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Foreign Relations, 1969-1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969-1972

Released by the Office of the Historian
Docs 127-147

127. Editorial Note

On February 25, 1970, Henry Kissinger sent a memorandum to Secretary of State Rogers, Secretary of the Treasury Kennedy, and AID Administrator Hannah requesting a study of worldwide untying of aid. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID, Volume II 1/70-8/10/70) The genesis of Kissinger's memorandum was a January 29 memorandum from Acting AID Administrator Poats to Kissinger proposing that a January 16 memorandum from Kissinger mandating a study of untying program loans to Indonesia be broadened to include untying for all counties. In his February 25 memorandum Kissinger instructed that the study should be regarded as a follow-on to the President's October 31 Latin American speech, which he quoted: "I am ordering that all other onerous conditions and restrictions on U.S. assistance loans be reviewed, with the objective or modifying or eliminating them." Kissinger also noted that the study should consider the recommendations of the Peterson Task Force (see Document 128) and a preliminary report should be submitted by March 20. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID, Volume II 1/70-8/10/70)

On April 15 Elliot Richardson, in his capacity as Chairman of the NSC Under Secretaries Committee, sent a memorandum to President Nixon informing him that the untying issue had been summarized in his March 25 memorandum on foreign assistance (Document 131), but that he was now providing a more detailed staff study of this issue. (National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 45) This April 15 untying study reviewed the emergence of tying practices between 1960 and 1969, which had arisen partly in recognition of balance-of-payments difficulties and partly to bolster lagging Congressional support for the program. The report suggested that if the balance of payments could be liberalized, other restrictions such as the foreign investment program could also be considered. The study looked at complete untying on a free world basis, in concert with other donor countries, and examined several options for untying with respect to procurement in developing countries only. With respect to the latter, the study estimated the balance-of-payments loss would be from $50 million to $125 million for the four options for which statistical estimates were made. (Ibid.)

 

128. Memorandum From President Nixon/1/

Washington, March 5, 1970.

/1/Source: National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 45. Confidential. Copies were sent to the Director of Central Intelligence, the Chairman of the Joint Chiefs of Staff, and the Chairman of the Board of Governors of the Federal Reserve System.

MEMORANDUM FOR
The Secretary of State
The Secretary of Treasury
The Secretary of Defense
The Secretary of Agriculture
The Secretary of Commerce
The Director, Bureau of the Budget
The Chairman, Council of Economic Advisers
The Administrator, Agency for International Development
The President, Export-Import Bank
The Special Representative for Trade Negotiations

SUBJECT
Review of U.S. Foreign Assistance Program

I received today the Report of my Task Force on International Development chaired by Rudolph Peterson, and hereby transmit a copy of it to you./2/ The Report will be released publicly on Sunday./3/

/2/U.S. Foreign Assistance in the 1970s: A New Approach--Report to the President From the Task Force on International Development. See also Department of State Bulletin, April 6, 1970, pp. 447-467, for text of the report, dated March 4, 1970.

/3/March 8. On March 3 Under Secretary of State Richardson had sent a memorandum to Kissinger requesting a short delay in the public release of the Peterson Report so that AID Administrator Hannah would have time to review it and inform his staff and overseas missions of its contents. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID Task Forces on AID) Telegram 33825 to all posts, March 6, summarized the report's main conclusions. (National Archives, RG 59, Central Files 1970-73, AID (US) 1) A Presidential statement announcing release of the report to the public was issued in Key Biscayne on Sunday, March 8. (Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 253-254)

I regard the Peterson Report as an extremely creative and exciting document, and urge you to read it. The Report provides a sound foundation on which to base a new U.S. foreign assistance program, which I expect to be one of our major foreign policy initiatives in the years ahead. I am particularly intrigued by the Report's proposals for clear separation of the different aspects of our assistance program, new institutions to implement these different aspects most effectively, and a coordinating mechanism to fuse all of our efforts which relate to international development.

I have directed the Under Secretaries Committee to staff the Peterson Report./4/ The Committee should prepare a paper on the issues raised in the Report, and elsewhere, concerning the future of the U.S. foreign assistance program:

/4/See Documents 129 and 130.

1. Our overall approach to foreign assistance in the 1970s

a. The objectives of our program

b. Its relationship to overall U.S. foreign policy

c. The mix between multilateral and bilateral channels for assistance

d. The basis for determining our levels of foreign assistance, including various proposals for specific targets

e. Staffing

2. Specific multilateral programs

a. U.S. contributions to the International Development Association, Inter-American Development Bank, and International Finance Corporation

b. Multilateral untying of bilateral assistance

c. Debt rescheduling policy

d. International insurance and guarantees of private investment

e. Family planning programs

3. The bilateral U.S. program

a. Separation of programs to pursue separate objectives

b. Proposed U.S. International Development Bank, including proposals for flexible lending terms and guarantee authority

c. Proposed U.S. International Development Institute, including its relationship to the (Fascell) Inter-American Social Development Institute

d. Proposed combination of military and supporting assistance and related programs

e. Proposed U.S. International Development Council

f. Increased administrative flexibility for all programs

g. Unilateral untying

h. Hickenlooper Amendment

i. Balance of payments controls on investment in LDCs

j. Trade issues, including generalized preferences proposal

The paper should be submitted to me by March 25, prior to consideration of the subject by the National Security Council./5/

/5/See Document 131. The NSC meeting, originally scheduled for April 1, was postponed several times and was never held.

I plan to announce my proposals for reform of our assistance program in my response to the Javits Amendment to the Foreign Assistance Act of 1967, which requires me to reappraise the present program and propose changes for the future. Taking into account the discussion which will follow my announcement, particularly including close consultations with the Congress, I plan to submit legislation to implement my new proposals in January 1971. I would hope that our new program could become effective for FY 1972.

The Peterson Task Force, after its intensive examination of the role of the United States in providing assistance to the developing countries, concluded that "The United States has a profound national interest in cooperating with developing countries in their efforts to improve conditions of life in their society." I agree wholeheartedly, and intend for this report to provide the basis for a new and viable U.S. assistance program for the future, to enable us to effectively pursue that profound national interest.

Richard Nixon

 

129. Editorial Note

The Peterson Task Force Report (see Document 128) became the basis of the Nixon administration's new foreign assistance strategy. The Peterson Report, not the study mandated in NSSM 45 (Document 111) fulfilled the Javits Amendment reporting requirement to Congress (see Document 1). At the National Security Council, Fred Bergsten had the lead in staffing the report. Documentation is in the National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID Task Forces on AID, Volume II 1/70-8/10/70. Much of the documentation relating to the actual drafting of the September 15 Report to Congress is ibid., Box 194, AID, Volume III 8/11/70-9/10/70.

On January 15, 1970, Bergsten had sent a memorandum to Kissinger informing him of how the Peterson Task Force was coming out on the issues. Bergsten noted that an NSC meeting would be required in late March to get Presidential decisions on the basic aspects of the new foreign assistance program, and thought the Javits Amendment report to Congress might be delayed into April. That same day Peter Vaky sent a memorandum to Kissinger noting that Bergsten's scenario and the prospective Task Force Report took no account of the Rockefeller Report and the need "to do things now for Latin America." (Ibid., AID Task Forces on AID)

The NSC meeting on aid was scheduled for April 1, postponed several times, and finally scheduled for April 27. A briefing book assembled for the President's use at this meeting included, among other things, a detailed "Issues for Decision" paper prepared by the NSC Staff for the President. (National Security Council, Secretariat, Box 86, 4/27/70 NSC Meeting--US Assistance Program, (Peterson Report)) On April 27 Bergsten sent Kissinger a memorandum informing him that the NSC meeting had been canceled. He also set out a schema for meeting the Javits Amendment reporting requirement and Congressional hearings on the President's aid proposals, which had been set for May 13 but postponed. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID, Volume II 1/70-8/10/70) During an August 25, 1997, interview with the editor of this volume, Bergsten recalled that the feeling was that the invasion of Cambodia in late April 1970 had so poisoned the foreign affairs climate in Congress that it would be fruitless to send forward foreign assistance reform legislation at that time.

In a May 12 memorandum, Bergsten informed Kissinger that he had not sent Richardson a copy of the draft foreign assistance message because it was not complete and assumed several Presidential decisions contrary to the State Department's recommendations. Kissinger approved Bergsten's not providing the draft at that time. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, AID, Volume II 1/70-8/10/70)

On July 23 Bergsten sent a memorandum to Kissinger informing him that AID Administrator Hannah sought a copy of the draft aid message in order to know the direction of the President's thinking. Bergsten reported Hannah's comments that the State Department had also "grumbled" about the delay. Bergsten thought it would be a mistake to circulate the draft before the basic policy decisions had been made and, referring to Kissinger's instruction on his May 12 memorandum, indicated that he would not circulate the draft foreign assistance message until the decisions were made. (Ibid.)

 

130. Memorandum From C. Fred Bergsten of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, March 19, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID Task Forces on AID. Confidential. Attached to a March 20 memorandum from Bergsten to Kissinger with Bergsten's additional recommendations for the Under Secretaries Committee meeting that day.

SUBJECT
Staffing of Peterson Proposals on Aid: Under Secretaries Committee Meeting on March 20 at 3:00 p.m.

The Under Secretaries Committee will have two papers before it at the March 20 meeting:/2/

/2/See Document 131.

--A draft memorandum for the President which treats the fundamental issues underlying the entire approach proposed by the Peterson Report. This will be the focus of the meeting.

--A long issues paper, detailing the options on the fifty-two specific issues raised by Peterson and others, responding to the President's directive which transmitted the Peterson Report to the agencies./3/ We have tried to clear away all comments on it separately, but a few parochial interests may come up at the USC because this is some agencies' only shot at the process.

/3/Document 128.

Present Situation

Before I outline the basic issues, you should have the following background:

--All agencies have been fully on board the President's approach, based on Peterson's proposals, throughout the staffing process. State, AID, and Treasury have been particularly cooperative.

--Three problems may arise at the Cabinet level, however: Secretary Rogers may fight to put the new International Development Council in State instead of the White House, although he may no longer fight separation of the basic lending institutions from State; Secretary Laird may want the proposed new Office of Security Assistance, which will run all security-related programs, in Defense instead of in State; and Secretary Kennedy may resist some of the financial innovations proposed for the new U.S. Development Bank (guarantees for LDC borrowings in DC capital markets) and some of the proposals which would hurt our balance of payments (partial unilateral untying, relaxation of restrictions on private U.S. investment in LDCs).

--All agencies assume there will be an NSC meeting and the NSC paper urges that it be held. I have told no one that there is any doubt about the April 1 date, although you rejected my recommendation to firm it up. An early deadline is necessary to keep up the pressure on the agencies. More basically, failure to have an NSC meeting would cause problems because of the possibility of Cabinet-level dissent just noted and because we plan to keep open all options through the USC meeting, to preserve full flexibility for the President's decisions./4/ If the USC learned that there would be no NSC meeting, they would probably want to make recommendations instead of present options; in any event, no NSC meeting would mean that we would have to get agency positions somehow--and the three Secretaries might feel strongly enough to want to present them orally anyway.

