gardless of whether principal foreign economic activities were consolidated, either in the Department of State or in a separate foreign economic affairs agency, there would still remain a government-wide problem of foreign economic policy coordination because of the large number of departments which in any event will continue to have responsibilities in this field. The Department of Agriculture, for example, will presumably continue as the principal agency concerned with agricultural activities both at home and abroad, just as the Department of the Treasury will maintain its position of leadership in domestic and foreign monetary and financial matters. Decisions as to foreign economic policy, then, will involve joint efforts on the part of a number of government agencies. There will also be a continuing problem of coordination to relate foreign economic policies to overall foreign policy considerations.

Various mechanisms for the coordination of foreign economic policy have been tested during recent years. During the Second World War, the Economic Defense Board provided a Cabinet-level committee to coordinate the various international economic programs in which the United States was engaged. A later approach to achieving unified economic policy was the creation of the wartime Foreign Economic Administration. Later the Executive Committee on Economic Foreign Policy was set up under the chairmanship of the Department of State to assist in performing the coordinating function, and it in turn created numerous subcommittees on specific problems and issues of relatively limited scope. This committee was followed by the creation of a number of other specialized interagency committees, including the National Advisory Council on International Monetary and Financial Problems. These arrangements as a group cover a large part of the foreign economic field, but mechanisms of this sort cannot provide an over-all view or the direction and leadership required for a unified approach to foreign economic problems.

The Department of State as an agency has the same general responsibility for leadership in securing coordination in the field of foreign economic policy that it has for other phases of foreign policy and foreign affairs. It attempts to meet that responsibility in many ways. The economic staffs under the Assistant Secretary of State for Economic Affairs follow developments on a global basis, carry on advance planning to meet emerging situations, and are active in all phases of preparation for and conduct of intergovernmental negotiations on economic matters, particularly such matters as are handled on a multilateral basis. The economic staffs attached to the regional bureaus are similarly concerned with foreign economic policy for the world regions and individual foreign countries assigned to each bureau. The Office of European Regional Affairs in the Bureau of European Affairs, for example, has been actively involved in the economic policy

aspects of the European recovery program and is currently giving much of its attention to the economic aspects of mutual defense assistance to the North Atlantic Treaty countries.

The work of the Department of State as a leader in securing coordination of foreign economic policy has been most effective in connection with the trade agreements program, other matters of commercial policy, and generally for the matters in which decisions take the form of formal intergovernmental agreements. In other matters, where statutory powers of decision have been vested in other agencies of the government and particularly in the case of programs where other agencies have operating responsibility, the position of the Department of State has been relatively weak. Policy often tends to be made through the sum total of operations from day to day, particularly in the case of programs involving large expenditures and for which financial control tends to become decisive.

The present dispersion of responsibility for policy decisions as well as for day to day operations in large part reflects uncertainty and disagreement as to the proper role of the Department of State in the operation and coordination of foreign programs. That problem will be discussed further in chapter VI, as well as later in this chapter.

Coordination of foreign and domestic economic policies.-Closely allied to the problem of achieving coordination among agencies concerned with foreign economic policy is that of arriving at consistent and effective economic policies from the standpoint of both domestic and foreign implications.

The Report to the President on Foreign Economic Policies by Mr. Gordon Gray has emphasized that the present economic outlook makes increasingly untenable the inconsistencies between domestic and foreign economic policies. For example, with labor and material shortages possibly continuing over a long period, and with further shifting of resources from civilian to military production, the continuation of high tariffs, burdensome customs procedures, and discriminations against foreign goods are clearly in conflict with the national interest. The attempt to achieve economic strength in the United States and among its allies makes these policies with respect to international trade wholly inconsistent. The need for reconciling foreign and domestic policies is also to be found in the field of agriculture, where the present price support program has had widespread repercussions abroad that are in direct contradiction to United States foreign policy objectives. Such domestic policies are damaging not only to specific objectives but to the reputation of the United States for sincerity in the effort to promote world cooperation.

The obstacles to resolving some of the most important inconsistencies rest mainly in the strength of domestic special interests. But the extent to which domestic and foreign aspects of national policy

can be reconciled depends in part on the availability of machinery by which fuller understanding of the issues is possible.

MAIN ISSUES AND ALTERNATIVES

In the preceding section it has been seen that the existing foreign economic activities have taken on a variety and complexity that has introduced new and difficult problems of organization and administration. Four principal issues must be resolved. It must be decided where the administration of foreign economic aid should be lodged; to what extent other economic activities should be included in any centralization of foreign economic aid; what measures should be taken to coordinate the activities of the several agencies of the Government that in any event will continue to share responsibility for foreign economic activities; and what procedure or mechanisms should be established for the coordination of foreign with domestic economic policy.

