DEPARTMENT OF STATE
DIVISION OF LANGUAGE SERVICES

(TRANSLATION)

/Full Summary/

LS NO.

28063
R-IV/R-XX
Italian

Henry Kissinger's Itinerary

THE CULTURAL ROOTS OF DIPLOMACY*

Henry Kissinger once remarked that if he had lived in 19th century Great Britain he could have been a conservative in domestic but not in foreign policy. In the aftermath of his last journey to Peking to prepare the way for President Nixon's trip this coming February, the facts appear to indicate that that remark is still true of him. Rarely has greater dynamism been exerted to maintain "world equilibrium" in this postwar era. It is hard to say to what extent this dynamism results from an objective situation and to what extent it represents President Nixon's personal choice. However that may be, it is beyond doubt that Dr. Kissinger's role in the charting of the new course that American diplomacy is taking has been anything but secondary.

Dr. Kissinger's connection with the White House goes back to the first
Eisenhower Administration. In the early fifties his Seminars of International
Studies were attended by some of the most important figures in the Government
and the Congress. He possesses an open-mindedness and a receptiveness to new
ideas that are rare among American leaders. Born in Bavaria in 1925, he has

*The name of the newspaper or periodical and the name of the author of this
article and its date of publication do not appear in the photocopy received
by LS.

-2-

always had a cultural background that is European. This explains the intellectual, and above all the cosmopolitan, attitude that he brought to the field of political action, without ever falling into the abstract idealism that was typical of the eggheads of Kennedy's "Brain Trust." He is a persistent and methodical worker, but is also capable of great intellectual originality, and he has a strong and charming personality.

Although he is generally thought of as a liberal, his approach to the Soviets and also to Mao's China has been strictly nonutopian. Both the intransigence of the "hawks" and the sentimentalism of the "doves" are completely foreign to his nature. He believes that the United States must realize that there are limits to its power and that its foreign relations should be conducted with a long-term, clear understanding of its own goals, but also with great flexibility of method.

The masterful way in which he reorganized and revitalized the National Security Council has given it "determining weight" that it never possessed prior to the Nixon administration.

Perhaps Dr. Kissinger's chief merit is his ability to harmonize his role as "impartial recorder" of de facto data with that of being a "creative spirit," along with his far-seeing concept of American foreign policy, the lack of which, in the previous administrations, he tirelessly pointed out.

Henry Kissinger, Head
National Security Council
White House
Washington D.C.

2Homen, January 27th, 1972

Dear Mr. Kissinger :

It is with great interest and pleasure that I
have followed your latest accomplishments in
foreign policy. In my reading about your extraor-
dinary success and important achievements I
often thought about the happy times when we
met at Harvard for the Seminar of International
Studies. It was indeed the best period of my
life in the States, and I cannot sincerely
think of another person as you with whom I felt
during the four years I spent in America such
natural sympathy and admiration.

I send you this article about your ideas and
activities, which I wrote with great enthusiasm
thinking of that faraway summer when I had the
fortune of making your acquaintance. I hope that
my attempt to give an interpretation of your work
and personality is not completely out of the way.
I hope to come in the States next spring and although
I imagine that your engagements will not allow you
to see me, I hope that I'll have at least news about
you from common friends.

With my best wishes for your future
happiness, and the greatest affection,
I am, X

Francesco Mei
Via della Scrofa 30
Roma

Homs
Afta delfa Bertha 30
Francece Mei

Francece Mei
sincerely, Home

I am, x
Habness, and the Rarest Mfection,
With my beat whieles for your future
You from common friends.

You from common friends.
to see me, I hope that I 'll have at least news about
I imagine that your engagements will not allow you
I hope to come in the States next spring and although
my attempt to give an interpretation of your work
fertile of making your acquaintance. I hope that
thinking of the faraway summer when I had the
activities, which I met with great enthusiasm
I send you this article about your ideas and
natural sympathy and admiration.

during the four years I spent in America and
think of another person so you with whom I felt
safe in the States, and I cannot sincerely
study. It was indeed the best period of my
met at Harvard for the Seminar at International
often thought about the happy times when we
dispart success and important improvements I
foreign policy. In reading about your extra-
have followed your latest accomplishments in
It is with great interest and pleasure that I

Dear Mr. Klaariger :

Khomex, January 54th '1915

WASHER, D.C.
White House
National Security Council
Henry Klaariger, Head

7204189

2 Romex, January 27th, 1972

Dear Mr. Kissinger :

It is with great interest and pleasure that I have followed your latest accomplishments in foreign policy. In my reading about your extraordinary success and important achievements I often thought about the happy times when we met at Harvard for the Seminar of International Studies. It was indeed the best period of my life in the States, and I cannot sincerely think of another person as you with whom I felt during the four years I spent in America such natural sympathy and admiration.

With my best wishes for your future happiness, and the greatest affection, I am, always

OFFICE OF THE PRIME MINISTER
TOKYO

7700805

December 23, 1976

Dear Mr. Secretary,

On the eve of my resignation from Premiership I thought
it appropriate to write to you.

It had been my belief that should my Liberal Democratic
Party suffer a substantial loss in the General Election of
December 5th I would assume the responsibility in a statesman-
like manner. As it turned out, the results of the election
were not in favour of my Party and accordingly I have decided
to resign.

In spite of this outcome of the election, Japan's
political stability based on conservative strength, I believe,
has not been affected, as a considerable number of candidates
belonging to the New Liberal Club and of independents with
LDP affiliation have been returned.

Moreover, Mr. Takeo Fukuda who for a long time has served
as my Deputy Prime Minister is expected to succeed me and I
feel certain that the Liberal Democratic Party will continue
to remain in power in the future.

The Honorable Henry A. Kissinger
The Secretary of State
The Department of State
Washington, D.C., 20520
U.S.A.

[L.C.]

Looking back upon the results of the recent election, I wish to mention two salient points. First, regarding the so-called Lockheed scandal the Liberal Democratic Party bore the brunt of severe criticism, particularly for the alleged involvement of a former Prime Minister. Secondly, however, the middle-of-the-road posture which I have long been pursuing, namely to avoid confrontation and seek dialogue and co-operation, did indeed receive firm support from the Japanese people. A sound testimony indicating the future course of Japan's political trend.