/4/No NSC meeting on the foreign assistance program was held.

--The only other problem is that some agencies may want to delay decisions which affect them. It is true that we have set a killing pace for this exercise, but we must maintain it (a) to avoid slipping the President's message too far beyond the March 31 legislative deadline/5/ and (b) to button up most of the specifics so that the agencies cannot subsequently gut the new approach.

/5/The Javits Amendment to Section 501 of the Foreign Assistance Act of 1968 required a comprehensive review of U.S. foreign assistance programs and a report to Congress by March 31, 1970.

--The issues paper is unmanageable for the President, and we will have to staff it as we did the IA-ECOSOC memorandum. Most of the fifty-two issues must be decided now, however, so that (a) the President can make his proposals sufficiently comprehensive, and (b) we will be in a position to answer when asked about the specifics behind any proposals which he may leave general in his message. (At State's request, I circulated a purely personal draft--attached at Tab A/6/--outlining my views on what might be included in the President's message. No one has challenged its comprehensiveness, though as noted above some agencies may try to delay decisions affecting them.)

/6/Not printed; entitled "Minimum Components of Presidential Proposals in Response to Javits Amendment."

--Jim Keogh has been working on the draft of the President's statement since Monday, when I talked to him after you approved my recommendation to do so. Herb Klein's people, with whom I have also talked, are working out a publicity scenario--featuring Peterson and other members of the Task Force, on the assumption that the President's proposals will largely encompass their recommendations.

Specific Issues

The USC draft first summarizes the general conclusions of the Peterson Task Force, and recommends that the NSC endorse them:

1. The U.S. has a profound national interest in cooperating with the LDCs for development purposes.

2. We must clearly define the rationale and objectives of our assistance program.

3. We should seek an international development effort involving (a) true partnership with the LDCs, (b) greater responsibility for the international organizations, and (c) other DCs.

4. The downward trend in U.S. appropriations for development should be reversed.

5. Our increased resources should be primarily channeled through international institutions.

6. The U.S. should provide a fair share of the international resources aimed at development.

7. Our assistance program should broaden the use of private initiative.

8. Development is more than economic growth; popular participation and equitable income distribution are equally important.

9. We should continue to provide security assistance to help individual countries and move them toward greater self-reliance.

The USC draft then flags the major issues on which it recommends that the NSC focus its primary attention:

--Whether we should clearly distinguish among our security, humanitarian and development programs.

--Whether we should turn over primary responsibility to international organizations.

--How to reconcile the development focus of our residual bilateral program and the basic foreign policy objectives, which prompt us to retain a bilateral effort. (My answer here is that our bilateral program would select countries and programs--such as Latin American and agricultural development--in light of our unique national interests, but avoid political influence determining their short-run operation.)

--Whether and how to pull all of our security assistance program under one roof. (This was the weakest part of the Peterson Report and the internal staffing is not much better so far. You may wish to look particularly at the options under issue 8 on pages 25-28 of the long paper.

--Whether we should decide on annual aid levels or leave the issue open ˆ la Peterson. This relates closely to whether we should endorse the targets for assistance previously agreed and recommended by the Pearson Commission. (The President has really rejected targetry already, but State rightly notes that such rejection will cause foreign policy problems for us. It must thus be aired at the NSC although I think it can be quickly disposed of.)

--How to coordinate the separate aspects of the new development approach. (This issue is critical for the President and for us, and I analyze it separately in the next section.)

--How to relate the Peterson program to our Latin American policy. (The Peterson approach is completely global and provides nothing special for Latin America. It may thus raise questions about whether we are still serious about a "special relationship" in the Hemisphere.)

--Organizational recommendations for the new International Development Bank, International Development Institute, Overseas Private Investment Corporation (already legislated), Office of Security Affairs in State, and International Development Council. (The basic decisions on these flow from the fundamental decision on separation of rationales, and you need not bother about the details.)

Coordinating Council

There is one issue on which I particularly need your approval on the specifics of my approach, or guidance to do otherwise: how to set up the International Development Council recommended by Peterson.

The Council is a crucial part of the Peterson proposals. It would pull together, for the first time, all U.S. government programs relating to economic development. It would thereby implement a key aspect of the new approach: integration of all U.S. economic policies which affect the LDCs. The creation of a White House coordinator, to chair the Council, would also bring new stature to our over-all aid effort and provide for Presidential leadership of the program.

The President agreed, at the meeting with Peterson,/7/ that the coordinator should be located in the White House. This raises the issue of how the Council relates to the NSC, and makes the issue particularly delicate for us. And Secretary Rogers may push hard to coordinate it from State.

/7/See Document 125.

The long issues paper lists six options (pages 72-79). I strongly prefer Option 1 (page 75), as recommended by Peterson:

--the coordinator in the White House;

--chairing a Cabinet-level Council;

--not formally integrated into the NSC system.

In practice, the coordinator would be closely linked to you (I use "you" as shorthand for your position). Under the present regime, recommendations would go to the President through you--as do memoranda from other Presidential assistants, such as the Special Trade Representative and the Chairman of the Council of Economic Advisers (on international matters). Close staff cooperation would provide daily coordination and prevent conflicts from developing. In short, I see no problems if it is played properly and the people are chosen carefully. I recommend that we choose this option.

The other options all have serious flaws:

--Option 2 would have a White House coordinator chair the Council as an NSC subcommittee at the Under Secretary level, like the present USC. This would probably preclude getting a coordinator of the stature needed to both do the job effectively and portray the desired new image; by linking the Council formally to the NSC, it would also blur the disaggregation between our development and security assistance programs, which is fundamental to the new approach.

--Option 3 would have the Under Secretary of State chair an NSC Subcommittee, which would simply be the present USC discussing development. It would gain nothing, conveying precisely the political overtones for development assistance which the new approach tries to eliminate and failing to eliminate the need for Presidential reconciliation of agency difference.

--Options 4-6 would give the coordination responsibilities to the new Development Bank or State. Any of them would essentially replicate AID and the entire status quo.

Recommendations: (for points to raise or support during USC discussion)

1. That you be ready to comment on the certainty and date of an NSC meeting to consider this issue. (Our schedule still carries an April 1 date as tentative.)

2. That you strongly support the USC draft's support of the overall Peterson approach, mentioning if appropriate that the President greatly appreciates the cooperative vein in which the agencies have been carrying forward his wishes.

3. That you help blunt any effort to slow down the momentum of staffing these issues, in view of the President's commitment to announce his new assistance program comprehensively in his response to the Javits Amendment. (The Javits Amendment sets a March 31 deadline, and at best we will slip that by a couple of weeks. The Congressional people feel strongly that we should not slip more than that.)

4. Blunt any efforts to keep the detailed issues of the longer paper from being submitted at this time, because many of them are needed to round out the President's initial statement and many more are needed to provide backup for questions that will immediately be raised on issues which he treats generally in his statement.

 

131. Memorandum From the Chairman of the National Security Council Under Secretaries Committee (Richardson) to President Nixon/1/

Washington, March 25, 1970.

/1/Source: National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 45. Confidential. Attached to a March 27 memorandum from NSC Secretariat Director Jeanne Davis to the members of the NSC informing them the paper would be the basis for discussion at the NSC meeting on foreign assistance on April 8. The meeting was ultimately canceled.

SUBJECT
Foreign Aid Review--Issues for the NSC Meeting

The Peterson Task Force Report sketches a new basis for U.S. participation in the international development effort. It sets out a general goal for the United States to:

"Take up the challenge of international development in a way that adds a new dimension to U.S. foreign policy and creates a broad and hopeful vision of the world and its future. Americans, young and old, can then take renewed pride in playing a constructive world role and in meeting the obligations of global citizenship."

A reassessment of our aid policy is called for because a new national commitment must be forged if we are to protect our basic national interest and if the United States is to participate in full partnership with other nations--rich and poor. Both the public and the Congress must participate in this process. In order to create a national consensus the Task Force recommends that we define our obligations clearly and recognize the changes in the international environment which have occurred in the past decade, brought about in part by our assistance efforts.

Among the changes noted by the Task Force are:

--The security situation in the world has changed substantially and while threats to peace will continue to exist, the sharply divided world of direct confrontation which existed in the 1950's and early 1960's has given way to increasing opportunities for cooperation. Security measures and assistance programs must take this into account.

--The growing capacities in a number of developing countries to establish their own development priorities, to mobilize their investment resources and to implement efficient development programs.

--The substantial economic progress of many developing countries which now makes the ability to export as important to them as obtaining aid financing. This requires a willingness by the industrial countries to facilitate imports of manufactured goods from the developing nations. Their economic progress also requires the development of more sophisticated and mature private sectors, with adequate financial institutions. An integrated approach to the problems of aid, trade and investment is deemed essential.

--The rapid expansion of the assistance efforts of other countries so that today their combined official development assistance is equal to that of the United States.

--The growth of international development organizations, most of which we have helped to create, which now account for an increasing share of development lending and technical assistance and have gained great competence in assessing and organizing development activities.

Based on their analysis of this changed world context, the Peterson Task Force reaches certain fundamental conclusions, which the Under Secretaries Committee believes the NSC should endorse:

1. The United States has a profound national interest in cooperating with developing countries in their efforts to improve conditions of life in their societies.

2. We should clearly define the rationale and objectives of our foreign assistance programs.

3. This country should not look for specific short-term foreign policy gains from our participation in international development programs.

4. The United States should help to create an international development effort which involves true partnership with the developing countries, assigns greater responsibility to the international organizations and joins with other donor countries to provide the resources necessary to make the development effort a success.

5. The downward trend in U.S. development assistance appropriations should be reversed.

6. Additional resources should be provided, primarily in support of international lending institutions.

7. The United States should provide a fair share of resources in the international development effort.

8. The United States assistance program should broaden the use of private initiative, skills and resources, both in providing assistance and in the developing countries.

9. We should recognize that development is more than economic growth. Popular participation and equitable income distribution are as important as increases in total productive capacity.

10. We should continue to provide security assistance on a selective basis to help countries assure their own security and move them toward greater self-reliance.

The Task Force also makes a series of recommendations on detailed objectives and organization, the general thrust of which is intended:

--to demonstrate a new approach--with new institutions--adapted to current problems;

--to delineate U.S. purposes more clearly; and

--to provide a platform from which the President can initiate discussions to seek a new Congressional commitment and renewed public support.

The Under Secretaries Committee strongly recommends that the issues--described below--be thoroughly aired in the NSC to provide you with the best judgment of your Cabinet officers.

