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The original documents are located in Box B2, folder "Balance of Payments (2)" of the
Arthur F. Burns Papers at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
TREASURY DEPARTMENT
OFFICE OF THE ASSISTANT SECRETARY
FOR INTERNATIONAL AFFAIRS
Date 2/19/70
To:
The Honorable
Arthur F. Burns
From: Walther Lederer
Pallagment
FORD i LIBRARY GERALD
FOR OFFICIAL USE ONLY
Balance-of-Payments Projections
for 1970 and the First Half of 1971*
This report is based on the projections prepared by
the Balance-of-Payments Information Committee in its quarterly
meeting on January 9, but the estimates have been modified to
reflect the assumptions for domestic economic developments
that are now included in the President's Economic Report, and
the data on international trade and banking transactions in
December which were not available at the time of the meeting.
The major part of the 1969 data on international transactions
will not be available until early March, however, so that the
figures for 1969 in the tables are still estimates and subject
to revisions.
Major Trends
Under the assumptions, indicated in detail later, the
merchandise trade balance is expected to improve from an
annual rate of about $1.6 billion in the second half of 1969
to about $2.5 billion in the first half of 1970, but to decline
again thereafter to about $1.6 billion in the second half of
1970 and perhaps to less than $1 billion in the first half of
1971 (Table 1). For 1970 as a whole, it is estimated at just
over $2 billion, a $1.4 billion improvement over 1969.
*
The review was prepared by Walther Lederer, Chairman,
Balance-of-Payments Information Committee. The estimates
are/those prepared by the Committee, but the text does not
necessarily reflect the views of the Committee members.
FORD & LIBRARY GERALD
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- 2 -
The balance on goods and services follows rather closely the
changes in the merchandise trade balance: It is expected to
rise from an annual rate of $2.9 billion in the last half of
1969 to a peak of $3.9 billion in the first half of this year
and then to recede again to $3.5 billion in the second half
and to $2.9 billion in the first half of next year.
The improvement in the balance on goods and services in
1970 is expected to be largely offset, however, by adverse
changes of about $1.1 billion in private capital transactions
(other than changes in liquid liabilities). About half of
that change is expected from a rise in the net outflow of U. S.
capital and half from a decline. in the net inflow of foreign
capital (other than liquid funds).
Government grants and credit transactions net of repay-
ments are expected to result in slightly smaller net debits
than last year. However, net receipts from advance payments
on military sales and from the sale of special bonds to
Germany under the military offset agreement are likely to
shift from net credits of over $0.5 billion in 1969 to net
GERALD, FORD ( BRARY
debits of nearly $200 million in 1970.
Omitting special financial transactions of official
U. S. and foreign agencies, (which in 1969 had an adverse ef-
fect of about $870 million¹/ on the liquidity balance), and
omitting also extraordinary errors and omissions (which in
1969 resulted in net payments of about $2 billion), the balance
1/ Including $37 million (net) received in the fourth quarter
from Germany to compensate for future losses resulting from
repayments of DM obligations at appreciated exchange rates.
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- 3 -
measured on the liquidity basis is expected in 1970 to be a
deficit of about $4.2 billion, roughly the same as the $4.1
billion deficit in 1969 measured on the same basis. If some
of the extraordinary outflow through unrecorded transactions
in 1969 should be reversed, the recorded liquidity deficit in
1970 would be considerably smaller than the $4.2 billion esti-
mated here. In the first half of 1971 the deficit, at an
annual rate, is estimated to be close to $5 billion.
Longer Run Perspectives
To bring the projected changes in the balance of payments
into a longer run perspective, the relationship between the
balance on goods and services and the balance on unilateral
transactions and capital flows for the years 1958 to 1970 is
shown on Chart I. The figures exclude changes in liquid
liabilities, special official financial transactions, liabili-
ties arising from advances on military sales, the sales of
special obligations to Germany under the offset agreements,
and errors and omissions. The chart shows that in this period,
with the exception of 1965 and 1968, the relationship between
the balance on goods and services and the balance on unilateral
and capital transactions was relatively stable. The present
indications for 1969 suggest that this relationship has con-
tinued and the estimates for 1970 fall into the same pattern.
The estimates for the first half of 1971, however, include a
somewhat larger net capital outflow than the amount that would
BERALD FORD VIBRARY
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JIALANCE
BALANCE OF PAYMENTS*)
P64
=1
10
0
UNILATERAL
\
CAPITAL
TRANSACTIONS
NET DEBITS
f
9
67
IN
BILLIONS OF
G3
DOLLARS
65
any
Go
CI
1/2'11
62
0
O
7
TO
CO
58
69
ZERO
BALANCE
X)EXCLUDING :
59
1) ERRORS +OMISSIONS,
2) SPECIAL OFFICIAL
68
FINANCIAL TRANSACT.
3) MILIT LIABILITIES
4
only
4) LIABILITIES UNDER
BALANCE pr ALL TRANSACTION
OFFSET AGREEMENTS
/
to
31/
48
they
6
7
#
9
or
GOODS and SERVICES - NET CREDITS- IN BILLIONS of DOLLARS
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- 4 -
correspond to the projected net balance on goods and services.
It is conceivable that for that period the estimate for
capital movements is too large or that the estimate for the
surplus on goods and services is too low, provided it is as-
sumed that the basic relationship between these two categories
of transactions has not deteriorated. To bring the figures
for the first half of 1971 in line with the previous relation-
ships, the balance on goods and services could be raised by
about $400 million, i.e., from $1,450 to about $1,850 million
(which would be about as high as the average for 1970 and
unlikely in view of the assumed changes in business conditions
at home and abroad) or the estimate for net capital outflows
and unilateral transfers could be lowered by about $400 million
from the present estimate of $3,540 million. In view of the
uncertainties in the estimates on capital flows, the latter
seems to be the more likely alternative.
The deviations in the relationship between the balances
on the two major categories of transactions in 1965 and 1968
probably reflect the initial effects of the programs to re-
strain capital outflows through banking and corporate trans-
actions, which were started on a voluntary basis in the first
of these years, and greatly strengthened in the second. The
chart suggests, however, that following these years adjust-
ments have taken place which restored the pattern in the
international transactions that prevailed prior to these
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deviations. However, with the programs continuing, there
were no comparable deviations in the other direction.
The stability in these relationships over a rather long
period, and the tendency of such relationships to be restored
after major or minor disturbances does not necessarily mean,
however, that it reflects an equilibrium for an indefinite
future. It may merely reflect the tenaciousness of the
balance-of-papments problem, and the difficulties of achieving
longer lasting improvements.
Comparison with Previous Estimates
Table 1 shows the various estimates made by the Balance-
of-Payments Information Committee for each of the major cate-
gories of transactions and for the liquidity balance (adjusted
for special financial transactions and for "abnormal" errors
and omissions) since early May of last year. It may be noted
that for each of the major categories (except Government grants
and credits) and for the balance itself the May estimate for
1969 was closer to the last estimate than any of the estimates
made in between. The largest variations were in the estimates
for private capital flows for which a dependable relationship
to the economic developments specified in the underlying as-
sumptions has not yet been found. The experience also suggests,
however, that in periods of financial stresses and disturbances
estimates that are based on longer run trends are often more
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reliable than those that are strongly influenced by most recent
data, because the latter are more likely to be affected by
erratic and temporary developments.
The experience that estimates based on longer run trends
(or economic relationships) are relatively more reliable than
those which attempt to put more weight on shorter term exper-
iences conforms also with the impression of relatively stable
relationships between major categories of international trans-
actions conveyed by Chart I.
FORD i LIBRARY GERMLD
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GERALD
LIBRARY
Major Assumptions
(a) Domestic Economic Developments
The assumptions concerning domestic developments conform
with those used in the Economic Report of the President
(pp 57 ff). They are shown in Table 2. Generally, the more.
recent projections show a smaller drop of real GNP in the
first half and a slower rise in the second half of 1970, and
for the year as a whole a slightly lower figure than had been
assumed in September. In money terms, however, the more
recent projection indicates a 5.7 percent year-to-year rise
in GNP compared with a 5 percent rise projected earlier. The
difference reflects the assumption that the rise in prices will
not be dampened as quickly as had previously been assumed.
The Balance-of-Payments Information Committee was not supplied
with specific data on interest rates or monetary quantities
that would be compatible with the GNP projections. In order
to estimate receipts and payments on investment incomes it
is necessary, however, to make some assumptions concerning
interest rates. For these estimates it has been assumed
that short-term rates charged and paid by banks will drop
each quarter approximately 1/2 percent, so that at the end
of 1970 the rates will be about 2 percent below the average
of those paid and received in the last quarter of 1969. For
1970 as a whole, the average rate will be less than 1 percent
below the average rate for 1969, and 1-1/2 percent below the
average for the fourth quarter. The decline in long-term
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rates may be somewhat slower.
The assumed decline in short-term rates would be some-
what faster than the 1.2 percent drop in the increment of the
GNP deflator - from the 4.7 percent increase at an annual
rate in the fourth quarter 1969 to a 3.5 percent increase in
the fourth quarter 1970. The assumption that interest rates
may drop somewhat faster than the GNP deflator is based on
the consideration that prices for goods will drop faster than
the deflator and that a cyclical decline in the demand for
short-term funds should be reflected in a decline in the real
(or price-adjusted) interest rate. These tendencies are ex-
pected to be partly offset, however, by a continuation of
tight credit throughout the year in major foreign countries
where authorities are also trying to dampen price increases.
The effects of these policies are more likely to be felt in
the Euro-dollar market than in U. S. domestic credit markets,
but it is assumed that U. S. banks will continue to be
interested in attracting funds through their foreign branches
and thus will have to pay the rates prevailing there.
GEBREO FORD LIBRARY
(b) Foreign Economic Developments
Industrial production in the major foreign countries,
weighted by their share in U. S. exports, is expected to rise
in 1970 over the preceding year only by about 6.5 percent,
compared with about 10 percent in 1969 from the relatively
low output in 1968. The change during 1970, however, is
also slower than last year, but the difference is likely to
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be less than in the year-to-year changes. (Table 3)
Some slowdown in production in 1970 is expected in
Canada, Germany and France, largely as a result of policies
to restrain inflationary tendencies. Increases are likely
to occur in the United Kingdom where the economy has been
substantially strengthened, and in Italy which in 1969 was
adversely affected by major strikes. Production in Japan
is now expected to rise approximately at the same pace as in
1969, but if inflationary pressures strengthen, restraining
measures may also be taken there.
The restraining measures in the first group of countries
will tend to keep up pressures on capital markets, offsetting
in part at least, the slight easing of pressures that might
be expected in the U. S. It is not expected that the pres-
sures on capital markets emanating from these countries will
be relieved by relaxations in the United Kingdom or Italy. It
may be expected, however, that the policies to dampen infla-
tionary pressures in Canada, Germany, and France will have
attained the desired results by the end of 1970, and that
some relaxations will be permitted late in the year or early
in 1971.