As I leave office, I would like to convey to you my deep appreciation for the friendship and inspiration you have given to me during my tenure as the Prime Minister of Japan. In the same vein I look forward to maintaining close association in the years to come as I shall remain active in politics and am determined to strive further for the peace and prosperity of mankind.

THE PRESIDENT OF THE UNITED STATES
PEOPLE-TO-PEOPLE SPORTS COMMITTEE

*Distinguished Service Award*

Henry A. Kissinger

WHO HAS BEEN DESIGNATED
SPORTS AMBASSADOR

OF THE UNITED STATES FOR OUTSTANDING CONTRIBUTIONS AS A MEMBER OF THE
DIPLOMATIC COUNCIL OF THE PEOPLE-TO-PEOPLE SPORTS COMMITTEE THUS BROADENING
INTERNATIONAL FRIENDSHIP, GOODWILL AND UNDERSTANDING THROUGH SPORTS.

June 14, 1974

PRESIDENT OF THE UNITED STATES
HONORARY CHAIRMAN

PRESIDENT,
PEOPLE-TO-PEOPLE SPORTS COMMITTEE

9 NOV 1974

Dear Mr. Vice President:

Thank you for arranging my recent visit to your country. The discussions which I and my colleagues had with you and your advisers were useful and productive. I am also grateful to you for arranging the memorable meetings with President Tito, Premier Bijedic and others of your distinguished countrymen.

Mrs. Kissinger and my colleagues have asked me also to convey their thanks to you, Mrs. Minic, and your hard-working associates for the efforts which were extended in making their short visit fruitful and enjoyable.

We left Yugoslavia sorry that circumstances prevented our staying longer, but we nonetheless carried away warm memories.

I look forward to seeing you again at the first available opportunity.

Warm regards,

Henry A. Kissinger

His Excellency
Milos Minic,
Vice President of the Federal
Executive Council and Federal
Secretary for Foreign Affairs of the
Socialist Federal Republic of
Yugoslavia,
Belgrade.

Belgrade,

Yugoslavia,

Socialist Federal Republic of

Secretary for Foreign Affairs of the
Executive Council and Federal
Vice President of the Federal
Miloš Miloš, His Excellence

Henry A. Klaasen

Warm regards,

first available opportunity.

I look forward to seeing you again at the
carried away warm memories.

Prevented our staying longer, but we nonetheless
We left Yugoslavia sorry that circumstances
and enjoyable.

were extended in making their short visit fruitful
your hard-working associates for the efforts which
said to convey their thanks to you, Mrs. Miloš, and
Mrs. Klaasen and my colleagues have asked me
countrymen.

Tito, Premier Bujedic and others of your distinguished
for arranging the memorable meetings with President
neatful and productive. I am also grateful to you
colleagues had with you and your advisors were
your country. The discussions which I and my
Thank you for arranging my recent visit to

Dear Mr. Vice President:

9 NOV 1974

October 9, 1968

Mr. John Mitchell
Nixon-Agnew Headquarters
450 Park Avenue
New York, N. Y.

Dear Mr. Mitchell:

I am enclosing the *curriculum vitae* of the scientist who has indicated that he would be willing to discuss trends in the strategic arms race with you. He is James Fisk, who is President of the Bell Telephone Laboratories. He is a most responsible scientist and well worth an hour. His number is (201) 582-4471.

I am also enclosing a copy of a letter from a member of the Executive Committee of the Christian Democratic Party. Are you or any members of your staff interested in talking to him when he comes through New York?

Henry A. Kissinger

ARTHUR A. MOOREFIELD, PH.D.

ASSOCIATE PROFESSOR OF MUSIC
CALIFORNIA STATE COLLEGE

(714) 887-6311
EXTENSION 515

5500 STATE COLLEGE PARKWAY
SAN BERNARDINO, CALIF. 92407

Columbia University in the City of New York

DEPARTMENT OF HISTORY

605 Fayerweather Hall
New York, N. Y. 10027

September 20, 1973

The Honorable Henry A. Kissinger
Assistant to the President for
National Security Affairs
The White House
Washington, D.C. 20500

Dear Dr. Kissinger:

I have asked Harper & Row
to send you a copy of my revised and updated
edition of GREAT PRESIDENTIAL DECISIONS,
which includes two decisions of President
Nixon's administration, in which you have
played so significant a role.

If you have any comments
about the coverage of these decisions or
your own part therein, I shall, it goes
without saying, welcome them.

With every good wish in
the enlarged career upon which you are
embarked, I am

RECEIVED

FEB 19 1973

CENTRAL FILES

CAYUGA PRODUCTS

CAYUGA GLASS WARE

COLLEGE CREST STATIONERY

THE CAYUGA POTTERY COMPANY, INC.

PHONE 607 533 4843

BOX 323

LUDLOWVILLE, NEW YORK 14862

September 6, 1972

Gov. Nelson Rockefeller,
Albany, New York.

Dear Gov. Rockefeller,

I am writing this letter with the full knowledge
that it might be intercepted by your palace guard, and never
reach your eyes. If it does reach you, it should be of help
in your efforts to re-elect the President this fall. As it is,
I feel it is my duty to make the efforts.

According to the essays by Victor Riesel about a week ago, your role in the election is to win over the support of labor. One of the most compelling ways to win the votes of the working people is to provide them with jobs. And I do not mean the WPA type jobs that are being promised by the opposition. I mean real jobs in the industrial complex of this nation.

I am enclosing a copy of an essay I published more
than a year ago, in July of 1971, and a full month before the
President amde his momentous proclamation of last Jegr in
August. If the concepts set forth in this essay been applied some
time in the past, the crisis that brought on his proclamation
would never have occured.

In this essay I describe a proposition for the
conduct of foreign trade that I have come to call the Fair
Exchange Policy (FEP). I conceived this proposition in 1956, and
in 1959 I published a thesis on it, that ran some 12,000 words.
The full thesis was published in The America's Textile Reporter
in three installments the following winter. The enclosed essay
is a condensation and updating to last year. But the concept
stays the same.

