In the 1950s, the US
manufactured shoes, clothing, chemicals, steel, aluminum, gun powder,
electronics, appliances and everything else we consumed in the US. Over the
last 68 years we have seen all of these industries locate overseas. We have
also seen a decline in the US automotive companies. Cars and trucks made by
foreign companies now dominate the US market. Many of these companies have
plants in the US. We are attempting to increase manufacturing in the US to
restore the middle class and it’s time to look at the reasons for our decline.
The following article gives us some history to ponder. US companies have been
going overseas since the 1950s. See below:
American Manufacturing
in Foreign Countries
Rise in U.S.
Private Investment Abroad - Tripling
of the Value of Direct Investments
Interest among American manufacturers in market
potentialities for their products in foreign countries has been growing
steadily since World War II. More and more companies have expanded exports from
their plants at home; licensed patents and processes to foreign producers
in exchange for royalties or a share of
profits; or established subsidiary companies or branch factories abroad. The
last-named of the three main ways of penetrating foreign markets has
attained special importance in the past decade. The huge dollar
investment poured into foreign production facilities by American business has
forged strong private economic ties with many countries.
Ten years ago, exports of non-military goods and foreign
sales of goods produced abroad by American companies each amounted to about $12
billion. By 1958, U.S. exports had risen to $16.3 billion, while American
companies producing in foreign countries rang up sales estimated at $30
billion. Net earnings of American business from operations abroad exceeded $3.3
billion in 1957, latest year for which the figures are available.
These earnings were derived from direct private investments
valued by the Department of Commerce at $25.3 billion. Actually, direct private
investments abroad—as distinct from indirect or portfolio investments, i.e.
investments in foreign securities1—are
worth much more. Department of Commerce figures are based on book value, or
original cost of plant and equipment, rather than current market value, and the
totals do not include those American holdings abroad which represent less than
25 per cent ownership in a foreign enterprise. Business Week recently hazarded the statement
that total direct private investment “in foreign branches, subsidiaries, and
affiliates may be worth $50 billion.”2
The Commerce Department total for direct American
investment in foreign countries has tripled since 1945, when it neared $8.3
billion, and more than doubled since 1950, when it stood at $11,8 billion. Most
of the huge dollar investment abroad in the past decade has gone into (1)
facilities for production of basic industrial materials (chiefly petroleum, but
also iron, copper, and other materials in demand here and abroad) and (2)
manufacturing plants whose products have been sold mainly in foreign markets.
More than 3,000 U.S. companies are now engaged in foreign production; they
include 99 of the nation's 100 largest industrial corporations. Working
alongside American companies producing abroad are a growing number of American
management and consulting firms, engineering and contracting outfits, and
foreign branches of U.S. banks and insurance companies. Business Week reported
on Jan. 3: “Many executives now predict a doubling in sales from foreign
operations in the next ten years. At the same time, they doubt that exports
will increase by as much as 50 per cent in the next decade.”
Shake
of Manufacturing in Investment Growth - A substantial share of
the increase in direct investment abroad will go into manufacturing. Many
forces are at work to make it attractive for American manufacturers to build or
expand facilities in other lands. One is the rising cost of manufacturing at
home for export. Another is the existence of trade barriers whose effect is to
make it more profitable for American business to operate within a foreign
market than to try to penetrate it from the outside. Most important is the rise
of income in many countries of the free world; markets are expanding for
everything from toasters to Pharmaceuticals, from bulldozers to modern business
machines.
Boeckel, R. M., & McIntyre, W. R. (1959). American manufacturing in foreign countries. Editorial research reports 1959 (Vol. I). Washington, DC: CQ Press. Retrieved from http://library.cqpress.com/cqresearcher/cqresrre1959062400
Document URL: http://library.cqpress.com/cqresearcher/cqresrre1959062400
Direct investment in manufacturing today constitutes about
one-third of all American private investment abroad. In 1957, $7.9 billion of
the $25.3 billion directly invested in other countries was in manufacturing
facilities; it has been estimated unofficially that the dollar totals rose in
1958 to around $8.5 billion and $28 billion, respectively. The total for
manufacturing would be much higher—perhaps up to $11.5 billion—if the Commerce
Department included in that category the part of petroleum investment of
American companies that is devoted to refining and marketing.
