Curbs on Capital Exports

April 7, 1965

Report Outline
Flow of Capital into Foreign Investment
Restraints on Export of American Capital
Shifts in U.S. Debtor and Creditor Status
Foreign Objections to U.S. Investments
Special Focus

Flow of Capital into Foreign Investment

Europe's Concern Over U.S. Economic Penetration

The yankee dollar, coveted by Americans and foreigners alike for many decades, is losing some of its attractiveness abroad. This country's tourists are still welcomed as avidly as ever, and European business sometimes finds American capital necessary for expansion. But the flood of dollars into direct investments overseas, with passing of control in some cases to United States interests, has aroused the strong opposition of certain governments and caused grumbling in foreign industrial and financial circles.

The most outspoken opponent of continued American participation in the business expansion of other countries is President Charles de Gaulle of France. Direct investments of American companies in France increased six times over between 1950 and 1963, to a total of $1.2 billion. More than 60 per cent of this investment was in manufacturing. For several years, France has been uneasy about American control of a large share of some sectors of its economy, especially industries essential to the French defense effort. U.S. companies are said to control virtually the whole of the French electronics industry, 90 per cent of synthetic rubber production, 65 per cent of petroleum distribution.

The persistent United States balance-of-payments deficit has given De Gaulle a new weapon to check the growth of American economic influence in Europe. At his latest news conference, last Feb. 4, the French President linked his concern over substantial U.S. investment in Europe with a call for a return to the gold standard. De Gaulle said that the gold exchange standard now used in world trade, under which U.S. dollars and British pounds are held as reserve currencies by other nations, allowed the United States to create capital through inflation. This capital, he said, was then exported as direct investment. “The result for certain countries,” De Gaulle asserted, “is a sort of expropriation of some of their business firms.”

ISSUE TRACKER for Related Reports
Exports and Imports
International Finance
Regional Political Affairs: Europe