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Major Transactions
Goods and Services
The balance on goods and services improved from about
$700 million in the first half of 1969 to about $1,500
million in the second half (Table 4). The change reflects,
in part, the effects of the dockworkers' strike in the first
half which may have reduced the trade balance in that period
by roughly $400 to $500 million. There was an improvement,
however, even after the strike effects are allowed for,
which may be attributed to an acceleration in exports, probably
in response to a sharp rise in demand in some of the major
European countries and Japan. The improvement in the trade
balance was partly offset, however, by a decline in net re-
ceipts of investment incomes, as U. S. payments were sharply
increased by the rising interest rates paid on foreign hold-
ings of liquid dollar assets.
Merchandise Trade
The improvement in the trade balance is expected to con-
tinue in the first half of this year, but this reflects a
leveling off of domestic import demands rather than a continu-
ation of the rapid rise in exports. In the second half of the
year, with imports accelerating again, but with the increase
in exports lessening further, the trade balance is expected
to decline again.
FORD & LIBRARY GERALD
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In the first half of 1971, both exports and imports
are expected to accelerate again. With foreign business
activity still in the early stages of the upswing, while
U. S. business activity is already in a more advanced phase
of the upswing, exports are not expected to rise as rapidly
as imports. A further decline in the trade balance is
anticipated therefore.
The estimates do not take into consideration the effects
of various developments which could not be evaluated in
quantitative terms. Those that could affect the trade balance
favorably include the appreciation of the German Mark, and
the production of small automobiles in the U. S. Those that
may have an adverse effect are potential changes in petroleum
strength
import policies, the general increase in the competitive/of
the United Kingdom, and the relaxation of the requirements
that foreign aid funds have to be spent in the United States.
The estimate for merchandise exports is composed of
separate estimates for agricultural products, commercial air-
craft and parts, automotive products shipped to Canada, and
all other exports. Only the latter are computed on the basis
of assumptions concerning business developments as outlined
above.
Although the rise in total exports is expected to
accelerate from 8.6 percent in 1969 to about 10 percent in
1970, the increase in that part that is estimated on the
FORD & LIBRARY 038830
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basis of business developments is projected to slow down from
nearly 16 percent in 1969, to about 6.6 percent in 1970. A
major part of the export increase is expected to be in commer-
cial aircraft (about $560 million), and in shipments of auto-
motive products to Canada (about $350 million). These ship-
ments consist to a large extent of parts for assembly of cars
in Canada, some of which are shipped back to the United States.
The trade in automotive products between Canada and the United
States reflects more the expansion in cross-shipments than
changes in either the U. S. or the Canadian markets. However,
the estimates represent largely extrapolations of recent trends,
rather than substantiated information (Table 5).
The slow-down in imports becomes evident only if the 1968
and 1969 figures are adjusted for the effects of strikes and
for shipments of automotive products from Canada. (In 1968
imports were raised by the strikes in the steel and copper-
mining industries, and in 1969 they were reduced by the ship-
ping strike.) With domestic GNP in current dollars projected
to rise about 5.65 percent in 1970, imports after adjustments
are expected to increase about 4.5 percent. The correspond-
ing figures for 1969 were a 7.7 percent rise for GNP and a
10.8 percent rise for imports. (Table 6)
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If the GNP. assumptions for 1970 were varied by plus or
minus $5 billion, the import estimate would have to be
adjusted by plus or minus $275 million. An increase in the
variation in GNP from the assumptions underlying this pro-
jection would be associated with a relatively larger change
in imports.
Military and Services Transactions
The peak in military expenditures at an annual rate of
about $5 billion is likely to be in the fourth quarter of
last year or the first quarter of this year. The decline
from this peak is expected to be rather slow, however, assum-
ing that no significant changes are made in the troop strength
in Europe. The anticipated rise in costs of maintaining
troops there, accentuated by the appreciation of the German
currency, would largely offset the expected decline in
expenditures in the Far East, as troop strength there is
reduced.
Deliveries under sales contracts of the Defense Department
are anticipated to decline in 1970. Nevertheless, they are
expected
to exceed current receipts of advance payments, so that the
backlog of still outstanding and paid orders is also expected
to be reduced. In the first half of 1971 a reversal of that
trend is expected as new funds from Germany are to be received
under the recently concluded offset agreement, but - at least
under the arrangements so far concluded - the decline in out-
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standing orders is likely to be resumed in subsequent periods.
To some extent the decline in orders for military equipment
channeled through the Department of Defense may be offset
by orders received directly by U. S. manufacturers of such
equipment, which would thus result in larger commercial exports.
Travel expenditures abroad are anticipated to rise in
1970 somewhat slower than in previous years as a consequence
of the slower growth in domestic incomes. Receipts may be
stimulated, however, by the lifting of restrictions on foreign
travel expenditures of residents of the United Kingdom, and
by the appreciation of the German Mark. The increase in
receipts expected from these countries may largely compensate
for a slower growth in receipts from residents of Canada, re-
flecting the slower growth in their incomes.
Net receipts from other services, which include trans-
portation, royalties and fees received from, and paid to,
independent as well as affiliated foreign enterprises, insur-
ance, contractors' fees, and U. S. Government services trans-
actions, are expected to continue the upward trend that pre-
vailed in past years. Royalties and fees received from
affiliated foreign enterprises are the major factor contribu-
ting to that trend.
-
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Investment Incomes
The balance on investment incomes is expected to rise
again in 1970 and continue to do so in 1971 after having
declined in 1969. This change will to some extent offset
the deterioration in the trade balance which is expected to
affect the second half of 1970 and the first half of 1971.
The increase in net receipts is expected to result
partly from the continued rise - although at a slower rate
than in 1969 - in incomes on direct investments, and, more
importantly, from a drop in incomes paid on foreign holdings
of dollar assets as a consequence of the anticipated decline
in interest rates on U. S. banking and other short-term
liabilities.
in 1970
Incomes on direct investments/are expected to be adversely
affected by the anticipated slowdown in business activity and
the associated squeeze on profits in some of the major foreign
countries. Also, the large rise in incomes in 1969 was in
part due to special developments, including the distribution
by some companies of incomes earned in previous periods, and
a large rise in incomes from oil investments as new develop-
ments became operative. No allowance was made for such
special developments in 1970 or the first half of 1971.
Incomes on other U. S. investments abroad are expected
to decline somewhat as the drop
in earnings on short-
term assets is expected to more than offset the continued rise
in earnings on longer term assets, mainly securities. The
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FORD : 07V839 LIBRARY
drop in earnings on short-term assets reflects mostly the
expected decline in interest rates on short-term loans.
Income payments on foreign assets in the United States
are strongly affected by interest rates paid on short-term
liabilities. At the end of 1969 short-term liabilities re-
ported by banks and non-bank corporations (including bank-
ing liabilities with a maturity over 1 year) were approximately
$47 billion. Omitting the very temporary reductionsat the
end of the year, they were about$1-1/2 billion higher. A
therefore,
1 percent change in the interest paid,/changes our payments by
nearly $500 million per year.
The interest rates paid on deposits in the Euro-dollar
markets are assumed to determine more or less the rates paid
by U. S. banks to their foreign branches and to foreign
official organizations which are exempt from Regulation Q.
These rates reached a peak in the third quarter (except for
very short-term funds for which the highest rates were paid
at the end of the year) and dropped in the fourth. They are
assumed for purposes of this projection - as indicated earlier -
to drop about 1/2 percent in each quarter of 1970 and slightly
less in the first half of 1971. By the last quarter of 1970
these rates are assumed to be about 2 percentage points lower
than in the last quarter of 1969. Nevertheless, the average
for 1970 will be less than 1 percent below the average for
1969. The rates on domestic money market investments, pri-
marily Treasury bills and commercial paper, reached a peak at
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the end of last. year, and have since then dropped. During
the year, these rates are assumed to decline in the same
proportion as the Euro-dollar rates.
The decline in average interest rates from 1969 to 1970
is more than offset, however, by the rise in the amount of
outstanding short-term liabilities, which may be expected to
average in 1970 $5 to $6 billion higher than in 1969, and by
a rise in long-term foreign investments here which may average
about $3-1/2 to $4 billion higher. For 1970 as a whole the
payments of income on foreign investments in the United States
are, therefore, calculated to be somewhat higher than in 1969
although the trend during the year is anticipated to be declin-
ing.
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Private Capital. Movements (Excluding Liquid Liabilities)
In 1969, capital transactions between private U. S. and
private foreign residents (i.e. excluding special financial
transactions of U. S. and foreign official agencies) may have
resulted in net outflows of about $900 million. (This figure
contains only rough estimates of corporate transactions in
the fourth quarter for which reasonably firm data will not be
available until the middle of March). The $900 million net
outflow followed a net inflow of roughly the same magnitude
in 1968
and thus resulted in an adverse change of $1.8 billion for the
balance of payments. (Table 7)
The $1.8 billion change in private capital flows in
1969 is
accounted for by (in millions of dollars) :
A. Adverse changes: (1) net outflow of U. S.
corporate capital:
-800
(2) net outflow of bank-
reported funds (ex-
cluding liquid
liabilities)
-740
(3) transactions in secur-
ities (other than
new issues by U. S.
corporations)
-710
(4) brokers' funds
-70
Total
-2320
B. Favorable changes: (1) foreign direct invest-
ments in the U. S.
+500
Total
+500
Net (A + B)
-1820
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For 1970, a further rise of about $1.1 billion in the
net outflow of capital is projected. The increase is ex-
pected to result from a $1 billion increase in net outflows
of corporate capital, a $0.2 billion decline in the inflow
of foreign capital for direct investments (from an exception-
ally large amount in 1969). These adverse changes are expected
to be partly offset by à $0.1 billion decline in the outflows of
bank-reported funds, and a small increase in net inflows
through security transactions.
the
In 1970 the change in/balance on private capital trans
FORD & GIRATO LIBRARY
actions reflects to an about equal extent a decline in the
inflow of foreign capital and an increase in the outflow of
U. S. capital. The latter, which is estimated to have increased
only $250 million in 1969, is projected to rise about $550
million in 1970. The inflow of foreign capital (which in-
cludes the foreign borrowing by U. S. corporations) is esti-
mated to have dropped from nearly $6 billion in 1968 to per-
haps $4.4 billion last year, and is projected to drop another
$550 million in 1970.
Although the net outflow of capital through private
transactions is projected to rise to about $2 billion in 1970,
it would be much smaller than the net capital outflow of
$3.55 billion in 1967, and of $3 billion in 1966.
