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Department of State bulletin (Volume v. 56, Jan- Mar 1967) online

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on Foreign Relations, New York, N. Y.

Mrs. Miriam Camps, Council on Foreign Relations,
New York, N. Y.

Melvin Conant, Government Relations Department,
Standard Oil Company, New York, N. Y.

Harold C. Deutsch, professor of history. University
of Minnesota, Minneapolis, Minn.

William Diebold, Jr., senior research fellow, Council
on Foreign Relations, New York, N. Y.

Merle Fainsod, professor of history and political sci-
ence. Harvard University, Cambridge, Mass.

Werner B. Feld, chairman, Department of Govern-
ment, Louisiana State University, New Orleans,
La.

William E. Griffith, professor of political science.
Center for International Studies, Massachusetts
Institute of Technology, Cambridge, Mass.

Ernest B. Haas, professor of international law and
organization. University of California, Berkeley,
Calif.

Henry A. Kissinger, associate professor of govern-
ment, Center for International Affairs, Harvard
University, Cambridge, Mass.

Philip E. Mosely, director, European Institute, Co-
lumbia University, New York, N. Y.

Robert Osgood, director, Washington Center of For-
eign Policy Research, Washington, D. C.

Thomas C. Schelling, professor of economics, Center
for International Affairs, Harvard University,
Cambridge, Mass.

Warner R. Schilling, acting director. Institute of
War and Peace Studies, Columbia University,
New York, N. Y.

Paul Seabury, provost. College IV, University of
California, Santa Cruz, Calif.

Marshall D. Shulman, professor of international
politics, Fletcher School of Law and Diplomacy,
Tufts University, Medford, Mass.

Eric Stein, professor of law, University of Michigan
Law School, Ann Arbor, Mich.

Shepard Stone, director, International Affairs Pro-
gram, The Ford Foundation, New York, N. Y.

Raymond Vernon, director. Center for International
Affairs, Harvard University, Cambridge, Mass.



Congressional Documents
Relating to Foreign Policy

89th Congress, 2d Session

News Policies in Vietnam. Hearings before the Sen-
ate Committee on Foreign Relations. August 17-
31, 1966. 161 pp. [Committee print.]

Communist Threat to the United States Through
the Caribbean. Hearings before the Subcommittee
to Investigate the Administration of the Internal
Security Act and Other Internal Security Laws
of the Senate Committee on the Judiciary. Septem-
ber 13-15, 1966. 42 pp. [Committee print]

Florence Agreement Implementation Legislation.
Hearings before the Senate Committee on Finance
on H.R. 8664. September 30, 1966. 87 pp. [Com-
mittee print.]

An Investigation of the U.S. Economic and Military
Assistance Programs in Vietnam. Forty-second
report by the Committee on Government Opera-
tions. H. Rept. 2257. October 12, 1966. 133 pp.

International Education Act of 1966. Report to ac-
company H.R. 14643. S. Rept. 1715. October 12,
1966. 21 pp.

Fur Seal Act of 1966. Conference report to accom-
pany S.2102. H. Rept. 2274. October 13, 1966.
4 pp.

Tariff Classification of Chinese Gooseberries. Report
to accompany H.R. 16160. H. Rept. 2282. October
14, 1966. 2 pp.

Temporary Suspension of Duty on Certain Television
and Radio Receiving Tubes. Report to accompany
H.R. 16092. October 14, 1966. 3 pp.

Safety of Life at Sea. Conference report to accom-
pany H.R. 10327. H. Rept. 2285. October 14, 1966.
8 pp.

Report of the Ninth Meeting of the Canada-United
States Interparliamentary Group, May 18-22, 1966,
Washington, D.C., by Representative Cornelius E.
Gallagher, chairman of the House of Representa-
tives delegation. H. Rept. 2291. October 17, 1966.
16 pp.

Duty Treatment of Limestone for Cement. Report
to accompany H.R. 5950. H. Rept. 2293. October

17, 1966. 2 pp.

Duty Treatment of Dicyandiamide. Report to accom-
pany H.R. 16077. H. Rept. 2294. October 17, 1966.
2 pp.

