ties of this kind. There are limits, however, to the effectiveness of unilateral efforts in these fields, and quite frequently the similar efforts of an international agency may be more fruitful. As an international agency the Corporation will tend not to be identified with the special interests of any one of its members. It will also be in a position to establish direct relationships with the world's principal capital markets. In addition, the experience gained from its own participation with private investors in specific investment projects should be useful in dealing with many of the problems which impede private investment. The Corporation's activities will not be limited to the encouragement of foreign investment; it will be prepared to invest in partnership with local investors and, of course, many of the factors which impede foreign investment in a country also impede investment by its own citizens in productive enterprises.

The fact that a large number of countries accept membership in an organization dedicated to "encouraging the growth of productive private enterprise" is a significant development. We feel that the Corporation will be in a position to influence the attitudes of its member countries toward private enterprise. In considering projects attention will be focused upon the treatment to be accorded the enterprise and its private participants, or if private investors fail to be attracted by the conditions and opportunities in a given country the fact that the Corporation will not be called upon to use its resources in that country could have significant results.

In closing, may I mention briefly the relationship of the International Finance Corporation to certain other broad aspects of our foreign policy objectives. Every country in the free world needs capital for its own economic growth, which in turn affects the combined economic strength of the entire free world. The increased flow of investment also means higher levels of international trade, an objective to which we are firmly committed. If the private enterprise system can further demonstrate its resourcefulness and ability to produce the sound economic growth and higher living standards to which men everywhere aspire, much will have been done to offset the false allure of the Communists. I believe that organized in the manner recommended, the International Finance Corporation can make a significant contribution to the achievement of this goal, and in a manner completely consistent with American concepts of private enterprise. Thank you, Mr. Chairman.

The CHAIRMAN. We will proceed under the 5-minute rule.
Mr. Wolcott?

Mr. WOLCOTT. I have nothing.

The CHAIRMAN. Mr. Patman?

Mr. PATMAN. I have no questions.

The CHAIRMAN. Dr. Talle?

Mr. TALLE. No questions, Mr. Chairman.

The CHAIRMAN. Mr. Multer?

Mr. MULTER. Thank you, Mr. Chairman.

Mr. Secretary, are you in agreement with the Secretary of the Treasury that this new organization will not compete with either the Export-Import Bank or with the International Bank?

Secretary WAUGH. Yes; I am in complete agreement with him, Mr. Multer.

Mr. MULTER. Would there be any objection to putting in a provision into this bill which will make it clear that they are not to go into competition with one another?

Secretary WAUGH. Personally I would have no objection.

Mr. MULTER. I think you might have been present this morning when I asked Secretary Humphrey about the Rio Conference of 1954. I think it was in November or December of 1954.

Secretary WAUGH. November of 1954; yes. I was present.

Mr. MULTER. Does this represent an extension of the program as submitted there, or is it in place of that?

Secretary WAUGH. There was just one word I didn't hear you say-did you say does this represent an extension?

Mr. MULTER. Extension of that same principle or is this intended to implement?

Secretary WAUGH. I was going to use the word "implementation" rather than "extension." This is an implementation of the program rather than subscribing to an Inter-American bank. It was the policy of the administration that it would be much better for us to subscribe to an international organization of this type, and that was made very clear at the Rio Conference.

Mr. MULTER. Is it intended that the loans to be made by this new ́organization will be made only within the countries of the participating nations?

Secretary WAUGH. Yes, sir.

Mr. MULTER. With reference to the policy of the Export-Import Bank, and while this is a different subject, it ties in directly with what we might expect this new organization would do: What has been the Export-Import Bank's policy with reference to its loans? Have they been made primarily for the purpose of financing American interests?

Secretary WAUGH. I really think that the man best qualified to answer that question is going to follow me, General Edgerton, but I think I can answer the question by saying "Yes."

Mr. MULTER. Possibly I should have framed the question a little differently.