Manufacturing investment has grown, since World War II, at
approximately the same rapid rate as total direct investment abroad. The sums
put into manufacturing facilities since 1950 have at least doubled in each of
the traditional strongholds of American foreign investment—Canada, Latin
America, Western Europe. In 1957, 92 per cent of the capital of American industry
invested in manufacturing abroad was in these regions—44.4 per cent in Canada,
21.3 per cent in Latin America, 25.3 per cent in Western Europe. Of the $1.7
billion laid out by American manufacturers to build and equip plants in Latin
America, more than one-third was invested in Brazil, another third in Argentina
and Mexico. Well over one-half of the $2.1 billion directly invested by U.S.
manufacturers in Western Europe in 1957 was expended in the United Kingdom;
one-fourth in France and West Germany.
Hardly a week passes without new announcements by American
corporations of plans to commence or expand manufacturing in foreign countries.
In the chemical and allied products industry, for example, the Du Pont Company
has jumped its foreign business to a point where 8c of each sales dollar is
earned outside the United States. Du Pont recently completed a new orlon plant
in the Netherlands; it is building neoprene and polyethylene plants in Canada
and Northern Ireland; a paint plant under construction in Belgium will serve
the growing European automobile industry. Monsanto Chemical is establishing a
European Common Market base in Italy in partnership with an Italian firm. Dow
Chemical formed subsidiaries in Switzerland and Venezuela last year. Union
Carbide spent $29 million in 1958 setting up or enlarging facilities in
Austria, Belgium, Brazil, England, India, Italy, Mexico, and Scotland.
The Ford Motor Company is preparing, via Ford of Canada, to
produce an all-Australian car to compete with the Holden, turned out by General
Motors down under. Chrysler acquired an interest in the French Simca last year
and announced in April of this year that Simca cars would be assembled in a
Mexico City plant to meet the rising demand for automobiles in Latin America.
The Underwood Corporation recently set up Underwood
Italiana to manufacture office machines; Smith-Corona completed acquisition of
a calculating machine company in West Germany; Burroughs is getting ready to
meet increased demand in the Common Market area by expanding productive
facilities in France. Ex-Cell-O recently took over a German machine tool
concern. Timken is constructing a $10 million roller-bearing plant in France
and is considering an additional plant in Brazil. Container Corporation has
acquired a majority interest in a large German paper-making firm.
Reynolds Aluminum, in partnership with a British company,
captured control of British Aluminium, Ltd., earlier this year. Kaiser
Engineering recently joined an Indian company in plans to build an aluminum
plant in India. Goodyear has announced plans to build a $7 million tire factory
in France. Firestone soon will complete a tire plant in Portugal and plans to
enlarge operations in India and in Argentina, Brazil, and Venezuela. L. C.
Boos, vice president of U.S. Rubber Co.'s international division, said in May
that “Future competition for foreign tire and tube markets will be on the basis
of local manufacturing, not domestic exports.”
Underlying every decision by an American company to produce
abroad has been the desire to expand its markets and thus add to its profits.
Henry Kearns, Assistant Secretary of Commerce for International Affairs, told a
House subcommittee last Dec. 1: “American business will, of course, support our
national foreign policy. But, in the strictly economic sense, American
companies invest abroad for just one reason—to make money by doing an efficient
production job.” Kearns pointed out that “There are other considerations, of
course, but each is directly related to the profit motive.” It is obvious that
increasing numbers of American concerns are finding it more profitable to
supply foreign markets with goods produced abroad instead of exporting goods
produced in the United States.
The case of Canada is in many ways unique. What makes it so
is that American corporations have built plants and facilities in the dominion
almost as if it were another state of the American Union. The proximity of
Canada, plus fundamental likenesses in political climate, economic traditions,
tax laws, corporate and financial structure, and popular tastes have put direct
U.S. investments in that country in a special category.
For many years, but particularly since the end of World War
II, American industry has been attracted by Canada's great natural wealth and
potentialities for growth. At the present time, four-fifths of all foreign
capital invested in Canada is owned in the United States. This contrasts with
the position at the end of World War I when the greater part was supplied by
the United Kingdom.
