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F o r m P. R. 5 1 1

/
y

«P0

Dr. Goldenweiser

FROM

Chairinan E c c l e s

REMARKS:
This is the report re Post-war Foreign
Economic Policy about which I spoke to
you over the phone, and which you were
going to take up with Mr. Knaj:

CHAIRMAN'S OFFICE



-L ,

s
DO NO:

- 143

i ??«

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x, it**.

-

RXPQR?

or IPIOHL Mmirru
CARTEL? to f i t m

x.
telt
of it?

ta

of tttt

studying th«
of

the r«i#?*at

In
Itet

thl«
lfft««t

to

two spin
On the

of mr,

will eh

Is
of
Inthe
property In
l in
f
but «»ipo In Latin Aaarte*. raltea a nwai^er of union*
baar upon tha intarnatlcmal bualaaaa g
la fst®®£ with- tH# taat «f dair#lopaaaiatlfif in sitatwrtf? with a irltw to
op, lnaoring « iatirwbl* »»,xiaitiai of In*
tf»ia f «n«fl artRting eon^ltlcma
far Military «a«ui»lty.
in

Qn tha othar Itaita» thtra are prohlaaa of
broi*(!®r mmm ^nd sons eontif^oup nfttura mitl@I* eanesrn
tha feastnatf fmstworlr yf International trada* I»p<ir»
taat ouaatlona »f policy aava arlaan from tha wiialy
not#d tandanef of ibyiinann f l m t <1 tiring th# inter-war
pcrlwt tn develop tneanlftftllcma of « mbnopoliatio ehapaater «na of tan out aid* tha taopt of public* tertitlny or
oontrol. These qyaatlon# ©ay btoo©« mm wmr% s@ut« in
tha po#t-M»r p#riM f owing to W0m§mMm t&km by tha Y*r.l$fQV9*nmtm%9 for %h® proieoutlon of tha WKT an^ to ten
vhlah any ^ovtlop In the ienth^ lmadlataly
the eonelueion of h o a t l l i t l a a .




It

i t WM %tm 8poot*l Saamttttt 1 !! opinion ttmX
of prtl lain i*?ry maljroli thoao two grmtpn of
b# tiNNittd ff#pn.rmt#l|r In o M i r to rtAn©« tltt
to KafcjtAg«9bl« pr©p0rtton« aiUI to *irol€
ffu oomltt««t hnv# aeoorAlAgXy ^##n f©r««^ to
r«p6rt aa th# pr^fel«m«* lirrolvoA la th« fall^wiag fluid i t
(I) the ftltpooitlon of Ax|« In4u0trial ^rcip»rtF'ia Lutlii
i-ia<*ri«r. snU th# rcl^tteHR of po-niilfe!® n t u n i to lnt«r»
nnti mni Bonopolio* nn«i ©urtnipf (f.) Tho iisp&si
control of ^xii lndu«trl«l property in tho on««jr
o«ouplo4 oott»trlo« of Cnropo} ana (3) Uttoitiiitlonol bant*
vitb ^p^olol r^foroneon to tho
Th® wort whl0h tho^e wuiNNNMittooiv hm® aeoospllohed
to Aato It *ot forth In tho report« vhioh




PROGRESS REPORT
SPECIAL COMMITTEE ON PRIVATE MONOPOLIES AND CARTELS
Subcommittee on
Problems in the Other American Republics
The work of the Subcommittee on Problesas in the
Other American Republics of t&te Oojsralttee on Private
Monopolies andtt Cartels relates largely to what is generally known as the Axis replacement program® in the
other African republics* The replacement program involves consideration of three distinct -types of policies
of this Government t




1* Economic warfare policy - the elimination of
Axis and pro-Axis influences in the other
American republics, the Proclaimed I#istf
action by the several governments to accomplish the ends set forth in the Resolutions
of the Rio and Washington Conferences • There
is attached a historical resum& of this aspect
of the economic warfare programs in the other
American republics *
2*

Policy of cooperation in the maintenance and
developmant of the economies of tixe other
American republics - It is the well-established
policy of this Government to cooperate within
the limitations imposed by war conditions in the
furnishing of capital, equipment and technical
skills necessary for a sound economic development of the other American republics• The mere
elimination of Axis owners, managers, and technicians from certain industries and commercial
activities in certain other American republics
might result in the liquidation of economic
activities essential to the umlnten&nce of
public health and safety in the countries in
question* In such cases it is obviously essential that the countries in question, with the
cooperation of the United States where necessary, develop substitute facilities to replace
those offered by the Axis interests to be
eliminated* In many countries, moreover,
thore is an important desire to build up
national




