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- March 20, 1.945'..- 2 P.M.
• . :i,
• ;('Tent,h day of hearings)
Mr. Clayton began by referring to Representative Wolcptt's (R. Mich.)
question about the possible influence of the Fund on our cotton exports. Pie mentioned that between 1929 and 1938 Brazil cane to furnish a much larger share of
German cotton imports and the United States a much smaller share. The Fund, in his
opinion, would prevent the bilateral,exchange arrangements which were partially responsible. In reply to questions"by Representatives Kunkel (R. Pa,), Baldwin (D.MdJ,
and Talle (R. Iowa) Mr. Clayton agreed that our price policy was also an important
In reply to a question by'Representative Sundstrom (R. N.J.) about the effects of bilateral clearing agreements on the countries involved, Mr. Clayton said
that no country benefits in the: long;run and that if bilateral clearing agreements
among foreign countries were-to continue after the war the United States would have
to make similar arrangements. Representative Thorn (D. 0.) asked if our\exports had
not boonhampered by a scarcity of dollars .abroad and if the Fund would not help to
maintain our exports raid Mr. Clayton agreed.. Representative Thorn also pointed out
that the clearing arrangements riot only cut.'.our cotton exports to Germany but our
other exports to Brazil.
. . •'. .'.'.
Representative Baldwin Said 'that .he was in full agreement with the principles of the Bretton Woods proposals "But that he would like to know whether, or not in
practice the development of industries in foreign countries would not lead to a deline in our'exports". Mr. Clayton replied that the Bretton Woods program had a
short-term and a long-term aspect. In the. short-run., American exports, sustained by
the operations of the Fund and the Bank would partly tafce care, of our excessive ce- •
pacity to produce capital equipment. 'lie' saicl he expects an export surplus of 5 to 4
billion dollars in the immediate post-war years. As. to the long-run aspect, he said
that experience had shown that industrial countries with a high standard of living
were our best customers and that they would continue to buy our mass-produced goods
in the production of which we command a decided advantage.' He added that we may
never want to take back tlie principal of our loans which may shift from country to
country and .from public to private channels,'and that through adjustments in our commercial policy we should be able to receive interests and dividends.
:• ,


Representative Smith (R. 0.) then read lengthy excerpts from speeches by
Lord Keynes which, in his opinion, proved that the Fund through Article VII, Sec. 3.
(Scarce Currencies), would put foreign countries in a position to exercise pressure
on the United States either -to; make tariff changes or to "give our exports away
without payment."


Mr, Clayton pointed out that some bf the quotations which Representative
Smith had read referred' to the Clearing Union proposal of Lord Keynes which had not
been accepted by the Bretton Woods Conference. Ho said that the Fund Agreement only
provides for recommendations by the Fund, and granted that this may mean some pressure on the United States. But representations which are common in international
relations may be made, and the Fund certainly can not exert undue pressure. The
United States is entirely free to lower tariffs or not as it sees fit. The fact is
that in the long run of course we can not export more than we import.
Representative Smith asked whether a delcaration of scarcity of dollars by
the Fund would create a serious problem for the United States. Mr. Clayton answered

that a scarcity of dollars has been a 'serious impediment to our exports for many
years and that the Fund actually could delay such a condition. Representative Smith
then said it was his belief that'Lord Keynes had written the scarce currency provision and all other important provisions of the Bretton Woods Agreements.
Mr, Acheson, who took the witness stand after Mr. Clayton, explained that
Lord Keynes did not write tlic Fund Agreement,' that no single person was responsible
for the drawing up of the document but rather that many delegates from many countries helped to formulate the Agreements. He also pointed out that Lord Keynes did
not sit! on Commission I which produced the Fund document. Chairman Spence (D. Ky.)
remarked that in his!opinion the American delegation exercised the greatest influence' on the Fund Agreement. '• •
Representative Riley (D. S.C.) inquired about our experience with the Stabilization Fund. To an explanation by Mr. Acheson he remarked that he was under the
impression that the Fund was not based 'on theoretical principles but on practical
experience of the -operations of stabilization funds. • :.
The next YTitaass,' Under-Secretary of Commerce Wayne C. Taylor read a prepared statement. He point'ed out that we experienced great difficulties- in penetrating exchange barriers abroad and in collecting payments when other countries were'
short of dollars. He called the Fund an attempt to create an international monetary
system. Critics of the Fund had seriously erred in failing to consider realistically
the alternatives to the system agreed upon at Bretton Woods-. The very detailed provisions of the Fund are probably not a disadvantage but actually an element of
strength. The weakness in most of the criticisms of the proposal'lies precisely in
their failure to face realistically the task of prescribing, in adequate detail the
policies and procedures. He then discussed some of the criticisms and alternative
proposals. As to the recommendation to: reject the Fund and to assign the task of
making stabilization loans to the Bank, he pointed out that in place of very definite commitments by foreign countries as to their'exchange policies we would obtain
nothing but the unsecure promise of further discussions.
Representative Kunkel, referring to Mr. Taylor*s participation at the
Inter-American Conference in Mexico City,'-asked whether the Bretton'Woods Agreements
would stand in the way of setting up an Inter-American Bank. Mr. Taylor replied in
the negative. To a further question by Representative Kunkel, he said that Latin
American countries were definitely interested in development loans.
Representative Talle commended Mr. Taylor on his statement. Representative Buffet (R. Nebr.) indicated that the Bretton Woods Agreements have been interpreted differently here and abroad. In particular, he referred to a statement by
Lord Keynes that England.would be free to maintain'her war-time restrictions and the
sterling area after the war. He thought that the British emphasis was on the permissibility of devaluation rather than stabilization. Mr. Taylor replied that the bad
experience with fixed exchange rates after the last war was prominent in the British
mind but that the British had wholeheartedly endorsed the Bretton Woods Agreements
which put the emphasis on stability. As to the removal of exchange restrictions, he
said that there was no question about the objective of their ultimate removal. The
only question which could arise would concern the speed of eliminating the restrictions." It certainly would take longer then sir months, as Representative Buffet had

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Board of Governors
of the Federal Reservo System
Division of Research ana Statistics
March 21, 1945