The principal difference between the period preceding
the end of 1967 and the period starting with 1968 is the growth
in foreign investments in the United States. Although such
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investments are. not expected to remain as high as they were
in the peak year of 1968, they are expected to remain a much
more important feature in the U. S. balance of payments than
they were prior to 1968. After passing a trough in 1970,
they are expected to increase again. The principal reasons
for the rise in capital inflows are (1) the rise in savings
relative to capital requirements in the more advanced foreign
countries as their per capita incomes increased but the growth
of their economies slowed down compared with what it had been
before 1966 or 1967; (2) the desire of residents of advanced
foreign countries to diversify their investments to include
more equity shares relative to fixed interest assets; (3) the
desire of foreign countries to diversify investments to include
U. S. securities in order to spread political and economic
risks, and to take advantage of the liquidity of such invest-
ments provided by the large security markets in this country;
(4) the increasing tendency of foreign enterprises to develop
or obtain affiliates in other countries including the United
States; and (5) the expansion of foreign capital markets and
the participation of U. S. financial firms in these markets,
which encouraged U. S. firms to consider them as alternative
sources of capital to U. S. markets. Even if capital can be
obtained in the United States at slightly lower costs than
abroad, some firms may continue to borrow abroad in order to
remain in these markets and thus to protect themselves against
the risks of capital stringencies in future periods. This
may apply to banks as well as other corporations.
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LISRARY GERALD R. FORD
Corporate Transactions
Capital outflows for direct investments are expected to
reach roughly $3.6 billion in 1969 without allowing for the
$175 million sale of a major mining investment in Latin
America for notes issued by the country in which the invest-
ment is located. The $3.6 billion estimate for capital out-
flows includes the transfers to foreign affiliates of funds
that had been borrowed abroad through the issue of bonds or
through loans from banks or other financial organizations.
The estimate for 1969 represents an increase of nearly $600
million from 1968. For 1970 another increase of about $700
million is anticipated.
This anticipation is based on the surveys on plant and
equipment expenditures of foreign affiliates of U. S. corpora-
tions conducted by the Balance of Payments Division of OBE.
The first survey for 1970, conducted last June, indicated a
rise of about 18 percent over 1969 compared with a 12 percent
rise in 1969. The next survey conducted in December confirmed
these results.
There is no firm link between plant and equipment expendi-
tures and capital transfers by the parent companies. Plant
and equipment expenditures can be financed not only with parent
company funds, but also with undistributed earnings of the
foreign affiliates, with funds retained by them in depreciation
reserves, with funds obtained from foreign sources, and even
from non-affiliated U. S. sources. On the other hand, funds
transferred by U. S. parent companies can be used to finance
FOR OFFICIAL USE ONLY
CHART
% of P+E
50 EXP.
CAPITAL OUTFLOWS
40
FOR DIRECT INVEST -
MENTS
BILL $
70
4
66
30
65
67
69
3
68
64
2
60
63
61
62
5
/
53
BILL.$ 4
5
6
7
8
9
10
11
12
PLANT AND EQUIPMENT EXPENDITURES OF FOR. AFFILIATES
FOR OFFICIAL USE ONLY
- 22 -
the increase in other capital assets (or to pay off liabilities)
of the foreign affiliates, or to acquire from foreign owners
equity interests in formerly independent enterprises or in
foreign companies with which the U. S. firm was already
affiliated.
Nevertheless, there appear to have been relatively stable
relationships between plant and equipment expenditures and
capital outflows, perhaps because of indirect connections.
Acquisitions of foreign enterprises, for instance, may be
motivated by the same considerations as expansions of existing
affiliates. These relationships are shown for the years 1958
through 1968 in Chart II. .It also shows the estimates for
1969 and 1970, permitting a comparison of these estimates with
the experiences in the earlier years. In the 1959 to 1964
period, capital transfers were just under 40 percent of plant
and equipment expenditures. In 1965 and 1966 they averaged
about 44 percent but dropped to an average of about 34 percent
in 1967 and 1968. The estimates for 1969 imply a 35 percent
ratio, and the same ratio has been assumed for 1970. The drop
in the ratio since 1967 may indicate a greater reliance by
the affiliated foreign enterprises on foreign sources for their
capital requirements. The change may have been stimulated by
the restrictions on capital outflows from the U. S., but it
was also facilitated by the development of foreign capital
markets, and in this connection particularly the rising activi-
ties of foreign branches of U. S. banks.
GERALD FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 23 -
The projected rise in capital transfers to foreign
affiliates is compatible with the restrictions on net capital
outflows for direct investments under the OFDI regulations.
Table 8 shows a rough reconciliation of the estimates based
on the data derived from OBE questionnaires which are used in
balance-of-payments presentations with those obtained by OFDI
for the transactions subject to OFDI regulations. The OFDI
data for 1969 and 1970 are based on sample questionnaires
returned in January this year.
The reconciliation between the estimates for funds ob-
tained abroad by U. S. corporations (shown in Table 7) and
the use of such funds to finance direct investments abroad
(shown in Table 8) is indicated in Table 9.
For 1970 it is assumed that U. S. corporations will use
about $0.4 billion of the funds obtained from bond issues in
previous years. Together with about $1.2 billion obtained
through new issues, and with net borrowings of $0.5 billion
from foreign financial organizations, the total of foreign
source funds used will be about $2.1 billion. However, $0.3
billion are expected to be repatriated to the U. S. leaving
about $1.8 billion to finance foreign direct investments.
This would be about $200 million more than in 1969. Since
funds obtained abroad by the parent companies and their do-
mestic finance affiliates are included in the transfers of
parent company funds to foreign affiliates, the increase in
GERALD FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 24 -
transfers of funds from United States sources would equal
the gross increase of $700 million less the $200 million
rise in the use of foreign funds, or $500 million.
GERAID R. FORD LIBRARY
Transactions in Securities
New issues of foreign securities (excluding special
financial transactions) which amounted to $1,620 million in
1969, are expected to be about $1,550 million in 1970. The
slight decline may be attributed to the incentive to postpone
some of the issues in order to take advantage of the decline
in interest rates, which is expected to occur during the year.
Purchases of outstanding foreign securities increased
in 1969 to about $190 million from $100 million in 1968. A
considerable part of that increase appears to have been due
to a temporary spurt in September in purchases of Japanese
stocks, amounting to over $90 million. For 1970 and the first
half of 1971 it has been assumed, however, that the basic con-
ditions, including the reduction in the IET would favor a rise
in such purchases. Consequently, an amount of $150 million
was included in the projections for 1970, and of $100 million
for the first half of 1971.
Foreign purchases of outstanding U. S. private securi-
ties (mostly stocks) dropped from about $2.1 billion in 1968
to about $1.6 billion in 1969. (These figures exclude govern-
ment agency bonds purchased by international organizations.)
About half of the 1969 purchases occurred in the first quarter
of the year, however. In the second and third quarters foreign
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 25 -
purchases dropped to $230 and $103 million, respectively.
Large foreign purchases were resumed in October, but they
declined again during the remainder of the fourth quarter.
Nevertheless the fourth quarter purchases amounted to about
$500 million. In 1970 the decline in domestic interest rates
in combination with the prospect of an acceleration of do-
mestic business activity at least after the middle of the
year should contribute to a rise in prices of U. S. securi-
ties which may stimulate foreign purchases. This tendency
may be reinforced by the simultaneous decline in yields on
Euro-dollar deposits, which in 1969 were high enough to
attract foreign capital that otherwise might have been invested
in U. S. stocks.
Although an increase in foreign purchases of U. S. securi-
ties is anticipated for 1970, such purchases are not expected
to return to the high level attained in 1968. Measures taken
by Germany to restrain domestic demand pressures, and measures
taken by most of the European countries to control the activi-
ties of investment funds are assumed to have an adverse effect
on capital outflows from Europe. Furthermore, the recent pro-
posals for tax reform in Canada, would tend to discourage
Canadian purchases of U. S. stocks and may even result in net
liquidations of Canadian investments. On the basis of these
considerations, it is assumed that net foreign purchases of
outstanding U. S. stocks would amount to about $600 million in
GERALE FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 26 -
the first half of 1970, that they would rise to about $900
million in the second half, and remain at that rate in the
first half of 1961. In addition, foreign residents may pur-
chase about $50 million of outstanding bonds in each of the
half year periods.
Banking Transactions
Claims reported by U. S. banks for themselves and their
domestic customers rose about $530 million in 1969, including
$326 million (after seasonal adjustment) in the fourth
quarter alone. Some reflow of these funds may have occurred
early this year or may still be expected.
The more than $500 million net outflow of capital re-
ported by banks for 1969 did not consist of transactions
which are subject to the voluntary credit controls of the
Federal Reserve System. Some of the outflow was to Canada,
some on loans guaranteed or participated in by the Export-
Import Bank and some was reported by the banks for their
domestic customers. These outflows can be expected to con-
tinue in 1970 and 1971. Furthermore, with the separation of
export credits under the revised restraint program, an in-
crease in the net outflow of banking funds may be expected.
In the first half of the year, this tendency will in part be
offset, however, by the reflow of some of the funds that
moved out at the end of 1969. Without any firm basis for
evaluating these tendencies, and the effects of the assumed
BERALD FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 27 -
easing on capital markets which may affect domestic markets
earlier than those abroad, it has been assumed that bank-
reported funds may show net outflows of $150 million in the
first half of 1970 and $250 million in the second. With
conditions in foreign capital markets becoming slightly
easier, the net outflow in the first half of 1971 may decline
slightly to, say, $200 million. However, these estimates may
be on the lower end of the possible range; the upper end may
be several hundred million higher.
GEBRLD FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 28 -
Government Grants and Credits
The estimates incorporated in this projection are
essentially the same as those used in the preceding projection
prepared last September (Table 10). The gross outflow figures
for 1969 (including a rough estimate for the fourth quarter
based only on partial data) consisted of approximately $1.7
billion in grants and of about $3.4 billion in credits. Debt
repayments (other than advance debt repayments which are
treated as special official financial transactions) were
approximately $1.35 billion. This adds to net disbursements
of about $3.7 billion.
In 1970, net disbursements are expected to be slightly
less than last year, or about $3.5 billion. Grants are ex-
pected to decline to about $1.6 billion. Credit disburse-
ments are anticipated to rise, however, to perhaps $3.5 billion,
so that gross disbursements would remain about the same as
last year. Disbursements under PL-480 and under the Foreign
Assistance Act are projected to decline somewhat, but Export-
Import Bank disbursements may increase.
The decline in net disbursements is expected to result
from larger scheduled debt repayments, and from transactions
with Germany involving the sale of $87.5 million Export-
Import Bank loans and advance debt repayment of $44 million.
These transactions were arranged under therrecent agreement to
GERALD FORD VIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 29 lesta
offset military expenditures. These as well as other trans-
actions that are linked to our military expenditures, are not
included among the special financial transactions.
Government Liabilities (other than special financial trans-
actions and liquid liabilities)
Government liabilities (other than arising from special.
financial transactions, and liquid liabilities) consist mainly
of obligations resulting from advance payments by foreign
countries for military equipment, and of restricted securities
purchased by Germany under military offset agreements. In
addition, they include obligations to Canada under the Columbia
River development project, non-interest bearing securities
issued to international lending organizations, and various
other deposits in special Treasury accounts.
In 1969, such liabilities increased about $520 million.
Included in this total is a net increase in outstanding obli-
gations (receipts less deliveries) of about $200 million on
military sales contracts, and receipts of $325 million from
sales of restricted securities to Germany.
