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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 ??« \ | - ^^-M- 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 mm ©f pQftlllblft toil—ti to i lift in to fuel!!Int# In ti<m of Ififff of t a to g to la # la of to be ta rtst^rt loeid Iit4 lftto » t in It® of ia . Xa will rtet in of fttlsul£ti9f aaMKUUfea&ats ln%& again any b# #s.p#elti to ttit this duration of viHi f g of i l t »ff#«t (Map af •ill 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<lant It It tef n^ m m e^rl^la ttet th« m q t t i hl f fh In ti ownership 0f t^rep^rl^ 1m f • Xftffft nt«ib®r of 4 for all wpon tilt t ful <iad ir^enl l a pf n aeeiarl^t ttrrlfcory «»vi, If I_iL_ 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 ( ^ p WK or of uroptrtjr my ba feaiidlad 1® • «a&4«©fc trhla-"> af Foreign F«a<s« c-mtrol »f the NpftMiiil af §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 tt wait of tta ^iTlal • of MUttoal ttu-Hm af g with d f p#»stration In t&mm *r^ balftg aloAla4 % f iaJLI af tii« ftapntfjaial of CaJamaraa *»n<s 13M 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 y Is a^lliaf i t ^ i t i la Its 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 H 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 ! , It furtiiep ft« Ifea I t is h-;>^€*t l a fcha saap futitra I * aata&ilali l l a l a a i tins C i v i l hff&ir® Qmmm& af t n * t«§« ip^f la to fsntllJ!t*is# tht Sp#0lsl 6oa»itta# vtiH ^ue& tha afmpyiBf fare#^ tafi §atpaXajaa€# I t that thrvvgli tha aa»i»tajwwi of #ur frtaaay in nptlWNii Uifarajatloii w i l t %# atfte&saji iv^s th« 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 of F-ortlyi Control In tfc* Llb*$rat*d Mr-nn% f# 6*ftt*4I*l ftfttiittl la tfcf Hfrfat f 1ft%M of fey f In ( i f tag Cosrpftsiitfi atsieh l!*^* Trmn«fitrrfi th«lr S#»ta Fro® O F | IttiK iK of Mip*MMHMi®a l^y 1 l l , r if ritain sn5 m®. 4 to d«9p«teh aa« 7860 of F^Maff oa g i t Aet# of p by 1 B 23, I i 4 5 f ( ^ g ! f l c t l o n froa & H ? no. no. 7H^0, taaAon, fpbrmry ^3, of taMNNMMtal i f 11. 11. $r*jtd Ihteby of tamifciwg* t p {Eaela*art a*. 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