Thus, we in the free world are moving steadily toward unity and cooperation, in the teeth of that old Bolshevik prophecy, and at the very time when extraordinary rumbles of discord can be heard across the Iron Curtain.  It is not free societies which bear within them the seeds of inevitable disunity.

X. OUR BALANCE OF PAYMENTS

On one special problem, of great concern to our friends, and to us, I am proud to give the Congress an encouraging report.  Our efforts to safeguard the dollar are progressing.  In the 11 months preceding last February 1, we suffered a net loss of nearly $2 billion in gold.  In the 11 months that followed, the loss was just over half a billion dollars.  And our deficit in our basic transactions with the rest of the world—­trade, defense, foreign aid, and capital, excluding volatile short-term flows—­has been reduced from $2 billion for 1960 to about one-third that amount for 1961.  Speculative fever against the dollar is ending—­and confidence in the dollar has been restored.

We did not—­and could not—­achieve these gains through import restrictions, troop withdrawals, exchange controls, dollar devaluation or choking off domestic recovery.  We acted not in panic but in perspective.  But the problem is not yet solved.  Persistently large deficits would endanger our economic growth and our military and defense commitments abroad.  Our goal must be a reasonable equilibrium in our balance of payments.  With the cooperation of the Congress, business, labor, and our major allies, that goal can be reached.

We shall continue to attract foreign tourists and investments to our shores, to seek increased military purchases here by our allies, to maximize foreign aid procurement from American firms, to urge increased aid from other fortunate nations to the less fortunate, to seek tax laws which do not favor investment in other industrialized nations or tax havens, and to urge coordination of allied fiscal and monetary policies so as to discourage large and disturbing capital movements.

TRADE

Above all, if we are to pay for our commitments abroad, we must expand our exports.  Our businessmen must be export conscious and export competitive.  Our tax policies must spur modernization of our plants—­our wage and price gains must be consistent with productivity to hold the line on prices—­our export credit and promotion campaigns for American industries must continue to expand.

But the greatest challenge of all is posed by the growth of the European Common Market.  Assuming the accession of the United Kingdom, there will arise across the Atlantic a trading partner behind a single external tariff similar to ours with an economy which nearly equals our own.  Will we in this country adapt our thinking to these new prospects and patterns—­or will we wait until events have passed us by?