Your message to the Congress will launch consultations with the Congress, and discussions in public forums, on the course of the U.S. assistance effort in the 1970's. Effective consultation is crucial to changing Congressional attitudes before the new aid legislation is submitted in January 1971. There will be strong views in the Congress on the means suggested by the Task Force to achieve our new objectives and thus the consultation effort may fail in its greater purpose if we give too much emphasis at this stage to the details of organization. Your message should provide:

--the rationale and operating style for our assistance program, and

--the general organizational framework to carry it out.

The refinement of national objectives and the details of legislative and organizational means to achieve them should be the focus of the consultations. There will also be a need for detailed follow-up planning within the Executive branch, and we suggest that the Under Secretaries Committee be instructed to do this. An illustrative list of such matters for further study is given on page 17 of this memorandum.

Basic Issues for NSC Discussion

Separate Rationale (Issues 1-8, pages 3-17)/2/

/2/Numbers in parentheses refer to the issues and pages in the annexed NSC Issues Paper. [Footnote in the source text. The 101-page NSC Issues Paper is not printed.]

The Peterson Report distinguishes between U.S. security, development and humanitarian objectives and recommends separate institutions for pursuing each. The Task Force believes that this creates a more logical framework and thus provides a more effective basis for seeking public support.

This approach--and the new institutions implicit in it--could provide a clearer rationale for the public and the Congress in support of foreign assistance programs, an opportunity to put development assistance on a more rational multi-year funding basis, and possibly a more efficient development assistance program free of short-term policy constraints.

However, there are also some drawbacks:

--Separate organizations and legislative authority substantially reduce the present flexibility of the Executive to respond to changing foreign policy interests in particular regions and countries.

--In Southeast Asia, for example, we are moving away from security assistance toward economic assistance but we would have lost valuable flexibility if our programs are fragmented according to particular objectives.

--There is likely to be substantial opposition in Congress, particularly in the House Foreign Affairs Committee and the House Appropriations Sub-Committee. The latter will be concerned with the multiplication of aid "spigots," the former with the real possibility that bilateral development legislation cannot by itself obtain enough votes for passage.

Multilateral Responsibility (II, B, pp. 5-10 plus Issues 26-29, pp. 65-71)

The Report places great responsibility on international and regional organizations (principally IBRD/IDA and the IDB but also eventually the UNDP). While taking into account their expanded capacity and intention to expand further, the Report recognizes their present limitations to play this larger role and points out that a U.S. decision to turn over responsibilities to these organizations would spur their growth into this role. We should endorse this objective--as you already have in the case of Latin America--but recognize that:

--it may take some time for the international development institutions to seize fully the larger role envisaged for them;

--the increasing role for international organizations requires support by other major donors, and not all of them are enthusiastic;

--the United States must be prepared to play an active role--while avoiding an appearance of domination--to get the international agencies to assume these increased responsibilities;

--there may be considerable Congressional opposition to increasing substantially funds to international organizations which reduces Congressional control over purposes and expenditures.

Bilateral Program and Foreign Policy Interests (Issues 3-4, pp. 7-9)

The Report suggests that the bilateral program should support international agency programs and, within that framework, focus on countries in which the United States has special interests. The Report thus recognizes that while economic development criteria must be predominant in our bilateral assistance program, it must also reflect certain U.S. assistance priorities. The Report recommends, however, that our bilateral program should take its lead from the multilateral institutions and programs in arriving at economic assessments.

There may be practical limits to this approach, for example:

--while development loans should be made on economic criteria, the U.S. may wish to apply a geographic formula for the distribution of aid resources which may not be reflected in the plans of international organizations;

--it may not be realistic in terms of foreign policy objectives and Congressional interests to subordinate our analytical and decision making, process to that of international organizations;

--bilateral programs serving specific national objectives of other donors will almost surely continue, and we may wish to recognize our own interests;

--many LDC's have argued that their interests are best served by having a balanced system of international and bilateral aid programs, because they fear an excessively centralized system. This will require expanding the present role and resources of the international agencies while retaining significant national programs.

Economic and Financial Policy (Issue 24, pp. 49-58)

The Peterson Report by its very nature gives particular emphasis to development issues within overall economic and financial policy. However, consideration of the Report's proposals for an integrated approach to economic development policy requires consideration of the interaction of development policy with our international economic policies generally. There are economic trade-offs and economic costs associated with the pursuit of various courses of action that must be appraised.

Furthermore, the ways in which we help developing countries--in subsidizing housing, providing incentives for investments, financing health and education, etc.--can have an impact on desirable or undesirable proposals in similar fields domestically in the United States. Particular development policies involving local procurement preferences, preferential trade and investment privileges may conflict with our broader multilateral objectives of non-discriminatory freer trade and investment. Our tax policies, investment guidelines, and balance of payments policies could follow one set of rules if our objectives were solely or even principally developmental. There may be practical limits, however, to the extent to which complete focus can be applied to development programs in contrast to the general international economic programs and on fusing the coordination mechanism for emphasizing the former.

Security Programs (Issues 6-8, pp. 13-17)

The Report recognizes the essential part that security assistance programs have played in U.S. foreign policy over the last two decades. To strengthen these programs, it proposes to link them in one piece of legislation--an International Security Cooperation Act. The Task Force would have the Department of State continue to set policy for all security assistance programs and to administer Supporting Assistance, Public Safety and the Contingency Fund; the Defense Department would continue to administer Military Assistance and Sales./3/

/3/The Export-Import Bank would also wish consideration to be given to having DOD assume full responsibility for financing the sale of military items to the developed as well as the developing countries. [Footnote in the source text.]

The Report supports the need for the kind of comprehensive country program analysis being developed within the NSC system. It also stresses the need for each nation to decide for itself what it is prepared to do and recommends that the United States should support these efforts in such a way as to enhance self-reliance and promote self-sufficiency.

The separation of development and security-related programs has much to recommend it. However:

--Once security assistance is considered as a separate category, the need to obtain adequate funds for the programs becomes a major consideration. The Task Force did not recommend specific security assistance levels. If the security programs are not to be considered a temporary expedient by the Congress, there must be a coherent plan and justification based on the Administration's new approach to indigenous efforts to become self-reliant. Security assistance should not simply be a combination of existing programs with a heavy focus on Southeast Asia.

--Inclusion of $2.2 billion Vietnam and Laos military assistance now funded by Defense would, in FY-1969, have resulted in an inflated security program of $3.4 billion worldwide and a total foreign assistance program of $6.3 billion. To the extent the Congress looks at these programs in their totality--as the appropriations committees are likely to do--there would be considerable temptation to cut the development program sharply in order to reduce the overall total.

--A basic issue is the advisability of linking the various security assistance activities in a single piece of legislation. There are also advantages and disadvantages in dividing the program in two pieces of legislation--one for supporting assistance, public safety and the contingency fund, the other for military assistance and foreign military sales. This is discussed on pp. 11-17 of the annexed issues paper.

Aid Levels (Issue 2, p. 4; Issue 3, p. 7; Issues 26-28, pp. 65-68)

The Report is silent on annual aid levels. We believe this tactically wise at this time. However, the Peterson Group does conclude unequivocally that the downward trend in our contributions of development assistance should be reversed, principally through contributions to international financial institutions. This is important for establishing the credibility of the U.S. commitment to development, both toward LDCs and other donors, and in such contexts as the Second UN Development Decade, UNCTAD, etc.

The major component is the $1 billion replenishment of IDA, which you have endorsed. Given opposition to this scale of replenishment from some key European donors and Japan, a strong U.S. effort will be needed to get agreement on a replenishment of this general magnitude. If we cannot reach the international flows suggested by the Task Force and if we do indeed wish "to reverse the downward trend" of our efforts, we may have to consider whether to support temporarily higher bilateral levels to accomplish our overall objective.

Targets (Issue 3, pp. 7-8)

The Report does not endorse any aid targets. We believe that the Peterson approach, with its emphasis on need and LDC performance, is the only feasible one with the Congress. Nonetheless, our failure to endorse a target would raise serious political problems in the U.N. and may be used as a justification for less support by other donors. We should accordingly consider whether it is feasible for us to support the principle of a global aid target while at the same time indicating that we could not subscribe to any specific date for attaining it.

Alternatively, we may wish to accept the implicit Peterson approach and emphasize our intent to seek higher levels but not subscribe to unattainable targets. This would be pleasing domestically to some in Congress and demonstrate a realistic policy to other countries that we are moving away from promises we cannot fill.

Coordination (Issue 4, p. 9; Issue 13, p. 26; Issue 24, pp. 49-58)

The separate organizations which are proposed create two separate problems of coordination--within the U.S. Government and between the U.S. program and those of international agencies. The Report recommends giving basic responsibility for achieving effective policy coordination to a U.S. International Development Council. Certain points require further discussion:

--there will be need for close coordination with other aspects of U.S. foreign policy since economic and assistance issues are at the core of our political relationship with most LDCs;

--policies toward LDCs in aid, trade and investment are inextricably linked to our policies in these respects toward the developed countries;

--there is a link between what we do internationally and certain domestic economic policies; e.g. parallel domestic pressures for special investment tax treatment, aid to education, etc. These pressures must be taken into account when deciding on similar international programs.

--effective coordination will entail both general policy guidance and operational coordination, to mesh the activities of the separate U.S. organizations and U.S. programs with those of the international agencies;

--development and security programs must be related to each other in countries where, as is the usual case, we pursue both objectives;

--it is unclear how the cabinet-level International Development Council and its supporting staff would relate to the National Security Council;

--if the White House Coordinator is to be more than an advisory coordinator and strategist, is it intended that he have decision-making power in the areas of responsibility of the Secretaries of State and Treasury.

Relationship to Latin American Policy (Issue 24, pp. 49-58)

The U.S. economic assistance relationship to Latin America will be the most important expression of U.S. policy in the hemisphere in the years ahead. While the substantive policy thrust of the Task Force Report is consistent with your Latin American initiatives, its organizational proposals may create problems with:

--the "one-window" policy you have stressed as the framework for our hemisphere relationships, including the role of the new Under Secretary for Western Hemisphere Affairs;/4/

/4/Expressed in the President's address on Latin American policy on October 31, 1969. See Document 122.

--effective administration of a U.S. bilateral assistance effort geared to the special Alliance for Progress relationship;

--more effective U.S. efforts toward strengthening the already substantial inter-American multilateral assistance machinery.

Organizational Recommendations

If the rationale for separate institutions, discussed above, is accepted, there remain certain subsidiary but important issues of organization. These are outlined below and discussed in more detail in the NSC Issues Paper.

A. The U.S. International Development Bank (Issues 9-17, pp. 18-37)

The Development Bank proposal reflects the Task Force belief that development lending should be separated from current political issues although it does recognize that the United States has a strong foreign policy interest in the geographic distribution of aid. We believe that the suggested framework for the Bank has merit and could be an important element in focusing public support on the development aspects of our foreign assistance program.