U.S. corporations now control about half of Canada's
manufacturing industries and a little more than half of Canadian industry as a
whole. Attaining a dominant position was facilitated by the fact that American
companies moved in on the ground floor after World War II. 0. J. Firestone,
economic adviser to Canada's Department of Trade and Commerce, cited figures on
May 21 to demonstrate that “a comparatively small amount of capital will
suffice to establish control of an enterprise in its early state.” Fifty-five
per cent of Canada's industry was controlled by American corporations in 1957,
he said, although only 31 per cent of all investment funds came from the United
States and 67 per cent from Canadian sources.
Canada's rates of economic growth and population increase
since the war have been among the highest in the free world. Huge mineral,
forest and power resources still wait to be tapped. Canadian markets for both
basic materials and consumer goods are expanding rapidly. Canadian resentment
over the practices of some American corporations has become a problem in recent
years, but Canada is eager for capital and large-scale investment north of the
border is expected to continue.
The postwar dollar shortage was not among the
considerations that triggered the great flow of American capital to Canada, but
in other countries the so-called dollar gap offered direct encouragement to
location of American plants abroad. The demand for dollars with which to buy
American goods was enormous in Europe, Latin America, and most other parts of
the free world after World War II, but the dollar resources of these countries,
gained through exports or through assistance from Washington, were far from
adequate to satisfy demand. As a result, most countries used dollars mainly to
meet imperative import needs and to build up reserves.
Scores of American manufacturers found established or
potential export markets cut off by inability of overseas customers to get
dollars. They concluded that the way to sell abroad was to produce abroad. Governments
in Western Europe and Latin America welcomed the new enterprises; in addition
to reducing dollar needs, they would help to create jobs, boost living
standards, and increase the country's ability to export. In the United Kingdom,
for example, American subsidiaries or Anglo-American companies now provide more
than 375,000 jobs for Britishers and account for more than 10 per cent of all
exports from Britain. More than 30 per cent of Latin America's exports are
produced by American-controlled corporations, and the proportion is even higher
for Canada.
Although the world-wide dollar gap is no longer a prob-iem,3 most
leading countries of Europe and Latin America continue to follow certain
policies which make it tempting for American producers seeking foreign sales to
locate within their borders. On the one hand, direct investment has been
encouraged by positive measures—tax incentives and investment guarantees. Among
the tax incentives used to attract foreign capital have been high depreciation
allowances, rates on corporation income that are lower than in the United
States, arrangements for deferral of payments, and liberal deduction provisions.
Antoine Pinay, French finance minister, said in New York on May 26 what holds
true for many countries in addition to his own: “We offer every desirable
guarantee to foreign investors. The transfer of profits is guaranteed, as is
the repatriation of investments in the event of liquidation.”
Import quotas, tariff barriers, and exchange restrictions
have been on the decline in Western Europe, but American manufacturers still
find some obstacles of this kind along the path to foreign markets. The
preferential tariff system which is part and parcel of the European Common
Market represents a new hurdle in the way of American exports to the Continent.
The European Economic Community or Common Market,
instituted on Jan. 1, 1958, is expected to boost direct American investment in
Western Europe substantially. The Common Market is intended to promote
coalescence of the economies of Belgium, France, Italy, Luxembourg, the
Netherlands and West Germany over a period of 12 to 15 years.4 The
plan provides for reduction and ultimate elimination of tariffs and quotas on
trade among the six member countries and for a common tariff on imports from
the outside.
First tangible steps toward the ultimate goal were taken on
Jan. 1, 1959, when an over-all 10 per cent reduction of tariff duties and an
over-all 20 per cent enlargement of import quotas were put into effect with
respect to trade within the community.5 A
British proposal to create a free trade area which would embrace all 17
European countries in the Organization for European Economic Cooperation,
including the Common Market countries, bogged down last year,6 But a
stopgap plan limited to Austria, Denmark, Great Britain, Norway, Portugal,
Sweden and Switzerland —the so-called “outer seven”—is currently under
consideration. Further action on it is expected at a meeting in Stockholm
around the middle of July.