In the first half of 1969, liabilities on military con-
tracts were reduced by $20 million, but receipts from the
sale of securities amounted to $250 million. In the second
half of the year liabilities on military contracts increased
about $225 million largely as a result of a large increase in
cash receipts from Germany in the last quarter. Sales of
GERALD FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 30 -
special, securities to Germany declined, however, to $75
million.
In 1970 it is expected that receipts of advance payments
by foreign governments on military contracts will be smaller
than deliveries for which advance payments had been received
in prior years, so that liabilities will drop by about $210
million. Sales of restricted securities to Germany will be
$75 million. Other types of Government liabilities are as-
sumed to decline about $50 million. Thus, the total of these
Government liabilities may decline by just under $200 million.
In the first half of 1971 another large installment of
advances on military contracts and additional sales of special
securities are expected under the provisions of the most recent
offset agreement with Germany, resulting a net increase in
liabilities of about $160 million.
Deposits in a special Treasury account by the German
Government under the recent offset agreement to pay for ex-
penditures for exports of civilian goods, and for direct in-
vestments by German firms in the United States are assumed to
be used in the same half-year period in which the deposits are
received so that liabilities will not accumulate. The esti-
mates for merchandise exports and foreign direct investments
are high enough to allow for such transactions.
GERALO FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 1
Summary of Balance of Payments
*)
Estimates
(Billions of Dollars)
1969
1970
1971
1969
1970
First
Second
First
Second
First
Annual
Half
Half
Half
Half
Half
Balance on:
Merchandise trade
Estimates of May 69
0.6
-
0.3
0.3
-
--
WE
July 69
0.5
-
0.1
0.4
1.0
---
--
Sept. 69
0.2
1.5
-0.1
0.4
0.9
0.6
--
Jan. 70
0.7
2.1
-0.1
0.8
1.3
0.8
0.4
Goods and services
May 69
2.2
--
1.1
1.1
--
--
--
July 69
2.0
-
0.8
1.2
--
-
--
Sept. 69
1.5
3.0
0.6
0.9
1.6
1.4
Jan. 70
2.1
3.7
0.7
1.5
2.0
1.7
1.4
Unilateral transfers
other than Gov't. grants
May 69
-1.2
---
-0.6
-0.6
-------
-
--
July 69
-1.2
-
-0.6
-0.6
-0.6
--
-
Sept. 69
-1.1
-1.2
-0.6
-0.6
-0.6
-0.6
--
Jan. 70
-1.2
-1.2
-0.6
-0.6
-0.6
-0.6
-0.6
Government grants and
credits (net of sched-
uled repayments)
May 69
-4.1
-2.1
-2.0
July 69
-3.6
-
-1.7
-1.9
-1.6
---
-
Sept. 69
-3.8
-3.5
-1.9
-1.9
-1.8
-1.7
-
Jan. 70
-3.7
-3.5
-2.0
-1.7
-1.7
-1.8
-1.7
Net movements of U.S.
and foreign private
capital (excl. liquid
liabilities)
May 69
-0.5
--
-0.6
0.1
--
--
---
July 69
-1.6
-
-1.1
-0.5
-1.2
--
---
Sept. 69
-1.7
-2.7
-1.3
-0.4
-1.5
-1.2
---
Jan. 70
-0.9
-2.0
-1.2
0.3
-1.1
-0.9
-1.2
GERALD FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 1 (Continued)
1969
1970
1971
1969
1970
First
Second
First
Second
First
Annual
Half
Half
Half
Half
Half
Changes in Gov't. liabil-
ities (mainly associated
with military transactions)
May 69
0.5
--
0.1
0.4
-
-
------
July 69
0.2
--
0.2
-
-0.1
-
---
Sept. 69
0.2
-0.2
0.2
--
-0.1
-0.1
--
Jan. 70
0.5
-0.2
0.2
0.3
-0.1
-0.1
-0.2
Balance on recorded
transactions (excl.
special financial
transactions) on
liquidity basis:
May 69
-3.1
-2.1
-1.0
--------
--
:
July 69
-4.2
-2.4
-1.8
-1.3
-
-
Sept. 69
-4.9
-4.6
-3.0
-2.1
-2.3
-2.3
----
Jan. 70
-3.1
-3.2
-2.9
-0.2
-1.5
-1.7
-1.9
Errors and Omissions
(excl. "abnormal" in
1969)
May 69
-1.0
-0.6
-0.4
-
---
-
July 69
-1.0
-0.5
-0.5
-0.5
------
Sept. 69
-1.3
-1.0
-1.1
-0.2
-0.5
Jan. 70
-1.0
-1.0
-0.8
-0.2
-0.6
-0.4
-0.5
Balance on liquidity
basis (excl. special
financial transactions
and "abnormal" errors
and omissions in 1969)
May 69
-4.1
-2.7
-1.4
-
-
--
July 69
-5.2
-2.9
-2.3
-1.8
--
--
Sept. 69
-6.2
-5.6
-4.0
-2.2
-2.8
-2.8
Jan. 70
-4.1
-4.2
-3.7
-0.4
-2.1
-2.1
-2.4
Special financial
transactions
-0.9
--
-0.4
-0.5
---
-
--
"Abnormal" errors
and omissions
-2.0
--
-1.5
-0.5
-
Balance on liquidity
GERALD FORD (FORARY
basis as published
-7.0
--
-5.5
-1.4
-
----
x) Excluding special financial transactions of U. S. and foreign (and inter-
national) official agencies, and excluding "abnormal" errors and omissions.
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
FORD is LIBRARY GERALD
Table 2
Assumptions for Economic Developments in the United States
Billions of Dollars, Seasonally Adjusted
Percentage
1969
1970
1969
1970
1971
Changes I/
Projection
used in:
Annual
IV
I
II
III
IV
I
II
70/69 IV 70/IV 69
May 1969
GNP, current $
926.8
-
946.7 -
-
-
-
-
-
-
I
1958 $
730.9
-
735.6 -
-
-
-
I
-
-
I
Deflator
126.8
-
128.7 -
-
ons
-
-
-
-
-
July 1969
GNP, current $
926.2
982.4
947.3
959.8
971,9
988.9
1008.9 -
-
6.07
6.50
1958 $
729.7
747.3
735.1
738.2
741.7
749.5
759.8 -
-
2.41
3.36
Deflator
126.9
131.5
128.9
130.0
131.0
131.9
132.8
-
-
3.62
3.03
Sept. 1969
GNP, current
$
2/
932.2
978.6
952.1
957.6
966.8
986.0
1004.0 -
-
4.98
5.45
1958 $
728.1
737.4
731.3
729.2
731.3
739.7
749.3
-
-
1.28
2.46
Deflator 2/
128.1
132.7
130.2
131.3
132.2
133.3
134.0
-
OFFD
3.59
2.92
Jan. 1970
GNP, current $
932.1
985.0
952.2
963.2
976.2
992.2
1008.4
1028.8
1047.4
5.65
5.90
1958 $
727.5
736.0
729.8
730.2
732.6
737.8
743.4
750.8
758.6
1.15
1.86
Deflator
128.1
133.8
130.5
131.9
133.2
134.5
135,6
137.0
138.1
4.45
3.91
The corresponding changes for 69/68 and IV 69/IV 68 were: GNP, current $
7.69
6.69
1958 $
2.84
1.57
Deflator
4.74
5.07
2/
The figures starting with the September projections reflect revisions of the historic data,
not previously available.
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 3
Assumptions for Economic Developments Abroad
Industrial Production in Major Foreign Industrial
Countries Weighed by Their Share in U. S. Exports
1963 = 100
1969
1970
1969
1970
1971
Percentage Changes 1/
Projection
used in:
Annual
IV
I
II
III
IV
I
II
70/69
IV 70/IV 69
-
May 1969
152
-
156
-
-
-
-
-
-
I
-
July 1969
153
-
156
158 161
64295
-
-
-
I
-
Sept. 1969
153
162
157
159
161
163
166
-
-
5.9
5.7
Jan. 1970
153
163
156
159
162
164
166
169 172
6.5
6.0
L/
The corresponding changes for 69/68 and IV 69/IV 68 were:
10.1
6.2
FORD i GERALD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 4
FORD & LIBRARY GERALD
Transactions in Goods and Services
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
1968
1969
1970
1969
1970
1971
Annual
First
Second
First
Second
First
Exports of goods and services,
excluding transfers under
military grants
50663
55510
60600
26175
29335
30100
30500
31500
Merchandise, adjusted
33598
36485
40200
17077
19408
20000
20200
21000
Transfers under military
sales contracts
1427
1503
1300
752
751
670
630
500
Travel
1770
2118
2450
1018
1100
1200
1250
1320
Other services
6101
6456
7040
3057
3399
3460
3580
3670
Income on U. S. invest-
ments abroad
Direct
4985
5759
6300
2743
3016
3100
3200
3400
Other private
1949
2256
2290
1061
1195
1170
1120
1070
Government
830-
933
1020
467
466
500
520
540
mports of goods and services
-48078
-53365
-56900
-25506
-27860
-28150
-28750
-30050
Merchandise, adjusted
-32972
-35810
-38150
-17180
-18630
-18750
-19400
-20600
Military expenditures
-4530
-4860
-4920
-2412
-2448
-2490
-2430
-2400
Travel
-3022
-3405
-3700
-1654
-1751
-1800
-1900
-2000
Other services
-4622
-4794
-5180
-2282
-2513
-2560
-2620
-2750
Income on foreign invest-
ments in the United States
-2933
-4496
-4950
-1978
-2518
-2550
-2400
-2300
Balances:
Goods and services,
total
2581
2145
3700
669
1475
1950
1750
1450
Merchandise trade
626
675
2050
-103
778
1250
800
400
Military sales and
purchases
-3103
-3357
-3620
-1660
-1697
-1820
-1800
-1900
Travel
-1252
-1287
-1250
-636
-651
-600
-650
-680
Other services
1479
1662
1860
775
886
900
960
920
Investment income
4831
4452
4660
2293
2159
2220
2440
2710
Includes deferred interest on U. K. loan
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 5
Merchandise Exports
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
Changes in
Percents
1968
1969
1970
1969
1970
1971
69/ 70/
Annual
First
Second
First
Second
First
68
69
Total exports, actual
or estimated
33598
36485
40200
17077
19408
20000
20200
21000
8.6
10.2
less: Effects of strikes
(increase +)
+45
-900
-
-900
-
-
I
I
Adjusted for strike-
effects
33553
37385
40200
17977
19408
20000
20200
21000
11.4
7.5
Agricultural
6301
6193
6300
2920
3273
3200
3100
3100
Commercial aircraft
1405
1237
1800
701
536
1000
800
1000
Automotive shipments
to Canada
2374
2752
3100
1351
1401
1400
1700
1700
Other exports, actual
or estimated on
basis of assumptions
23473
27203
29000
13005
14198
14400
14600
15200
15.9
6.6
FORD 2. 07V839 LIBRARY
FOR OFFICIAL USE ONLY
Table 6
Merchandise Imports
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
Changes in
Percents
1968
1969
1970
1969
1970
1971
69/ 70/
Annual
First Second First Second First
68 69
Total imports, actual
or estimated
32972 35810 38150 17180 18630 18750 19400 20600 8.6 6.5
less: Effects of strikes
and other special
developments
(increase +)
840 -400
-400
Adjusted for strike
effects
32132 36210 38150 17580 18630 18750 19400 20600 12.7 5.4
Automotive shipments
from Canada
2302
3163
3600
1420
1743
1700
1900
2000
Other imports, actual
or estimated on
basis of assumptions 29830 33047 34550 16160 16887 17050 17500 18600 10.8 4.5
FORD & 9ERALD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 7
Movements of United States and Foreign Private Capital (Excluding Liquid Liabilities)
By Years and Half Year Periods, Seasonally Adjusted
Millions of Dollars
1968
1969
1970
1969
1970
1971
Inflows +, Outflows -
Annual
First
Second
First
Second
First
to S. assets abroad, total
-5036
-5291
-5840
-3384
-1907
-2870
-2970
-3330
U. S. direct investments abroad
-3025
-36002
-4300
-1982
-16182/
-2200
-2100
-2300
U. S. purchases of foreign
securities
-1145
-1364
-1290
-736
-628
-620
-670
-730
Claims reported by U. S. banks
269
-528
-400
-419
-109
-150
-250
-200
Claims (other than direct in-
vestments) reported by non-
bank corporations
-924
-10 2
150
-354
3442/
100
50
-100
Claims reported by U. S.