The advantages of a "banking approach" are:

--multiyear authority and programming;

--a clearer image of strict economic criteria;

--a structure that would more readily accompany the shift of LDC's themselves and multilateral institutions to the center of the development process.

There are important questions of technique, appropriation and budget treatment. While a bank can be proposed without resolving all these questions, these issues are likely to be of great interest to the Congress. Problems relating to the management and financial structure suggested by the Task Force are spelled out in the issues paper. One particular problem is that a "bank" might indicate Banking and Currency Committee jurisdiction in the House and a bypassing of the Foreign Affairs Committee./5/

/5/International development bank bills in the Senate now go to the Foreign Relations Committee for authorization. [Footnote in the source text.]

A number of issues center on whether an institution with a "banking" focus is a flexible enough instrument to accomplish the broad development purposes of a bilateral development program. Changes are suggested in the annex to correct these deficiencies. For example, some technical assistance grant funds--limited in amount and for clearly defined purposes--might be needed in the Bank.

Any moves away from the banking approach for development purposes might mean a loss of public appeal and Congressional support for the "new approach" to deal with the "new situation" of the 1970s. On the other hand, strict adherence to the "banking approach" might limit the Bank's ability to respond to LDC development needs.

If the banking approach is followed, it will be important to draw a clear distinction between the developmental, concessionary lending of the new bank and the harder-term, export financing performed by the Export-Import Bank. While EX-IM activities in developing countries related to U.S. exports contribute to development, efforts would have to be made to avoid any overlap or confusion by emphasizing the concessionary terms of the Development Bank.

B. The U.S. International Development Institute (Issues 18-23, pp. 38-48)

If it is accepted that an adequate technical assistance function is incorporated in the Bank,/6/ there is little debate on the validity of a separate Development Institute, particularly if it is focused on scientific, technological and professional sectors. The Institute should operate along the lines of the National Science Foundation. The Institute should focus on research and training activities in the United States and abroad and on social development programs, including family planning. It would operate principally through grants to private organizations in the United States and abroad, and include similar current programs such as grants to American schools and hospitals abroad. It would also handle technical cooperation activities with countries not requiring concessional assistance.

/6/This might include retaining the means for conducting technical assistance programs where they now exist, even though we may later choose to cut back some of these programs as suggested by Peterson. Having this facility in the Bank could ease adjustments in areas such as Africa where our technical assistance efforts are often the only visible sign of U.S. interest in development. [Footnote in the source text.]

Significant issues relate to appropriate coordination with other bilateral and multilateral technical assistance (UNDP) programs, Congressional vulnerability of the Peterson suggestion for "endowing" the Institute, and the role it should play in supporting social development projects designed to assure popular participation.

C. The Overseas Private Investment Corporation

The Peterson Task Force endorses this Corporation, authorized by Congress in the FY-1970 Foreign Assistance Act as an effective instrument in encouraging U.S. private investment activities in developing countries. There are no major issues on the organization of OPIC.

D. Security Affairs, Department of State (Issues 6-8, pp. 13-17)

The Peterson Task Force proposes that the Department of State provide policy guidance and coordinate all security assistance programs, including military grants, military credit sales, public safety, supporting assistance programs and the Contingency Fund. The Department would administer the last three; DOD the first two. The major problems are flagged on page 8 and relate to formulating a coherent defensible "new" program. The remaining issues are in the area of coordination and operational effectiveness. These are subsidiary to the crucial question of obtaining Congressional support for a long-term, flexible security program.

E. U.S. International Development Council (Issue 24, pp. 49-58)

This Council is intended to provide a focus for development concerns and interrelated aid, trade and investment policies. It would assure consistency among U.S. development programs, and between U.S. programs and positions taken in international forums. The Chairman of the Council would be appointed by the President, served by a small staff, and located in the White House. However, as discussed on page 11, the proposal fails to relate these development concerns closely to other aspects of domestic economic and foreign policy and does not meet the need for relating security and development programs to each other, even though in most countries where we pursue security objectives we pursue development objectives as well. Alternative coordinating arrangements are discussed on pages 49-58 of the annexed issues paper.

Other Issues

In addition to these major conceptual and organizational issues the NSC might wish to discuss some additional items for possible inclusion in your aid message. These might include the following:

1. Population.

The Task Force recommends that we call for an international study of the population problem, led by the UN Fund for Population, to define assistance requirements in this area more clearly. There is no dissent from that recommendation. However, it is not certain that UN institutions can make this survey when many members still oppose population programs.

2. Debt Relief. (Issue 48, pp. 94-95)

The Task Force suggests international action to devise a strategy for long-term debt relief for countries likely to have a serious debt service problem in the next decade. NSDM 41/7/ established a group under Treasury leadership. While their report to you may turn up interagency disagreements on details, there is general agreement with the main thrust of the Peterson suggestion, namely that the debt service problem should be treated as a part of total development strategy, be approached multilaterally, but undoubtedly will need to be applied on a case-by-case basis.

/7/Entitled "Debt Service," dated February 18, 1970.

3. Aid Untying. (Issues 46 and 47, pp. 90-93)

The Peterson Group suggests that we initiate multilateral action for general untying, unilaterally permit LDC's to participate in providing goods and services under U.S. development loans (as was recently done for Latin America) and remove procurement restrictions in the U.S. investment guarantee program. The issue is the trade-off between U.S. balance of payments considerations and the advantages of using our assistance programs for development purposes (not for export promotion). There is the subsidiary issue of tactics and how we should encourage multilateral untying.

4. Administrative Flexibility. (Issues 38-41, pp. 81-85)

While many administrative restrictions can be removed when new legislation is prepared, the Peterson Task Force specifically mentions that (a) the Hickenlooper Amendment has outlived its usefulness and (b) the provisions relating to penalties for the purchase of sophisticated military equipment are unduly rigid and not consistent with your concept of a mature partnership. There is virtually no dissent among agencies that these "barnacles" should be lopped off and further encrustations resisted. Those who criticize what they consider to be the arrogant use of U.S. power are often responsible for the arrogant use of our foreign assistance program to impose a particular U.S. point of view.

Illustrative List of Follow-Up Studies

It is suggested that the USC be instructed to initiate studies along the following lines:

1. Financial Implications (appropriation levels for bilateral and multilateral development assistance; projected funding for security and other programs).

2. Security Assistance (implications of separate rationale and organization).

3. Development Bank (management and financial structure, functions, method of operation).

4. Development Institute (management, financing, functions, method of operation).

5. Financing of International Programs (UNDP, WFP, UNICEF, etc.).

6. Legislative Implications (Hickenlooper and other restrictive amendments; relation to FMCS, PL-480).

7. Assistance to the Private Sector (III A, ownership, U.S. investment restraints, tax incentives, guarantees).

8. Untying.

9. Debt.

10. PL-480 (terms, export flexibility).

11. Latin American Policy (the new assistance organization and cohesive country programming, a possible distinctive organizational arrangement for Latin America, the effect on hemispheric multilateral assistance mechanisms, the consequences for the existing separate Alliance for Progress).

12. Role of the Inspector General.

Elliot

 

132. Memorandum From the President's Science Adviser (DuBridge) to President Nixon/1/

Washington, March 26, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID Task Forces on AID. No classification marking. According to a note by Kissinger on an attached April 1 memorandum from Bergsten to Kissinger, this memorandum did not go forward to the President.

SUBJECT
The Peterson Report

As you know I have long been interested in our technical assistance programs overseas. I strongly supported the recent establishment of a separate Technical Assistance Bureau within AID./2/

/2/On January 8 AID Administrator Hannah sent Secretary Rogers a note informing him the Technical Assistance Bureau had been established on September 22, 1969. He attached a report summarizing its first 3 months of operation. (Ibid., RG 59, Central Files 1970-73, AID (US) 8)

I have examined with keen interest the report of Mr. Peterson's Task Force on International Development. I found it an illuminating and constructive document for which the authors deserve great praise.

The analysis of technical assistance is of particular value. As the report points out, the United States is no longer the principal source of foreign assistance and other developed countries can be expected to continue to increase their efforts in the future. As our share of capital assistance declines, it is all the more important that the quality of our technical assistance measures up to our position of world leadership in the areas of science, technology and research.

The past and present mechanisms in AID have not produced the desired result. We have not been able to tap the vast resources of highly trained scientists available in this country for foreign assistance. A move to place technical assistance in an institution where it can receive the full-time, top-level professional and managerial attention it requires is long overdue. Such was the conclusion of an extensive study made by the President's Science Advisory Committee in 1968.

The proposed U.S. International Development Institute is well-conceived and should be established. It is timely in view of the pressing need to raise the technical capabilities of the developing countries to cope with the problems arising from population pressures and the resulting strains on the world food supply and the environment.

I fully support the contention that "the United States should seek to operate these programs more as a private foundation would." I concur that the International Development Institute should base its programs on agreements with participating countries on specific goals, cost-sharing arrangements and on plans for the country to eventually take over total program responsibilities. To accomplish these objectives, the Institute should be a professionally competent management organization that develops agreements, and arranges for the initiation and performance of broad assistance programs by industry, universities or appropriate Federal agencies. This arrangement is in contrast to the project-oriented system that characterizes many of our technical assistance efforts currently.

Another recommendation of the Peterson Report calls for changing the current practice of terminating technical assistance to a country whenever concessional development loans end. This was agreed in principle at the National Security Council meeting on foreign assistance a year ago./3/ Dr. Hannah has developed an interim program within AID for dealing with this problem within existing resources. The new Institute proposed by Mr. Peterson would provide a long-term solution. In the meantime, it would be desirable to make United States technical competence more readily available on a reimbursable basis to the developing countries that can afford to pay. There appear to be many countries where such possibilities exist and where the results can profoundly influence national development. I have discussed this with Secretary Rogers and recommendations for a practical program to this end will be ready soon for your consideration.

/3/Reference is to the March 26, 1969, NSC meeting; see Document 5.

In an even broader context, the Institute (I prefer a broader name such as the United States Institute for International Cooperation and Development) could also become the principal focus for other programs currently outside the economic aid sphere such as exchange activities sponsored or supported by the Government. The Department of State, as well as other agencies, has had increasing difficulty in securing funds from the Congress for these purposes, and the resulting decrease in our international exchanges is, I believe, not in the best interest of this country.

The movement of professors, researchers, teachers, students and important leaders in any field between the United States and other countries is all part of a single process of constructive United States interaction with changing societies abroad, regardless of the precise stage of development of those societies. It is as valid for our relations with Germany and Japan as for West Africa.

The key to more effective technical assistance and more effective exchanges is better management. The Institute offers promise, if properly established and staffed, of providing that broad management capability.

You have frequently spoken to me of your desire to further cooperative relationships in science and technology with other countries. This Institute could fill the institutional gap in the Government for managing these relationships. An important aspect will be the ability to draw on competence in the private sector--universities, industries and professional societies. The proposed institutional form is appropriate to this task.

