Mrs. Edith W. Macy, president, YWCA National Board, New York, N. Y. George Meany, president, American Federation of Labor, Washington, D. C. Herschel D. Newsom, master, the National Grange, Washington, D. C. Walter Reuther, president, Congress of Industrial Organizations, Washington, Wayne E. Richards, Arkansas City, Kans. H. Christian Sonne, chairman, National Planning Association, Washington, D. C. Michael Straight, American Veterans Committee, Washington, D. C. Walter White, secretary, National Association for the Advancement of Colored People, New York, N. Y. Rufus Wilson, national commander, AMVETS, Washington, D. C. Mrs. James Wyker, president, United Church Women, Columbia, Mo. Mr. BELL. As I have indicated, our major area of interest is trade policy, and we are presently, and have been in the past, concerned with such matters as H. R. 1, the Trade Agreements Act, customs procedures, and the proposed Organization for Trade Cooperation, and various administrative problems in the field of trade policy. Inevitably, our interest in trade policy leads us to a concern for other aspects of our foreign economic policy, particularly as they relate to international trade. It is, therefore, understandable that we are concerned with foreign investment policy for it is through an international flow of investment funds that an important contribution is made to the development of the facilities and capacity for increased production that is the basis for widening the flow of international trade. Foreign investment policy should quite properly be consistent with, and a complement of, foreign-trade policy. They are both concerned with enhancing our own welfare as well as the well-being of the free world as a whole. And the fact is that both trade and investment policy have been integral parts of our foreign economic policy under both Democratic and Republican administrations. We have, as a matter of national policy, engaged in activities designed to encourage the expansion of trade and to foster and encourage an increased flow of investment abroad. These two aspects of our foreign economic relations are necessarily related. Increased investment is the sine qua non of increased production and growing standards of living that are the goals of the less developed countries of the world. It is vital to the solidarity of the free world alliance that the goal of growing standards of living be attained, and particularly that the real expectation exist in the minds of the people in the underdeveloped areas that these goals are achievable. We ourselves have much to gain from a purely economic point of view from such a process of growth and expansion. The record of history points to the fact that ecnomic growth in foreign countries leads to expansion of international trade. It can be expected that we, as the major participants in world trade, are likely to benefit considerably through the expansion of our export markets. Moreover, we would have much to gain from the increased investment abroad in production of raw materials and in the facilities that are necessary for the best development of raw-material production. Our growing dependence on imports of industrial raw materials requires the expansion of economic sources of supply of these materials in order to feed the voracious appetitie of our expanding industrial economy. It is our view that the IFC would make a contribution to furthering these objectives. Of great importance is the fact that the special contribution that the IFC would make would be through encouraging and invigorating the initiative of private businessmen both here and abroad. This initiative of private individuals, as we know from our own experience, is an essential factor in economic progress. To the extent that increased private investment can substitute for public grants and loans, to that extent the American taxpayer would be relieved of a tax burden. Because private investment carries with it technical and managerial know-how, the contribution it can make to economic growth and progress should be greater than the contribution made through the medium of intergovernmental grants and loans. I think it only fair to say that the problem of expanding the flow of private investment is not a simple one. There are many obstacles to such investment. They vary a good deal from place to place, and, correspondingly, there are many things that probably should be done to remove those obstacles and to provide further encouragement to the flow of private investment. We conclude that when the opportunity exists to make what can reasonably be expected to be a significant contribution to expanding private investment abroad, this opportunity should be seized. The problem of encouraging private investment to go abroad was well stated, it seems to me, by the president of the International Bank for Reconstruction and Development on the occasion of the annual meeting 2 years ago, of the board of governors of that institution. As I recall it, he said that the question of what to do to encourage private investment was not one of a particular panacea to solve a particular obstacle, but, rather, a devising of many policies that were appropriate to the many difficulties involved. And to illustrate what he meant, he told the story of the young man from Boston who was out on the west coast on business, when