While you wouldn't know specifically, while he would know specifically how the policy was implemented, is it the State Department's policy that as to Export-Import Bank how does the State Department feel that policy should be? Should it finance American interests?

Secretary WAUGH. Yes, sir. The Department of State feels very keenly that the Export-Import Bank is an extremely important adjunct to the foreign-policy interests of our country, and my answer to your specific question is "Yes."

Mr. MULTER. And the International Bank for Reconstruction and Development was intended to finance operations in foreign countries, regardless of whether they were American interests or foreign interests?

Secretary WAUGH. I think that is one of the rules of the International Bank; yes, sir.

Mr. MULTER. That is the principal difference between those two organizations?

Secretary WAUGH. On that particular question, yes.

Mr. MULTER. And in this new organization there is to be no emphasis upon American loans, but there are to be loans for persons who

are willing to go into companies or who will be willing to go into any of these participating countries and try to help them develop their industry in those countries?

Secretary WAUGH. Yes, sir; plus the fact that you might find people located within the country that had a portion of capital they would like to invest.

Mr. MULTER. I would like to ask you a question I addressed to Secretary Humphrey this morning and get the view of the State Department on it:

Do you not believe that we should insist-when I say "we should insist"-insist upon it being written into that agreement that each country participating in this organization should undertake, by proper manner, not to nationalize or confiscate or expropriate any of the securities that may be pledged?

Secretary WAUGH. I don't know whether it can be written into the agreement as specifically as you say, but, of course, that is one of the factors that the Department of State is constantly engaged in, in getting just that very agreement with the respective countries with which we are cooperating, sir.

Mr. MULTER. I am quite sure that if the State Department should say to the Export-Import Bank, "You ought to stay out of, or not finance any loans into a particular country because their domestic pol-· icy is inimical to the best interests of the democratic way of life," that they would follow your suggestion, and I am sure that this bank or the new organization will, too.

I think we would like to have a commitment from the State Department that it would, to the best of its ability, see to it that it is is in the articles of agreement, or done separately as a condition of a loan being made to a foreign country, that such a commitment would be obtained from that country so as to have at least some assurance that there will be no confiscations and no nationalizations that would adversely affect this organization.

Secretary WAUGH. In regard to the first portion of your statement, sir, I would like to subscribe to the fact that the relationship between the Export-Import Bank and the Department of State has been about as near ideal as two branches of the executive could operate. We have the finest kind of cooperation on matters of the type you are speaking. Whether or not in the international organization we could spell it out as definitely as you would like to have it, is a question in my mind. We can, of course, in an organization where we have complete control, and I completely subscribe to your objective. As to how it can be done, I think that is a matter that must be given very careful consideration.

The objective that you are seeking is, as you know, an objective of the Department of State in all of the agreements we are entering into

now.

Mr. MULTER. I think it is traditional American policy, and I am sure the State Department subscribes to it and advances it wherever possible.

Secretary WAUGH. Yes, sir.

Mr. MULTER. I think it is one of the questions that will be thrown at members of this committee on the floor, particularly when we have listed among the countries that originally indicated a desire to participate Yugoslavia. While Yugoslavia is numbered among our

friendly allies, it does subscribe to the Communist theory and part of that is nationalization, and that is directly contrary to what we are trying to accomplish. We were told this morning by Secretary Humphrey that Yugoslavia has indicated it will not join.

Secretary WAUGH. That has been my information.

Mr. MULTER. It may at some future time join. If a country like Argentina should decide or become qualified to join I think we should get commitments of countries of that kind where we know from past history they have done things we don't like to see them do. We don't have a right to tell them, "You change your domestic policy and run your internal affairs in accordance with our way of life," but at least we can refuse to give them any help to set up principles of government that run counter to our own.

Secretary WAUGH. Perhaps I should say that immediately following the Rio Conference, and subsequent to the Rio Conference, the very problem that you are presenting has been discussed with the Argentine Government at the highest level.

Mr. MULTER. I am pleased to know that you are on that problem. Secretary WAUGH. Yes, sir.