Tariff Treatment of Certain Articles. Conference re-
port to accompany H.R. 11216. H. Rept. 2297.
October 17, 1966. 4 pp.

Duty on Certain Nonmalleable Iron Castings. Report
to accompany H.R. 13116. H. Rept. 2303. October

18, 1966. 4 pp.
Footl for Peace. Conference report to accompany

H.R. 14929. H. Rept. 2304. October 18, 1966. 22 pp.



18



DEPARTMENT OF STATE BULLETIN



INTERNATIONAL ORGANIZATIONS AND CONFERENCES



OECD Ministerial Council IVIeets at Paris



The Ministerial Council of the Organiza-
tion for Economic Cooperation and Develop-
ment met at Paris November 2i-25. Follow-
ing are three statements made by Eugene V.
Rostow, Under Secretary for Political Af-
fairs, who 7vas head of the U.S. delegation,
and the text of a commiinique issued at the
close of the meeting on November 25.



STATEMENT ON ECONOMIC POLICY,
NOVEMBER 24

I am pleased both personally and profes-
sionally that my first appearance at an inter-
national organization in my new post is at
this meeting of the OECD. We are happy as
a government to pay tribute to the OECD
on its fifth anniversary, which marks almost
20 years of constructive and sagacious work
by this agency and its predecessor.

I should like, if I may, to add a personal
tribute to what I have said oflicially. Every
student of economics and of international
affairs is in your debt for a solid and quiet
achievement, imaginative in its perspectives
and original in its intellectual strength. Your
studies and reports have been indispensable
tools of study and of action, both for gov-
ernments and international organizations
and for scholars in many fields all over the
world.

Those of you who have read President
Johnson's speech of October 7 ^ will appre-



'For text, see Bulletin of Oct. 24, 1966, p. 622.



ciate the importance our Government at-
taches to the future of the Atlantic relation-
ship. That speech announces a policy of
vigorous initiative in the many cooperative
programs which have done so much to vital-
ize the free world and knit it together.

If we look back to the bleak days of the
late forties, when this organization had its
beginnings, we can realize what stupendous
deeds have been accomplished. The economies
and societies of the free world have been
restored — indeed, more than restored, they
have been transformed. The nations repre-
sented here have never in their histories
known so long a period of sustained growth
nor a period so rich in progress toward social
justice. Their achievement is truly the great
social revolution of the 20th century, a revo-
lution accomplished peacefully and without
destructive conflict and one which dramati-
cally improved the welfare of all our peoples.

In this process the OECD has played a
significant part from the days when its pred-
ecessor helped to organize the eff"ort of the
Marshall Plan in ways which contributed to
the reconstruction both of national economies
and of the international economy which is
the decisive matrix of our respective national
economies.

If we look forward in the perspective of
this achievement, we can, I think, define one
of the vital functions which the OECD can
and should perform in guiding the relation-
ships between our national economies and the
international economy, from which they



[JANUARY 2, 1967



19



draw so much of their capacity for develop-
ment.

The decisive fact about our economic ex-
perience since 1945 is that each of us, in our
own ways, has created and mastered methods
for effectively managing our national eco-
nomic lives. We now take it for granted that
the great trade cycles of the past, the great
swings of unemployment and inflation, are
matters of economic history. It has been one
of the basic purposes of this organization to
help coordinate the policies of governments
and international agencies in this regard,
through the powerful influence of regular
consultations based on serious studies. We
take it for granted also that governments and
public agencies can and should anticipate the
future and help to direct flows of capital and
the development of crucial techniques. We
take it for granted that we should have poli-
cies directed at targets for growth, an inno-
vation in policy which this body has helped
to establish.

Some of the control measures developed in
this period have worked better than others.
Some are restrictive rather than expansive in
their effects. Many are incomplete or in need
of reform. For present purposes, the impor-
tant fact is that we have reason to be confi-
dent that our economic systems can be effec-
tively directed as systems and that we c?n
act effectively to improve and reform the
devices of guidance and control which we use
to manage different sectors of our economies,
and those economies viewed in their totality.
One of the shortcomings of the interna-
tional economy of the free world, as com-
pared with our several national economies, is
that we have not yet developed procedures of
international economic oversight as compre-
hensive and as effective as those used in na-
tional economic management. The OECD has
made an important and most useful begin-
ning in this regard. As we are all aware, one
of its great tasks for the future is to develop
this organization as an international coun-
cil of economic advice which could help na-
tional governments and other international
agencies of action to establish the policies



and programs we all need in order to main-
tain an international economy of wide hori-
zons through which mankind can be helped
to realize the potentials of modern technique
and to overcome the curse of poverty.