In his proclamation of last year, the President
asked for, and received, an increase in the price of gold from
$35 to a paltry $38 per ounce. On page 2 of the enclosed I show
that the price of gold should go to $100 per ounce, and tell why.
Remember, that was more than a year ago. On February 6, 1972,
J.A. Livingstone, of Philadelphia, stated in his essay in a
Syracuse paper, that the price of gold should have been increased
to double the value, to $70 per ounce, or even tripped. Last
spring, just before the President made his mission to Moscow, the
Wall Street Journal carried a front page item saying that the
Russians may pressure him to raise the price of gold to $70 per
ounce so that their supply will go farther. This summer some one
made the statement that if the American people were again allowed
to own monitory gold, the world price will go to $100 per ounce.
I point these out to show that there is thinking along the same
lines as I published more than a year ago. I am just too far
out in front for any one to understand me.

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CAYUGA PRODUCTS

LUDLOWVILLE, NEW YORK 14862

TO
DATE September 6, 1972
PAGE 2

Let me stress the point here that the FEP stands for a system of import surcharges and exports subsidies, and to do it in a way that is not obtainable today. You will note that on page 4 I quote the 1969 report of the Special Representative for Trade Negotiations, where they say that such a concept would have the effect of an exchange rate devaluation, but without resorting to a devaluation. You know very well, as do all people who make a study of foreign trade, that if any sudden giant steps were taken to increase the price of gold to $70 or even $100 per ounce, the entire industrial world would be thrown into turmoil. Yet it remains a fact that as long as gold is priced at the low figure where it now stands, we are going to continue to take a beating in world trade, and millions of Americans will remain on the unemployment roles.

Under some such concept as the FEP we can bring about the same effect as an exchange devaluation, but without the actual change in the price of gold, and we will be able to bring millions of job opportunities back to this country, and offer work to millions of Americans. And not WPA jobs, but real honest jobs.

And so as you go out to win the votes of Labor this fall, if the President would empower you to tell them that some such proposition as the FEP will be instituted in the new Administration, even George Meany would have to vote Republican.

As conditions now stand, very ineffectual steps have been taken to reverse our foreign trade deficit. One step was the tiny step taken to devalue the dollar. So far things have become worse. Also, last week the President met with Prime Minister Tanaka of Japan, and asked him to be nice to us in matters of foreign trade. To this the Japs figuratively thumbed their noses at us. We are powerless to do anything about it, and we go on taking a beating. I would stress at this point that the FEP could be instituted by us unilaterally, and we would not have to ask any other nation's leave. I would not look for any trouble from our trading partners on this. We have been asking Japan to cut the amount of textiles they send us, and they have grudgingly allowed a small reduction. However, if we tell them that if they will be willing to reduce their exports to us by X amount, we will pay them X dollars more for what we take, they should be willing to go along. Of course they may not, but we should make the set up where it is offered. If they refuse the FEP premium, it is their loss. This is all spelled out in the enclosed essay.

There is far more to this than was covered in the original thesis, so if you have questions, or want more information, let me know. Of course this may not get past your palace guard. In that case it will be your loss, and the loss of the President. It could mean millions of votes for him.

Yours very truly,
H.C. Jones.

THE FAIR EXCHANGE POLICY AND FOREIGN TRADE.

REVISED JULY 1971

In the beginning, foreign trade between nations was mostly on a barter basis, and beneficial to the trading partners. Nation A would take what it produced in surplus to its needs, and trade with nation B for what it produced in surplus, and which A did not produce. Both nations were the richer for the exchange. The expression "to carry coals to Newcastle" illustrated the stupidity of trying to sell such goods to a country that was already endowed with ample supplies.

Today trade is no longer as barter, but through a medium of exchange; in our case, the dollar. The only reason any other nation wants to send her goods to us is so that she may earn the purchasing power of the almighty (?) American dollars, or the gold they represent. She must have this to buy from us, or from others, such goods as she does not produce for herself, or can buy at better advantage from others. If it were not for this need for dollar purchasing power, no other nation would care to send us anything. Furthermore, I contend that if other nations could obtain the needed dollar purchasing power in some other way, they would not be so eager to send us the flood of their goods. They would keep more at home for their own use.

Today the U.S. has ample textile manufacturing facilities to more than supply our needs, but yet we allow a flood of textiles to enter our market at a lower price than we can produce them. This causes great unemployment in our textile industry. Rather than to take any steps to correct this condition, we find that our elected officers, most of whom have had little or no experience in commerce or industry, along with cloistered economists, who sit in the ivory towers of our institutions of higher learning, and who likewise have had little or no such experience, are telling us, who have had such experiences, that we must have foreign trade and it must be free trade.

Even though importing textiles into the U.S. is much the same as carrying coals to Newcastle, the free traders tell us that it must be done. They offer arguments based on their faulty, ivory tower, thinking, and I will shoot down every one they put up. I will touch on only a few here.

On page 751 in my copy of HUMAN ACTION, Ludwig von Mises states, "It is the consummation of the lasting blessing of free trade, in shifting every branch of industry to the location in which comparative cost is lowest, increases the productivity of labor and the total quantity of goods produced. Etc." Wonderful. We should import all of our needed goods, and become a nation of service workers. By "cost" is must be assumed that von Mises means monetary cost. But monetary costs must be based on amount of labor expended, and the American workman can produce more units of goods per man hour worked than any other people of the world. The reason that textiles from Japan cost less than American made textiles is that the medium of exchange between the yen and the dollar has become distorted. Let me explain.

2

Back about 1930, a skilled workman was paid about $60 per week. That came to 3 ounces of gold, on the $20 per ounce standard at that time. If an American wanted to buy an imported item worth 3 ounces of gold to the exporter, he gave up 60 American dollars to buy the exchange. Conversely, if a foreign buyer wanted an American made item that was worth $60 on the American market, he gave up 3 ounces of gold. In 1933 the New Deal took over. One of its first acts was to call in all of the monetary gold in this country. Then, in two steps, the dollar was devalued on the foreign market to $35 per ounce. This did not effect the Americans, as they did not hold any gold any longer, but the foreign gold holders reaped a bonanza. This action was supposed to stimulate our exports and curtail imports. Today there are those who are calling for the devaluation of the dollar in terms of gold. Since most currencies of the world are pegged to the dollar, they will devalue right along, and we will have no more success than we did in 1934.