he received a telegram from his wife. telling him that his mother-in-law had passed away. The wife asked whether they should cremate or bury, and he wired back "Cremate, embalm, bury-take no chances." It seems to me that the particular contribution that the IFC can make is in providing a vehicle for removing some of the special barriers which seem to impede the greater flow of private investment abroad. There is, for example, the barrier of lack of information or adequate information about investment opportunities. The IFC can engage in research and through its facilities develop opportunities that have languished because of inadequate knowledge of real prospects for private investment. There is the barrier of unfavorable climates and unfavorable attitudes in the recipient countries for investment. The IFC can work diplomatically to improve such attitudes, and then lend confidence by displaying initiative in undertaking new ventures. Because it is an international body, it can lend authority to investment undertakings that would reduce the possibility that the host country might enact special legislation or otherwise discriminate against the foreign investment. It is through these somewhat intangible means that it can be expected, we believe, that the modest resources of the IFC can create multiplier effects on investment by overcoming risks and uncertainties and by creating more favorable climates for private investment. We believe it is clearly provided in the bill that there is no plan to have the funds of the IFC permanently invested in equities in foreign projects. There is not only a limitation on the percentage of equity they could hold in any venture, but there is the explicit direction given for IFC to dispose of holdings to private investors as rapidly as possible. Thus the IFC capital will serve as a revolving fund. In short, to use a phrase that I am sure has been used a great many times before, it could serve as a catalyst that would create a far greater effect in inducing private investment than would be evident from a simple examination of the financial resources that would be available to the IFC. We would like to affirm our support for the United States participation in the IFC, and to urge upon the committee that it report out title II of H. R. 6228 favorably. Thank you. The CHAIRMAN. Do you think there will be any overlapping of activities or any conflict between this organization, the IFC, and the Export-Import Bank? Mr. BELL. No, Mr. Chairman. It is not our view that there would be any conflict. We believe this is supplemental to the activities of the Export-Import Bank. As I understand it, the activities of the Export-Import Bank have been largely limited to the field of assisting exporters in financing shipments of commodities and materials, and in loans, This proposal goes beyond that to the development of production activities abroad. Furthermore, we believe, as was mentioned by the preceding witness, that an international body can be perhaps more effective in this field of investment. The CHAIRMAN. How successful do you think we would be in encouraging private risk capital in this plan? Mr. BELL. I think it will be very successful, judging from what I have learned in talking with people in the International Bank, and with potential or actual investors in fields abroad who have dealt with the International Bank. I know that the bank informally, after making investigations of proposed projects, has sometimes found that they were probably not proper for the bank itself in a loan, but has offered the opportunities to private investors and turned over to them results of the investigation, and many of them have followed through and made investments. The CHAIRMAN. Your organization is in favor of title II. How did you reach that conclusion? Was that by a vote? Mr. BELL. After consideration by the executive committee of our board, for which I have authority to act. The CHAIRMAN. Mr. Wolcott. Mr. WOLCOTT. No questions. The CHAIRMAN. Mrs. Griffiths? Mrs. GRIFFITHS. Mr. Chairman, I would like to ask you the answer to a question that sometimes bothers me. I am for free trade, and I think that it is a good idea for American capital to invest abroad. How can you answer the question, though, and to what extent does American capital, when investing abroad, invest in the same type of plant facilities that it has invested in already in the United States, and to what extent does it then ship those items into the United Sates and undercut the American market? Mr. BELL. So far as I know, there are no official statistics showing figures on such a point because statistics on imports do not show individual firms, and so forth. I cannot quote any Government statisties, but I do know from considerable experience in this field, with both exporters and importers, that the American plants which have subsidiaries or other plants abroad manufacturing the same thing import very few of their products into the United States. Frankly, many of the companies that do put up plants abroad manufacturing the same or similar products to what they manufacture here, are motivated on two counts: One is to take advantage of a market where they are lacking in dollars, where they can therefore accept payment in the currency of the country, or in the case of our British friends, if concerns