As you said in your February 18 statement on foreign policy,/4/ we need "new forms of international cooperation." The Institute proposed by the Peterson Report, particularly in the broadened context, responds to your challenge in a forthright, imaginative and exciting manner.

/4/See footnote 5, Document 23.

Lee A. DuBridge

 

133. Memorandum From Secretary of State Rogers to President Nixon/1/

Washington, April 17, 1970.

/1/Source: National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 45. Confidential. Attached to an April 20 memorandum from Arthur Hartman (S/PC) providing copies to interested State Department offices and informing them that the NSC meeting scheduled for April 21 had been postponed indefinitely. The State Department's views on the foreign assistance program were not sent to the President until mid-July; see Document 134.

SUBJECT
State Department Position on Foreign Assistance Review

We have studied the many issues involved in the reappraisal of our foreign assistance programs. I welcome the opportunity to discuss these matters with you and my NSC colleagues in our meeting on April 21. I feel it would be useful, however, if I set out very briefly in written form the details of my position on what our new foreign assistance program should be.

A. Policy Guidelines

1. The United States should commit itself to a continued foreign assistance program for LDC's on a higher scale than now prevailing.

2. The U.S. has previously supported a level of aid target of 1 per cent of GNP for public plus private flows. For tactical reasons, we should not reverse this position but, in supporting the target, we should stress that recipient as well as donor countries have important responsibilities for achieving higher levels of development progress.

3. Foreign policy and practical reasons dictate the maintenance of an important bilateral program while at the same time we give support to an increasing utilization of multilateral agencies for aid purposes.

B. Organization of Development Assistance

1. We should organize our long-term development assistance programs in a bank-type institution. The Bank should be responsible for technical assistance related to its lending, and for certain categories of grant technical assistance to other governments.

2. Coordination of development aid with other foreign affairs activities of the U.S. Government should be achieved by virtue of the Board membership of the Bank. Such representation should include the appropriate Departments and Agencies, with the Secretary of State as Chairman in order to ensure foreign policy guidance, coordination with security assistance, and coordination in field implementation.

3. We should create a separate International Scientific and Social Development Institute. This Institute would keep some distance from the more operational foreign assistance programs and concentrate on research directed toward the transfer of scientific and technological knowledge to LDC's and on social development activities (Title IX, among others). Relations between the Institute and the LDC's would be, insofar as possible, on a non-governmental plane: foundations, universities, private research organizations, etc.

4. OPIC should be continued in its present form as an independent entity in encouraging private investment flows to the LDC's.

C. Security Assistance

There should be established under State Department authority in a single piece of legislation a single security program to include MAP, military sales (administered by DOD) and the present supporting

assistance and public safety program (administered by State). Coordination between development assistance, as carried out in the proposed Bank, and security assistance would be achieved through State chairmanship of the Bank Board and State policy and operational control over the security assistance program.

D. Contingency Fund

A substantial Contingency Fund should be available for varied foreign policy uses, such as emergency disaster assistance, unforeseen public order or military assistance requirements. This Fund would be appropriated to you and then assigned to the Secretary of State for such other disposition as appropriate.

E. Latin America

The above views are not entirely consistent with the "one window" concept for Latin America enunciated in your October 31 speech./2/ This difference can be reconciled by providing for a sub-committee of the NSC (parallel to the Under Secretaries Committee) to deal with all Latin American matters and by the Assistant Secretary (or new Under Secretary for Hemisphere Affairs) sitting as a member of the Bank Board when Latin American matters are discussed.

/2/See Document 122.

F. Relation to Peterson Committee Recommendations

The above position is by and large consistent with the Peterson recommendations, except on four important points:

1. On targets, Peterson proposes that we scrap our support of the 1 per cent of GNP target which the United States Government has consistently supported since 1965. I see nothing to be gained, and much to lose, in this suggested departure, particularly in the UN context. The 1 per cent target contains no specific timetable and thus is not a definite commitment for U.S. action. It is, however, considered helpful by other donor countries in terms of their public opinion and, of course, it has a great symbolic importance to the LDC's./3/

/3/Regarding these targets, see Documents 26 and 38.

2. The Peterson recommendation tends to treat bilateral development assistance as a diminishing and residual part of our contribution to international development programs. I strongly disagree. It seems to me that the United States has special foreign policy interests and relationships (for example, in Latin America, Indonesia, Southeast Asia) or special functional interests (private sector promotion, population, agricultural productivity, etc.) which can only be supported by an effective bilateral effort. Peterson appears to recognize this when he suggests setting up a development bank but I believe that the rationale has got to be presented in a much more straight-forward and convincing fashion. We need a bilateral development program as an integral part of our foreign affairs establishment. There is no other way of assuring that vital U.S. foreign policy and security interests can be met through the use of a development tool.

3. I have suggested that the Bank take on most of the government-to-government technical assistance activities and leave to the Institute the more innovative, and perhaps more risky from a foreign policy point of view, people-to-people programs suggested by Peterson. I agree with most of our development experts who feel very strongly that development lending and technical assistance to other governments should not be separated. I accept, however, the need for an institution oriented toward problem-solving, research and technology along the lines of the Fascell Institute now incorporated in our foreign assistance legislation.

4. Finally, on the subject of coordination, Peterson recommends a White House Coordinator and a Development Council. I do not believe that such a structure would serve your purposes well. If we have learned anything over the last twenty years, it is that there should not be a fragmentation and proliferation of programs and controls but rather a firm coordination, both here in Washington and in our missions in the field. We have adequate means through the NSC and the NAC to bring policy issues and differences to you for decision without adding a whole new structure of machinery. I have suggested that the Bank Board under State chairmanship is the way to assure the coordination and unity of purpose that you wish to see in our development efforts and in our more general foreign policy and security programs.

If you feel that it is desirable to have additional independent advice on development matters, I suggest that you may wish to consider the establishment of an Advisory Council on Development Assistance in the Executive Offices. Such a council could be made up, for example, of three distinguished citizens who could provide advice on aid policies generally and report directly to you. But this body should have no operational responsibilities.

G. Your Message to the Congress

As we all recognize, the Congress will play a crucial role in the final shaping of our new program. I recommend that your message focus clearly on new directions and operating principles, while leaving some flexibility with respect to the specifics of institutions. These specifics, which we will be embodying in a piece of legislation next fall, may look very different to us after reflecting on our Congressional consultations. The important thing is to obtain, through discussion with the appropriate Congressional Committees and among the general public, a new American commitment to development and security programs for the 70's.

William P. Rogers

 

134. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, July 14, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID, Volume II 1/70-8/10/70. Confidential.

SUBJECT
The New U.S. Foreign Aid Program

Issue

Your message to Congress outlining your new foreign aid program will be ready for submission shortly./2/ Your decisions are therefore needed now on several issues which are disagreed among the agencies.

/2/The message went to Congress on September 15; see Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 745-756.

Peterson Program

All agencies agree that our new foreign assistance program should incorporate most of the recommendations of the Peterson Task Force (summary at Tab A) including:

--Clear separation of our program into its three component parts: security assistance, to promote our short-run political objectives; humanitarian assistance; and assistance to economic and social development, to promote our long-term interest in a more peaceful world.

--A new aid role for the U.S., in which we support the initiatives of others rather than seek to dominate the international development process.

--Maximum possible freedom of our development assistance from short-term political objectives, mainly through increasing our use of multilateral channels.

--Creation of a U.S. Development Bank and a U.S. Development Institute, replacing AID, to carry out the new thrusts of our bilateral development assistance program.

--Emphasis on non-financial programs as an integral part of our development assistance: tariff preferences for LDC exports and other trade measures; untying of aid, to improve its quality and reduce political frictions; debt rescheduling; family planning; and concrete steps to promote private enterprise in the LDCs.

Extent of Multilateralization

The key substantive issue is the extent to which we should seek to multilateralize our development assistance.

Peterson recommends that we multilateralize as much as possible immediately, to pursue the new international thrust of our development effort and to divorce our development aid from short-term political objectives.

Peterson takes no explicit position on the eventual extent of multilateralization. However, he recommends that our remaining bilateral program be regarded as a diminishing residual. His logic thus points to complete multilateralization when the international institutions and the other donor countries are ready for it. There are three variants on this theme which you could announce in your message:

--A target of complete multilateralization by a fixed date, probably 1975.

--A target of complete multilateralization with no date.

--A target of complete multilateralization of development assistance appropriations by 1975, retaining the option of a bilateral lending program thereafter with repayments on old loans and the other authorities to use non-appropriated funds recommended by Peterson for the new Development Bank.

State recommends (Tab B)/3/ that we retain an important bilateral development assistance program indefinitely while supporting an increasing use of the multilateral agencies. They feel that we will always need a strong bilateral program to pursue our special regional and functional interests.

/3/See Document 133.

I recommend that you set 1975 as a target date for complete multilateralization of all U.S. development assistance appropriations. This approach would achieve the Peterson objective of internationalizing our aid effort, while also meeting State's position by retaining a significant bilateral development assistance effort as well as a strong bilateral security assistance program:

--We have already multilateralized about 50 percent of our development aid appropriations. It is thus impossible to multilateralize much further and retain a sizable bilateral program from appropriated funds, unless Congress were to increase total aid appropriations far beyond present (and anticipated) levels.

--An indication that we intend to completely multilateralize our aid appropriations, if not our total development assistance, thus becomes virtually necessary to set a truly new course. Anything less would imply a slowdown of the multilateral shift, raising serious doubts about our efforts to depoliticize development lending and jeopardizing the image of newness of the entire program.

--Setting such a target is the best way to galvanize the international institutions to gear up to play the leadership role we want them to assume.

--We could still promote our regional interests readily, by altering our contributions among the various international institutions: the Inter-American Development Bank for Latin America, the Asian Development Bank for Southeast Asia, etc.

--We could still promote our special functional interests readily, through our other bilateral institutions: the Overseas Private Investment Corporation for private enterprise, the new Development Institute for family planning and agriculture, etc.

--Over-all Congressional support would probably be maximized by maximizing multilateralization, though some key Congressmen in the aid area will oppose it vigorously.

--By retaining the option of a bilateral lending capacity with non-appropriated funds, this approach retains a great deal of flexibility. We would, of course, always retain a sizable bilateral program of security assistance.

Recommendation:

That you indicate that the U.S. hopes to be able to channel all of its appropriated funds for development assistance through multilateral institutions by 1975. Bill Timmons concurs.

Approve/4/
Disapprove, prefer objective of complete multilateralization but with no target date./5/
Disapprove, prefer no statement on eventual extent of multilateralization.

/4/Next to this option the President wrote: "no I'm not so sure--a target date might not be in our interests."

/5/The President initialed this option.

