first year of the 5-year program. We anticipate that the Philippines will reach most of the first-year target goal it has outlined for economic growth, increased investment and savings, improved agricultural output, and its other goals. It was over a century ago that the American naval explorer, Charles Wilkes, first extolled the ideal situation of the port of Manila. Today we believe that Manila stands on the threshold of becoming the trading center of one of the great industrial areas of the Far East.

It is essential to remember that this 5-year program is the harbinger of an important economic transformation. This was borne out in the speech of President Macapagal at the opening of the 19th ECAFE [Economic Commission for Asia and the Far East] conference in Manila this spring,15 when he exposed the myth that the God-given specialty of Asian countries like the Philippines is the production of rice, sugar, copra, lumber, rubber, coffee, and tea. The President stressed that industrialization alone is the hope for advancement of economic development for the Philippines.

Unfortunately this increased industrial production has also brought increased demands for protection for the new industries. Our mutual trade relations have suffered, and we have pointed this out to the Philippine authorities. While we understand the need of infant industries for protection, we fear that steep increases may not only mar the existing trade relationships but also put off the day when these new industries will be able to stand on their own.

As I have already noted, the Laurel-Langley trade agreement will expire in 1974 and it is time for us to start thinking about a successor arrangement. We realize the importance of the existing agreement to both countries, and we are anxious to take the necessary steps which will safeguard mutual interests. In the modern commercial world this type of preferential tariff arrangement is becoming increasingly rare. It was drawn up for the purpose of giving the two countries a transitional period during which they could reduce their usual economic interdependence. It has always been the objective of both countries to move toward a more normal economic relationship, and this goal is being achieved by the gradual phasing out of the preferential tariffs and by the gradual reduction of the duty-free quotas. These arrangements have still 11 years to go, but it is not too early to start thinking of new arrangements which will be mutually satisfactory. As a basis, we shall look to the treaties of friendship, commerce, and navigation which have been negotiated recently with other Asian countries. We shall count on your advice and support in preparing for these negotiations.

16

We are also getting ready to implement the Trade Expansion Act,1 which has the objective of an even more open multilateral trading system. This month Governor Herter [Christian A. Herter, the President's Special Representative for Trade Negotiations] and his assistants have been meeting in Geneva with the ministers of the

15 Mar. 5-18, 1963.

16 Text in American Foreign Policy: Current Documents, 1962, pp. 1383-1396.

other GATT member countries to work out the ground rules for the “Kennedy roun 1" of international tarif regulations" This Kennedy round will open next spring, and there are already 50 GATT member nations who will participate in the discussions and enjoy the full benefits of the negotiations. It is for this reason that we hope the Philippines will become a member of the General Agree ment on Tariffs and Trade. We feel certain that the Philippines has much to gain from such membership and will make a valuable contribution toward the creation of a new global trading policy.

Before leaving the field of trade it is necessary to note the sharp drop in our exports to the Philippines during the past year. U.S. exports fell by $64 million, and our share of the Philippines import market went below 50 percent. As you know, the United States has a balance-of-payments problem.18 and every decrease in exports counts. We recognize such causal factors as devaluation, shrinking preferences, higher tariffs, and increasing competition from other Asian countries, but nevertheless we hope to maintain a high level of trade. In view of the $300 million growth that is projected for the Philippines over the next 5 years, I am certain that your companies will rise to the occasion and make the necessary sales efforts.

During the past several months there have been several problems of interpretation of the Laurel-Langley agreement which have arisen, but I am confident that they will be resolved soon. In this connection I should mention that the Embassy has worked closely with the Philippine authorities in establishing "treaty trader" and "treaty investor" visa status for American businessmen and technicians. We are also planning to enter into negotiations this fall to put an end to double taxation and thus further promote private investment. The suggestions of members of this distinguished group have always been useful when such legal problems arise.

As the 5-year program goes forward and new economic strength is developed, we can expect the pace in our special economic relationship to quicken. We must be prepared to adjust to the increased importance of other nations as investors and trading partners of the Philippines. American business has proven its great strength in its almost infinite adaptability to changing technology and changing circum

stances.

I have every confidence that, with all the opportunities and challenges that will arise in the years ahead, the Philippine-American economic partnership will grow and flourish on the new foundations we are now preparing. And within that larger sphere of international relations, in the vital interests which are shared by the United States and the Philippines, we shall persevere together in extending the frontiers of freedom everywhere.

"See post, docs. XI-8-10.

See post, docs. XI-2-5.

"See TIAS 3349; 6 UST 3030; 238 UNTS 109.

IX-89

UNITED STATES SUPPORT OF THE ESTABLISHMENT OF A $20 MILLION TO $30 MILLION EDUCATIONAL FUND AS PART OF THE SETTLEMENT OF PHILIPPINE WAR DAMAGE CLAIMS: Statement Issued by the Department of State, July 31, 1963 20

The Department of State on July 31 welcomed the passage by the House of Representatives of the Fulbright-Hays amendment to the Philippine War Damage Act of 1962.21 The amendment provided equitable settlement of all outstanding claims based on a $25,000 limitation on any individual claim. This ceiling would permit 99.6 percent of the 86,000 claimants to be paid in full. Balances of claims over $25,000, which previously would have gone to 287 large claimants, would be paid into a special account to be used for educational programs in the Philippines and educational exchange as agreed upon between the President of the Philippines and the President of the United States.