There is a strong reason to devalue the dollar in terms of gold, and that reason is that a dollar is no longer worth one thirty-fifth of an ounce of gold. Today 3 ounces of gold is worth $105. No skilled workman will work for that sum per week. He demands several times that amount. Yet, if he wants to buy an imported item that is offered for 3 ounces of gold, instead of having to give up the wages of a full week's work, as in 1930, he has to give up the wages of only a part of a week. On the other hand, if he chose to buy the same item as American made, he will have to give up a full week's wages, because some other American worker wants more than $105 per week. Thus it is that because of our dual monetary system, imports cost the American worker far less than domestic made goods. And so those industries that are in competition with cheap imports suffer.

On the other hand, when a foreign buyer wants an American made item, he finds that he must give up more than the 3 ounces of gold that once bought it. Now, to buy the American dollars to pay for a week's wages, he must give up 3 or 4 times as much gold. So our exports are too expensive for others to buy, and our industries depending upon exports suffer.

It is a fact that we are on a dual monetary system, $35 per ounce of gold for foreign trade, and fiat money for internal use. It is not only the higher wages paid to the industrial workers in the auto plants and textile mills that are causing this distortion, but the higher wages paid to the garbage collectors and porters are having their effect as well. The dollar spent for foreign trade is presumed to be exchangeable for gold at the rate of $35 per ounce, so our trading partners have been willing to take them. Since May of 1971 they have begun to have second thoughts. To bring the American paper dollar back to the value it had in foreign trade 40 years ago, gold would have to go to at least $100 per ounce. So when von Mises says that goods should be made where they can be produced at the lowest price, if it were not for our dual monetary system, the U.S. would be an exporting country rather than an importing country. We would not need protection for our own industries.

To ridicule the protection concepts, the free traders will some times

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go to ridiculous lengths. On page 25 of THE TARIFF IDEA, published by the Foundation for Economic Education, Prof. W. M. Curtiss tries to show how ridiculous it would be for New York to try to raise its own bananas, rather than to import them from Central America. He makes the very valid point of the comparative advantages of geography. It is to the advantage of both countries for us to buy our bananas from Central America, and sell them manufactured goods, such as textiles. That is good. But now Central America has built up a textile industry, and wants to send us BOTH bananas AND textiles. And they get mad when we do not want to accommodate them. Time was when the Yankee Clipper would take a load of pots and pans to the Orient and bring back tea and spices. Now the Orient wants to send us BOTH the tea AND the pots.

It has become more and more evident that we are going to need protection for our own industries, or we are going to have economic ruin. The free traders say that if we raise tariff walls against our trading partners, or establish a system of quotas, they will retaliate by taking the same actions against us. The truth is that our trading partners are already doing this against our goods, and we hold still for it. Yet I must agree with the free traders on this point; higher tariffs and quotas are not the answer to this problem. We must reduce the amount of goods that come into this country, but at the same time, NOT reduce the dollar purchasing power to be earned by our trading partners. It can be done.

In 1968 there was a commission called the Special Representative for Trade Negotiations. On July 15, 1968, I sent my 4 page presentation to this commission. In this I described a proposition which I have come to call The Fair Exchange Policy (FEP). (A copy of this may be had upon request). Under the FEP, rather than to increase the tariffs, we would place a premium upon foreign invoices, to be paid by the American importer, but, unlike tariffs, it would be paid over to the foreign exporter as part of his payment. This would have the same protective effect as a higher tariff, but as it reduced the amount of goods coming into the country, the foreign exporter would still be receiving the same number of dollars as before. For example, say that we imported 10 items at $10 each for a total of $100. We would tell the exporter that we would take only 9 of his items, but that we would still pay him $100. This reduction of items imported, plus the increase in costs, would make room for the American workers to hold their jobs. In this way it would act the same as a protective tariff on the domestic market, but would not curtail the purchasing power of our trading partner.

So that this would not be just another means of passing out American dollars, the FEP premium would be paid in the form of scrip. This scrip would be good only for the purchases of goods made in America by American workers. As conditions now obtain, we pay Japan gold convertible dollars for her textiles, but Japan does not have to use these dollars to buy cotton from us. She can use these dollars to buy the cotton from Egypt. So that a foreign buyer could not use all FEP scrip to buy from us, and save his gold convertible dollars with which to buy from others, we will permit only a certain percentage of the invoice to be paid in scrip.

To illustrate how this will work, I will pose a case. First, we will assume that the exporting nation has already accumulated a fund of scrip. Say

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that nation A wants to buy a certain machine. It can be had from us for $100,000 or from country B for $90,000. Under present trade conditions, A would naturally go to B for the machine. However, to buy it from B, she will have to pay the full $90,000 in gold. We will let her buy the machine for only $80,000 in gold, and $20,000 in scrip, for which she paid nothing. Under this transaction A would save $10,000 of her own gold, our machine maker has made an export sale, and $80,000 in gold, that might have gone to B, is returned to us. The machine maker redeems the $20,000 in scrip for a like amount of American dollars, which had been deposited by some importer, when he paid the foreign invoice.

On page 4 of the Presentation, I show where an official in the Deutsche Bundesbank, of Frankfurt, was of the opinion that the FEP scrip would have the effect of reducing the value of the American dollar on world trade. That was in July of 1968. In May of 1971, efforts were started, in effect, to reduce the value of the American dollar on world trade. Germany has taken billions of American dollars, presumably worth 35 dollars to the ounce of gold, and should their holdings be reduced in value, they take a loss, and the Bundesbank would not like that. Furthermore, by controlling the amount of scrip issued, we would exercise some control over the value of the dollar for international trade. And this is done without changing the value of the dollar in terms of gold. It can be held at $35 per ounce.

The above presents three cardinal points of the FEP. There is another point that will be discussed later. The three points are: we place a surcharge on all imports, which would have the same effect as a tariff, but not reduce the purchasing power of our trading partners; our trading partners could use the scrip as part payment for what they buy from us, and it will act as a subsidy for our export trade; and it will have the same effect as an exchange rate devaluation.

On January 14, 1969, six months after my presentation, the Special Representative submitted its Report to the President. On page 56, the second full paragraph, it states, "Import surcharges combined with export subsidies of the same amount applicable to all products could avoid the distortions resulting from the use of surcharges alone. They would have an effect on trade similar to an exchange rate devaluation. Imports would be discouraged and exports would be stimulated." Since this is exactly what the FEP stands for, I would like to feel that my presentation had some influence on this passage.