Management of U.S. Development Aid Effort

There is agency disagreement on two aspects of the organizational structure of our new development assistance program. Peterson, supported by Budget and Dr. Hannah personally,/6/ recommends that:

/6/In an April 22 memorandum to the President on AID's position on foreign assistance renewal, Hannah proposed that the Bank be headed by a President under the general supervision of a Board of Directors chaired by the Secretary of State. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID Volume II 1/70-8/10/70) Hannah's memorandum is attached to a May 23 memorandum from Kissinger to Nixon regarding the latter's meeting with Hannah on May 25. According to Kissinger, Hannah strongly supported using the Peterson Report to stimulate a fundamental reappraisal of foreign assistance and he was "particularly firm on the need for independence--from State Department control--of the new Development Bank [but was] circumscribed in saying so openly because of AID's present location in State." Kissinger and Hannah met with President Nixon on May 25. (Ibid., White House Central Files, President's Daily Diary)

--The new U.S. Development Bank, which all agencies agree should replace AID, be managed by an independent president reporting directly to you and by a Board of Directors comprising Government officials and private citizens.

--We create an International Development Council, chaired by a new Presidential Assistant in the White House, to plan our overall development strategy and coordinate the numerous programs involved in it (Treasury for the multilateral lending institutions, the Special Trade Representative and Commerce for trade matters, Agriculture for PL-480, the Export-Import Bank for debt rescheduling, the Peace Corps, and the three new institutions--OPIC, the Development Bank, and the Development Institute).

State recommends that you install the Secretary of State as Chairman of the Board of the Development Bank./7/ They would coordinate all development activities through the Bank, obviating the need for a Development Council.

/7/See Document 133.

Treasury supports the Peterson proposals, except for recommending that the President chair the Development Council himself with operational coordination run through existing Treasury-chaired committees./8/

/8/On March 31 Volcker sent Secretary Kennedy a memorandum on "Peterson Report Matters" that supported this position. (Washington National Records Center, Department of the Treasury, Secretary's Memos/Correspondence: FRC 56 74 A 7, Memo to the President, January-April 1970) Volcker's memorandum is attached to an April 3 memorandum from Kennedy to the President fully endorsing Volcker's views and cautioning against any weakening of Treasury Department responsibilities.

The Ash Council will shortly recommend that you create a new coordinating council for all foreign economic policy, including foreign assistance, chaired by a Presidential Assistant in the White House./9/ It would pursue the same objectives as the Peterson proposal, but link foreign assistance with trade and monetary policy in a broader coordinating body.

/9/The President's Advisory Council on Executive Organization, know as the Ash Council after its chairman Roy Ash, was appointed by President Nixon on April 5, 1969, to review the organization of the Executive Branch. The Council proposed major changes in the organization of the Executive Office of the President, including the establishment of OMB, which were instituted in Reorganization Plan 2 of 1970, effective July 1, 1970. Documentation on the Council's activities is in the National Archives, Nixon Presidential Materials, White House Special Files, Staff Member and Office Files, Ehrlichman Files, Box 32, Executive Office Reorganization.

I recommend that you adopt the Peterson and Ash proposals to create a Coordinating Council chaired by a new Presidential Assistant in the White House. It would operate at the Under Secretary level and receive its general policy guidance on aid issues from the National Security Council. I recommend that you leave open whether the Council coordinate development assistance alone or over-all foreign economic policy until you can consider the recommendations of the Ash Council.

Whatever your decisions on the Ash proposals, it is clear that aid issues badly need coordination and the Peterson-Ash approach would give us an organization parallel to the NSC to provide it. The State approach would essentially replicate AID, jeopardizing the depoliticization of the new lending institutions and thus jeopardizing the image of newness of the whole program.

Recommendations (The Ash Council concurs):

1. That the new Development Bank be run by an independent President, reporting directly to you;

2. That its Board of Directors include private citizens as well as Government officials;

3. That a new coordinating council, chaired by a Presidential Assistant in the White House, be created to coordinate the various facets of our development assistance program--either alone or with the rest of foreign economic policy, pending the Ash Council recommendations. It would operate under the general policy guidance of the National Security Council on aid issues. The Ash Council concurs.

Approve/10/
Prefer State approach: the Secretary of State to chair an all-Government board of directors for the Bank, with no Development Council
Prefer Treasury approach: President to chair Council, with operations coordinated through Treasury

/10/The President initialed this option.

Management of Security Assistance Program

Peterson, supported by State, recommends that we set up a single security assistance program including MAP, military credit sales (FMCS), disposal of surplus military stocks, our economic assistance for security-related programs ("supporting assistance"), perhaps the public safety program, and the contingency fund. State would set policy for the program and coordinate its operation. Administration of MAP, FMCS and surplus disposal would be left with Defense.

Defense recommends that MAP and FMCS be located completely in Defense./11/ Their objective is to avoid the Senate Foreign Relations Committee, which would have authority over a combined security assistance program but would not, of course, over DOD's own budget. The other aspects of security assistance would then be distributed among the other agencies.

/11/This position is set out in a May 6 memorandum from Secretary of Defense Laird to the President. Laird supported the Peterson recommendation that security assistance be legislatively separated from development and humanitarian assistance, and believed there was a reasonable chance to obtain Congressional approval for putting MAP and FMS into the Defense Department budget. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID, Volume II 1/70-8/10/70)

I have talked to Secretary Laird, who thinks we could win a battle to get MAP/FMCS out of Foreign Relations. Bill Timmons thinks the outcome would be uncertain. Everyone agrees that such a proposal would touch off a furious fight--especially in Foreign Relations but also in the House Foreign Affairs Committee, which have commitments to get back the military assistance now in the Defense budget (Vietnam, Laos, Thailand) and would vigorously resist the loss of jurisdiction. Our making the proposal might therefore jeopardize the whole new foreign assistance effort, like the Taiwan jets did on a smaller scale last year, although Timmons doubts that Fulbright could block the whole program and is less concerned about the House.

Putting MAP/FMCS in Defense would preclude the extremely desirable Peterson-proposed effort to better coordinate all aspects of our security assistance via a single security assistance program; leave supporting assistance to stand alone in State, which would raise major problems in getting Congressional support for it; and shift to Defense the present major authority now given the Secretary of State for MAP. However, our requests for MAP/FMCS would clearly fare better in the Armed Services Committee; if successful, this approach would obviate our having to move Southeast Asia MAP back to Foreign Relations/Foreign Affairs; and the approach could lead to better developed tradeoffs between MAP/FMCS and our own overseas military expenditures.

Recommendation:

The choice on this issue rests on whether we are willing to touch off a major battle on the Hill in an effort to get better receptivity for our MAP/FMCS requests, recognizing that the effort might not succeed and that there could be serious costs for the rest of the new assistance program whether or not it does.

Include MAP/FMCS in a new security assistance program comprising all related programs, under the policy guidance of State and with DOD continuing to administer both, as proposed by Peterson and supported by State and Budget.
Propose to Congress that MAP/FMCS be included in the Defense budget with other security assistance programs divided among the other agencies, as proposed by DOD./12/

/12/The President initialed both options.

Implementation of New Program

Finally, we must decide how to put the new program into effect:

--To work out the myriad of details involved and get them into legislative form;

--To handle Congressional consultations prior to, and following, the submission of legislation next January.

There are four alternatives:

--AID. Dr. Hannah has asked to be given the mandate, has now got some good people, and will have to be relied upon for many of the details anyway. However, it would be extremely curious for AID to preside over its own burial, and its interests and expertise are neither sufficiently widespread to handle the non-financial issues (trade, debt rescheduling, etc.) nor very sensitive to foreign policy considerations.

--State. This would assure foreign policy control. However, it would risk the credibility of the new, depoliticized nature of the development part of the program and State is not staffed sufficiently to do the job alone anyway.

--The Budget Bureau. They have a fair amount of expertise but are distant from foreign policy and do not feel adequate to do the job alone.

--A special White House operation, using individuals from the agencies (and some people from outside) and calling in an outsider such as Peterson to head it up. This would assure foreign policy direction, White House leadership, and hence the talent to do the job.

Recommendation:

That we create a temporary White House operation to manage the creation of the new program, asking Peterson to head it up. Budget and Bill Timmons agree.

Approve/13/
Prefer AID
Prefer State
Prefer Budget Bureau

/13/The President initialed this option.

 

Tab A/14/

/14/No classification marking.

Summary of the Peterson Report Recommendations

1. The Report recommends a clear separation of the U.S. assistance program into three component parts to reflect the three different objectives we seek to promote through aid:

--our short-term political and security interests,

--our humanitarian interests, and

--our interests in long-term economic development of less developed countries.

2. Our security assistance program should include military assist-ance, military credit sales, supporting assistance, and the contingency fund. The State Department should set policy for, direct, and coordinate the security assistance program, but administration of military grants, sales, and surplus disposal should be left with the Defense Department.

3. LDC development is in the U.S. national interest and our foreign assistance program should be as effective and efficient as possible in promoting this interest. It should not be influenced by short-term political goals.

4. Multilateral lending institutions, which are expanding in capacity and capability, should become the major channel for U.S. development assistance. At present, however, the U.S. should retain a bilateral program because other developed countries are not yet willing to multilateralize sufficiently and the institutions themselves cannot yet utilize the total amount of resources which this country provides.

5. In order to increase emphasis on the multilateral approach, the Report recommends that the U.S. take the lead in supporting an increase in the level of contributions to IDA from its present $400 million annually to $1 billion a year by 1972 and $1.5 billion by 1975. It also recommends that the U.S. support an increase in resources for the Inter-American Development Bank and an increase in capital in the International Finance Corporation.

6. To carry out our bilateral development program, Peterson recommends establishment of a new U.S. Development Bank, managed by a full-time President doubling as Chairman of a Board of Directors, which would include private citizens as well as public officials. The Bank should make loans for projects, sector programs, and general import requirements; finance related preinvestment and feasibility studies, and technical assistance activities related to its program.

7. The Bank should, in order to have bank-like autonomy, seek a $2 billion multi-year authorization and appropriation, be authorized to borrow $2 billion from the public to support its appropriated funds, (use receipts from old loans to subsidize the interest rate on these borrowed funds), and be authorized to guarantee foreign official borrowing on international capital markets as a transitional device to help countries to become independent of U.S. concessional lending.

8. The U.S. should place emphasis on the quality, structure, and style of its lending program as a major supplement to financial flows and should be free of legislative and administrative restrictions which make the administration of U.S. assistance inefficient.

9. The Peterson Report calls for international joint action to devise and implement a strategy for long-term solutions to the debt service problem over the next decade.

10. It recommends that all industrial countries should begin working toward an agreement to completely untie bilateral lending; until then, the U.S. should unilaterally permit goods and services financed under U.S. development loans to be purchased in all developing countries as well as in the U.S.

11. It recommends also elimination of the Hickenlooper Amendment, the Conte-Long restrictions concerning LDC arms purchases, all political restrictions on U.S. development assistance, and the administrative restrictions and political requirements which unnecessarily encumber the assistance program.

