MONDAY, MARCH 26, 1956.

BUREAU OF FOREIGN COMMERCE

WITNESSES

H. C. MCCLELLAN, ASSISTANT SECRETARY FOR INTERNATIONAL
AFFAIRS

LORING K. MACY, DIRECTOR, BUREAU OF FOREIGN COMMERCE
E. E. SCHNELLBACHER, DIRECTOR, OFFICE OF INTELLIGENCE AND
SERVICES

R. E. SIMPSON, DIRECTOR, OFFICE OF ECONOMIC AFFAIRS

SUMMARY JUSTIFICATION DATA

Mr. PRESTON. The next item which we will take up is the one for the Bureau of Foreign Commerce which is found on page 62 of the committee print and at page 600 of the justifications.

Before going into the program activities, we will be very glad to hear Assistant Secretary McClellan, who has a general statement to make on this subject.

Before Mr. McClellan proceeds, however, we will insert into the record at this point the appropriate pages of the justifications. (The pages referred to follow:)

SUMMARY AND HIGHLIGHT STATEMENT

The budget for the Bureau of Foreign Commerce recognizes the importance of increasing foreign trade, investment, and travel to the advantage of our national economy and our foreign-policy objectives. The Bureau of Foreign Commerce is responsible for the promotion of international trade, private foreign investment, and travel. The Bureau proposes to carry on its foreign operations as necessary to provide the business community with assistance and information during the fiscal year 1957 at the same minimum level as in fiscal year 1956. For this work, $2 million plus $130,500 to meet the pay raise has been requested. The Foreign Service of the State Department is proposing an accelerated program for the exchange of personnel with the Department of Commerce in order to strengthen and expand the Foreign Service economic and business activities essential to the Department of Commerce. To make effective use of this activity and to carry forward a more constructive foreign trade and investment program of value to our economy and national defense, the Bureau requests $125,000 additional. $75,000 is requested to support a travel-promotion program which had previously been financed by allocations from the International Cooperation Administration and predecessor agencies. In veiw of the increasing importance of international trade in strengthening the free world, $119,500 has been requested to support the travel costs and incidental expenses of 10 trade teams composed of qualified businessmen under the leadership of Commerce Department personnel. These trade teams will tour countries carefully selected on the basis of present or potentional trade development to meet with foreign business groups for the purpose of stimulating two-way trade.

Mr. PRESTON. You may proceed, Mr. McClellan.

GENERAL STATEMENT

Mr. MCCLELLAN. Mr. Chairman and members of the committee, I appreciate very much you giving me the privilege to appear before you today in connection with the 1957 budget for the Bureau of Foreign Commerce.

This being my first appearance before this committee, I especially appreciate this courtesy.

Mr. PRESTON. We are glad to have you.

Mr. MCCLELLAN. I have a prepared statement which if it meets your wishes, I will merely file for the record. I know you have all received it in advance.

Mr. PRESTON. We will be glad to have you do that, Mr. Secretary. (The statement referred to follows:)

Mr. Chairman and members of this committee, this being my first appearance before you, I wish to express my appreciation for having this opportunity to present the programs planned for fiscal year 1957 in the Bureau of Foreign Commerce.

Prior to my coming to Washington, I had the opportunity to travel abroad rather extensively. During my travels I discovered that in many countries there are tremendous opportunities for the development of two-way trade if a way can be found to provide adequately the needed two-way information. Even the simplest facts concerning trade opportunities with the United States are largely unknown to our foreign friends. The same is true as to most American businessmen's knowledge of trade opportunities overseas.

Furthermore, the normal pattern of international trade, which was completely disrupted during World War II, is now redeveloping. Strong competition from many nations is being met as world markets expand. The United States must obtain its share of these markets as the trade channels are reopened and trade and investment opportunities reappear.

It must be recognized that the conduct of international trade today is unusually complicated. It is particularly difficult for the medium sized or smaller companies to obtain all the information necessary for them to make sound judgments and to exploit fully foreign opportunities under increasingly competitive world conditions.

The Bureau is fully aware of its responsibility toward the expansion of international trade in an orderly manner. It realizes, however, that, given the necessary tools and up-to-date information, the initiative of the American businessman can be relied upon to obtain a full share of international trade, investment, and travel.

A report submitted by the Bureau of the Budget to the Committees on Appropriations of the Senate and the House of Representatives on the end-use value of foreign economic commercial reporting was prepared with the cooperation of businessmen on the Advisory Council on Federal Reports. The following conclusions were reached after answers to a comprehensive questionnaire were received from business and after many detailed discussions with businessmen engaged in foreign activities.

"Our Government policy of promoting foreign trade has greatly increased the demand for commercial intelligence of our world trade opportunities as an aid to the business community in search for new foreign markets. Dissatisfaction with the coverage and timeliness of the foreign intelligence reports has been expressed by business users. Our program for the fostering of foreign trade has given greater urgency to the demands for an expanded commercial intelligence service by those who consider such information indispensable in the search for new markets."

Predicated on close examination of every function within the Bureau, I have proposed a redirection of some programing designed to meet the demands of the business community for increased services. These proposals were approved by Secretary Weeks and are now presented to the Congress in this, the President's budget.

The budget estimate presented reflects the Bureau of Foreign Commerce's responsibility to carry on its traditional services to the business community at the same level as over the past 2 years. The additional requests, although modest, will provide adequate funds to carry out the planned programing.