The only semblance of any solution offered by the Representative is the "re-examination of Article XII" of the GATT. Under the GATT, a country can subsidize its exports under very special conditions. In this country it has been proposed that we offer a tax abatement to stimulate exports. Since our tax system is based on the income tax, that is not permitted under the GATT. No tax abatement can be allowed to a person, and a corporation is deemed to be a person. On the other hand, under the tax system used in most of Europe, the Value Added Tax, the tax abatement would be against the product, and that is allowable. The redemption of the FEP scrip would act as a subsidy.

The fourth cardinal point of the FEP is as follows. Under the FEP

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the export subsidies are implemented by redeeming the scrip as part of the invoice, and no tax abatement is involved. We do not have to go back to the GATT to have changes made. Our own legislative bodies can enact the enabling laws, and do it by unilateral action. We would have the full control of our foreign trade, and not have to go, hat in hand, and ask any other nation for its permission.

So, if the FEP is so good, why has it not been adopted? That is a good question. The first point of the FEP is for the protection of American industry, and the jobs of the American workmen. Those of us who are old enough to have had at least part of our education prior to the first war might recall that in those days we were taught that the protection for our industries was good. We have become the strongest nation in the world behind tariff walls. Some time after that, and probably before the depression, it became fashionable to be for free trade. It seems that it was at the same time it was popular to be at least a "parlor pink". So today, after a half century, we find that most, if not all, of our legislators, our executives and cloistered economists are all for free trade. As stated above, they have had little or no experience in the fields of commerce or industry, yet they tell us, who are in it, what to do. I have repeatedly challenged them to debate me. Prof. Curtiss, in refusing, said his arguments would be too ivory tower to suit me. At least he was honest about it. I will point out some of the most glaring free trade fallacies.

Going back to page 751 of Human Action, just above the passage quoted above, von Mises states, "---drop in their earnings, these workers will experience a drop in the prices of many articles they have to buy." By this he must mean that if, because of import competition, a man found his earnings to be 20% less, he would find that nearly everything he had to buy would be 20% cheaper. I wonder if he gave this any real thought. True, there are some things that he would need that could be had cheaper by buying the cheaper imports. The largest single outlay for the average family is for housing. This cost could not be reduced for the worker, because we do not import housing. It might be that soon we will be bringing mobile homes, and at that time we will get lower cost housing. But for now, no. Also, the worker will not find lower priced imported bus rides, or imported hair cuts. Nor will he find cheaper imported medical care. The items that he will be able to buy cheaper because of imports are very limited.

Furthermore, the total amount of our imports is only about 4% to 5% of our gross national product (GNP). Even to allow a discrepancy in the relationship between our imports and the GNP, the amount of the family's budget that can be used for low cost goods is limited, despite what von Mises says.

Now before any one labors under the impression that this small percentage of our workers can be allowed to be disposed of, let me point out the more than 80% of our workers are engaged in services, with less than 20% in productive industry. It is in the production industries where the wealth of this nation is produced. The services are important, but they do not produce any wealth. A truck driver may enhance the utility of an item by moving it from the factory to the user, but he did not produce any wealth.

[lc]

6

It has been stated that of the 20% in production, half are in industries that are vulnerable to harm by imports. With having 4 service workers for every one production worker, when a production worker becomes unemployed, it must stand to reason that some service workers will also become unemployed. Conversely, if we can increase the employment in our production industries by 5%, or 1% of the total employment, these will create demands that will increase employment in the service industries. By increasing the production employees by 10%, along with the increase in service employment, we could just about wipe out the high unemployment we have today. Since the FEP would protect our domestic market, and at the same time, enhance our exports, it could go a long way in solving that problem.

Writing in Newsweek, on December 21, 1970, Prof. Milton Friedman, University of Chicago, stated that a South American had said his country would save money by importing their autos, and paying the employees to stay home. I cannot see where this was such world shaking news. We have been doing that here. We import shoes and textiles, and thus put people out of work. We give them unemployment compensation and then welfare. That is exactly what the South American, and presumably Prof. Friedman, feel is good. At least they are getting some gainful work out of their people, where we just let them sit and watch TV.

On June 9, 1971, there were two related stories in the news. One stated that 375 former employees of a New Hampshire shoe factory had been certified for special assistance because they had lost their jobs as a result of rising foreign imports. The other story told that the Senate had voted 45 to 33 for $5.5 billions to provide public service jobs for the unemployed. This is just the old WPA back again.

As stated above, our imports amount to about 5% of our GNP, or about $50 billions. If, to protect the jobs of American workmen, we should impose a surcharge of 10%, or $5 billions, there would be screaming from one end of the country to the other. Yet we sit by and watch the Senate appropriate $5.5 billions to support those who have lost their jobs because of cheap imports. This does not make sense to me. A man can save a few cents by buying imported shoes, but what does he gain when he has to pay a like amount, or even more, in taxes to support those whom he put out of work by his actions? In Newsweek, August 17, 1970, speaking of protection, and any higher prices, Prof. Friedman says, "The consumer will be force to spend several dollars to subsidize the producers by one dollar." I disagree. I say that with free trade, the tax payers, as a whole, will have to pay several dollars in extra taxes to subsidize the consumers by one dollar. If protection of any kind is taken to be a subsidy for production workers, then I say the free trade is a subsidy for service workers.

In that same Newsweek, Prof. Friedman asks, "What would Japan do with the dollars she receives for her exports?" Although some of his reasoning is hard to understand, he implies that Japan would have to use the dollars to buy from us. In the same trend of thought, on page 753, von Mises says, speaking of the Swiss, "It does not matter whether they themselves buy more of the products of other American industries or whether they increase their domestic purchases in other countries. What ever happens, the equivalent of the dollars they earned

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7

must finally go to the United States and increase the sales of some American industries."

This argument sounds all right, but it will not hold water. As long as the American dollar is presumed to be worth gold at the rate of $35 per ounce, then it can circulate into other nations, and never come back, excepting to exchange for gold. As pointed out above, we buy textiles from Japan, and pay with our dollars. Japan does not have to use these dollars to buy from us, but can buy cotton from Egypt with them. Then Egypt is under no obligation to buy goods from us. She can demand gold. So it does not hold that when we buy from others, they must, of necessity, buy our goods. And that is what the dollar crisis of May 1971, was all about.