Mr. MULTER. Thank you, Mr. Chairman.

Mr. Betts.

Mr. BETTS. Mr. Waugh, this subject may have been discussed this morning before I came here. I am wondering if you are acquainted with the manner in which the contribution of each participating nation is determined?

Secretary WAUGH. I think it was determined in accordance with its proportionate subscription to the International Bank. Only the countries which subscribed to the International Bank are the countries eligible for the International Finance Corporation. It is on a percertage basis, based on their percentage in the International Bank.

Mr. BETTS. I noticed that Secretary Humphrey's remarks this morning indicated the United States will contribute $35 million; is that correct? That is over a third of the $100 million.

Secretary WAUGH. $35 million, and that is our correct proportionate subscription to the International Bank today.

Mr. BETTS. I was just wondering why it couldn't be more equitably divided among the whole nations? Is there any reason why it should be so subscribed?

Secretary WAUGH. I have never heard that question asked or answered before or discussed. It is extremely difficult, of course, to determine the countries' ability to pay the way it is an individual's ability to pay, and I think they had to resort to some schedule, and it seemed that the proportionate schedule would be the best schedule for the determination of the ability, although I confess I have never heard this particular phase discussed.

Mr. BETTS. If there were 50 countries participating in a hundred million, that would be about $2 million apiece; is that right? Secretary WAUGH. Yes, but

Mr. BETTS. It doesn't seem to me like it is very much and all the countries are going to benefit equally by it.

Secretary WAUGH. You are violating all the precedents

Mr. BETTS. What is that?

Secretary WAUGH. You are violating all the precedents.

Mr. BETTS. I am just curious.

Secretary WAUGH. I know your point. Some of these countries proportionately could not pay in the exact proportion the United States could. It is in accordance with their ability to pay. I think that was the basis on which it was originally figured.

Mr. MULTER. Mr. Betts, if you will yield at that point, I was going to suggest, if you are going to take the total fund and divide it by the number of countries, you could never get the contributions because there are many countries listed here. I think their total annual budget is hardly more than the amount that they would be asked to subscribe, if you took the hundred million dollars and divided by 50. They just wouldn't have the funds with which to do it. As a matter of fact, as Mr. Patman just suggested off the record, I think some of these countries that make the smallest contributions to the capital fund will be in asking for the largest loans. That is their need. Is that a fair statement?

Mr. BETTS. That is the reason I asked the question.

Mr. MULTER. Isn't that a fair statement, Mr. Secretary?

Secretary WAUGH. Generally speaking, I think it is a very fair and very comprehensive statement, sir.

Mr. BETTS. I was just interested in knowing the why's and wherefore's of the contribution.

That is all, Mr. Chairman.

The CHAIRMAN. Mr. Brown?
Mr. BROWN. No questions.

The CHAIRMAN. Mr. Davidson?

Mr. DAVIDSON. The only question I would like to ask, Mr. Secretary, is with regard to these various restrictions and regulations and controls in force in various territories and various member groups of this Corporation, let us assume that we, the United States, as a member of this Corporation, contributes about one-third of the $100 million that is authorized here, and we participate in investments in various countries.

Some of these countries have very restrictive provisions controlling their foreign exchange, and I see that in section 5 of the provisions here, setting up these articles of agreement of the International Finance Corporation, that none of the moneys which are loaned by this International Finance Corporation will in anywise be free of any such restrictions as a member country might choose to impose. Very simply, to my naive mind and limited experience, I have found that there are certain countries which will not permit you to take any money out of the country and there are certain countries which permit as dividends on investments only that type of money which may be used within the country, and their limitations are such as to probably complicate the free investment that all of us are so very much interested to see.

Would you care to comment on that?

Secretary WAUGH. Yes, Mr. Davidson. I would like to comment on this phase because it is a phase that I think is extremely important. In the first place, not limiting ourselves to the one article, but talking on the broader subject of the investment climate-there are many ways in which restrictions are put into effect that deter capital from going into the various countries.