One of the major tools of economic man-
agement in all countries is that of the eco-
nomic review — ^the attempt to examine the
performance of the economy as a whole, and
the performance of its several parts and
sectors, in the light of our anticipations of
the future. With that thought in mind, I turn
now to the Secretary General's [Thorkil
Kristensen] excellent and candid annual re-
port to this Council, upon which he has just
commented.

U.S. Economic Policy

I shall note first the several references in
his report to the economic performance of the
United States.

As the Secretary General remarked, our
recent budgetary actions and programs of
monetaiy restraint have slowed down what
might have become an untenably rapid rise
in economic activity. We agree with his con-
clusion that both the level of internal demand
and the pressures of militaiy spending in the
United States raise the possibility that fur-
ther restrictive measures might become de-
sirable, depending upon the response of the
economy to the programs of limitation which
have already been applied and the new budg-
et. As he says, a flexible fiscal policy may be
called for in the months ahead. I can assure
you that the issue is on our agenda.

We will not have a recession in 1967. Nor
shall we have anything that could properly
be described as an inflation. All recent indi-
cations are that we are making the transition
to a sustainable full employment growth pat-
tern, despite the burden of our military re-
sponsibilities and all that they have involved
in recent years.

If we have not made further progress in
our balance-of-payments position this year,
the chief reasons are the increase in our im-
ports, due to the high rate of economic activ-
ity at home, and the continuing direct foreign



20



DEPARTMENT OF STATE BULLETIN



exchange costs of our inteniational commit-
ments — two factors which are interrelated.
These trends have been offset to a certain ex-
tent by capital movements influenced by the
level of interest rates in the United States.

The United States has, at present, a net
international payments deficit on military ac-
count of $2.6 billion. This is not the budget-
ary cost, but the foreign exchange drain. We
have a net deficit on foreign aid account —
after tying — of about three-quarters of a bil-
lion dollars. The total of these twa items
taken together is about 2i/o times our liquid-
ity deficit.

It is our policy to make further progress
toward equilibrium in our balance of pay-
ments, through the modification and continu-
ance of our present actions. The limiting
factor in that process, of course, is the need
to maintain military forces both in Europe
and in the Far East, where their presence is
required by overriding considerations of col-
lective security.

And there should be no doubt, finally, that
the United States is prepared to adjust its
fiscal, monetary, and other policies as neces-
sary to assure a growing, balanced economy.

Need for Productivity Gains

r Turning now to other aspects of economic
policy, I join in the general commendation of
Working Party II for its excellent review of
progress toward the economic growth target.
The policy lessons of the growth report are
plain.

We can agree with the Secretary General
that economic growth and price stability are
not always easy partners in a free society. If
we are to achieve both goals, we need to blend
fiscal, monetary, and income policies for flexi-
ble demand management and appropriate re-
straint on costs.

But new, bold policies will be needed to
supplement those which have already become
familiar. During the first 5 years of this
decade, labor markets in most of our coun-
tries were relieved of excessive pressures by
the availability of new workers. They came
into the labor market by immigration.



through a reduction of unemployment, or
through movements from farm to industry.
For the next 5 years, and for the longer run,
many of these sources may diminish in im-
portance. Meanwhile, the trend will continue
toward shorter hours, longer vacations, ear-
lier retirement, later school-leaving ages. If
present manpower policies continue, we shall
be lucky in many countries if the effective
labor force can be held stable — which would
mean that the entire burden of economic
growth wall depend on increases in produc-
tivity.

This prospect should tell us how necessary
will be policy measures aimed at steady and
substantial productivity gains. Many of the
issues that arise are being considered in the
bodies of this organization. We need to pur-
sue these lines of work with all possible ex-
pedition and vigor.