In considering all of these issues, it is important to bear in mind the major changes in emphasis that are occurring with respect to economic aid. The European recovery program has been largely completed so far as its original objectives are concerned although a number of the individual countries included in the program remain in a difficult economic situation. On the other hand, the economic aspects of what has so far been known as the mutual defense assistance program have constantly grown in importance in recent months. The President's message to Congress of May 24, 1951, presenting proposals for economic assistance in the amount of 2.25 billion dollars during the next fiscal year as a part of the 8.5 billion dollars proposed for the entire mutual security program, makes it clear that future appropriations for economic aid will be mainly determined by the extent to which such aid is directly related to the requirements of the national defense emergency.

Issue 1: Administration of foreign economic aid

In what agency or agencies shall the administration of foreign economic aid be lodged?

During the past few years the agency issue with respect to foreign aid programs has been under consideration in several official reports on foreign affairs. Three members of the Hoover Commission favored the creation of a separate Administration of Overseas Affairs to administer occupied areas, the European recovery program, and the administration of island possessions and trust territories. The Report to the President on Foreign Economic Policies by Mr. Gordon Gray recommended a foreign economic programs agency which could achieve the necessary administrative centralization. An Overseas Economic Administration was recommended to the President by the

International Development Advisory Board under the chairmanship of Mr. Nelson Rockefeller. In the studies preceding establishment of the Economic Cooperation Administration, several reports to the President and the Congress recommended the establishment of an independent agency to administer foreign economic assistance.

Consideration of where economic aid should be centered for administrative purposes does not imply that the foreign role of the various agencies of the Government such as the Departments of the Treasury, Interior, Agriculture, Commerce, Labor, and others, should be terminated. It is assumed that under any administrative arrangement these agencies will continue to participate in the formulation of foreign economic policy, and that any centralization of administrative responsibility would still call for operating assignments to the agen cies having special competence in their respective fields.

The six major alternatives with respect to the administration of economic aid programs in Washington which we consider are: (1) to continue the existing arrangement of having both the Department of State and the Economic Cooperation Administration participate in the conduct of major economic aid programs, (2) to bring about a closer partnership between the two agencies, (3) to concentrate the administration of economic aid in a special purpose executive agency: the Economic Cooperation Administration, a new Overseas Economic Administration, or a Department of Foreign Economic Affairs, (4) to transfer Economic Cocperation Administration activities into the existing structure of the Department of State, (5) to transfer the Economic Cooperation Administration to the Department of State as a unit, and (6) to create a new Department of Foreign Affairs, replacing the Department of State, in which there would be a foreign economic affairs agency as one of several coordinate parts of the Department.

It is possible, of course, that some other existing agency or agencies might assume central responsibility for economic aid; for example, the Department of the Treasury, the Department of Commerce, or the Export-Import Bank. It is believed that while an assignment to one of these agencies might be feasible, the nature of their present responsibilities and the importance of their domestic clientele interests eliminate them as practical alternatives.

Most of the issues involved in the recent Gordon Gray and Rockefeller board administrative proposals will be discussed in connection with the alternatives we have selected for consideration. The Gordon Gray proposal is apparently a variant of alternative three, although the possibility that it is a variant of alternative five is not excluded by the language of Mr. Gray's report. The Rockefeller board proposal is a variant of alternative three, since it is a proposal for the creation of a new permanent foreign economic affairs agency separate from the Department of State.

The Hoover Commission proposal for an Administration of Overseas Affairs was not a proposal for an agency that would have the administration of foreign econòmic affairs as its primary purpose. Rather it was a proposal for a general purpose foreign program administering agency. It will accordingly be discussed mainly in chapter VI, although the present discussion will be pertinent to the problem as it arises in chapter VI.

Alternative 1 is to continue the existing division of responsibility between the Department of State and the Economic Cooperation Administration.

A principal argument in favor of continuing the present division of responsibility for foreign economic aid programs is that the existing arrangements have resulted in successful accomplishment. The fact that two or more agencies have been engaged simultaneously in the conduct of economic aid programs has apparently not had damaging consequences. It is also argued that the Economic Cooperation Administration has provided a convenient administrative arrangement capable of accommodating temporary economic aid activities without disturbing other permanent program administration in the Department of State.

A different view is that the present separation of economic aid between the Department of State and the Economic Cooperation Administration on the basis of long-term versus emergency operations is in many respects an artificial distinction. The type of economic development that has been sponsored by the Economic Cooperation Administration in its overseas development program, and in its technical assistance and strategic materials activities, has been similar in many respects to technical assistance rendered through the Institute of Inter-American Affairs and similar aspects of the work of the Technical Cooperation Administration in the Department of State. As the point 4 program becomes more closely associated with the procurement of scarce materials and the development of raw material sources, there will be a further similarity between these activities and major aspects of technical assistance as conducted by the Economic Cooperation Administration.

More significant opposition to the existing separation arises from the charge that the impact of different aid activities cannot be confined to any particular area of the world or to any particular aspect of economic activity. Two separate agencies for economic assistance, therefore, are said to lead inevitably to overlap and conflict, with failure to realize the advantages of over-all strategy, selection of the best tools and timing, and the best place to accomplish the desired objective. For example, economic assistance by the Economic Cooperation Administration in Europe has important repercussions on Latin American countries. The view has accordingly been taken that