Under the FEP, for our trading partners to realize the full value of the scrip, they will have to buy from us. The scrip is not convertible into gold, and so cannot be used to buy from others. Despite what von Mises and Friedman say, that the dollars will have to come back to us, the history of our trade relations shows that this is not so. Only some such proposition as the FEP will reverse the outflow of our dollars.

One thing that has bothered me for some time is the selfishness of the American industries. Many are asking for protection, yet they will not lift a finger to obtain protection for any other industries. Textiles wants protection but will not offer to help shoes. Shoes will not offer to help glass. Glass will not offer to help autos. Each one wants it own protected, but turns its back on all others. Twenty years ago when the pottery industry was being hurt, a certain auto maker said that if we did not buy their pottery and textiles, they could not buy our cars. Now they are sending in their pottery, textiles AND cars. And this man weeps. When the time comes that we see autos, textiles, pottery, shoes, etc., all combining their efforts, and demanding protection for ALL industries, then we will have protection for the individual industry. But just so long as textiles wants protection for itself alone, then it does not deserve to have any protection. If all industries needing protection would unite, then there would be no combination of free traders that could stand up against them.

It is not only unfortunate that individuals present arguments against protection, but our own government joins in. The figures that show the imports and exports for each year are distorted. In my Presentation, I quote Department of Commerce figures for 1964. In that year Commerce shows we had exports of $25.2 billions and imports of $18.6 billions, for a favorable balance of $6.6 billions. However, of the $25.2 billions, $8.8 billions were in the form of foreign aid and investments, and we could not demand one red cent in payment for them. That made our foreign sales only $16.4 billions. So instead of the favorable balance of $6.6 billions, we really had an unfavorable balance of $2.2 billions. This amounted to two thirds of our balance of payments deficit for that year. So when you read our balance of trade figures, take a little salt with them.

Despite what von Mises and Friedman say, the dollars we spend with other nations do not, of necessity, have to come back to us in the form of sales

[LC]

8

to them. We now have some $50 billion deficit in balance of payments, and that is what brought on the May dollar crisis. After the first splash, very few waves have been made. Our government has been trying to get such currencies as the mark and the yen to "float higher, and thus take the pressure off of the dollar. There has been little, if any, success. We have no control over the currencies of other nations. Under the FEP we would have a decided amount of control of international exchange of the dollar.

Unless we are able to take the heat off of the dollar deficit, we are going to find that our trading partners are going to find themselves in the position where they will have to refuse to sell us any more of their goods. We will no longer have the cheap imports. With so many of our factories already closed, it may be that we no longer have the production capacity to fill our needs. That will create a seller's market, and prices will go higher than they would with the FEP premium increment added. It would be better to try to control our trade to some extent than to allow it to crash.

From time to time there are stories in the news that some foreign company is looking for a location in this country, where it can set up to manufacture its goods here, and not have to export from the home land. I can see two reasons for this.

First, our trading partners are beginning to realize that the time will soon come when they will no longer take our paper dollars in exchange for their goods. They do not want to lose the rich American market, so they are preparing to be able to manufacture their goods here. And second, they are holding very large quantities of paper dollars, and with foreign governments and industries working in concert, they can buy up, or establish and finance new companies in such a way that they will have a decided advantage over the old and established American companies. It is true that American interests have invested heavily in foreign industries, but I would hate to see the day when foreign interests own and control much of the American industrial complex. Operating under the FEP, this condition can be averted.

One of the things being done by this government to ease the dollar crisis is to sell to the central banks of our trading partners, such as the Deutsche Bundesbank, up to $5 billions in special treasury notes. This is to allow the other nations to have an investment outlet for their surplus of American dollars. But what of the cost in interest we will have to pay? What ever it is, it is money that has to be paid out by the American people, just as much as what they would have to pay as the FEP premium. Whether it is paid out by the general taxpayer or as a premium by the general purchaser, it still has to be paid by the American people. And when we pay out interest to these foreign banks, it will be in gold convertible dollars, which in turn will make our dollar deficit crisis all the deeper. Under the FEP, this would not be necessary to do.

The Fair Exchange Policy is not offered as a panacea for all of our trade and economic ills. It will not cure our inflation. Inflation has been

9

caused because of our fiat monetary system for internal use, and is another and
different can of worms. However, I will point out that today we do NOT have any-
thing like the FEP in operation, and we DO have inflation. So when, as, and if,
the FEP is established, and we still have inflation, it should not be blamed on
the FEP. And even without the FEP, we are going to continue to have inflation,
unless some steps are taken to stop it.

Today a million veterans of the Indo-China war are being dumped on
the labor market each year. Our political leaders call upon private industry to
make jobs for them. How in the world can industry do this, when these same poli-
tical leaders are doing all they can to export the job opportunities from America
to other lands? What are the veteran organizations doing about it? It would seem
that they are as much imbued with the free trade concept as are our government
leaders, and so they do nothing but to sit back and hope. The FEP could create
many jobs, for the returning veterans, and they would not be stop-gap, WPA type
jobs.

To save our economy, it has become very evident that we are going to
have to make changes in our foreign trade policies. I offer The Fair Exchange
Policy.

Published by
The Cayuga Pottery Co., Inc.
Box 323, Ludlowville, N.Y. 14862

United World College
of the Atlantic

This first United World College was
founded in 1962 at St. Donat's Castle on
the coast of South Wales.

The academic course covers the last two
secondary school years, leads to the IB
and is taught by a fully international
faculty. Over 45 countries are represented
in this co-educational College.

Ninety per cent of students come on
scholarships. They come from Europe,
North America and the Western Pacific.

The first students from the People's
Republic of China entered in 1973.

Former students have entered more than
150 universities in all parts of the world.

Entry to the College is full and over-
subscribed each September.

The College Rescue Services (Beach
Rescue Unit, Cliff Rescue Team and
Inshore Life Boat Corps) are manned by
students and are responsible to the
competent British National Authorities
for the safety of the public along the
twenty-mile stretch of rocky coast of
which St. Donat's is the centre. The
College Social Service Unit sends stu-
dents into surrounding Welsh towns and
villages to help the sick, the aged and
handicapped children.

