Climbing the Barriers

Since the Eisenhower Administration took office in 1953, it has encountered one obstacle after another in its efforts toward freer trade with other nations. Last week, however, a whole series of developments made the slogan, "Trade, not aid," begin to ring a little truer.

New Venture. Most dramatic among the week's trade-policy developments was Treasury Secretary George Humphrey's announcement that he had approved U.S. participation in the International Finance Corp., an institution to be set up as a subsidiary of the World Bank (International Bank for Reconstruction and Development). IFC, brain child of the World Bank's President Eugene Black, will invest capital and share ownership in private ventures, mainly in underdeveloped lands, and thus also promote private investments which would not otherwise be made.

As such, it is a new concent in international lending which differs from both the World Bank and the U.S. Export-Import Bank. The World Bank can make loans only for projects guaranteed by the government of the country involved, a rule which invites government meddling, discouraging many investors. The Export-Import Bank's chief purpose is to promote the purchase of U.S. products.

Key to Black's plan is to secure IFC's money with debentures, a cross between stocks and bonds which pay a fixed interest, fluctuate in value, represent ownership in the company but carry no voting rights. With this device, rarely used in international finance, IFC can avert the stigma of creeping socialism (it will have no voice in management) while realizing capital gains. Black expects most debentures to be convertible into common stock, so that IFC will find a ready market when it is ready to take its profits out of a smoothly running new business.

For IFC to start operating, at least 30 countries must subscribe a total of $75 million. The U.S. share: almost half the minimum total -- $35 million.

Opportunity's Corners. From both sides of the Atlantic last week came other good news on the trade front. Items:

P: At Geneva for the opening session on revision of GATT (the General Agreement on Tariffs and Trade), Assistant Secretary of State Samuel C. Waugh read a letter from President Eisenhower in which Ike said that he "looks forward to early action" in the next Congress on his international trade program.

P: Next day, also at Geneva, Tennessee's Democratic Congressman Jere Cooper, the House Ways and Means Committee's prospective chairman, promised that tariff revision will be "one of the first major pieces of legislation" that his committee will take up, come January.

P: The State Department disclosed that, at the President's request, it had ordered Foreign Service officers to give more help to U.S. businessmen abroad.

P: The Foreign Operations Administration has launched a new program to promote U.S. investment abroad. It has already compiled and distributed to businessmen a list of industrial projects needed in various countries. To augment the list, FOA is training a force of 16 business-school graduates, who will scatter to the globe's corners looking for investment opportunities.

P: The Export-Import Bank announced a new policy of extending general credit lines up to $10 million each to exporters of capital equipment. The foreign customer must pay 20% down; the U.S. exporter must finance 20%, and the Export-Import Bank will lend the rest. The two first credit lines under this policy: $4,000,000 to The Oliver Corp. (farm implements); $6,000,000 to Combustion Engineering, Inc. (steam boilers).

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