DISPOSITION OF SUNDRY PAPERS OCTOBER 6, 1949.-Ordered to be printed Mr. GARMATZ, from the Joint Committee on the Disposition of Executive Papers, submitted the following REPORT The joint select committee of the Senate and House of Representatives, appointed on the part of the Senate and House of Representatives and acting in compliance with the provisions of the act approved July 7, 1943 (57 Stat. 380), as amended by the act approved July 6, 1945 (59 Stat. 434), respectfully reports to the Senate and House of Representatives that it has received and examined the report of the Archivist of the United States No. 50-9, dated October 4, 1949, to the Eighty-first Congress, first session, submitting the following lists or schedules, or parts of lists or schedules, covering records proposed for disposal by the Government agencies indicated: Your committee reports that the records proposed for disposal in the said lists or schedules, or parts of lists or schedules, reported by the Archivist of the United States do not, or will not after the lapse of the period specified, have sufficient administrative, legal, research, or other value to warrant their continued preservation by the Government and recommends that their disposal be accomplished subject to the proviso of section 6 and the provisions of section 9 of the aforemen tioned act, as amended, in accordance with the regulations promulgated by the National Archives Council under the provisions of said act. Respectfully submitted to the Senate and House of Representatives. Members on the Part of the House. Members on the Part of the Senate. H. Rept. 1383 EXPORT-IMPORT BANK FOREIGN INVESTMENT OCTOBER 6, 1949.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed Mr. SPENCE, from the Committee on Banking and Currency, submitted the following REPORT To accompany H. R. 55941 The Committee on Banking and Currency, to whom was referred the bill (H. R. 5594) to amend the Export-Import Bank Act of 1945, as amended (59 Stat. 526, 666; 61 Stat. 130), to vest in the ExportImport Bank of Washington the power to guarantee United States investments abroad, having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass. The amendment is as follows: Page 2, line 5, strike out "against risks peculiar to such investments;" and insert in lieu thereof: by assuring either or both (i) the conversion into United States dollars of foreign currency derived from an investment and (ii) compensation in United States dollars for loss resulting from expropriation, confiscation or seizure by action of public authority; GENERAL STATEMENT The bill would implement one of the recommendations of President Truman in his recent special message to the Congress on point IV of his inaugural address in which the President outlined a broad program designed to assist underdeveloped areas of the world to improve the economic status of their peoples. The two basic elements of the program are technical assistance and the investment of capital. H. R. 5594 deals with the investment of capital and administratively is independent of legislation that would authorize the furnishing of technical assistance. The President pointed out in his special message that With many of the economically underdeveloped areas of the world, we have long had ties of trade and commerce. In many instances today we greatly need the products of their labor and their resources. If the productivity and the purchasing power of these countrics are expanded, our own industry and agriculture will benefit. Our experience shows that the volume of our foreign trade is far greater with highly developed countries than it is with countries having a low standard of living and inadequate industry. To increase the output and the national income of the less developed regions is to increase our own economic stability. Particular emphasis in the point IV program is placed upon the need for increasing the flow of private investment. Not only is private capital in this country potentially the greatest external source of investment funds for development abroad, but in addition private investment carries with it the technical skills, managerial experience, organizational talents and incentive which are essential to put capital to effective use. Our industrial technology is largely in the hands of private organizations and can best be put to work through private channels. To induce and encourage the flow of private capital, several interrelated courses of action are envisaged. The continuing effort of United States foreign policy to create a secure and peaceful world is a fundamental measure. A more specific measure will be the negotiation of investment treaties with foreign countries which have as their purpose the creation of a more favorable climate for the investment of capital. Over the years it is hoped that these courses of action together will have their effect in removing some of the deterrents to the investment of private capital abroad. Treaties alone, however, cannot give an investor the assurances which he may legitimately require in order to risk his capital abroad. In order to bring about a material increase in the flow of private capital, more tangible assurances need be given to potential investors against some risks which today attend investment in foreign countries. H. R. 5594, as amended, would vest the discretionary