Lester B. Pearson College
of the Pacific

This College, which enrolled its first students in September, 1974, is located on the shores of Pedder Bay on Vancouver Island, about 18 miles northwest of Victoria, the capital city of the province of British Columbia, Canada.

The architectural approach has been to produce a settlement at this heavily-timbered site which reflects and complements the natural beauty of the environment. The simple buildings are constructed from the native woods of Canada's west coast. Every attempt has been made to provide a warm, human, and natural atmosphere. The buildings have been designed to the human proportions of a rural village in the hope that students and teachers will experience the friendly large-family feeling of a small community.

The College has been designated as the national memorial to the former Canadian Prime Minister and Nobel Peace Prize winner, whose name it proudly bears. The late Mr. Pearson was also Honorary

Chairman of the Canadian National Committee of UWC.

All students take the IB examination which may be written in English or French.

The students and teachers of the College provide a number of services to nearby communities including sea search and rescue, mountain search and rescue, fisheries and pollution control research, and assistance to local organizations helping the elderly, handicapped, and underprivileged.

More than 30 countries are represented by the student body and an international faculty provides a student/teacher ratio of 10:1.

All students attend on scholarships and are accepted only for the full two-year course beyond Grade 11. One hundred places are available each year, most of which are allocated by a quota system to the countries which regularly sponsor students at the College.

United World College
of South East Asia

Singapore, the cultural meeting place of East and West, an international business and financial centre and yet a new nation in the midst of many growing nations, is an ideal site for an international college. The region offers a living curriculum to the student of international affairs and the strong Department of South-East Asian Studies at the College reflects this opportunity.

The College has twelve hundred students from over forty countries, aged eleven to eighteen. In the early years, students of all abilities are welcomed into a community wide-ranging in ability, cultural heritage and social background. United World Colleges scholars are admitted on merit to the two pre-university years of the College programme which prepares students for Advanced Level Examinations of the London GCE, for College Board Examinations of North America and, from September, 1975, the International Baccalaureate programme will be progressively introduced.

The College was opened in 1971 by the Prime Minister, Mr. Lee Kuan Yew.

Community service projects are well established with local children who are handicapped, deaf or blind. The College is linked with local schools and many students visit the homes of local families. The College is also developing a Jungle Centre in Malaysia on a coastal site in South-East Johore. The Centre will give students a first-hand opportunity to study social and economic changes associated with major land re-development. It will also provide an ideal base for jungle expeditions, community work and water sports.

The United World College of South-East Asia has a distinctive educational structure, but the international aims and philosophy are the same as for all other United World Colleges.

# Future Colleges

Colleges on mainland Europe are being planned in Italy and Germany. These Colleges will be outward looking and link the countries of the EEC with those of Eastern Europe and the developing world.

## Italian College

The Regional Government of Friuli-Venezia Giulia in Northern Italy has agreed to build a United World College on the Adriatic coast near Trieste. The College will accommodate 350 students and be similar to the College of the Atlantic. English will be the language of instruction and a wide range of languages, including Slavonic languages, will be taught. However, all students will be expected to acquire a working knowledge of Italian, so that effective links can be developed with the local community. In addition to a demanding academic programme, the College will have an activities programme based on community service work, sea-going activities in the Adriatic, and mountain sport and rescue in the nearby Julian Alps.

The College has been approved by the Italian Ministry of Foreign Affairs and Ministry of Public Instruction.

The international characteristics of the Trieste area at the cross-roads of Europe which is an historic meeting ground for Latin, German and Slav cultures, make the area particularly suitable for an international College. A special feature of the

College will be to develop close links with the countries of Eastern Europe and the Mediterranean.

## College of the Rhine

A proposal to open a United World College at Edenkoben in Rhineland/Pfalz has been accepted by the International Council. The necessary plans are now being prepared by the German UWC Founding Committee.

The College will be housed in a group of existing buildings, including the Schloss Ludwigshöhe, which was the family home of the Wittelsbachs and which will be the academic centre of the College.

The College will be within easy reach of several leading German university towns and will develop rescue services on the nearby Rhine. A special feature will be the creation of close contacts between the College and German industry.

## Other Countries

Plans for further Colleges are being investigated in a number of countries, including Iran.

> "These could provide, in many countries, dedicated men and women with a genuinely international education, who are needed so acutely to staff the growing international organisations and companies. In addition, each nation needs its own cadre of ranking businessmen, administrators, civil servants and so on, who have a real sense of loyalty and dedication to the international community. This is one of the great needs of our age and one which the United World Colleges could help meet."

Lester B. Pearson

United World Colleges
International Council

President:

Admiral of the Fleet the Earl Mountbatten
of Burma KG, PC, OM, DSO, FRS, DCL,
LLD, DSc, CEng

Honorary Vice-Presidents:

Mrs. Lester B. Pearson
Dr. Thor Heyerdahl

Deputy Presidents:

Mr. H. D. H. Wills, CBE, DL
Mr. Eric Weiss

Vice-Presidents:

Sir George Schuster, KCSI, KCMG, CBE,
MC*
Monsieur Antonin Besse
Rear-Admiral D. J. Hoare, CB, CEng