Such radical developments are bound to concern American
firms interested in selling in the affected markets. In the first place, it is
much tougher for U.S. exports to penetrate a preferential tariff area than an
individual country, at least in the short run, because of competition from producers
within the whole area. Many enterprises in Common Market countries already are
drawing up merger plans, and more efficient use of Western Europe's labor and
capital is expected to bring sharp pick-ups in productivity and output. But the
Common Market offers attractions to American companies which establish
manufacturing facilities within its borders. The community has 165 million
inhabitants, representing a market potential nearly as great as that of the
United States, and eventually it will be similarly unencumbered by internal
trade restrictions. Free movement of goods, labor, and capital across national
borders within the area will enable American companies to reach the entire
market if they manufacture in a single country.
The impact on American industry of the Common Market is
graphically demonstrated by what has happened recently in the Netherlands. In
the three-year period 1955–57, 21 American branch plants were established in
that country; in 1958, after the Common Market had come into existence, 23
additional American companies set up shop there. Comparable figures are not yet
available for the other countries in the community, but a Department of
Commerce official wrote recently: “It may be assumed that a similar situation
prevails in most other Common Market countries and that the influx of U.S.
investment there has also been considerable.”7
Walter Hallstein, chief executive of the Common Market,
pointed out on a visit to New York, June 16, that American investment in the
community still amounted to only about 1 per cent of the total capital
investment. He said the opportunities for U.S. private investors were
“practically unlimited.” Hallstein told reporters: “We need new capital and
‘know-how’ from all sources. American industrial capital is particularly
welcome.” He added that American branch plants, and partnerships with
enterprises in the community, would be of special help in developing mass
production and marketing in Western Europe.
Success of the European Common Market may strengthen the
hand of persons who want to set up regional common markets in Latin America.
Although supporters of that idea admit that its realization may be some years
away, they have been working diligently to overcome opposition in business and
industrial circles and opposition on the part of leaders preoccupied with the
difficult economic problems of their separate countries. A move toward economic
integration below the Rio Grande came on May 19, when the trade committee of
the United Nations Economic Commission for Latin America unanimously approved a
resolution setting forth common market principles and establishing a group of
experts to frame a draft agreement.
Much has been said about lower labor costs abroad in tariff
debates extending back more than a century. Ernest R. Breech, board chairman of
the Ford Motor Company, said earlier this year: “Traditionally, American
industry has been able to meet and beat wage competition because of its greater
capital investment, its superior plant, equipment, management methods, and
economies of scale.” Breech added, however, that in Europe, “we have now
largely lost this advantage, particularly in industrial production.”
The National Industrial Conference Board recently published
a study on the comparative costs of producing in the United States and abroad.
The study disclosed that, on the whole, labor costs were lower in foreign
countries and overhead costs slightly lower; material costs, on the other hand,
were considerably higher. Balancing out the labor, overhead and material costs,
it was found that only in Great Britain and Western Europe was there a pattern of
lower production costs than those that prevail in the United States. In Canada,
Latin America, and Australia production costs were usually higher than in the
United States.
The N.I.C.B. study noted “the absence of correlation
between countries in which production costs are low and those in which American
capital investment is high.” It said the decision to manufacture in a country
to which exports have been limited by transportation costs, trade barriers, or
currency restrictions may be quite divorced from production cost
considerations. “There are other motives besides low production costs that lead
firms to locate abroad. One is the promise of increased sales in local and
adjacent markets.”8
In big American manufacturing industries, where competition
is keen, each company puts great stress on holding or enlarging its share of
the market. Thus when one industrial giant has made a sizable direct investment
in a foreign country, its chief competitors usually have felt compelled to do
likewise. Although it is impossible to assess the prominence of this factor in
company decisions, it is generally taken as a matter of course that a company
risks impairment of profits if it fails to cultivate a developing market. A
company's foreign operations are not necessarily more profitable than its
domestic operations; for manufacturing as a whole, in fact, the annual profit
yield on direct American investment abroad has generally run a little lower
than the yield at home. But, as pointed out by Business Week last Jan. 3, “a 5 per cent
addition to consolidated gross sales that comes from [a company's] overseas
operations often builds up the over-all profit margin by a much larger
percentage.”