authority in the Export-Import Bank to afford such assurances by extending guaranties against two risks which weigh heavily in the minds of potential investors in varying degrees in different countries of the world. Ordi The committee desires to emphasize that the bill does not permit guaranties covering ordinary business risks. It does not assure anyone of a profit; it does not insure anyone against business loss. nary business risks are encountered by any business enterprise whether it operates in the United States or elsewhere. They are the risks involved in attempting to earn a profit and they are not peculiar to foreign investments. In its hearings conducted on the bill the committee heard testimony from the Secretary of the Treasury, John W. Snyder; the Under Secretary of State, James Webb; and the Chairman of the Board of Directors of the Export-Import Bank of Washington, Herbert E. Gaston, who appeared on behalf of the executive department of the Government and testified in support of the bill. Other witnesses supported the purposes of the proposed legislation although, in certain instances, there were differences of opinions on the approach to the problem involved. As a result of its consideration of the subject matter involved in the proposed legislation, the committee has recommended an amendment to the introduced bill. The purpose and effect of the committee. amendment is to limit the risks against which guaranties might be issued to that of inconvertibility, and that of expropriation, confiscation or seizure by action of public authority. In its introduced form, the bill provided that the bank might guarantee "against risks peculiar to" foreign investments. Under such language the bank would have had the authority to cover any risks it might determine to be peculiar to foreign investments. The committee believed that such language was too broad in its scope and that the risks to be covered should be limited to the two expressly provided for by the amendment. The first and most important of the two risks which the bill, as reported by the committee, would permit the bank to insure against is that of inconvertibility; that is to say, that an investor abroad would not be able to convert local currency, received as earnings on or the proceeds of disposition of the investment, into United States dollars and to transfer these dollars to the United States. This risk of inconvertibility is not faced by a domestic investor but is a risk of serious proportion in a very large number of foreign countries today. The second risk which the bill would permit the bank to cover is that of expropriation, confiscation or seizure by action of public authority. If expropriation of an investment should occur and there should be prompt and adequate compensation in the currency of the country in which the investment is made, the investor, if he held a contract guaranteeing convertibility, would be able to invoke such a contract to convert the foreign currency into dollars. Thus, a guaranty of convertibility would cover this situation. The additional risk against which it may be desirable to guarantee is the risk that there will be expropriation, confiscation or seizure (distinct acts in the law) without prompt or adequate compensation even in the currency of the foreign country. Although investment treaties can do much to assure against the risk of loss to the investor through expropriation, confiscation or seizure, they may not be the complete answer to the fears of the investor. Despite the good faith of an existing government in entering into a treaty, expropriation may become unavoidable in its public interest and, if the country is unable to pay promptly for the property, a guaranty would be the only recourse of the investor. In entering into guaranties the bank proposes to charge a fee which will bear some relation to the value of the guaranty to the investor as well as to the liability assumed by the United States Government. The committee desires to point out that the proposed guaranty program would in no way alter the policy of this Government not to intervene in the domestic affairs of foreign countries. In this connection your attention is invited to the statement of Under Secretary of State James Webb, which appears on pages 56 and 57 of the committee hearings on H. R. 5594. The enactment of the bill would not automatically commit the Government to a program of any specific character or magnitude. The legislation would merely vest in the bank, in the same manner and breadth as are its other powers, the discretionary authority to exercise a function. The guaranty function is closely allied to and is indeed but a logical extension of the powers which the bank has been exercising since 1934. It is understood that the bank proposes to pass upon individual cases and determine the merits of each application. A judgment will be made in each case with regard to the country in which the proposed investment is to be made, the character and experience of the investor, the nature of the investment, and other factors which will weigh in a determination whether a guaranty should be granted. The bill does not provide for any additional funds for the bank. The amount of guaranties that the bank could issue in exercise of the authority granted by the proposed legislation would be limited to the |