**Africa**
Mr. R. K. A. Gardiner, U.N.
Economic Commission for
Africa

**Argentina**
Dr. Venancio Deulofeu *

**Australia**
Mr. B. R. Pelly *

**Austria**
Dr. L. Wohlgemuth *

**Bahamas**
H.E. The Governor *

**Belgium**
M. Jacques de Thier *

**Bermuda**
H.E. The Governor *

**Brazil**
Dr. Jorge Fragoso *

**Canada**
Mr. K. Rotenberg *
The Hon. John Nichol

Mr. James A. Coutts

Mr. G. A. H. Pearson

Mr. Robert G. Rogers

Mr. John Yarnall

**Colombia**
Dr. Augusto Franco
Arbeláez *

**Denmark**
Mr. N. Kjølbye *

**Ecuador**
Señor Pablo Williams C. *

**Finland**
Represented by the
Finnish Cultural
Foundation

**France**
M. Olivier Giscard
d'Estaing *

**Germany**
Herr H. H. von Herwarth *
H.R.H. The Princess of
Hesse and the Rhine
Herr H. J. Abs

**Hong Kong**
Sir Kenneth Ping-fan
Fung *

**India**
Mr. Lalit Sen *

**Indonesia**
H.E. Mr. R. Subono,
London, representing
Chairman of National
Committee

**Iran**
H.E. Mr. A. Alam *

**Ireland**
Dr. F. H. Boland *

**Italy**
Professor P. Rossi *
Signora M. Agnelli

**Japan**
Avv. Antonio Comelli

**Kenya**
Mr. Kogoro Uemura *

**Luxembourg**
Dr. C. Obura *

**Malaysia**
M. Guy de Muyser *

**Malta**
Inche Hussein Onn *
The President of the
Republic *

**Netherlands**
Professor Dr. J.
Kymmell *

**New Zealand**
Mr. J. M. Howden *

**Norway**
Mr. Peter F. Holst *

**Philippines**
Mr. Dagfinn Paust

**Singapore**
Represented by the
Filipinas Foundation

**Spain**
Mr. R. G. Bennett

Mr. Robert Booker

Mr. Robert Lutton

Mr. A. P. Rajah

Professor G. G. Thomson

**Sweden**
The Duchess of Alba *

The Marqués de Santa
Cruz *

Señor J. del Val Caturla

**Switzerland**
Mr. Folke Haldén *

Professor Max

Petitpierre *

**U.K.**
Dr. D. V. Atterton

Lord Hankey

Lady Pamela Hicks

Sir Paul Sinker

**Uruguay**
Dr. Ramón Díaz *

**U.S.A.**
Mr. Frank E. Taplin *

Mr. Malcolm Muir

Mrs. Walter Rothschild

Mrs. Philip Farley
(alternate/

**Venezuela**
Dr. F. Kerdel Vegas *

U.N.
H.E. Prince Sadruddin
Aga Khan, U.N. High
Commissioner for
Refugees

UWC
Network
6 Network members,
including 2 former
members of teaching
staff, are full members of
the International Council

I.B.O.
Mr. A. D. C. Peterson

* Chairman, National Committee

# International Organisation

## International Council

The International Council (President: Admiral of the Fleet the Earl Mountbatten of Burma) and International Board of Directors (Chairman: M. Antonin Besse) are responsible for developing the project and the planning and co-ordination of new United World Colleges.

## International Office

The international development of the project is co-ordinated from the International Office in London by the International Executive Committee (Chairman: Sir Ian Gourlay).

## National Committees

National Committees have been set up in 36 countries. These Committees, working closely with national Ministries of Education and Foreign Affairs, select and finance UWC scholars. The Heads of State in a number of countries have become Patrons of their National Committee.

### UWC International Office

London House,
Mecklenburgh Square,
London WC1N 2AB
International Secretary:
Mr. Robert Blackburn

### United World College of the Atlantic,

St. Donat's Castle,
Llantwit Major,
Glamorgan CF6 9WF,
Wales
Headmaster:
Mr. D. B. Sutcliffe, MA

### Lester B. Pearson College of the Pacific,

Pearson College Drive,
R.R. No. 1,
Victoria,
British Columbia,
Canada V8X 3W9.

Director:
Mr. Jack E. Matthews, MA

### United World College of South East Asia,

Pasir Panjang P.O. Box 15,
Singapore 5.
Headmaster:
Mr. P. B. Jolley, BSc, MI Biol

Printed in England by The Hillingdon Press, Uxbridge, Middlesex

November 18, 1973

Dear Ambassador Murphy:

I hope that you understand why I must be absent tonight. I would appreciate it if you would read the following personal message from me to those attending the award ceremony.

"I deeply regret that the press of recent events prevents me from personally accepting the award of the National Council of Christians and Jews. My sense of honor in receiving this award is heightened by my great respect for the man in whose name the award is given.

"Charles Evans Hughes once observed, 'The pathway of peace is the longest and most beset with obstacles the human race has to tread; the goal may be distant, but we must press on.' He himself sought that distant goal with conviction and imagination -- he authored a new and more equal relationship with China, Japan and Latin America; a broad disarmament program among the major powers; and a plan to resolve the economic problems that beset Europe after World War I. But his policies, despite their merit, did not endure. The fleeting moment of promise that Charles Evans Hughes recognized was never more than that. Failure of vision -- both at home and abroad -- led to the collapse of the world's hopes for peace.

"Today, if our vision does not fail us, a structure of peace can be brought within our grasp. The United States faces a moment of opportunity. We can succumb to doubt and turn from hope -- or confident of our ability and united in our purpose, we can over the next three years bring a new sense of legitimacy and durability to the international order. We can move further along Charles Evans Hughes'

The Honorable
Robert D. Murphy,
1701 Kalmia Road, N. W.,
Washington, D. C.

Washington, D. C.
1701 Kalmi Road, N. W.
Robert D. Murphy,

The Honorable

order. We can move further along Charles Evans Hughes, a new sense of legitimacy and durability to the international in our purpose, we can over the next three years bring a and turn from hope -- or confident of our ability and united faces a moment of opportunity. We can succumb to doubt because can be brought within our grasp. The United States "Today, it our vision does not fall us, a structure of to the collapse of the world's hopes for peace.

that. Failure of vision -- both at home and abroad -- led
Charles Evans Hughes recognized was never more than
did not endure. The fleeting moment of promise that
after World War I. But his policies, despite their merit,
a plan to resolve the economic problems that beset Europe
proud disassembly program amid the major powers; and
equal relationship with China, Japan and Latin America; a
conviction and imagination -- he authored a new and more
must press on. He himself sought that distant goal with
human race has to treat: the goal may be distant, but we
of peace is the longest and most peset with obstacles the
"Charles Evans Hughes once observed, 'The pathway

name the award is given.
award is heightened by my great respect for the man in whose
of Christians and Jews. My sense of honor in receiving this
me from personally accepting the award of the National Council
"I deeply regret that the press of recent events prevents

message from me to those attending the award ceremony.
I would appreciate it if you would read the following personal
I hope that you understand why I must be a present tonight.

Dear Ambassador Murphy:

November 18, 1943

2\PC:Tfriedman:MPalmer:ml

Henry A. Klessinger

Warm regards,

the constancy and strength to turn those hopes into reality."

where of hope; once again we must decide whether we have

have done so much to open. Once again we live in an atmosphere

pathway to peace, a pathway that President Nixon's policies

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