12. A U.S. International Development Institute should be set up as an independent government agency to bring U.S. science and technology to bear on the problems of development and help LDCs develop their own scientific and research capabilities. It should have a $1 billion authorization.

13. The report also recommends increased assistance to the private sector. The U.S. should seek to bring into operation the proposed International Investment Insurance Agency, as soon as the minimum number of countries agree; use OPIC's guarantee programs, in combination with those of other countries, to encourage international joint ventures; and eliminate restraints on U.S. direct private investment in developing countries.

14. The report recommends that U.S. economic policies toward the LDCs be coordinated by a White House Coordinator, chairing a Cabinet-level International Development Council. The Council and Coordinator would formulate overall U.S. development strategies and assert the importance of the development objective in the formulation of all U.S. policies affecting LDCs.

 

135. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, August 4, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 193, AID, Volume II 1/70-8/10/70. No classification marking. The date is handwritten on the memorandum.

SUBJECT
Additional Issues on New Foreign Aid Program

There are several additional issues which you need to decide for your forthcoming message to the Congress on our new foreign aid program. The message is scheduled for submission before the House recess begins on August 14./2/

/2/See footnote 2, Document 134.

Management of Security Assistance Program

Peterson, supported by State/3/ and Budget, recommends that we set up a single security assistance program to include military assistance (MAP), foreign military credit sales (FMCS), disposal of surplus military stocks, our economic assistance for security-related programs ("supporting assistance"), perhaps the public safety program, and the contingency fund. State would set policy for the program and coordinate its operation. Administration of MAP, FMCS and surplus disposal would be left with Defense.

/3/See Document 133. Rogers sent another memorandum to the President on this subject on August 4, reaffirming his previous recommendation; see Document 30.

Defense recommends an alternative arrangement: that MAP and FMCS be located completely in Defense. Their objective is to avoid the Senate Foreign Relations Committee, which would have authority over a combined security assistance program but would not, of course, over DOD's own budget. The other aspects of security assistance would then be distributed among the other agencies.

The Peterson/State/Budget proposal approach for a single security assistance program would:

--Enable us to better coordinate all aspects of our security assistance, trading off military and supporting assistance in countries such as Korea.

--Avoid shifting to Defense the major authority presently held by the Secretary of State for MAP.

--Avoid leaving supporting assistance standing alone in State, raising major problems in getting Congressional support for this program, which is extremely important in Vietnam and other trouble spots.

The Defense proposal to move MAP/FMCS into the Defense budget, if successful, would:

--Improve the likelihood of getting favorable Congressional response to future requests for MAP funding.

--Avoid the risk of eventually having to move Southeast Asia MAP back into the Foreign Relations and Foreign Affairs Committee. (Military assistance to Vietnam, Laos and Thailand is now in the DOD budget, but the shift was based on an agreement to return it to regular MAP as soon as possible.)

--Lead to better development of tradeoffs between MAP/FMCS and our own overseas military expenditures.

I have talked to Secretary Laird, who thinks we could win a battle to get MAP/FMCS out of Foreign Relations. Bill Timmons thinks the outcome would be uncertain. Everyone agrees that such a proposal would touch off a furious fight--especially in Foreign Relations but also in the House Foreign Affairs Committee, which have commitments to get back the military assistance now in the Defense budget (Vietnam, Laos, Thailand) and would vigorously resist the loss of jurisdiction. Our making the proposal might therefore jeopardize the whole new foreign assistance effort, like the Taiwan jets did on a smaller scale last year, although Timmons doubts that Fulbright could block the whole program and is less concerned about the House.

The choice on this issue rests on whether we are willing to touch off a major battle on the Hill in an effort to get better receptivity for our MAP/FMCS requests in the future, recognizing that the effort might not succeed and that there could be serious costs for the rest of the new assistance program whether or not it does.

Recommendation:

On balance, I recommend that we include MAP/FMCS in a new Security Assistance Act comprising all assistance programs pursuing U.S. security objectives, under the policy guidance of State and with DOD continuing to administer both, as proposed by Peterson and supported by State and Budget. This would leave them in the Foreign Relations/Foreign Affairs Committees.

Approve/4/
Disapprove, prefer to propose to Congress that MAP/FMCS be included in the Defense budget, with the other security assistance programs divided among other agencies, as proposed by DOD./5/

/4/The President wrote "no" next to this option.

/5/The President wrote "yes" next to this option and added: "It is too dangerous to risk putting this under the Foreign Relations Committee. When we have a change in the Senate I shall reconsider." This addressed the President's earlier contradictory decision; see footnote 12, Document 134.

Balance of Payments Restraints on U.S. Investment in LDCs

Peterson, supported by Commerce and CEA, recommends elimination of the current restraints on flows of private U.S. investment to the less developed countries, which were imposed in 1968 in an effort to protect the U.S. balance of payments. The move would take effect in 1971. Treasury and the Federal Reserve strongly oppose it at this time./6/

/6/This issue was discussed in a July 2 memorandum from Volcker to Secretaries Kennedy, Rogers, and Stans; Arthur Burns; Henry Kissinger; Paul McCracken; and George Shultz. Volcker noted that the matter was discussed in the Volcker Group on June 19 and there was a strong consensus that it would be undesirable at that time to make such an announcement. (Washington National Records Center, Department of the Treasury, OASIA Central Files, World Files: FRC 56 86 A 24, World/1/544-555)

Under the present program, each U.S. firm can transfer U.S. funds abroad for investment in less developed countries at a rate no greater than 10 percent above its rate of transfers in 1965-1966. There is no limitation on the amount of actual investment, only on transfers of funds from the United States--firms can invest any amount which they can finance with foreign borrowings.

Elimination of the direct investment controls:

--Would be the best possible indication to the U.S. business community of our desire for U.S. private investment to play a major role in the development process. (This desire will be one of the major features of our new aid program.)

--Might elicit some additional investment, since some firms may be (a) unable to borrow abroad or (b) unwilling to pay the higher interest costs of doing so, and (c) since the red tape of the present program would be removed.

--Would be a significant step toward your stated objective of eliminating the capital controls program altogether.

--In strongly opposing elimination of the controls at this time, Treasury and the Federal Reserve argue that:

--Elimination would adversely affect our balance of payments by several hundred million dollars annually, because U.S. outflows would replace borrowings abroad which would occur otherwise, in addition to a one-time cost as previous foreign borrowings of $1.6 billion are paid off over time.

--In view of the present large deficit in our balance of payments, such a step would seriously undermine foreign confidence in our resolve to solve our payments problem. Foreign monetary authorities might become unwilling to finance our deficit by holding dollars. In addition, their unwillingness to support our efforts to further reform the monetary system (and help our own payments position), through increased flexibility of exchange rates, might be increased.

--It would be possible to limit the balance of payments loss, but doing so would require maintaining or even increasing the amount of red tape under the program, thereby obviating one of the major pros of taking the step.

--The step would probably not promote any significant increase in private investment in the LDCs, since most firms can borrow abroad to pursue virtually all of their desired investments.

Both the pros and cons of the proposed action are largely psychological. Elimination of the controls would clearly signal your intent to promote private investment as an integral part of our development assistance. On the other hand, foreign monetary authorities might regard the step as "further proof" that the U.S. had no intention of attempting to control its balance of payments deficits. In real terms, it is unlikely that the measure would significantly increase either U.S. private investment in the LDCs or the magnitude of our balance of payments problem.

Recommendation:

That you not make any decision now to eliminate the balance of payments controls on U.S. direct investment outflows for 1971. Treasury, State, and the Federal Reserve recommend this position.

Approve/7/
Disapprove, prefer to announce now that we will eliminate the controls in 1971, as recommended by Peterson and supported by Commerce and CEA

/7/The President initialed this option. For additional documentation on foreign investment controls, see Foreign Relations, 1969-1976, vol. III, Documents 31, 33, and 54.

Overseas Staffing of New Development Bank

Peterson recommends that the new Development Bank should operate with a "minimum of field representatives." His report, however, did not define "minimum" or indicate what functions should be centralized in Washington.

There are essentially three alternatives:

--Centralize all operations in Washington, as now done by the Export-Import Bank, with field visits by Washington personnel when necessary to help prepare project proposals. This would permit a major reduction of overseas U.S. personnel and place desirable pressure on borrowing countries to assume more responsibility for preparing their own projects, perhaps at the cost of reducing the quality of these project proposals for a while.

--Centralize loan operations in Washington but station technical advisers overseas to help develop projects, as necessary, on the grounds that the LDCs and international organizations cannot yet do the whole job themselves. This would still permit significant reductions of our overseas staffing but phase out our advisory functions more gradually.

--Have the Bank retain the same functions as present AID personnel, though reducing their numbers. AID supports this approach, which would maintain a major U.S. assistance capacity within the LDCs and prevent any major reduction in overseas personnel, thus detracting from our basic thrust of shifting responsibility to the LDCs themselves.

Recommendation:

That you approve centralization of all operations of the new Development Bank in Washington, with technical advisors supplied only via field visits. This is the option most consistent with the Peterson recommendation.

Approve/8/
Prefer to centralize most operations in Washington but station advisers overseas for project development as needed.
Prefer to retain the present AID approach, on a reduced scale, as proposed by AID.

/8/The President initialed this option and wrote "no" through the other two.

Hickenlooper Amendment

Peterson, supported by State, recommends that our new aid legislation exclude the Hickenlooper amendment. Instead, we would work actively to find and utilize international forums to resolve expropriation disputes.

The presentation of completely new aid legislation provides a unique opportunity to eliminate the Hickenlooper amendment without seeking its elimination from existing legislation. Avoiding it in the future would:

--Increase our flexibility to deal with expropriation disputes, which of course always includes the possibility of cutting off aid.

--Would be of major political significance to the LDCs, particularly in Latin America where it is widely regarded as the economic version of a "big stick" U.S. policy.

--Would further improve our relations with Peru, and perhaps make it easier for the GOP to eventually settle the IPC issue.

--Encourage our seeking multilateral means to resolve expropriation disputes.

The disadvantages of the move would be:

--Some feeling in the business community that we were weakening our resolve to protect U.S. private investment.

--Some Congressional opposition, on similar grounds.

--An apparent backdown in the IPC dispute with Peru (though there has been no pressure from Congress or Jersey Standard to apply Hickenlooper in the case).

The Hickenlooper amendment has certainly not helped us protect U.S. private investment in the past, and it may have even made settlement of disputes more difficult by representing a heavy-handed U.S. threat. Its image as a weapon of U.S. economic imperialism is widespread. If strong Congressional opposition to its complete elimination were to develop, however, we could still eliminate most of its present problems by falling back to (a) elimination of its present mandatory six-month time limit for application of sanctions and to (b) simply requiring the President "to take into account" expropriations when determining U.S. aid levels.