brokers
-210
211
-
107
104
-
-
-
oreign assets in the United States,
total
5977
4402
3850
2159
2243
1750
2100
2100
Foreign direct investments
319
821
650
406
415
300
350
350
Foreign purchases of U. S.
securities:
New issues by U. S.
corporations
2129
1017
1200
551
466
550
650
650
Other stocks
2084
1471
1500
878
593
600
900
900
Other bonds
29
152
100
140
12
50
50
50
Long-term liabilities of
U. S. banks to private
foreign residents
-7
-47
-
4
43
I
I
-
Other liabilities by U. S.
corporations
1098
1063
400
250
813
250
150
150
Liabilities reported by
U. S. brokers
325
-169
-
-70
-99
I
I
I
FORD & LIBRARY GERALD
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 7 (Continued
1968
1969
1970
1969
1970
1971
Inflows +, Outflows -
Annual
First
Second1/
First
Second
First
Net movements of U. S. and foreign
private capital (excluding liquid
liabilities)
941
-889
-1990
-1225
336
-1120
-870
-1230
Changes in assets and liabili-
ties of U. S. corporations
-722
-1530
-2550
-1535
5
-1300
-1250
-1600
Foreign direct investments in
the U. S.
319
821
650
406
415
300
350
350
Transactions in securities
(other than new foreign
issues of U. S. corporations)
968
259
310
282
-23
30
280
220
Claims and liabilities re-
ported by:
U.S. banks
262
-481
-400
-415
-66
-150
-250
-200
U. S. brokers
115
42
-
37
5
I
-
I
Partially estimated.
2/
The figure does not reflect the $175 million sale of an investment in Latin America for long-term
notes.
GERALD R. FORD LIBRANA
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 8
Direct Investment Transactions
Balance of
Payments Data
OFDI Data
1968
1969
1970
1968
1969
Capital transfers for
direct investments
3025
3600
4300
2671
Less: Canada
594
500
600
410
In scheduled areas
2431
31001/
37001/
2261
4000
Less: net use of
funds obtained
through:
security issues
785
900
1300
other foreign
21772/
30002/
sources
673
700
500
Equals: net capital
outflow to scheduled
areas
9731/
15001/
19001/
84
1000
Reinvested earnings
in scheduled areas
13801/
16001/
18001/
11233/
17003/
Total subject to
regulations
23531/
31001/
37001/
1207
2700
4100
Ceiling
2700
3350
3600
1/
Includes banks and other financial organizations not subject to OFDI
regulations
2/
Includes funds that had previously been repatriated to the U. S.
3/
The figures shown include some company reports for the year ended
February 1969, as permitted under the program. The corresponding
figure adjusted for the calendar year is $1312 million.
FORD is GERALD LIBRARY
FOR USE
FOR OFFICIAL USE ONLY
Table 9
Sources and Uses of Funds Borrowed Abroad by U. S. Corporations
(Millions of Dollars)
1968
1969
1970
New issues of securities
2129
1017
1200
Uses:
Transfers to foreign
bank accounts
973
-165
-400
Repayments of foreign debts
2
15
-
Transfers to U. S. parents
369
267
300
Transfers to foreign
affiliates
785
900
1300
Increase in corporate
liabilities
1098
1063
400
Uses:
Commercial purposes, etc.
425
463
-100
Transfers to foreign
affiliatesi
673
700
500
1/
Assumed to equal changes in long-term liabilities to
Western Europe
FORD & GERALD LIBRARY
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Table 10
Major Government Grant and Credit Transactions
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
Debits (-)
1968
1969
1970
1969
1970
1971
Annual
First
Second
First
Second
First
Disbursements:
Grants
-1706
-1692
-1630
--837
-855
-830
-800
-770
Credits and
other assets
-3641
-3380
-3500
-1796
-1584
-1700
-1800
-1800
Total
-5347
-5072
-5130
-2633
-2439
-2530
-2600
-2570
not seasonally
By program
adjusted
PL 480
-1260
-1150
-1100
-704
-446
Foreign Assistance
Act
-2145
-2120
-2000
-1142
-978
Export-Import
Bank
-1517
-1280
-1400
-703
-577
not estimated
Capital subscrip-
tions to inter-
national agen-
cies
-127
-180
-280
-77
-103
Other programs
and assets
-298
-342
-350
-159
-183
FORD & GERALO LIBRARY
Credits (+)
Foreign repay-
ments of
credits (excl.
advance repay-
ments)
1195
1372
1500
651
721
720
780
825
German trans-
actions under
offset agree-
ment:
Advance debt
repayment
44
44
-
31
Purchases of
X-M Bank
Assets
87
87
-
34
Total
1195
1372
1630
651
721
850
780
890
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 10 (Continued)
Debits (-)
1968 1969 1970
1969
1970
1971
- Annual
First Second First Second First
Balance on
grants and
credit trans-
actions
-4152 -3700 -3500 -1982 -1718 -1680 -1820 -1680
FORD is LIBRARY 076839
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Table 11
Changes in Government Liabilities (Excluding
Special Transactions and Liquid Liabilities)
Millions of Dollars
Debits (-)
1968
1969
1970
1969
1970
1971
Annual
First
Second
First
Second
First
Liabilities asso-
ciated with
military sales
-137
206
-210
-20
226
-100
-110
75
Obligations asso-
ciated with
German offset
agreement
500
325
75
250
75
75
-
100
Other liabili-
ties
-50
-13
-55
6
-19
-30
-25
-15
Total
313
518
-190
236
282
-55
-135
160
FORD & LIBRARY
FOR OFFICIAL USE ONLY
TREASURY DEPARTMENT
OFFICE OF THE ASSISTANT SECRETARY
FOR INTERNATIONAL AFFAIRS
Date.4-16-70
The Honorable
To: Arthur F. Burns
From: Walther Lederer
FORD is LIBRARY 076670
FOR OFFICIAL USE ONLY
Balance of Payments Projections
for 1970 and the First Half of 1971
Revised April 1970 X
FORD i LIBRARY GERALD
At its April meeting, the Balance of Payments Information
Committee revised its January estimates of the international
transactions with the result that the deficit measured on the
liquidity basis (before special financial transactions of
U. S. and foreign official agencies, before extraordinary
errors and omissions and excluding SDR allocations) for 1970
was increased from $4.2 billion to nearly $4.8 billion. For
the first half of 1971 the deficit was raised from about $2.4
billion to about $2.7 billion.
Comparison of 1970 Estimates with Long-Run Relationships
The $4.8 billion adjusted liquidity deficit for 1970
represents a deterioration from the comparable measure for
1969 of $4.2 billion. The change is more than accounted for
by government capital transactions (excluding special financial
transactions) which added about $900 million to net capital
outflows. xx/ Of the other major categories of transactions, the
balance on goods and services is expected to improve in 1970
over 1969 by about $1.6 billion, but the balance on capital
flows through private U. S. and foreign transactions is ex-
This review was prepared by Walther Lederer, Chairman,
Balance of Payments Information Committee. The estimates
are those prepared by the Committee, but the text does
not necessarily reflect the views of the Committee members.
xx/ This $900 million adverse shift largely represents a shift
from advance payments on military orders in excess of de-
liveries during 1969 to the reverse situation in 1970. The
$540 million liquidation of non-marketable Treasury securi-
ties by Germany in January is treated here as a special
transaction - that is, it is not included in the $900 million.
FOR OFFICIAL USE ONLY
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- 2 -
pected to deteriorate by $1.3 billion. Nearly all of the
latter change is in net outflows of U. S. corporate capital.
The revised 1970 estimates include slightly larger net
capital outflows (private and government) relative to the
balance on goods and services than might be expected on the
basis of the 1958 to 1969 relationships between the balances
on these categories of transactions. In the January estimate
the net capital outflows were slightly smaller. The differences
between the January and April estimates and those that may be
derived from the longer run relationships are well within a
normal margin of errors. The estimates presented here, there-
fore, appear to be reasonably consistent with the longer run
experiences, and an adjusted liquidity deficit for 1970 of
about $4.5 billion + $200 to $300 million seems to be a
reasonably plausible estimate.
Balance by Half-Year Periods
The division of that balance between the first and second
half depends on seasonal adjustments. The adjustments used
for 1969 are being revised to make allowance for the large
capital inflows in the last quarter of the year, and for other
changes in the seasonal pattern of the transactions. The re-
visions are expected to improve the balance in the first half
of the year, and lower it in the second half, compared with
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the data presented in the attached tables which are still
based on last year's seasonal adjustment factors. Likewise,
the balance for the first half of 1971 will be more favorable
than shown in the present estimates after the seasonal adjust-
ment has been revised.
Changes in Assumptions:
A. Domestic Developments
The assumptions with respect to domestic business develop-
ments allow for the more than expected drop in output during
the first quarter, and incorporate the retroactive pay raises
for government employees, as well as various other recent
budget modifications. Compared with the January estimates
GNP in current prices in 1970 is assumed to be lower by less
than $1 billion. Most of that difference is in the first
quarter; from the second to the fourth quarter of 1970 the
quarter-to-quarter increase is now assumed to be slightly
more than had been anticipated earlier, but in the first half
of 1971 the increases have been revised downward.
Interest rates on domestic and Euro-dollar markets for
short-term funds have dropped faster in the latter part of
the first quarter than was assumed in January. This decline
will mostly affect the assumptions for the second quarter.
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Further declines are anticipated for the remainder of 1970,
but at a much slower rate. At the end of the year the average
rate paid to foreign holders of short-term dollar funds are
expected to level off at close to 8 percent in the Euro-dollar
market and at about 6 percent in the United States, which is
close to what had been assumed in January.