Of major importance is the agreement reached between the State Department and the Department of Commerce. It is designed to strengthen our services to the business community. To implement this agreement, the Department of Commerce proposes to receive 20 economic officers from the Foreign Service and train them for a 2-year period. At the same time, the Department will exchange 20 men with the Foreign Service who have had at least 2 years' experience in the field of international trade and investment.

This joint program will increase the activity and effectiveness of the Foreign Service to make available to the business community information relative to the development of foreign trade and investment.

To achieve the maximum results of this program it is essential that the activities of the Bureau be increased. The Office of Economic Affairs should develop more economic and investment studies for publication. The offices concerned with trade and investment development must assemble more complete information on opportunities and disseminate this information to business.

The exchange program with the State Department must be implemented with broader activity within the Bureau, if we intend to meet the new developments in the field of foreign commerce. Therefore, provision has been made in this appropriation estimate to increase these activities.

Allowances have been made in this budget to send 10 trade missions to countries where there will be no international trade fairs.

Here again we visualize tremendous trade opportunities for American businessmen. The success of trade missions touring the foreign business communities in the interest of two-way trade at fairs has been phenomenal.

However, we have not gone far enough. Many other countries should be explored beyond those that have trade fairs. The program now suggested will bring about thousands of valuable contacts on each tour. Although specific trade results will not be quantitatively evaluated, these contacts will be unquestionably important.

The countries selected to be visited by these 10 trade missions will be carefully screened for probable immediate benefits to the United States in terms of good will as well as opportunity for long-range trade and investment promotion.

Additional funds are requested for a travel promotion program. This program was previously financed by allocations from ICA and predecessor agencies. The ICA, Department of State, and the Bureau of the Budget have agreed that the Department of Commerce shall request its own funds for carrying out this program in fiscal 1957. United States residents spent about $1 billion in 1955 in foreign travel. Dollars spent in travel can make a significant contribution toward correcting the trade imbalance now covered by aid programs, troops overseas, and other dollars spent as a cost to the taxpayer.

Specifically, the Department contributes to the development of increased international travel by engaging in the following activities:

(1) Coordinating travel programs through United States cooperation with foreign governments and with businessmen here and abroad.

(2) Making special reports on travel-development activities and publicity programs in foreign countries to encourage travel to the United States.

(3) Making annual statistical reports on the United States share in international travel.

(4) Improvement and expansion of analysis of questionnaire replies by United States residents returning from abroad.

I sincerely believe that the Bureau of Foreign Commerce program as proposed, effectively administered, will perform an important and much-needed service in the national interest. Therefore, I respectfully submit that this request is justified and I trust it will be given your favorable consideration.

IMPORTANCE OF FOREIGN TRADE IN NATIONAL ECONOMY

Mr. MCCLELLAN. Mr. Chairman, I would like to make a few observations extemporaneously concerning some of the problems which are referred to in my prepared statement, and which I think will prompt some questions in connection with the budget figures under discussion.

First, I would like to say that from my own personal observation I consider the importance of high level of trade, investment, and travel very real indeed in connection with the responsibilities carried out by our Government today, and recognizing that in ratio to our gross national product in 1955, exports amounted to the comparatively small figure of 3.5 percent, even taking into account everything, such as services and invisibles, and such, our exports of nonmilitary goods would total about $14 billion, which is close to 10 percent of what we would consider the movable goods produced in this country and somewhere in the neighborhood of that amount of the manufactured items produced. Further than that, close to 40 million acres of American farmland produced for markets overseas and between 3.5 and 4 million people are employed in connection with foreign trade. When you consider them, and their families and all these other factors, it is clear at once that our foreign trade is an important part of our national economy.

REDEVELOPMENT OF TRADE CHANNELS FOLLOWING WORLD WAR II

In connection with this, there are real problems, I believe for United States firms doing business abroad-either buying or selling. All of us realize, of course, that following World War II and the Korean situation trade channels throughout the world had to be completely recast and that channels of trade which obtained before World War I and before World War II have been completely disrupted twice. As they are rebuilding, they are being reformed in ways that could easily exclude the United States from markets which we formerly enjoyed unless we are right on the job to develop our own opportunities.

I think this is particularly true with the smaller businesses who have not been able to develop for themselves the kind of communication channels between the various countries with whom they would like to deal and the United States. The bigger firms have had a better chance of doing that, and have done more about it. However, it seems to me that based upon my own experience in travels through between 15 and 20 different countries during the past 7 years that the small businesses, both here and abroad, have opportunities for expanding our world trade, and that can only be brought to full fruit with some additional work on the part of the Government, largely through the Department of Commerce in cooperation with the Department of State and our Foreign Service.

The Bureau of Foreign Commerce has the primary role in this work. The problems we are facing today in meeting the needs of American business and industry are not being fully met, and that is one of the points that will be developed in this presentation. I am personally extremely anxious that we do what is right, and only that in developing adequate services to business.

It is our purpose to aid in the expansion of foreign trade on a proper basis, both buying and selling. That is, two-way trade to the mutual advantage of all the countries concerned, including the United States.

EXPLANATION OF REQUESTED INCREASE IN FUNDS

As to the budget figures, our request includes $2,130,500 to carry the operations in 1957 at approximately present levels. I would like to