Higher productivity requires some reallo-
cation of resources and increased attention to
investment, as was so well pointed out in the
growth report.

For this reason, as well as for reasons of
simple social justice, we attach great impor-
tance to the manpower studies of OECD. We
have much to learn from each other's experi-
ence in this vital field. New and imaginative
methods have been adopted in recent years
in education, in retraining, and in encourag-
ing labor mobility. More is to be done, both
directly and through appropriate tax meas-
ures, to encourage the employment of older
people who prefer work to retirement and to
facilitate the training of migrants from so-
cieties which have not been part of the world
of modern technology. We are far from hav-
ing exhausted the range of wise and humane
actions that governments can take to raise
the income-producing capacities of their
citizens.

The United States has taken many of its
ideas in this general area from European ex-
perience, but we are still comparatively back-
ward in this significant area. We think that
continuing systematic exchanges on man-
power policy in the OECD can be of real
value to all of us in the pursuit of more



IJANUARY 2, 1967



21



mobile and more equitable societies.

Another key to higher productivity is ad-
vancing technology — the fruits of research
and development and investment in new
plant and equipment.

The Pace of Technological Change

I know that there is concern in Europe —
and understandable concern — that the pace
of technological change is lagging here in
comparison with the United States. In some
areas these disparities of technique produce
anxiety about a possible loss of economic
control, or a sense of coercive pressure.

I suggest that if these problems are ex-
amined in wider perspective, anxieties should
be allayed. If we look at the entire range of
our industries and not only at the few in-
dustries which have been propelled forward
by new techniques generated in or near
the defense sector, we see at once that there
are many technological gaps and not simply
one. The principle of comparative advantage
has not vanished as a force in economic life.
No one can ride on an American railroad
coach and conclude that all technical dispari-
ties are in one direction.

The problem of using science in technology
is a universal one and an old one. All coun-
tries have much to contribute if advance is to
be maintained. And advance requires many
modes of cooperative effort, from which we
have as much to learn as to contribute.

We are therefore ready, as President
Johnson said recently,^ to join with you in
a systematic examination of these problems
and in cooperative programs to further the
advance of science and technology. I have no
doubt that the work just begun by the
Science Policy Committee will illuminate this
whole complex area and will point to ways
in which we can cooperate to foster an opti-
mum rate of technological development
throughout the OECD community.

If we are to realize our full potential in
technological advancement, we shall need
more investment and the reallocation of re-



'Ibid.



sources that I referred to earlier. We are
persuaded that much can be done in all our
economies, and in the international economy,
to improve our machinery for mobilizing
savings and making them available for the ^
basic work of cost reduction through invest-
ment. This, I believe, is where the role of
our capital markets is fundamental to the
growth process.

As you know, the United States attaches
great importance to the capital-markets
study now before us and to the recommenda-
tions we expect to see emerge from further
work. Mr. Chairman, may I ask that later
today you call upon Mr. Silberstein [Murray
Silberstein, of Oppenheimer and Co., New
York] of the American delegation for some
further observations about this important
matter.

Restrictive Business Practices

Similarly, I trust that you are in agree-
ment that the organization should actively
pursue its work on restrictive business prac-
tices. Private arrangements to share mar-
kets, to fix prices, and otherwise to evade
the discomforts of competition are destined
by their nature to inhibit the growth of pro-
ductivity. When extended beyond one coun-
try they tend to frustrate and offset the
economic benefits of lower trade barriers.

Our Committee of Experts is considering
a recommendation to member governments
on international cooperation in the field of
restrictive business practices. We support
the recommendation and hope that it will
lead to further cooperative steps in this im-
portant field. The whole area is one of fun-
damental importance to the development of a
truly effective international economy. There
have been changes in law and practice in
this field in many countries in recent years
and in the European Economic Community.
Whether an international agreement is
needed to supplement national law in pro-
tecting the international economy as a whole
is a question which in our view merits seri-
ous consideration.



22



DEPARTMENT OF STATE BULLETIN



Continuing work on investment in educa-
tion, on curriculm building, and on teach-
ing teachers also deserves our support.
Nothing is more important for the future
of the OECD community than an expanding
flow of teachers and students in both direc-
tions across the Atlantic and Pacific.