B. Foreign Developments
Foreign production is still expected to rise less in 1970
than it did in 1969, but the decline in the rate of expansion
is now expected to be only from 10.1 percent to 7.6 percent,
compared with a decline to 6.5 percent assumed in January.
Principal Changes in Estimates
(1) Merchandise exports for 1970 were raised from $40.2
to $40.8 billion, and imports were increased from $38.2 to
$38.5 billion. These changes increased the trade balance
from $2.0 billion to $2.3 billion. For the first half of 1971
the trade balance was revised from $0.4 billion to $0.8 billion.
The upward revisions reflect the higher than previously ex-
pected export and import data for January and February, a slight
upward revision of the rate of expansion in foreign business
activity, and a change in the estimating methods for exports
to allow for relative price changes. On the other hand, the
FORD is LIBRARY 078870
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- 5 -
previous estimate for exports of commercial airplanes was
lowered.
(2) The upward revision of the trade balance was offset,
however, by a roughly equal downward revision of the surplus
balance on other goods and services transactions. The estimate
for military and other government expenditures abroad was
raised to reflect the recent pay raise. Incomes on direct
investments are now expected to be. somewhat lower than seemed
likely in January, largely because the figures for the last
quarter of 1969 were less than had been anticipated. On the
other hand, a faster decline in short-term interest rates in
the U. S. and in the Euro-dollar market made it advisable to
lower the estimate for interest payments to foreigners.
(3) The surplus on goods and services for 1970 remained
unchanged at about $3.7 billion, but it was raised (from
$1,450 million to $1,630 million) for the first half of 1971.
The distribution of the 1970 surplus between the first and
second half of the year was changed, however. The peak which
earlier was expected to occur in the first half of the year,
is now expected to be in the second half. In the first half
of 1971 the balance is expected to be lower again.
FORD & LIBRARY 976870
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(4) Net capital outflows through private U. S. and
foreign transactions were slightly revised up. Net outflows
of capital reported by banks, including export credits, may be
larger than had been estimated earlier, and for foreign direct
investments in the U. S. which did not rise as much in 1969
as had been expected, the estimates were revised downward.
Net outflows of capital through transactions by U. S. corpora-
tions are expected to rise from about $1,450 million in 1969
to about $2.6 billion in 1970, about the same as had previously
been estimated. The downward revision from $4.3 billion to
$3.8 billion in the transfers of capital by U. S. parent com-
panies for direct investments was matched by a downward re-
vision in new foreign borrowing and the utilization of funds
that had been borrowed in previous periods and temporarily
invested abroad.
(5) The major revision that led to the increase in the
deficit on the adjusted liquidity balance in 1970 was in
government capital transactions.
Compared with the January estimates (which were essential-
ly carried forward from. those made last September), loans under
the Farm Products Disposal Program were raised by nearly $200
million, and credits under the Export-Import Bank Act for non-
FORD is LIBRARY 07V839
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
- 7 = -
military exports also by about $200 million. These increases
were offset by a $100 million reduction in disbursements
under the Foreign Assistance Act. Military credits were re-
duced from the previous estimate by $300 million. This change,
however, had no effect on the overall balance of payments.
Such credits initially finance the advance payments on military
contracts, and thus, pending the delivery of the goods con-
tracted for, increase military liabilities. The downward re-
vision in new military credits thus is reflected in a downward
revision in new military liabilities, and thus in a faster re-
duction of net military liabilities from $0.2 billion in the
previous estimate to $0.5 billion in this estimate. For the
period through the middle of 1971 the downward revision for
military credits did not require a downward revision in military
exports.
FDRD i LIBRARY 07V839
FOR OFFICIAL USE ONLY
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Table 1
Summary of Balance of Payments
Estimates
(Billions of Dollars)
1969
1970
1971
1969
1970
First
Second
First
Second
First
Annual
Half
Half
Half
Half
Half
Balance on:
Merchandise trade
Estimates of May 69
0.6
---
0.3
0.3
--
-
-
July 69
0.5
--
0.1
0.4
1.0
-
-
Sept. 69
0.2
1.5
-0.1
0.4
0.9
0.6
---
Jan. 70
0.7
2.1
-0.1
0.8
1.3
0.8
0.4
April 70
0.7
2.3
-0.1
0.8
1.2
1.1
0.8
Goods and services
May 69
2.2
--
1.1
1.1
--
--
-
July 69
2.0
--
0.8
1.2
-
-
-
Sept. 69
1.5
3.0
0.6
0.9
1.6
1.4
Jan. 70
2.1
3.7
0.7
1.5
2.0
1.7
1.4
April 70
2.1
3.7
0.6
1.4
1.7
2.0
1.6
Unilateral transfers
other than Gov't. grants
May 69
-1.2
--
-0.6
-0.6
---
---
-
July 69
-1.2
--
-0.6
-0.6
-0.6
--
--
Sept. 69
-1.1
-1.2
-0.6
-0.6
-0.6
-0.6
Jan. 70
-1.2
-1.2
-0.6
-0.6
-0.6
-0.6
-0.6
April 70
-1.2
-1.2
-0.6
-0.6
-0.6
-0.6
-0.6
Government grants and
credits (net of sched-
uled repayments)
May 69
-4.1
-2.1
-2.0
July 69
-3.6
-
-1.7
-1.9
-1.6
-
--
Sept. 69
-3.8
-3.5
-1.9
-1.9
-1.8
-1.7
----
Jan. 70
-3.7
-3.5
-2.0
-1.7
-1.7
-1.8
-1.7
April 70
-3.7
-3.6
-2.0
-1.7
-1.9
-1.7
-1.6
Net movements of U. S.
and foreign private
capital (excl. liquid
liabilities)
May 69
-0.5
--
-0.6
0.1
--
--
---
July 69
-1.6
-1.1
-0.5
-1.2
--
--
Sept. 69
-1.7
-2.7
-1.3
-0.4
-1.5
-1.2
-
Jan. 70
-0.9
-2.0
-1.2
0.3
-1.1
-0.9
-1.2
April 70
-0.9
-2.2
-1.2
0.4
-1.3
-0.9
-1.5
FOR OFFICIAL USE ONLY
FORD & LIBRARY GERALD
FOR OFFICIAD USE ONLY
Table 1 (Continued
1969
1970
1971
1969
1970
First
Second
First
Second
First
Annual
Half
Half
Half
Half
Half
Changes in Gov't. liabil-
ities (mainly associated
with military transactions)
2/
May 69
0.5
-
0.1
0.4
----
-
--
July 69
0.2
-
0.2
--
-0.1
--
---
Sept. 69
0.2
-0.2
0.2
---
-0.1
-0.1
-
Jan. 70
0.5
-0.2
0.2
0.3
-0.1
-0.1
0.2
April 70
0.5
-0.5
0.2
0.3
-0.3
-0.2
-0.0
Balance on recorded
transactions (excl.
special financial
transactions) on
BERALD FORD VIBRARI
liquidity basis:
May 69
-3.1
-2,1
-1.0
--
--
---
July 69
-4.2
-2.4
-1.8
-1.3
-
Sept. 69
-4.9
-4.6
-3.0
-2.1
-2.3
-2.3
--
Jan. 70
-3.1
-3.2
-2.9
-0.2
-1.5
-1.7
-1.9
April 70
-3.2
-3.8
-2.9
-0.3
-2.4
-1.4
-2.2
Errors and Omissions
(excl. "abnormal" in
1969)
May 69
-1.0
-0.6
-0.4
---
-
----
July 69
-1.0
-0.5
-0.5
-0.5
---
Sept. 69
-1.3
-1.0
-1.1
-0.2
-0.5
Jan. 70
-1.0
-1.0
-0.8
-0.2
-0.6
-0.4
-0.5
April 70
-1.0
-1.0
-0.8
-0.2
-0.6
-0.4
-0.5
Balance on liquidity
basis (excl. special
financial transactions
and "abnormal" errors
and omissions in 1969)
May 69
-4.1
-2.7
-1.4
--
---
--
July 69
-5.2
-2.9
-2.3
-1.8
---
--
Sept. 69
-6.2
-5.6
-4.0
-2.2
-2.8
-2.8
Jan. 70
-4.1
-4.2
-3.7
-0.4
-2.1
-2.1
-2.4
April 70
-4.2
-4.8
-3.7
-0.5
-3.0
-1.8
-2.7
Special financial
not estimated
transactions
-0.9
--
-0.4
-0.5
--
-
--
"Abnormal" errors
not estimated
and omissions
-2.0
--
-1.5
-0.5
--
--
--
Balance on liquidity
not estimated
basis as published
-7.1
---
-5.6
-1.5
-
-
--
1/ Excluding SDR allocations.
2/ The liquidations in the first quarter 1970 by Germany of non-marketable
medium-term bonds sold under the military offset agreement, prior to their
maturity, are treated here as special financial transactions.
