Attempt To Avoid Discrimination

Press, Volume CVIII, Issue 31568, 4 January 1968, Page 9

Attempt To Avoid Discrimination

(N.Z.P. A.-Reuter—Copyright) WASHINGTON, Jan. 3.

United States Administration officials say the new regulations on direct foreign investment by American concerns will be applied on a company - by-company basis.

Each company operating abroad will be told to halt any further investment in Western Europe and South Africa, and to keep its outlays in Britain and 15 other countries to 65 per cent of the 1965-66 average. In this way the Administration hopes to avoid discrimination. For instance, were it merely to stipulate an over-all limit on a group of countries, then* would be a serious danger that one particular country

might be held to account for a disproportionate share of the cut-back.

This might have affected Britain in particular, since its group includes countries in which American companies hold substantial metal, mining and oil exploration and refining assets. As spending on these is not easily cut back at short notice, there may have been a temptation to seek reductions elsewhere. Officials would not speculate today on where United States corporations might choose individually to make their chief cut-backs, but it was thought that the net gain in American assets in Britain would be held to about the required ratio. This suggested that roughly SUS4OOm might be added to American investments in Britain in 1968, compared with about s6oom in each of 1965

ind 1966. Figures for the first half of 1967 show that American com-

panies were adding to their British investments at an annual rate of about s6oom. Officials pointed out that the new limit of 65 per cent for the so-called Group “B" countries would be computed on the 1965-66 average of both undistributed profits and capital transfers.

The Group “B” countries include about a dozen Middle East oil-producing nations, together with Australia, Canada, New Zealand, Japan, Ireland, Hong Kong and Britain. Officials conceded that the combined effect of the restraint on new investment, the call to repatriate a large percentage of annual earnings, and the need to reduce foreign liquid balances would place considerable pressures on foreign money markets. Some officials said Congressional support raised hopes that President Johnson might now win approval for a longstalled plan to impose a 10 per cent surcharge on income

taxes. Congressional leaders had demanded more vigorous action by the Administration to check the nation’s economic ailments before committing themselves to an antiinflationary tax increase. Congress will be consulted soon on how to put legal “teeth” into the President’s call for a cut in foreign travel. Apart from the possibility of punitive taxes on such trips, the Government may also seek power to limit the amount of foreign currency that tourists can carry out of the country, or the amount of duty-free gifts they can bring back—at present limited to $lOO a head. Officials say that the Defence Secretary (Mr Robert McNamara) will probably urge United States troops and their families in Germany to spend less on local purchases and to send more of their money back to America in the form of savings. The Defence Department

will also put pressure on the European N.A.T.O. allies to buy more of their defence equipment in the United States and to invest in longterm American securities to help spread the load now carried largely by the United States in maintaining its garrisons abroad. Some American civilians attached to American bases abroad may be brought home. Two senior State Department officials, Under-Secre-taries Nicholas Katzenbach and Eugene Rostow, are travelling around the world to explain the new moves to other Governments and to try to enlist their co-operation. President Johnson has again promised that he will keep the dollar rate of exchange intact, but he has warned other nations that their help is needed to shore up the world’s major currency, which has been under heavy attack lately from France, a leading gold-buying nation.