Examination of some of the characteristics of direct U.S.
investment abroad suggests that American manufacturers are in good position to
retain or expand their foreign operations. In the first place, corporations
eager to tap foreign markets have, in the main, steered clear of less developed
countries. Although this has been due primarily to profit considerations, it
has been caused also by political instability; American manufacturers have been
inclined to keep out of countries where they considered confiscation or
harassment a threat. Statistics for 1957 show that only about $130 million, or
less than 2 per cent of total private American investment in manufacturing
abroad, is found in the underdeveloped (and in many cases unstable) countries
of Southeast Asia, Africa, and the Middle East.9
In the second place, the favorable position of American
corporations operating abroad is attested by the fact that the billions of
dollars they have put into manufacturing facilities in foreign countries since
World War II have gone mostly for production of goods in high demand. Capital
of U.S. companies is not invested in “depressed industries.” In Western Europe,
for example, the postwar investment has been concentrated where U.S.
manufacturers had a development lead, either in the product itself or in
production methods. Examples are business machines, automobiles, and oil
refining equipment. More recently, the big push has been in electronics and
chemicals and allied products, J. H. Dunning, a British expert on direct
investment, wrote recently of American industrial operations in the United
Kingdom: “At present … the United States representation is almost entirely
confined to industries supplying those products which, if they were not
actually discovered in the United States, were first exploited on any scale in
that country.”10
The willingness shown by American corporations to vary the
form of foreign investments according to conditions prevailing in other
countries has itself become one of the reasons direct investments have
continued to mount. Appearing before a House subcommittee last Dec. 1,
Assistant Secretary of Commerce Kearns outlined seven major forms taken by
direct private investment: (1) wholly-owned subsidiaries or branches of American
companies, managed by Americans; (2) establishments in which there is American
majority ownership and management; (3) American-managed establishments where
ownership is equally divided with foreign interests; (4) foreign-managed
establishments where ownership is equally divided; (5) U.S. minority ownership
with American management; (6) U.S. minority ownership with foreign management;
and (7) contractual investment with fixed procedures for retiring the U.S.
investor's interest.
In recent years there has been a definite tendency for the
American manufacturer to team up with a company in the host country. Foreign
participation in ownership of U.S. manufacturing operations abroad is estimated
to have risen from about 20 per cent in 1950 to about 25 percent today. A
variety of reasons are responsible for the increase. Canada and some Latin
American countries offer added tax incentives to encourage joint ventures.
Partnership arrangements have become more common in Western Europe—as American
corporations have shown increased disposition to “spread the risk,” take
advantage of the growing supply of private foreign capital, and acquire the
option of branding the product with a foreign label or an American label
depending on public attitudes.
Most American corporations have settled on that form of
direct investment which suits their interests and is as little likely as
possible to provoke the ill will of the people or government of the host
country. In the case of the United Kingdom, Dunning reported that two-thirds of
the American-controlled manufacturing operations there have adopted “the
principles of United States management.” However, “only 15 per cent employ
American managing' directors and an even smaller proportion of their United
States personnel.” He concluded that “In the great majority of cases a
realistic blending of American ideas adapted to a British environment would
appear to have been achieved.”11
In Canada, many American corporations have been trying to
develop more of a “Canadian outlook.” A Royal Commission observed in a report
on “Canada's Economic Prospects” in 1957 that “Many Canadians are worried about
such a large degree of economic decision-making” lodged in the hands of
non-Canadians. Referring to the large share of Canada's industry owned by U.S.
interests, the commission said that “Canadians should have more tangible
assurance” that foreign-owned companies “make decisions that are in the best
interests of Canada.” Robert C. Heim vice president of the Empire Trust Co. of
New York, said on May 22 of this year that a 1958 survey conducted by that bank
disclosed a trend toward increased Canadian managerial representation in U.S.
subsidiaries in Canada and a growing awareness of the “political advantages” of
Canadian participation in the ownership of these subsidiaries.12
Two other characteristics of direct investments abroad
point to a strengthening of U.S. operations in foreign countries. First, a
great many companies have set up foreign operations, but the biggest share of
direct investment has been undertaken by strong corporations with long
experience and backed by large financial resources. In the United Kingdom, for
example, where more than half of American direct investment in Western Europe
is located, about 400 U.S. subsidiaries or Anglo-American firms are
currently-engaged in manufacturing. The 35 largest of these control 80 per cent
of total U.S. manufacturing capital in the United Kingdom. Nearly 60 per cent
is controlled by the ten largest companies.