-2-

natlonal industries which may go beyond the
sphere of activities previously engaged in
by the Axis interests. Thus a particular government may wish to establish an industry
which may manufacture certain chemical products
formerly imported through Axis firms from
Germany.
The United States Government at the Rio
Conference and on other occasions since that
time has expressed its readiness to cooperate
fully with the governments of the other American
republics in such Axis replacement programs.
5.

Private monopoly and cartel policy - the conceniraiion in a number of countries of "essential"
Axis firms in the pharmaceutical, chemical and
similar industries raises a number of cartel
issues. These are the very industries which
have been peculiarly favorable to the development of cartels as the result of the special
position in them of technological research and
development, patents and trademarks.
The replacement program must seek to avoid
replacing a structure of industry in the American
republics formerly tied in with Axis cartels
with an alternative structure tied in, in an
equally undesirable manner, with monopolists
of tiie United States or other United Nations
origin, or likely to become in the postwar
period again affiliated with Axis cartels.
There is another type of monopoly situation encountered in several of the American
republics which is not particularly linked with
Axis cartels as such. This is the situation of
the one or two very large commercial organisations of Axis taint or control which dominate
the wholesale and, in many cases, retail distribution systems of the specific countries.
These are private monopolies in a national
rather than international sense. They have in
many cases constituted a drag on the economic
development of the countries in question.
The

-3The Axis replacement program in the other Asaeriean
republics must consequently look to the establishment of
satisfactory alternative industries to replace those undesirable firms which it is not practicable merely to
liquidate, to foster sound national or cooperative enterprises which will maintain and develop the economies of
the countries in quest!on, and to avoid the establishment
or re-establishment of structures of industries that will
be linked with international cartels either of an Axis
or United Nations character, or which would constitute
national monopolies not subject to proper regulation*
From the outset it must be kept in mind that the discussion relates to enterprises in sovereign nations, all of
which except Argentina are associated with the United
States in the war* The replacement program ean succeed
only if it has the cooperation of the national governments which Must, of course, take the principal steps in
putting it into effect* The role of the United States
can only be to urgetibiacarrying out of the program and
to extend assistance of a material, technical or financial character,
The problem for the local governments is in many
cases very difficult as the firms in question are old
established firms which have been important eleiaents in
the business coimminity of the countries for years and
generations, eiaploying large numbers of loyal citizens,
furnishing valuable services to the community, and in
most cases owned and managed by nationals of the countries
in question, many of whom have had and continue to have
great political influence• These problems have been
largely overcome in the cases of Brazil and Mexico where
the governments have either vested or are prepared to
vest the major Axis concerns•

The work of the Subcommittee will be to analyze
several of the leading types of oases encountered - it
should be remembered of course, that the Subcommittee
is not the operating vehicle through which the United
States Government is attempting to meet this general
problem - in order to lay down general principles applicable to the several types of cases, and to consider the




various

various types of measures which may be suggested for
particular cases$ analysing their advantages and disadvantages, and reeoraaending the lines of both policy
and procedure which the operating organisation should
follow*
The Subcommittee is collecting full information
on the principal cases of important enterprises which
are currently the subject of replacement act!vities*
Among these enterprises may be mentioned the following:

1*

A Ohimica Bayer« Ltda*

2*

Sphering Si At

3#

SociedjMle Tecnica Bremensis« Ltda# This firm is
engaged In (a) the production and distribution of
printing and engraving xoachinery and of certain
types of electrical supplies; (b) tlie importation
and distribution of similar products, as well as
of railroad equipment, automobiles, and accessories;
(c) engraving*

4* Allianca Commercial de Anillnas», Iitda^ !• &• Farben's
dyeatuff subsidiary in Brazil*
5#

Carl Zeiss Soc# Qtica« Ltda» A subsidiary of Zeiss
of Jena, now under military technical direction It
is now producing various articles using, of course,
imported glass exclusively*

6*

Oia» Chimica

7#

Casa Lohner S> A» A subsidiary of Siemens-Reiniger,
whicdi is engaged in the production and distribution
of X-ray and other medical equipment*

lf

Merckn do Brasil S t A.

