Controlling the Controls

One of the least enviable jobs in Washington this winter is held by the youngest member of President Johnson's cabinet: Commerce Secretary Alexander Buel Trowbridge, 37. On him falls the burden of enforcing the first mandatory controls on private investment abroad, restrictions that constitute the largest element of Johnson's program to cut the U.S. balance of payments deficit by $3 billion this year.

It is especially awkward for Trowbridge because for months he has been assuring worried businessmen that no harsh steps would be necessary. Last week, as Trowbridge started to recruit a staff of 200 experts for his infant Office of Foreign Direct Investment, all kinds of problems popped up. Telephone inquiries by the hundreds deluged his skeletal staff, which was handicapped by the lack not only of the inevitable official forms but also of the prestigious business executive that the Secretary seeks to take charge of OFDI.

Responding to businessmen's complaints that some of the new rules seemed unduly onerous, OFDI aides sent out word that U.S. corporations will not run afoul of the investment curbs by guaranteeing the debts of their foreign subsidiaries. Only by such underwriting can many a subsidiary borrow abroad--as the Administration still allows--on reasonable terms. Some moviemakers, pointing out that 54% of industry revenues last year came from abroad, hoped for exemption from capital controls to enable them to continue filming overseas. And the petroleum industry demanded a ruling that money spent on oil-well drilling is a "current transaction" and thus automatically exempt (like temporary financing of exports) from the stern program.

Rising Role. In his formidable task of trying to persuade businessmen to comply willingly with controls that many resent, "Sandy" Trowbridge will need all of his considerable charm. Athletically trim (6 ft. 2 in., 210 Ibs.) and handsome as a cinema star, New Jersey-born Trowbridge graduated cum laude from Princeton ('51), won a Bronze Star as a Marine second lieutenant in Korea. A onetime assistant to Franklin D. Roosevelt Jr. (then a Congressman and later Commerce Under Secretary), Trowbridge spent eleven years in the oil industry, mostly in Cuba, El Salvador, the Philippines and Panama. He was president and division manager of Esso Standard Oil Co. of Puerto Rico when the Administration tapped him as Assistant Secretary of Commerce about three years ago.

Impressed with his poise and energy, Lyndon Johnson promoted him to Acting Secretary a year ago when John Connor quit after two frustrating years of steadily diminishing influence over U.S. economic policy. Though the post looked like a backwater, Trowbridge worked skillfully to bolster sagging department morale, pleased the White House with his loyalty in promoting Administration policies and his ability to keep his mouth shut about Commerce's many vacancies in top jobs. His reward was not only appointment last May as full-fledged Secretary--youngest in the department's history--but also a rising role in such Administration efforts as attracting business interest in slum problems, trying to end the long copper strike (which has caused an increase in imports of the metal), patching up L.B.J.'s tattered ties with big business.

A Chill Abroad. "Under the new program," maintains Trowbridge, "everyone is sharing the burden--tourism, Government and trade." Outside of Administration circles, that was a lonely view last week. G.O.P. Presidential Hopeful George Romney denounced the balance of payments plan as a "major backward move" from free trade, and insisted that Johnson's proposed restrictions on travel "would create a 'Berlin Wall' separating U.S. citizens from the rest of the Atlantic Community." Despite the Administration's globe-hopping efforts, the reaction from abroad turned almost as chilly.

Italy and Spain argued for relief from restraints on tourism, which Katzenbach said might take the form of a head tax, increased passport fees or a tax based on the number of days spent abroad. While France demanded that the U.S. hold formal talks with its trading partners before imposing restrictive measures. Finance Minister Michel Debre hinted at reprisals if U.S. companies are forced to repatriate their profits rather than reinvest them in France.

Apart from showing a willingness to buy more U.S. Government bonds, West Germany balked at U.S. pressure for more help in defraying the cost of stationing troops in Europe. Japan pleaded difficulties with its own balance of payments deficit in refusing to agree to any specific new steps to bolster the dollar. Officials in both London and Tokyo expressed alarm over the possibility that the Administration may ask Congress to enact some form of border taxes to offset those imposed by Common Market countries. Clearly, Johnson's unexpectedly drastic blow at the U.S. payments deficit had strained the intricate fabric of international arrangements for world trade. It will take cool heads and delicate negotiations to avoid some serious rips.

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