Let me close this intervention with some
brief remarks on the bearing of certain other
international economic policies on economic
growth.

One is trade policy. We are not here to
debate the issues of the Kennedy Round.
But as we move into an economic situation
in which manpower and other resources be-
come progressively tighter, we are going to
need to improve the efficiency with which
we use these factors of production. Trade
policy offers the most immediate and prac-
tical way we have to expose our economies
to the fresh air of competition.

The forces of protection and restriction
are always with us, always seeking to es-
tablish comfortable enclaves of monopoly.
If we hope to hold a line against that pres-
sure and to find out where we can produce
most profitably, we shall need pressures
from outside as well as from inside our
countries. Our basic interests should lead us
not only to take advantage of the Kennedy
Round to achieve the greatest reduction of
tariff and other trade barriers in the post-
war period but also to take a long look ahead
at the needs of the OECD community for the
trade policy that will promote economic
growth.

International Monetary Policy

Finally, I turn to international monetary
policy.

Beyond the immediate problems of deficits
and surpluses is the question of the interna-
tional monetary system itself.

The system under which we have lived
since the end of the war has gone hand in
hand with the longest period of steady eco-
nomic growth and the greatest expansion of
trade in the history of our countries. It has



been developed and maintained by a series
of ingenious and imaginative devices of co-
operation, which have supplemented and fur-
thered the invaluable influence of the Inter-
national Monetary Fund. No tribute can be
excessive to the devoted work of the various
groups of experts in this field who have
solved successive threats to the monetary
system in a spirit of admirable solidarity.
Our Economic Policy Committee and its
Working Party III have also been notable
participants in this endeavor. Without these
international efforts the progress of the
world economy in investment, trade, and
growth would have been impossible.

The assurance of relative stability and
openness in our monetary arrangements has
been a major factor in the structure of the
economy, a factor favoring and facilitating
growth on a world scale.

Nonetheless, the monetary system is not
yet perfectly adapted to the economic needs
of the next generation. If by common con-
sent we now wish to modify it, we should
do so in the spirit of building on what has
been accomplished for positive and carefully
defined goals.

Essentially, we should seek to improve the
system in many ways that will continue to
provide the monetary basis for high and sus-
tained rates of growth of production and
trade. We wish, of course, to maintain the
discipline of external reality in our internal
programs of costs, prices, and investment.
But we do not want the monetary system
to work in such fashion that ijiembers of the
system encountering temporary balance-of-
payments deficits are driven to unduly dis-
ruptive internal and external policies.

Recent trends in the accumulation and dis-
position of reserve assets make it clear that
we need a new and assured source of
liquidity which can be employed responsibly
and under proper safeguards when needed.
This is, I believe, the objective of the Group
of Ten.3 And we need to adopt and adapt on



^ The 10 countries which participate in the Gen-
eral Arrangements To Borrow, designed to provide
the IMF with additional currencies.



JANUARY 2, 1967



23



a practical basis the sensible suggestions of
Working Party III in its report on the ad-
justment process. Other improvements in the
monetary system may well be considered.
As the fruitful and promising proposals of
recent years approach the point of decision
through the tested machinery of the Interna-
tional Monetary Fund, these possibilities
should also be examined.

The debate over monetary policy, like
many other aspects of economics, sometimes
takes on a moral cast.. We have gotten over
the puritanical conviction that periods of
depression and unemployment were good for
our characters. But we still sometimes talk
as if the balance of payments were a totem
to be worshipped, not an economic reality
like others to be controlled in the interest
of the general welfare. Not all balance-of-
payments deficits or surpluses are sinful or
harmful to the legitimate economic interests
of other countries. I hope and believe we are
learning to confront this fact as a fact with-
out raising the temperature of international
relations.



STATEMENT ON EAST-WEST RELATIONS,
NOVEMBER 24

Press release 280 dated November 25

I should like to say a few words now
about East-West relations or more specifi-
cally about the part the OECD might play
in the task of closing the breach that has ex-
isted between Western and Eastern Europe



Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 56, Jan- Mar 1967) → online text (page 11 of 90)