American Investments in European Industry

Report Outline
Action to Correct Payments Imbalance
U.S. Penetration of European Markets
New Directions for Investment Policy
Special Focus

Action to Correct Payments Imbalance

American defense of the dollar will undergo its first test on the financial fields of Europe this year. The massive American business investment across the Atlantic is the central target of a new control program outlined by President Johnson on New Year's Day to bring this country's income from abroad into balance with its foreign spending—on trade, investments, tourism, military and foreign aid.

The United States balance of international payments, with an unbroken string of annual deficits since 1958, worsened under the impact of Britain's decision, Nov. 18, 1967, to devalue the pound sterling. The further imbalance threatened to undermine world confidence in the dollar, which has become the common currency for international transactions outside the Communist bloc.

Even before the British devaluation, the dollar's international standing had come under pressures from abroad, particularly from France. President Charles de Gaulle contended that the United States had financed its business penetration of Europe by “exporting dollar inflation.” Linking the American payments deficit to this country's investments in France, De Gaulle told a news conference, Nov. 27, that “France wishes that an end be put to this abuse.” In recent years France has sought to slow the business penetration by making inroads into America's dwindling gold supply. It has done so by exchanging for gold an abundance of dollars accruing from U. S. investments in France and from tourism.