FOR OFFICIAL USE ONLY
Table 2
Assumptions for Economic Developments in the United States
Billions of Dollars, Seasonally Adjusted
Percentage
1969
1970
1969
1970
1971
Changes
1/
Projection
used in:
Annual
IV
I
II
III
IV
I
II
70/69
IV 70/IV 69
Sept. 1969
GNP, current $
932.2
978.6
952.1
957.6
966.8
986.0
1004.0 -
-
4.98
5.45
1958 $
728.1
737.4
731.3
729.2
731.3
739.7
749.3 -
-
1.28
2.46
Deflator
128.0
132.7
130.2
131.3
132.2
133.3
134.0
I
-
3.59
2.92
Jan. 1970
GNP, current $
932.1
985.0
952.0
963.2
976.2
992.2
1008.4
1028.8
1047.4
5.65
5.90
1958 $
727.5
736.0
729.8
730.2
732.6
737.8
743.4
750.8
758.6
1.15
1.86
Deflator
128.1
133.8
130.5
131.9
133.2
134.5
135.6
137.0
138.1
4.45
3.91
April 1970
GNP, current $
932.1
984.1
952.1
958.3
975.3
992.4
1010.5
1027.4
1041.9
5.58
6.13
1958 $
727.5
734.7
729.7
726.6
730.7
737.0
744.5
751.4
756.7
1.11
2.02
Deflator
128.1
133.9
130.5
131.9
133.5
134.7
135.7
136.7
137.7
4.54
3.98
1/ The corresponding changes for 69/68 and IV 69/IV 68 were: GNP, current $
7.69
6.69
1958 $
2.84
1.57
Deflator
4.74
5.07
FORD & GERALD LIBRARY
FOR OFFICIAL USE ONLY
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Table 3
Assumptions for Economic Developments Abroad
Industrial Production in Major Foreign Industrial
Countries Weighed by Their Share in U. S. Exports
1963 = 100
1969
1970
1969
1970
1971
Percentage Changes 1,
Projection
used in:
Annual
IV
I
II
III
IV
I
II
70/69
IV 70/IV 6
May 1969
152
-
156
-
-
-
-
-
-
I
-
July 1969
153
-
156
158
161
-
-
-
I
-
I
Sept. 1969
153
162
157
159
161
163
166
-
-
5.9
5.7
Jan. 1970
153
163
156
159
162
164
166
169
172
6.5
6.0
April 1970
153
164
156
161
163
165
168
170
173
7.6
7.7
1/ The corresponding changes for 69/68 and IV 69/IV 68 were:
10.1
6.2
FORD i GERALD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
-
Table 4
FORD is LIBRARY GERALD
Transactions in Goods and Services
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
1968
1969
1970
1969
1970
1971
Annual
First
Second
First
Second
First
Exports of goods and services,
excluding transfers under
military grants
50660
55387
60920
26173
29214
30220
30700
31770
Merchandise, adjusted
33598
36487
40800
17077
19410
20300
20500
21300
Transfers under military
sales contracts
1427
1504
1300
745
758
670
630
500
Travel
1770
2052
2400
1020
1032
1170
1230
1320
Other services
6101
6448
7070
3066
3382
3480
3590
3680
Income on U. S. invest-
ments abroad
Direct
4985
5707
6100
2741
2966
2950
3150
3300
Other private
1949
2258
2290
1061
1197
1170
1120
1170
Government
8305
931
960
463
469
480
480
500
Imports of goods and services
-48078
-53314
-57250
-25535
-27779
-28530
-28720
-30140
Merchandise, adjusted
-32972
-35797
-38500
-17178
-18619
-19100
-19400
-20500
Military expenditures
-4530
--4882
-5020
-2412
-2469
-2540
-2480
-2450
Travel
-3022
-3372
-3700
-1676
-1696
-1800
-1900
-2000
Other services
-4622
-4832
-5290
-2289
-2544
-2610
-2680
-2790
Income on foreign invest-
ments in the United States
-2933
-4431
-4740
-1980
-2451
-2480
-2260
-2400
Balances:
Goods and services,
total
2581
2073
3670
638
1435
1690
1980
1630
Merchandise trade
626
690
2300
-101
791
1200
1100
800
Military sales and
purchases
-3103
-3378
-3720
-1667
-1711
-1870
-1850
-1950
Travel
-1252
-1320
-1300
-656
-664
-630
-670
-680
Other services
1479
1616
1780
777
838
870
910
890
Investment income
4831
4465
4610
2285
2181
2120
2490
2570
Includes deferred interest on U. K. loan
FOR OFFICIAL USE ONLY
Table 5
Merchandise Exports
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
Changes in
Percents
1968
1969
1970
1969
1970
1971
69/
70/
Annual
First
Second
First
Second
First
68
69
Total exports, actual
or estimated
33598
36485
40800
17077
19408
20300
20500
21300
8.6
11.8
less: Effects of strikes
(increase +)
+45
-900
-
-900
-
-
-
I
equals: Exports adjusted for
strike effects
33553
37385
40800
17977
19408
20300
20500
21300
11.4
9.1
less: Agricultural goods
6301
6190
6300
2920
3270
3175
3125
3200
Commercial aircraft
1405
1240
1500
700
540
900
600
700
Automotive shipments
to Canada
2374
2750
2800
1350
1400
1275
1525
1600
equals:
Other exports, actual
or estimated on
basis of assumptions
23473
27205
30200
13007
14198
14950
15250
15800
15.9
11.0
GERALD FORD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 6
Merchandise Imports
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
Changes
Percents
1968
1969
1970
1969
1970
1971
69/ 70/
Annual
First
Second
First
Second
First
68
69
Total imports, actual
or estimated
32972
35797
38500
17178
18619
19100
19400
20500
8.6 7.5
less: Effects of strikes
and other special
developments
(increase +)
840
-350
100
-400
50
100
-
I
equals:
Imports adjusted for
strike effects
32132
36147
38400
17578
18569
19000
19400
20500
12.7 6.2
less: Automotive shipments
from Canada
2302
3159
3300
1421
1738
1500
1800
1900
equals: Other imports, actual
or estimated on
basis of assumptions 29830 32988 35100 16157 16831 17500 17600 18600 10.8 6.4
FOR OFFICIAL USE ONLY
FORD & GERALD LIBRARY
FOR OFFICIAL USE ONLY
FORD is LIBRARY GERALD
Table 7
Movements of United States and Foreign Private Capital (Excluding Liquid Liabilities)
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
1968
1969
1970
1969
1970
1971
Inflows +, Outflows -
Annual
First
Second:
First
Second
First
U. S. assets abroad, total
-5036
-4994
-5550
-3394
-1603
-2700
-2850
-3400
U. S. direct investments abroad
-3025
-30602/-3800
-1985
-1076
-2200
-1600
-2300
U. S. purchases of foreign
securities
-1145
-1365
-1300
-736
-631
-600
-700
-700
Claims reported by U. S. banks
269
-528
-500
-419
-109
+100
-600
-300
Claims (other than direct in-
vestments) reported by non-
bank corporations
-924
-2792/
50
-374
952/
0
50
-100
Claims reported by U. S.
brokers
-210
238
-
120
118
-
-
-
Foreign assets in the United States,
total
5977
4135
3400
2159
1973
1400
2000
1900
Foreign direct investments
319
749
550
406
342
250
300
300
Foreign purchases of U. S.
securities:
New issues by U. S.
corporations
2129
1026
900
551
475
300
600
500
Other stocks
2084
1515
1500
878
637
600
900
900
Other bonds
29
156
200
140
16
150
50
50
Long-term liabilities of
U. S. banks to private
foreign residents
-7
+48
-
4
42
-
I
-
Other liabilities by U. S.
corporations
1098
859
250
266
593
100
150
150
Liabilities reported by
U. S. brokers
325
-218
-
-86
-132
-
-
I
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 7 (Continued)
1968 1969 1970
1969
1970
1971
Inflows +, Outflows -
Annual
First Second
/
First
Second
First
Net movements of U. S. and foreign
private capital (excluding liquid
liabilities)
941 -859 -2150
-1235
370
-1300
-850
-1500
Changes in assets and liabili-
ties of U. S. corporations
-720 -1454 -2600
-1542
87
-1800
-800
-1750
Foreign direct investments in
the U. S.
319
749
550
406
342
250
300
300
Transactions in securities
(other than new foreign
issues of U. S. corporations)
968
306
400
282
22
150
250
250
Claims and liabilities re-
ported by:
U. S. banks
262
-480
-500
-415
-67
100
-600
-300
U. S. brokers
115
20
-
34 A -14
-
-
-
1/
Partially estimated.
The figure reflects the $175 million sale of an investment in Latin America for long-term notes.
FORD & LIBRARN
FOR OFFICIAL USE ONLY
FOR OFICIAL USE ONLY
Table 8
Direct Investment Transactions
Balance of
Payments Data
OFDI Data
1968
1969
1970
1968
1969
1970
Capital transfers for
direct investments
3025
3060
3800
2671
Less: Canada
594
624
700
410
In scheduled areas
24311/
24361/
31001/
2261
2950
Less: net use of
funds obtained
through:
security issues
785
611
1000
other foreign
21772/
2400
24004/
sources
673
561
350
Equals: net capital
outflow to scheduled
areas
9731/
12641/
17501/
84
550
Reinvested earnings
in scheduled areas
13801/
11233/
16203/
Total subject to
regulations
23531/
1207
2170
Ceiling
2700
3350
3600
1/
Includes banks and other financial organizations not subject to OFDI
regulations; the 1969 figure is after a $175 million liquidation of
a mining investment in Latin America
2/
Includes some funds that had previously been repatriated to the U. S.
3/
The figures shown include some company reports for the year ended
February 1969, as permitted under the program. The corresponding
figure adjusted for the calendar year is $1312 million.
4/
Includes about $1000 of funds available from prior years' borrowings.
FORD LIBRARY j BERALD
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 9
Sources and Uses of Funds Borrowed Abroad by U. S. Corporations
(Millions of Dollars)
1968
1969
1970
New issues of securities
2129
1026
900
Uses:
Transfers to foreign
bank accounts
973
118
-300
Repayments of foreign debts
2
15
-
Transfers to U. S. parents
369
282
200
Transfers to foreign
affiliates
785
611
1000
Increase in corporate
liabilities
1102
859
250
Uses:
Commercial purposes, etc.
429
298
-100
Transfers to foreign
affiliates
673
561
350
1/
Assumed to equal changes in long-term liabilities to
Western Europe.
FORD & GERALD LIBRARY
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 10
Major Government Grant and Credit Transactions
By Years and Half-Year Periods, Seasonally Adjusted
Millions of Dollars
Debits (-)
1968
1969
1970
1969
1970
1971
Annual
First Second
First Second
First
Disbursements:
Grants
-1706 -1649
-1600
-837
-813
-800
-800
-750
Credits and
other assets
-3641
-3421
-3520
-1796
-1625
-1840
-1680
-1650
Total
-5347 -5070 -5120 -2633 -2438 -2640 -2480 -2400
not seasonally
adjusted
By program
PL 480
-1260 -1155
-1285
-704
-459
-755
-530
Foreign Assistance
Act
-2145
-2152
-1920
-1142
-1010
-995
-925
Export-Import
Bank
-1517
-1258
-1280
-703
-556
-680
-600
not
military credits
(-554)
(-535)
(-180)
(-322)
(-214)
(-90)
(-90)
estimate
other credits
(-963) (-723) (-1100)
Capital subscrip-
tions to inter-
national agencies
-127
-184
-300
-77
-107
-145
-155
Other programs
and assets
-298
-321
-335
-159
-161
-185
-150
Credits (+)
Foreign repayments
of credits (excl.
advance repayments)
1195
1336
1420
651
686
660
760
700
FORD i LIBRARY GERALD
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 10 (Continued)
Debits (-)
1968 1969 1970
1969
1970
1971
Annual
First Second
First Second
First
German trans-
actions under
offset agree-
ment:
Advance debt
repayment
44
44
Purchases of
X-M Bank
assets
-86
86
70
Total
1195
1336
1550
651
686
790
760
770
Balance on
grants and
credit trans-
actions
-4152 -3734 -3570 -1982 -1752 -1850 -1720 -1630
FORD & LIBRARY GERALD
FOR OFFICIAL USE ONLY
FOR OFFICIAL USE ONLY
Table 11
Changes in Government Liabilities (Excluding
Special Transactions and Liquid Liabilities)
Millions of Dollars
Debits (-)
1968
1969
1970
1969
1970
1971
Annual
First
Second
First
Second
First
Liabilities asso-
ciated with
military sales
-137
178
-520
-13
191
-310
-210
-120
Obligations asso-
ciated with
German offset
agreement
500
325
75
250
75
75
100
Other liabili-
ties
-50
-8
-55
5
-14
-30
-25
-20
Total
313
495
-500
242
252
-340
-160
-40
F
GERALD R. FORD
FOR OFFICIAL USE ONLY
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date December 30, 1970.
To
Chairman Burns
Subject: Balance of Payments
From
Robert Solomon
Programs.
CONFIDENTIAL (FR)
I understand that the President has not yet definitely
decided to approve Secretary Kennedy's recommendation for a
relaxation of the balance of payments programs. The President,
of course, knows of your position and this may explain why he
has not yet accepted the Kennedy proposal.