put a plant in some one of the British Empire countries they have the advantage of the favorable conditions for exports throughout the British Empire, the so-called Empire preference. Those are the main objectives. I know of no concern of any consequence that goes over deliberately to make things, and then bring them back into the United States. Mrs. GRIFFITHS. It would probably be very helpful to the positon of all of us if there were the facts and figures assembled which we could quote. Mr. BELL. Frankly, we have suggested to a foundation to make such a survey, because the facts would be very helpful, and better than opinions, whichever way one happens to slant. Mrs. GRIFFITHS. To what extent can you encourage industry or capital to invest in completely different items in foreign countries? Mr. BELL. I think that that holds real potentialities. There are many American companies who are very much interested in any diversification and that do not like to have all their eggs in one basket. That is true of the medium-sized, smaller companies, as well as larger companies. In fact, I happen to know of a couple of concerns-it wouldn't be fair to name them-that have gone into investment abroad, manufacturing products entirely unrelated to what they make in this country. Mrs. GRIFFITHS. Is some aid given by the Government in showing American capital these opportunities? I mean, I would think it would take great imagination to see an investment possibility. Mr. BELL. When you said aid by the Government, you mean the host government, or our own? Mrs. GRIFFITHS. This Government, our Government. Do we help investors to some extent to see the possibilities of investment? Mr. BELL. There is no organized setup. I think that will be a spot that the IFC will fill a vacuum in connection with the administration of point 4. I think there has been a sort of side, corollary effort made to call to the attention of private investors to some projects. But the smaller companies particularly need the help, I think, of the IFC in analyzing prospective projects, because they cannot afford to do what the big American companies, our big investment groups, can do in the way of investigation abroad. There are so many features to be studied. You can go, as I have, into many countries, and say, "My, this country must be full of potentialities," but when you get down to brass tacks you have to investigate so many things, tax laws, convertibility of currency, and all those things, and there is no Government agency, as far as I know, that does a very comprehensive and thorough job on that as of today for the guidance of investors. Mr. GRIFFITHS. I think if you do that, it is a good idea. Mr. BETTS. I don't know as I have much to suggest. I was thinking of the remarks you made to Mrs. Griffiths about small business being interested in this. And my district is made up mostly of small business. For instance, there is an electric insulating company which finds a great deal of competition in Japanese products. In what way would you think this bill might assist that small company in competing with imports of competing Japanese firms? Mr. BELL. Well, frankly, I don't know as this bill, Mr. Congressman, would provide a machinery that would be particularly helpful, except, if the firm were interested in considering establishing a plant in some other country where they felt they could manufacture more cheaply, which is very doubtful from experience. That is a conceivable development. Mr. BETTS. I wondered how far your statement intended to go when you said you felt it would be beneficial to small business. Mr. BELL. In the particular illustration you cite, I don't see that there would be any particular avenue, but I do know that there are small businesses which would like to develop things abroad, but haven't the capital and the personnel to send people abroad to make these thoroughgoing investigations that I referred to, of the source of supplies for raw materials for manufacturing, studying the laws of the country on taxation, and so forth. Nor have they enough technical personnel to go in and start the development of a project on the basis of only cursory studies. Mr. BETTS. Does your organization include the membership of small businesses? Mr. BELL. Yes. There are many small businesses. We have in addition to a board of directors of some 30, an advisory board, as shown on the list here, that we believe includes all the important national organizations, labor, CIO, A. F. of L., American Farm Bureau, Farmers Union, the Grange, as well as business organizations, and, therefore, we do represent quite a crosscut of the whole business economy. In addition, we have people who are contributors or supportersnearly a thousand, many of whom are small-business people. Mr. BETTS. Are there any members on your board from Ohio? Mr. BETTS. No. Is there anyone you can name who is from Ohio? Mr. BELL. Mr. Charles P. Taft is our president. He, of course, is a lawyer. He is on our board of directors from Ohio. There is on our advisory board the president of the Cooperative League. The reporter just now called my attention to the name of a man who is on our advisory board, not the regular board, who is from Newark, Ohio, Everett Becker, who is president of the Park National Bank in Newark, Ohio. The man representing the National Co |