It is estimated that this special educational fund would amount to approximately $20 million to $30 million. Senator Fulbright made clear in his comments to the Senate describing the amendment that the educational programs it could cover could be broadly conceived. As examples, Senator Fulbright noted the fund could be used in the Philippines for school construction; assistance to teachers salaries; providing training, salaries, and equipment of community development specialists, to provide support for the educational aspects of the youth movement; vocational training and agricultural extension work.

20 Department of State press release No. 400 (text as printed in the Department of State Bulletin, Aug. 19, 1963, p. 301).

IX-90

AUTHORIZATION OF PAYMENT OF CERTAIN PHILIPPINE WAR DAMAGE CLAIMS: Public Law 88-94, Approved August 12, 1963 (Excerpts) 22

AN ACT

To amend the Foreign Service Buildings Act, 1928, to authorize additional appropriations, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That

Sec. 3. (a) The first section of the Act entitled "An Act to authorize the payment of the balance of awards for war damage compensation made by the Philippine War Damage Commission under the terms of the Philippine Rehabilitation Act of April 30, 1946, and to authorize the appropriation of $73,000,000 for that purpose", approved August 30, 1962, (50 App. U.S.C. 1751-1785 note: Public Law 87616)," is amended by inserting before the period at the end of the second sentence thereof a comma and the following: "or $25,000, whichever is the lesser".

(b) Section 6 of such Act is amended by inserting immediately before the first sentence therein the letter "(a)"; by striking the word "section" in the last two sentences therein and inserting the word "subsection"; and by adding the following new subsection:

"(b) Notwithstanding the provisions of subsection (a), no sum shall be paid by any claimant directly or indirectly to, or received or accepted by, any former commissioner or employee of the Philippine War Damage Commission or their assigns, or any person employed by or associated with any such former commissioner or employee in connection with the preparation, filing, allowance, or collection of any claim under this Act, as compensation on account of services rendered or as reimbursement on account of expenses incurred in connection with any application filed under this Act. Whoever, subject to the jurisdiction of the United States, makes a payment in violation of the provisions of this subsection shall be fined not more than $5,000 or imprisoned for not more than one year or both. Whoever, subject to the jurisdiction of the United States, receives or accepts a payment in violation of this subsection, shall be fined not more than $5,000 or

"H.R. 5207, 88th Cong.; 77 Stat. 121. See Foreign Service Buildings Act Amendments, 1963: Hearings Before a Subcommittee of the Committee on Foreign Affairs, U.S. House of Representatives, 88th Congress, 1st Session, on Draft Legislation To Amend the Foreign Service Buildings Act of 1926, To Authorize Additional Appropriations, and for Other Purposes, February 27-March 12, 1963; H. Rept. 194, 88th Cong., Apr. 4, 1963; Foreign Service Buildings Act Amendments of 1963: Hearing Before the Committee on Foreign Relations, U.S. Senate, 88th Congress, 1st Session, on H.R. 5207, May 7, 1963; S. Rept. 178, 88th Cong., May 15, 1963; H. Rept. 497, 88th Cong., July 1, 1963 (the conference report). 260 Stat. 128; 59 U.S.C. app. § 1751 note.

24 Text in American Foreign Policy: Current Documents, 1962, pp. 1089–1091.

imprisoned for not more than five years or both. Whoever, subject to the jurisdiction of the United States, receives or accepts a payment in violation of this subsection, shall forfeit to the Government of the United States a sum equal to three times the amount of such payment, and the Commission shall take action to recover such sum from the person receiving the payment."

(c) Section 5(a) of such Act is amended by striking out the next to the last sentence thereof and inserting in lieu thereof the following: "Any balance of the appropriation made pursuant to section 8 remaining after the payments authorized by the first section of this Act have been made and after any administrative expenses incurred by the Commission in connection with such payments have been paid shall be paid into a special fund in the United States Treasury to be used for the purpose of furthering educational exchange and other educational programs to the mutual advantage of the Republic of the Philippines and the United States in such manner as the Presidents of those two Republics shall from time to time determine. There shall be withheld from the payment authorized by the preceding sentence a sum equal to the difference between $73,000,000 (less administrative expenses) and the total amount which would have been paid to the claimants under the provisions of Public Law 87-616, which sum shall revert to the general funds in the United States Treasury. The acceptance by any claimant of a payment under this Act shall be considered to be in full satisfaction and final settlement of all claims of such claimant arising out of awards for war damage compensation made by the Philippine War Damage Commission."

WEST NEW GUINEA (WEST IRIAN)

IX-91

IMPLEMENTATION OF THE NETHERLANDS-INDONESIAN AGREEMENT CONCERNING WEST NEW GUINEA (WEST IRIAN): Annual Report of the U.N. Secretary-General (Thant) on the Work of the Organization During the Period June 16, 1962June 15, 1963, Submitted July 15, 1963 (Excerpt) 25

CONCLUSION

In carrying out the task entrusted to him [administration of the United Nations Temporary Executive Authority (UNTEA) in West New Guinea (West Irian)], the Secretary-General was guided solely by the terms of the Agreement of 15 August 1962. The transfer of the administration from the Netherlands to UNTEA" and later from the UNTEA to Indonesia" was achieved peacefully and without incident. The population was gradually prepared for the changes brought about under the Agreement. Disruption of essential

25 U.N. doc. A/5501, p. 40.

20 Text in American Foreign Policy: Current Documents, 1962, pp. 1121-1127. "Oct. 1, 1962. 28 May 1, 1963.