Secondly, many corporations have found it increasingly easy
to expand foreign operations as sales of goods produced abroad have grown. In
1957, 40 per cent of the funds invested in productive ventures in foreign
countries came from retained profits generated by existing overseas
enterprises. Only 19 per cent came from parent companies or from other U.S.
sources.13
Some Concern has been voiced about adverse effects on the
American economy of direct private investment abroad. Sen. William Proxmire
(D-Wis.) submitted a resolution, April 21, calling for a Senate investigation
“of the full consequences of the investment of American capital abroad.” He
said the investigation should have the dual purpose of recognizing “the massive
values of the investment of American capital abroad” and getting “the facts on
some of the very grave problems it provokes.”
Proxmire explained that his proposal had been inspired by
the fact that “In at least two industries vital to employment in my
state—machine tools and tractors—American companies have recently in effect
transferred part of their production from Wisconsin to foreign countries.” This
meant that “Jobs formerly held by Wisconsin working men are now held by working
people in other countries.”
The Wall
Street Journal reported, March 19, that growing numbers of
American machine tool firms were “trying to regain lost business, and to head
off future losses, by producing abroad, either by purchasing foreign companies
or by setting up new plants overseas.” The same paper reported on April 20 that
earlier that month International Harvester, world's largest maker of farm
machinery, had imported a shipment of tractors produced in one of its foreign
plants for sale in the United States, Ford Motor Co.'s tractor division for
some time has been an importer of Ford tractors manufactured abroad. The list of
farm equipment companies contemplating similar action is on the increase.
Moreover, International Harvester expects to bring in other types of equipment;
plans call for hay balers from the company's plant in France and grain planters
from its Swedish unit.
Concern over foreign production by U.S. manufacturers for
the American market usually has been discussed in the context of rising
competition from foreign producers in general. This country's merchandise
export surplus fell from $7.9 billion in 1957 to $5.1 billion in 1958, due
largely to a sharp decline in exports.14 For
a variety of reasons, exports of coal, steel, mill products, cotton, vegetable
oils, foodstuffs, industrial and textile machinery, construction and mining
equipment, tractors and automobiles declined. At the same time, imports of such
manufactured products as agricultural machinery, petroleum products,
foodstuffs, sugar, sawmill products, electrical items and, most notably,
automobiles increased in 1958. Sen. Proxmire said on April 21: “Reliable
reports indicate that this export of American jobs has just begun. The
combination of available American capital, American automation and know-how,
fused with lower foreign wages, is not only cutting a terrible swath in the
export market for American factories; it is beginning to cost them some of
their domestic U.S. markets.”
During the first quarter of 1959, exports continued to fall
and imports to rise at a faster rate than last year. The country's export
surplus in the first quarter of 1059 was less than one-third of what it had
been in the first three months of 1958. Imports have risen most sharply in oil,
machinery, and vehicles. The biggest reductions in exports this year have been
in crude materials and finished manufactured goods. Such developments have
swelled protectionist sentiment among many American producers. The Office of
Civil and Defense Mobilization, the Tariff Commission, the President, and the
Congress have been subjected to strong pressure to clamp down on imports of
everything from heavy electrical power equipment to mink skins.
The administration, numerous business establishments, and
most labor unions nevertheless strongly oppose any general increase in tariffs.
Assistant Secretary of Commerce Kearns said on May 20: “It is axiomatic that
international trade, for the benefit of all, must be a two-way exchange unencumbered
by artificial barriers or restrictions.” He noted that “Our purchases from
other countries in 1958 continued to provide American consumers with goods and
commodities which they desire for better living” and “our world customers with
the dollars they need to buy American exports.” He pointed out that 1958 was a
recession year in many industrial countries and said that “Taking a second look
at our exports in 1958, we find they were greater than in any other year in our
history, with the exceptions of 1956 and 1957.”
