance, Belgium has traditionally been an
exporter of steel; Greece and Norway have to
import it. Yet, Greece cannot sell enough olive
oil, tobacco, and fruit to Belgium; and Norway
cannot sell enough fish, lumber, and paper pulp to
pay for the steel and all the other goods it wishes
to buy in Belgium. Therefore, under the condi-
tions prevailing at the beginning of the Marshall
Plan, these two countries might have had to use
their EGA aid to buy steel in the United States
at a time when the steel could have been produced
in Europe. Obviously, this would have increased
tlie cost of the recovery progi-am. The only other
coiirse that the Greeks and Norwegians might have
followed was that of restricting the importation
of most goods from Belgium so as to save their
earnings of Belgian currency for such highly es-
sential items as steel. Either way, European trade
was stifled, European resources were not put to
their best uses and recovery was impeded.

Given the nature of this situation, the quickest



May 1, 1950



681



way to stimulate an expansion of European trade
and, thus, a fuller use of European resources was
to provide the means whereby any participating
country could pay for the excess of its purchases
from its neighbors over its sales to the same
neighbors.

2. Offshore Purchases

The first device that was employed to accom-
plish this purpose was to allow each participating
country to use its EGA dollars to buy goods in
other participating countries. To use the previous
example, Greece and Norway would pay for as
large a part as possible of their purchases in Bel-
gium with their own earnings of Belgian francs.
The balance of their purchases they would pay for
with EGA dollars. The dollars that the Belgians
earned from their neighbors in this fashion could
then be used to finance imports into Belgium from
the dollar area. In this way, these dollars were
used twice: once to finance purchases in Belgium
by other European countries and a second time to
help cover Belgium's dollar deficit. Since the dol-
lars would otherwise have gone directly to Belgium
for the latter purposes, there was, of course, no in-
crease in the amount of aid required.

Offshore purchases with EGA dollars were an
effective emergency method of preventing the
further shrinkage of European trade. But this
method had disadvantages. The fact that EGA
dollars could be used in this fashion led more and
more sellers, often with the support of their gov-
ernments, to insist on payment in dollars. In this
way the countries tried to earn dollars from one
another. Often prices quoted in dollar transac-
tions were lower than the prices asked for the same
goods by the same seller when they were sold for
European currencies. If long continued, there-
fore, this practice would have disrupted trade
in Europe, even though, initially, it acted as a
stimulant.

3. The Intra-European Payments Plan

In September 1948, therefore, a second and more
effective arrangement was devised which was
called the Intra-European Payments Plan. Its
basic principle is simple. A part of the EGA dol-
lar aid to each creditor country, which it needs to
pay for its necessary imports from the dollar area,
is given only on condition that the recipient coun-
try extend grants-in-aid of the same amount in its
own currency to the other participating countries
with which it has a trade surplus. (This part of
tlie aid is called conditional aid.) In this way, the
debtor country receives a grant, which is called
a drawing right, in the currency of each country
with which it has a trade deficit. Stated in terms
of the earlier example, Belgium receives EGA dol-
lar financing (as conditional aid) to pay for goods
and services from the United States and elsewhere
in the dollar area on condition that it make a grant



of Belgium francs to Greece with which Greece
can buy steel in Belgium.

The Intra-European Payments Plan has made
a major contribution toward the freeing of Euro-
pean trade and, consequently, the better use of
European resources. By financing trade deficits,
it has removed, or weakened, the incentive of each
country to husband its, dollars, or to earn dollars
from its neighbors, by restricting its imports from
them. But it is based on a series of bilateral ar-
rangements between pairs of countries. The draw-
ing rights that Belgium gives Greece can (except
for a small portion) be used only in Belgium.
Greece cannot shop around and buy its steel in the
cheapest market in Europe. Moreover, the present
payments plan does not furnish enough stimulus
to the individual countries to bring their trade into
balance. Accordingly, it is time to take a further
step through the creation of a European Payments
Union which will make European currencies freely
convertible into one another (for current as dis-
tinguished from capital transactions) and thus
facilitate a further dismantling of restrictions on
trade among the participating countries.