Bolivia

1*

Kyllmaim* Bauer f Gia«

2#

Zel3.er r Moser y Cia*




3*

Juan

3*

Juan Blanar ? Cla#
A H of the above firms are Important in the distribution
of general merchandise in Bolivia* Zeller, Moser y
Cia* operates an alcohol factory, has facilities for
processing hides, and owns extensive cattle lands and
rubber reserves*

Colombia
1#

Ifhe Behriftg Institute# which has a well-equipped
laboratory for research and manufacturing* It is
equipped only for the production and manufacture of
serums and vaccines for veterinary purposes•

2#

Quisalca Bayer-Weskott

3#

Quijalca Sphering Columbiana» S» A»

Ohile

2m

O^i&lca Bayer.

3#

Quimica Chilena Merck*

Costa Rica
!• ThB Victoria Su^ar Mill^ one of the various enterprises operated by the Niehaus family •
Venezuela
!• Frey y» Oia» An important general merchandise firm,
a plan for reorganisation of which has just reached
the Department •
2#

Gran Perrocarril de Veneasuelta* a railroad beneficially owned by Gersmns in ^eiroany through a Spanish
front*

This list does not include any of the Mexican enterprises which have already been vested by the Mexican Gov
ernment, nor does it include several Ectiadoran firms regarding which discussions are just beginning between the
two Governments *




In order

-6In order to be In a position
the Subcommittee is attempting to
available to the various agencies
through American missions abroad,
possible of the following type of




to carry out its work,
collect information
of this Government ard
covering as much as
questions:

For Drugs and Chemicals*
1* What are the most important drugs and chemicals
now sold by Axis firms in the country in question?
These should be broken down, so far as possiblef
into categories —• "ethieals**, tfpopularstf, etc.
2*

Are similar or competing products sold in these
countries by British, Swiss, French, or American
firms? Is the same product sold under a different trade name, or a similar product sold, which
is really competitive?

3#

A tabulation of principal firms and products,
showing where competition exists and where it
does not*

4*

A tabulation showing which products, if any, are
manufactured in whole or in part In the local
country*

5*

A brief discussion of imnufacturing possibilities as to primary products, intermediates, and finished
products*

6*

A discussion of patent and cartel controls over
the items mentioned in 5, both here and in the
local country*

7#

A discussion of the importance of trademrks, in which fields are t&iey important, in «hlch
fields are they most susceptible to competition*

8#

A discussion of merchandizing inetiiods employed do the Axis firms operate through import houses,
wholesale houses, specialty selling organizations,
retail outlets, or by combination of all methods*
9* What

9« What are the laws of the local country, as to
purchase of Axis firms, re-salef operation of
foreign "businesses?
1G*

What contracts exist between the Axis firms and
the home Gerisan f Irms? Under local law are
these merely suspended or can they be abrogated?
What is the voluxae of business involved In the
various Iteias?
Can this volume be supplied in the United States
Tinder present WPB rulings?

Concurrently with assembling this factual information
necessary for its work, the Subcosnnittee is beginning
a study of the various types of measures which have been
suggested for handling the Axis replacement program* their
suitability for the various types of cases being considered,
and tiie facilities already existing within the Gwernsaant
of the United States or available to it for meeting some
of the problems • A further progress report will give
preliminary information on the scope and direction of this
part of the study*




III.

of t&t vorfe ©f iais tiftUHwaaHtn
to lite tad* aa #x*alaatioii of I r a i l a w oi*gf»ni«»
f aa4 la * * l i ; —aa^lai Swop* as a f f a a t t i

tloa in

#

tOg«th«* with Ml •Vftllftfttloa

s tb« ft#W of Bwp^pNW

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i
lift in

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ti<m of

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a

to
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in

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any b# #s.p#elti to

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this duration of
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af