The A.F.L.-C.I.O. has long been a supporter of the
reciprocal trade program. Its Executive Council said on Feb. 24: “We recognize
that removal of the barriers to trade among the free nations of the world
contributes to the economic progress and political stability of our own country
and to the welfare and strength of the entire free world.” The council urged
American efforts to raise labor standards all over the world so that American
workers and employers “will not be faced by unfair competition from foreign
imports based on unduly low wages and labor standards in the exporting
country,”15
Business Week observed on Jan. 3: “The kind of
tough foreign competition that American industry now faces in its home market
would once have produced a sharp increase in American tariff rates. That has
not happened and isn't likely to, largely because so many companies realize
that a broad move to raise U.S. tariffs would limit their opportunities for
doing profitable business abroad.” If American imports were restricted by
higher duties, it would be harder to transfer the profits earned by American
companies producing abroad. Moreover, it stands to reason that foreign
companies hurt by higher U.S. tariffs would be tempted to urge their
governments to discriminate against the foreign operations of American firms.
Sen. Proxmire, in proposing his investigation, acknowledged
“the massive values” of direct American investment abroad and said: “I
emphatically prefer private investment to government investment abroad. It is
more efficient. It is subject to the iron discipline of the profit system, so
it will not be wasteful. And of course it is to the great interest of America
and the free world to assist other free countries to grow strong economically.
This kind of investment does that.” But he urged Congress to “find a way to
encourage private American investment abroad while providing some kind of proper
safeguards for American jobs.”
[1] American investments in foreign
securities stood at $8.3 billion in 1957.
[2] “U S. Industry Migrates Abroad to
Tap Markets of the World,” Business
Week, Jan. 3, 1959, p. 29.
[3] Easing of British restrictions,
June 8 on importation of a long list of consumer goods from dollar countries
marked virtual elimination of the discrimination against dollar imports that
had been effective in the United Kingdom in varying decrees since the start of
World War II in 1939.
[4] The European Economic Community
was established by the Treaty of Rome, signed March 25, 1957, by the six member
countries and later ratified by all of them. See “European Economic
Union,” E.R.R.,
1957 Vol. I, pp. 225–242.
[5] The six countries agreed, late in
1958, to extend a part of the 20 per cent quota enlargement to imports from the
11 other nations belonging to the Organization for European Economic
Cooperation. At the same time, they agreed to extend the initial tariff cut to
imports from countries signatory to the General Agreement on Tariffs and Trade.
[6] Under the original British
proposal, countries in the free trade area would exchange goods among
themselves and with Common Market countries on the same basis as that on which
the latter trade with one another, but they would retain the right to fix their
own tariffs on trade with outside countries.
[7] Walter Buchdahl, “European Common
Market: A Progress Report,” Foreign
Commerce Weekly, April 6, 1958, p. 6,
[8] Theodore R. Gates. Production Coats Here and. Abroad (1958).
pp. 21–22.
[9] Ninety-two per cent of the
manufacturing investment is in Canada, Latin America, and Western Europe, and
six per cent in industrialized or more developed countries like Australia and
Japan. For discussion of current proposals to encourage private investment in
underdeveloped countries, see Congressional Quarterly. Weekly Report, June 19,
1959, p. 826,
[10] J. H. Dunning, “The American Stake
in British Industry: I,” London
Times April 22, 1959.
[11] J. H. During, “The American Stake
in British Industry II,” London
Times,
[12] See “Relations With Canada,” E.R.R., 1957 Vol. I, pp.
393–398.
[13] About 17 per cent came from
foreign sources and 24 per cent from depreciation allowances.
[14] Exports dropped from $20.9 billion
in 1957 to,$l7.9 billion in 1958 imports remained almost unchanged at,$l3
billion in 1957 and $12.8 billion in 1958.
[15] Walter P. Reuther, president of
the United Automobile Workers, on May 12 gave general endorsement to this view
“but said be favored some kind of “penalty” on imports of foreign cars
manufactured by underpaid -workers. Reuther did not spell out the difference
between a “penalty” and a tariff quota restriction.
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ID: cqresrre1959062400
Norb Leahy, Dunwoody
GA Tea Party Leader
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