4. European Payments Union

The fundamentals of the proposed Payments
Union are similar to those of the present payments
plan but the mechanics of the operation will be
quite different. The Payments Union will not be
a device for underwriting EurojDean currencies or
protecting overvalued currencies. Its basic func-
tion, like that of the present payments plan and
the earlier offshore purchases, will be to provide
the means whereby a debtor counti-y can cover
the deficit in its trade with its neighbors without
having to make full payment in gold or dollars.
Europe's internal trade is not yet in balance.
Some countries still have to buy more from their
neighbors than they sell to them. These countries
must still have help in financing their trade deficits
if they are to feel free to eliminate trade restric-
tions.

The operation of the Payments Union will not
change either the amount of aid needed, or the pur-
poses for which EGA dollars are ultimately used
by the Europeans. The EGA dollars which are
used to support its operations (and which corre-
spond to the conditional aid of the Intra-European
Payments Plan) will find their way to the countries
that turn out to be creditors in their trade with
the rest of Western Europe to be used by those
countries to buy the goods and services they must
have from the dollar area. The only difference is
that, under the proposed amendment, assistance
may be furnished to the participating countries
indirectly thi'ough the Payments Union and may
be in the form of dollars not eai'marked for the
purchase by the recipient country of pai'ticular
goods and services.

This new Payments Union will be an improve-



682



Department of State Bulletin



ment over the old Intra-European Payments Plan
in two important respects.

The first is tliat it will permit trade to bo con-
ducted within Europe on a truly multilateral basis.
The Payments Union will be, in effect, a clearing
house of which all the central banks of the partici-
pating countries will be members and through
which they will be able to settle their accounts with
one another. Even at the present time, indiviilual
private transactions between the citizens of any
two countries are offset against one another by
their two central banks so that only a single pay-
ment from one to the other is necessary. In the
Payments Union this clearing house operation will
be carried a step further. Each country's deficits
with some of its neighbors will be ofliset against
its surpluses with others so that only a single net
settlement between its central bank and the clear-
ing house will be necessary. In this way an enor-
mous volume of transactions can be handled with
minimum payments between countries.

The financing of trade deficits through the Pay-
ments Union will also be done entirely on a multi-
lateral basis. A countrj' that is a debtor in its
trade with other European countries, instead of
receiving drawing rights consisting of fixed
amounts of the currencies of each of its prospective
creditors (as in the present plan), will have the
right to draw upon the central clearing house for
any European currency it needs to make purchases
from its neighbors. There will, of course, be a
limit to the total amount a country may borrow in
all currencies. A creditor country, instead of sup-
plying drawing rights consisting of fixed amounts
of its own currency directly to various prospective
debtor countries, will provide its own currency to
the clearing house as needed, up to a stated limit.
To refer once more to the earlier example, Greece
will be able to choose freely whether it will draw
on the clearing house for Belgian francs to buy
its steel in Belgium, or in German marks to buy
its steel in Germany, or in pounds sterling to
buy its steel in Britain.

In such a completely flexible system, it will be
impossible to predict in advance the exact amount
that any particular debtor country will need to
obtain from the Payments Union or that any par-
ticular creditor will need to furnish to it. There-
fore, it will not be possible to allocate in advance
a definite sum of EGA conditional aid to each
country that will be a creditor. Instead, dollars
can be paid to the creditor country only when it
actually has to supply its own currency to the
clearing house. Thus neither the countries that
will ultimately receive these dollars, nor the
amounts they will receive, nor the time during the
year when the payments will be made, can be
accurately foreseen. It is proposed, therefore,
that a considerable part of the EGA funds re-
quired for the financing of European trade deficits



be granted as aid to the Payments Union and, in
effect, earned from the clearing house by the
creditor countries. It is for this reason that the
EGA seeks tlie authority to furnish a part of the
aid to Europe next year by means of the transfer
of dollars through a central institution of this
character.