If you think it appropriate, therefore, you would have
a chance to get a word in with the President on Monday.
An additional argument that can be used is that the
trade figures for November, just announced, show a deficit
($1/2 billion, annual rate). Thus a relaxation is even less
opportune than it seemed earlier.
RS
FORD & LIBRARY GERALD
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date January 4, 1971.
To
Chairman Burns
Subject: Trade and Current Account
From
Bernard Norwood
Data.
W
f
In response to your request, I attach documents showing:
(1) 1970 monthly data on U.S. trade -- see especially Table 1 of
Attachment 1, and (2) 1970 quarterly data on U.S. current account.
Attachments
FORD is LIBRARY GERALD
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
Office Correspondence
Date December 30, 1970
To Mr. Robert Solomon
Subject: U.S. Merchandise Trade -
From Irene W. Kost
November 1970
The trade balance in November registered a deficit of $0.5
billion at a seasonally adjusted annual rate (balance of payments basis),
down from the small surplus of $0.9 billion recorded in October. The
balance has worsened steadily since mid-year, when the surplus was at an
annual rate of over $3 billion, as exports have tended to decline while
imports reached record rates. For the January-November period the trade
surplus was at a $2.3 billion rate.
Exports in November were $40.9 billion (SAAR), balance of
payments basis, nearly 5 per cent below that of October and the lowest
rate since April. Exports fell substantially from the October rate
over a broad range of commodities, including a sizeable decline in the
export of transport equipment associated with the GM strike. Other large
monthly declines occurred in exports of non-electrical and electrical
machinery, foods, mineral fuels, chemicals, and crude materials; there
were smaller declines in oils and fats, and semi-finished industrial
products.
Imports in November were $41.4 billion (SAAR) balance of
payments basis. While down by nearly 2 per cent from the record high of
$42.2 billion in October, November imports were nevertheless the second
highest recorded total despite reduced imports of automobiles from
Canada. Compared with third-quarter rates there was some import
reduction in November in electric machinery, foodstuffs, crude materials,
and miscellaneous manufactured goods (mainly consumer items) but imports
were higher for. other major commodity groups, particularly transport
equipment, mineral fuels, and semi-finished industrial products.
U.S. Merchandise Trade, Balance of Payments Basis
(billions of dollars, seasonally adjusted annual rates)
1969
1970
Year
3Q
4Q
1Q
2Q
3Q
Oct.
Nov.
Exports
36.5
38.3
39.3
41.0
42.8
42.7
43.1
40.9
Imports
35.8
37.1
37.6
38.9
39.5
39.8
42.2ʳ
41.4
Balance
+0.7
+1.2
+1.7
+2.1
+3.3
+2.9
+0.9
-0.5
r/ Revised.
GERALD FORD LIBRARY
Table 1
U.S. Merchandise Trade
(billions of dollars, seasonally adjusted annual rates)
Census Basis
Balance of Payments Basis*
Exports
Imports
Balance
Exports
Imports
Balance
1963
22.5
17.2
5.3
22.3
17.0
5.2
1964
25.8
18.7
7.1
25.5
18.6
6.8
1965
26.8
21.4
5.3
26.4
21.5
5.0
1966
29.5
25.6
3.9
29.4
25.5
3.9
1967
31.0
26.9
4.1
30.7
26.8
3.9
1968
34.1
33.2
0.9
33.6
33.0
0.6
1969
37.3
36.1
1.3
36.5
35.8
0.6
1967
I
31.1
26.9
4.2
30.8
26.6
4.1
II
31.1
26.1
5.0
30.9
25.9
5.0
III
31.1
26.4
4.7
30.7
26.2
4.5
IV
31.1
28.7
2.5
30.4
38.6
1.8
1968
I
32.1
31.5
0.6
31.8
31.3
0.5
II
33.9
32.6
1.3
33.5
32.5
1.0
III
36.1
34.2
1.9
35.5
34.3
1.2
IV
34.3
34.1
0.2
33.5
33.8
-0.3
1969
I
30.4
30.6
-0.2
29.9
30.3
-0.4
II
39.4
38.5
0.9
38.3
38.4
-0.1
III
39.5
37.2
2.3
38.3
37.1
1.2ʳ
IV
39.9
37.8
2.1
39.3
37.6
1.7ʳ
1970
I
41.3
38.9
2.4
41.0
38.9
2.1
II
43.7
39.7
4.0
42.8
39.5
3.3
III
43.3
39.8
3.5
42.7
39.8
2.9
1969
November
40.4
38.6
1.8
39.4
38.1
1.3
December
38.9
36.1
2.8
38.5
35.9
2.6
1970
January
39.7
39.0
0.7
39.5
39.7
-0.2
February
43.5
39.1
4.5
43.0
38.3
4.7
March
40.6
38.6
2.0
40.3
38.7
1.6
April
41.4
39.0
2.4
41.0
38.8
2.2
May
44.3
40.3
4.0
43.0
40.2
2.8
June
45.3
39.7
5.6
44.5
39.5
5.0
GERALD FORD LIBRARY
July
44.2
38.9
5.3
43.6
38.5
5.1
August
43.2
40.4
2.8
42.7
40.3
2.4
September
42.4
40.8
1.6
41.9
40.6
1.3
October
44.5
42.3
2.2
43.1
42.2ʳ
0.9
November
41.6
41.5
0.1
40.9
41.4
-0.5
* The monthly balance of payments figures are only rough estimates
and are subject to considerable revision.
/ Revised.
TABLE 2
U.S. Exports of Domestic Merchandise
Schedule B Sections
Including Department of Defense Shipments
GERALD FORD LIBRARA
(seasonally adjusted; annual rates)
billions of dollars
1969
1970
40
1Q
20
30
Oct.
Nov.
Food and live animals
4.16
3.98
3.92
4.59
5.19
4.76
Beverages and tobacco
0.80
0.67
0.77
0.61
0.73
0.83
Crude materials
3.89
4.27
4.82
4.93
4.59
4.24
Mineral fuels
1.25
1.44
1.57
1.52
1.80
1.60
Oils and fats 1/
0.39
0.43
0.51
0.51
0.48
0.39
Chemicals
3.63
4.06
3.94
3.64
3.91
3.60
Manufactured goods
classified by material
5.16
5.33
5.29
5.01
4.70
4.67
Machinery
10.55
10.80
11.04
11.90
12.59
11.62
Nonelectrical machinery
(7.81)
(7.93)
(8.04)
(8.86)
(9.39)
(8.51)
Electrical machinery
(2.74)
(2.88)
(3.00)
(3.04)
(3.20)
(3.11)
Transport equipment
6.49
6.48
7.35
6.19
7.39
5.78
Miscellaneous manufactured
articles
2.48
2.62
2.49
2.61
2.67
2.66
Other 1/
1.53
1.42
1.56
1.49
1.41
1.39
Total
40.33
41.50
43.26
43.00
45.46
41.54
U.S. General Imports
Schedule A Sections
(seasonally adjusted; annual rates)
billions of dollars
1969
1970
4Q
10
20
3Q
Oct.
Nov.
Food and live animals
4.79
5.44
5.49
5.38
5.14
5.20
Beverages and tobacco
0.77
0.77
0.87
0.92
0.87
0.96
Crude materials
3.60
3.39
3.25
3.41
3.29
3.34
Mineral fuels
2.94
3.17
2.99
2.97
3.14
3.25
Oils and fats 1/
0.17
0.11
0.18
0.15
0.19
0.14
Chemicals
1.32
1.39
1.44
1.46
1.69
1.50
Manufactured goods
classified by material
7.76
8.07
8.16
8.44
9.27
9.18
Machinery
4.65
5.02
5.30
5.45
5.72
5.36
Nonelectrical machinery
(2.66)
(2.82)
(2.94)
(3.13)
(3.42)
(3.14)
Electrical machinery
(1.99)
(2.20)
(2.36)
(2.32)
(2.30)
(2.22)
Transport equipment
5.76
5.33
6.10
6.06
6.30
6.59
Miscellaneous manufactured
articles
4.20
4.71
4.93
4.86
5.17
4.74
Other 1/
1.47
1.14
1.26
1.35
1.45
1.30
Total
37.43
38.54
39.97
40.45
42.23
41.56
1/ Not seasonally adjusted.
Note: Totals will not correspond to the Census basis totals in Table 1 because:
(1) the commodity sections were independently adjusted for seasonal variations,
(2) Department of Defense Military Grant-Aid shipments are included in Table 2.
Table 3
Imports as Per Cent of GNP
GERALD FORD LIBRARY
(billions of current dollars)
1/
Annual
GNP
Imports
Per Cent
1960
503.7
14.74
2.93
1961
520.1
14.52
2.79
1962
560.3
16.22
2.89
1963
590.5
17.01
2.88
1964
632.4
18.65
2.95
1965
684.9
21.50
3.14
1966
749.9
25.46
3.40
1967
793.9
26.82
3.38
1968
865.0
32.96
3.81
1969
931.4
35.84
3.85
Half Years at Annual Rates, Seasonally Adjusted
1967
1H
779.5
26.25
3.37
2H
808.4
27.40
3.39
1968
1H
846.5
31.90
3.77
2H
883.6
34.05
3.85
1969
1H
915.7
34.36
3.75
2H
947.2
37.30
3.94
1970
1H
965.3
39.20
4.06
Quarterly at Annual Rates, Seasonally Adjusted
1967
I
774.4
26.64
3.44
II
784.5
25.86
3.30
III
800.9
26.17
3.27
IV
815.9
28.62
3.51
1968
I
834.9
31.28
3.75
II
858.1
32.53
3.79
III
875.8
34.28
3.91
IV
891.4
33.77
3.79
1969
I
907.6
30.30
3.34
II
923.7
38.42
4.16
III
942.6
37.05
3.93
IV
951.7
37.56
3.95
1970
I
959.5
38.89
4.05
II
971.1
39.50
4.07
III
985.5
39.82
4.04
1/ Balance of payments basis.
U.S. FOREIGN TRADE - BALANCE OF PAYMENTS BASIS
EXPORTS - SOLID
12
(SEASONALLY ADJUSTED, QUARTERLY BILLIONS OF DOLLARS) IMPORTS - DASHED
FORD in LIBRA 988870
10
8
EXPORTS
IMPORTS
6
4
2
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
MERCHANDISE TRADE 1-2-1 MOVING AVERAGES B.O.P. BASIS EXPORTS - SOLID
50
(SEASONALLY ADJUSTED, ANNUAL RATES, BILLIONS OF DOLLARS) IMPORTS - DASHED
FORD j LIBRA GERALD
45
40
EXPORTS
IMPORTS
35
30
J F M AMJ J A S o N D JFMAMJ JAS OND
25
1969
1970
Attachment 2
Current Account
(millions of dollars, S.A.)
Current Account
Quarter
Balance
Goods
Services
Remittances & Pensions
1970 - 1
504
505
327
-328
2
744
829
275
-360
3
661
720
301
-360
Source: Green Book, December 9, 1970.
FORD & LIBRARY GERALD