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of rtliof
to b

tf i t s distribution. H * l&r$®r %to% loeal production of es*eatl«l Hflm* tfee l # i s will bt the dtsuind
for necessary voile f ««p*»llfs« *f psyroilt esatotr#~
e*tftbllsA*d M i a«l£tt«.laed through th« JaWgmyagawt of

t#l*f concent, itctrtfeetlaa ihro^h tu$tmmry Until
policy
of product ion ia ln*Ja«^rlea af Axti
f tto« ^-ar tfe€F# iiaa occurred la
In 'S
of

i

#

v t f jmtioii«ll%«ition# thin
a l t o blta fi*.rt&#rti by ftfcftl p » l t # l t i d«clfa#d to
of v-rtln* ehsnget ta fimpNIg t ^ r e f a r t , w i l l !>«
to Nl » aerltod s h i f t itn^ty fro» *
end « i«|ilieitt«i 07 fn latrlomto ^y^tea if
wmntnl

of tfet !nter#ft@ elosoly ft»«ocl^t«d v l t h this
»1I1 bt t l i ; i a s t e d fey th* tefMt *a
a of Axis p o l l t l e a l pov«r» Howwer,
v i t a a restoration of th»
or other w i l l t^ndoyibtodly t»#rft
I t i s a l t o roseibif* Hi %, f«f purposes Of solitary
^ llM Oaited i s t l e m w i l l via:- to
eontrola 0T#r UMtaetS? it» eaeagr e0^i
l a fe#r#f©r# arit#» coae^raimf tiei aeet effootlve
It »e«^s»lli^ thia e%|##ttvt« flie eefflplexily of
i t "h# MMlt




3 . Vh»»t ehoal-i te# ^awriosa pulley tnw#.rt the e.equi~
m by ^rsmmg af o^-n*r*«hin ^«^ MfttBti! If

y substantial o*m*r8hii> «M: control lat*r«tt£ la eat*r
prls«* of aeeitpltd countries* la §»e i i i t i eeati*Ql has
**4itireA fe| «xel}*&gft of stock i s d^man firms Mr
controll1*3 lufctrett In flf*l in 3eeuol«a Itrrltorlt**
tuth eaa&ltlant It It tef n^ m m e^rl^la ttet th«
m

q
t
t
i
hl
f
fh
In
ti
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f • Xftffft nt«ib®r of

4 for

all

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of work iaa& fe#«E 45on®
^
.g*it«l#f on HffiMNMit «ap«ela of
but mnmh rmtain* to b t ioa«» vI f i s e l « a r thttt
bs iarot«4 t o vh t hut iiffppmied
of fs&riieiil^f l i i l l M i i tariff

by ftMWM aafelaafel* In m^ulrim
owa*»rat»lo
#f f o r t l ^ n pjfBpiylltaj «.i w t l l M t o tfe*
of *oeh —aty»l» Ov»r and A l f f tte»« e«atr&l p




fht wnii i a prwfr*«» i n

of

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or

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§t&i;rl&§« f&la **tvl8i a he* h®4 txpspltaet irith tbla
l
In tha ilaJtad Stfttfta M i in Latla
laaitaa of tha <!ys®ii^s of i
In ©eew^l^a «$tfali*l#s of Fupopa «r# aiiatp
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with d
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f
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of faamnajli Hasiitea« i l i s t af tfea work lo a>a
fey tltfift# a f t a e l t s aaf • # faajal la t h *
atmitaa aho 14 h*!^ l a »mt*-»r the ^
p
Imin®trial
p r a $ « r t i a s do the flarajam #wa O F a^HitPal fat
oca«'•• 1 «•€ eo'tmtirlaa t
im

p

p

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by a WMalHtr of afaactla*, laeludlnf tha ttajiiylaaat af
t l e t , sfe« B#p*,rtigiit af t a w i P t i j tha Sfft«# aJ* s
S5 tfet DlVlfion Of r#3S5®l€ StMl#« Of
mt
f
p
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la @oll«bor«tt v i t i i fist aAaMaiItia>a i n «n
to waway ti»« ajaaatigm aJait 1® tiw
at*ta af awam aililp «.«4 or^^nlaiitloa) af I M a a t i f in
rti ajfgtit paaJI
f fm4 hov—rif «t
for t:mri?a##s #f oeeypntl.-n ®mi future
:Sp#mial yraliiaaia painting %o list eoatpol of &
-lu^umlrj la tha iaf^ptata of

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to fsntllJ!t*is# tht Sp#0lsl 6oa»itta# vtiH ^ue&
tha afmpyiBf fare#^ tafi §atpaXajaa€# I t
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fJafUFwaawtt tha S-5ifapaaiafit**la^lmilaj «it4 tha
l t a ( l a — t i l a t ©n M t « af itt
la aat f o r t l i



j I t a i af jRvtiiebia t t o t l a a

or sfj
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