The second major change and improvement in
the new Payments Union (as compared with the
present payments plan) is that the trade deficits
that develop among the European countries will
be paid for only partly with EGA aid in the man-
ner just described. The balance will be paid for
partly out of the dollar resources of the countries
themselves and partly out of funds loaned to the
Payments Union by the creditors without any
relation to EGA aid.

Whenever a country turns out to be a debtor —
that is, whenever it buys more from its neighbors
than it sells to them — it will have to meet part of
the deficit thus incurred by the payment of its own
gold or dollars to the Payments Union (unless its
deficit is held within fixed limits or is of a purely
seasonal chai-acter). Whenever a country turns
out to be a creditor — that is, when it sells more
to its neighbors than it buys from them — it will
receive payment to cover this trading surplus only
partly in gold or dollars. The balance due will
remain simply as a debt in European currencies
owed to the creditor country by the clearing house.

The advantage of requiring debtors to make part
payment in gold or dollars and creditors to finance
a part of their exports with loans is that the Euro-
pean countries are in this way given a strong
incentive to bring their trade into a reasonable
balance. The debtor's obligation to cover a part
of its trade deficit in hard money gives it an incen-
tive to reduce the size of its trade deficit. Likewise
the creditor, having to finance a part of its export
surplus by exetnding credits will be more willing
to import from its neighbors and thus bring its
trade more nearly into balance. It is in this way
that the operation of the Payments Union will
help to cure the disease and not merely to alleviate
its symptoms.

Moreover, a payments union that operates in
this manner can j^repare the way for the end of
EGA aid. By 1952 the trade surpluses and deficits
among the European countries will have to be
small enough to be financed entirely by a combi-
nation of credits and gold and dollar payments
through a central institution without the help of
any EGA funds. The establishment of the Pay-
ments Union is a significant step in this direction.
After its first year of operation, it can be modified
in such a way as to reduce its dependence on EGA
funds. We hope that, by the end of the ERP, it
can operate as an independent institution financed
entirely out of European resources.



May 1, 1950



683



U.S. Closes Information Libraries in Czechoslovakia



U.S. ASKS CZECHOSLOVAKIA
TO CLOSE CHICAGO CONSULATE



[Released to the press April 21]



STATEMENT BY SECRETARY ACHESON

Our notes, together with Miss Kosinak's affi-
davit, speak for themselves, and I have only one
thing to add to them : That is, to observe that so
far as broadcasts to the Soviet orbit are concerned,
the Voice of America and, indeed, the informa-
tion distributed by USIE in Czechoslovakia serve
only as the channels through which the American
people and their Government speak to the peoples
in that area.

In fulfilling this mission, the Voice of America
and USIE agencies in Czechoslovakia carry those
news reports and editorial comments available to
any citizen of a free country.

If free information becomes dangerous to a
totalitarian regime, it is not the fault of the
United States nor of the USIE, but of the regime
itself. The quarrel of the Czechoslovak Govern-
ment, therefore, is not with the Voice of America
nor with the USIE. Its quarrel is with the truth.

U.S. NOTES TO CZECHOSLOVAKIA

Text of a note transmitted today hy the American
A7nbassador in Praha to the Czechoslovak Ministry of
Foreign Affairs and subsequently released to the press
in Praha. The same communication has also been traus-
mitted to the Czechoslovak Embassy in Washington.

The American Embassy presents its compli-
ments to the Czechoslovak Ministry of Foreign
Affaii-s and has the honor to refer to its note dated
April 19, 1950 demanding that the United States
Information Service libraries of the Embassy in
Praha and the Consulate General in Bratislava be
closed immediately and that the United States
press attache, Joseph C. Kolarek, be recalled.

The United States Govermnent considers the
demand for the closing of the United States In-
formation Service libraries and the recall of the
United States press attache as utterly unwarranted
and based on demonstrably untrue charges. These
offices of the Embassy and Consulate (ieneral have
confined their cultural and information activities



Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 22, Apr- Jun 1950) → online text (page 35 of 116)