Recommendation:

I therefore recommend that our new aid legislation (a) exclude the Hickenlooper amendment, (b) if major Congressional opposition develops, that we fall back to a Hickenlooper-type amendment which would require the President "to take into account" any foreign expropriations in determining U.S. aid levels but not include a mandatory time limit for sanctions. Bill Timmons concurs.

Approve/9/
Disapprove, prefer a middle course of originally proposing the fallback language--requiring the President "to take into account" the effect of expropriations on U.S. aid levels but with no mandatory time limit for sanctions/10/
Disapprove, prefer to include Hickenlooper Amendment in new legislation

/9/The President wrote "no" next to this option.

/10/The President wrote "OK" next to this option. See also Document 31 and Documents 148 ff.

Other Political "Barnacles"

Over the years, Congress has written numerous restrictions into our foreign aid legislation. They include prohibitions on aid to unfriendly countries, countries assisting unfriendly countries, countries taking actions unfriendly to U.S. nationals, specific types of projects, and a wide range of miscellaneous prohibitions on aid to countries for various reasons. (A complete list of these "barnacles" is attached (Tab A).)/11/

/11/Not printed, but see Documents 9-11 and 31.

Peterson, reported by State, recommends that we include none of these limitations in our new aid legislation.

I agree that most of the "barnacles" serve no positive purpose and represent an irritant in our relations with countries affected. However, some of them are consistent with our basic foreign policy objectives; none of them have provided serious practical problems; and all have at least some Congressional support.

Recommendation:

I therefore recommend that our new legislation eliminate all of the specific "barnacles" accumulated over the years, substituting for them a general provision authorizing the President to "take into account" the actions of other countries in determining which of them shall be eligible for U.S. assistance. Bill Timmons suggested this as the best way to meet the potential Congressional problem while avoiding substantive difficulties, and I agree.

Approve/12/
Disapprove, prefer to propose that present "barnacles" remain but that President "take account" of them rather than be required to apply them/13/
Disapprove, prefer to propose continuation of the restrictions in present mandatory form (not simply requiring the President "to take account" of them)
Other

/12/The President wrote "no" next to this option.

/13/The President wrote "yes" next to this option.

 

136. National Security Decision Memorandum 76/1/

Washington, August 10, 1970.

/1/Source: National Archives, RG 59, S/S Files: Lot 83 D 305, NSDM 76. Confidential.

TO
The Secretary of State
The Secretary of the Treasury
The Secretary of Defense
The Secretary of Agriculture
The Secretary of Commerce
The Secretary of Labor
The Director, Office of Management and Budget
The Administrator, Agency for International Development
The Special Trade Representative
The Director, Peace Corps
The Director, U.S. Information Agency
The Director, Office of Science and Technology
The Chairman, NSC Under Secretaries Committee
The Director, Office of Emergency Preparedness
The President, Export-Import Bank

SUBJECT
The New U.S. Foreign Assistance Program

Based on the recommendations contained in the report of the Peterson Task Force, the issues paper submitted by the Under Secretaries Committee,/2/ and the memoranda submitted by several of you,/3/ the President has made the following decisions concerning his new foreign assistance program.

/2/See Document 131.

/3/See Documents 134 and 135.

1. General Philosophy

a. The United States has a profound national interest in the social and economic development of the lower income countries.

b. The new U.S. foreign assistance program should be separated clearly both in terms of objectives and organizations, into its three component parts: security assistance, humanitarian assistance, and development assistance.

c. The United States, through its assistance programs, should henceforth seek to support the initiatives of other countries and the international development institutions rather than seek to dominate the development process.

d. The levels and forms of U.S. development assistance should be determined by the needs of the lower income countries and the most effective ways in which we can help meet them.

e. Our development assistance should be divorced from short-term U.S. foreign policy objectives.

2. Security Assistance

a. The President has decided to consider further the rationale and organization of our security-related assistance programs before making a final decision on them.

b. The Under Secretaries Committee should therefore study the alternatives available for using our security-related assistance programs in support of the Nixon Doctrine. It should also study the alternative organizational arrangements for military assistance, foreign military credit sales, disposal of excess military stocks, supporting assistance and the contingency fund. A paper developing options and recommendations on both issues should be submitted to the President by October 1.

c. The Committee should also submit recommendations on whether the public safety program should be treated as a "security-related assistance program" and how it should be administered in the new assistance program.

3. Humanitarian Assistance

a. U.S. assistance programs which seek to promote our humanitarian interests--child feeding, maternal feeding, disaster and emergency relief, and refugee relief--should be combined in an International Humanitarian Assistance Act.

b. The Department of State should manage these programs, which should continue to rely heavily for their implementation on private organizations.

4. Development Assistance Policy

a. The United States should seek to channel all of its development assistance through multilateral institutions as soon as practicable, in light of the capabilities of the institutions and without raising the U.S. share in them.

b. The downward trend in the level of U.S. development assistance should be reversed, and the present level should be raised substantially. The U.S. will avoid any pledges to meet the international targets relating foreign assistance to GNP, but will seek to minimize damaging their usefulness to other donor countries.

5. Development Assistance Organization

a. A. U.S. Development Corporation should be established as an independent government agency to carry out the U.S. bilateral development lending program.

--The main criterion for use of Corporation resources should be their effectiveness in promoting development. There should be no attempt to relate Bank loans to short-term foreign policy considerations.

--The Corporation should rely heavily on the efforts of the international institutions to provide the broad framework and country programs within which it considers individual loans.

--The Corporation's Board of Directors should include public officials and private citizens. The Corporation should have a full-time President, serving also as Chairman of the Board, who reports directly to the President. The Secretaries of State and Treasury should be ex-officio members of the Board.

--The Corporation's loan functions should be supplemented with authority to provide grant-financed technical assistance only for projects closely related to the Corporation's lending operations.

--The Corporation should be equipped with authority to borrow directly from the public to supplement its appropriated funds and to subsidize, with reflows from existing foreign assistance loans, interest rates on loans financed from its borrowed capital.

--The Corporation should be authorized to guarantee foreign officials borrowing on international capital markets as a transitional device to help countries become independent of U.S. concessional lending.

--The Corporation should seek authorizations on a multi-year basis, subject to annual appropriations.

--The Corporation should centralize all of its loan operations in Washington, with technical advisors supplied only via field visits.

b. A U.S. Development Institute should be established as an independent government agency to concentrate on bringing U.S. science and technology to bear on the problems of developing nations, help develop research capacity in the lower income countries, and help finance projects of private institutes working on social and economic problems in these areas.

--The Institute should have primary responsibility for administering U.S. technical assistance programs abroad.

--The Institute's Board of Directors should include public officials and private citizens. It should be headed by an independent director, serving also as Chairman of the Board, who reports directly to the President. The Secretary of State should be an ex-officio member of the Board.

--The Institute should seek authorizations on a multi-year basis, subject to annual appropriations.

c. U.S. economic policies toward the lower income countries should be coordinated by an interagency Council or committee, at the Under Secretary level, chaired by a Presidential Assistant in the White House. The Council or committee should formulate and coordinate over-all U.S. development strategy, under the general policy guidance of the National Security Council. The President will make more specific decisions in the near future on the organization of this committee. A Western Hemisphere subcommittee should be established and chaired by the new Under Secretary for Western Hemisphere Affairs,/4/ inter alia to recommend a guideline for the approximate share of resources of the U.S. development institutions that would go to Latin America.

/4/This was proposed in a memorandum from Charles A. Meyer to Richardson, March 12. (National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 45) The position of Under Secretary was not established. See also Document 122.

6. Other Issues

a. The U.S. should henceforth permit goods and services financed under U.S. development loans to be purchased in any non-European lower income country (defined as any country with per capita income of less than $1000) eligible to receive U.S. assistance, as well as in the United States.

--Such purchases should be permitted for any eligible product for which at least 50 percent of the components originates in the U.S. or other eligible country.

--AID should henceforth use untied dollars, instead of dollar credits, to purchase local currencies where local currency financing is necessary.

b. All procurement restrictions under the U.S. Extended Risk Guarantee Program should be removed.

c. The U.S. should seek to bring into operation the proposed International Investment Insurance Agency as soon as the minimum number of countries agree to do so.

d. We should propose that the Hickenlooper-type amendment in the new foreign assistance legislation: (i) avoid any mandatory time limit for application of sanctions and (ii) require only that the President "take into account" expropriations in determining country eligibility for U.S. assistance.

e. The new legislation should require only that the President "take into account" the specific "political" restrictions in the present law, rather than be required to apply them.

f. The new legislation should exclude procedural requirements which encumber the administration of the assistance program and reduce its flexibility, except for the 50-50 shipping requirement, the restrictions on sourcing of iron and steel products for Vietnam, and the limitations on the number and rank of Presidential appointees to the new institutions. Administrators will be accountable for achieving program objectives.

g. The U.S. should continue to press for the establishment of a generalized system of tariff preferences in the markets of the industrialized countries for exports of lower income countries, as directed in NSDM 29 and NSDM 65./5/

/5/Documents 218 and 234.

h. The U.S. should recommend that the UN Fund for Population Activities undertake a study of world population problems and measures required to deal with them, as a top priority item in the Second Development Decade.

7. To manage the transition from present arrangements to the new program, a temporary office will be created in the White House. The office will be responsible for directing the preparation of the implementing legislation, which is to be submitted in January 1971, and for directing Congressional consultations on the new program. The President had directed that addressees give their full support to this office, and that they make personnel available to it as requested.

Henry A. Kissinger

 

137. Editorial Note

On August 10, 1970, Henry Kissinger sent a draft of the President's message to Congress on foreign aid, scheduled for delivery before Congress adjourned on August 14, to the Secretaries of State, the Treasury, and Defense; the OMB Director; and the AID Administrator. Kissinger noted that the decisions indicated in the draft had already been communicated in NSDM 76 (Document 136). He requested comments on the draft by August 13, but acknowledged that the timing of the message could slip past the House recess. (National Archives, RG 59, S/S Files: Lot 83 D 305, NSDM 76)

On August 12 AID Administrator Hannah sent his comments to Kissinger on the draft foreign aid message, noting that there was sharp disagreement about the future of bilateral assistance, of which the President should be aware, and he asked for reconsideration of decision 4a of NSDM 76. Hannah indicated that some continued bilateral involvement in development efforts was in the national interest and that Secretary of State Rogers joined in his recommendation. (Ibid.)

Council of Economic Advisers Chairman Paul McCracken, in an August 12 memorandum to Kissinger, commented that, after reviewing the draft message, the CEA believed additional interagency discussion of major substantive issues was required, which would almost certainly require postponing the message to Congress. (Ibid., Nixon Presidential Materials, NSC Files, Agency Files, Box 194, AID, Volume III 8/11/70-9/10/70)

On August 13 C. Fred Bergsten prepared a memorandum to Kissinger regarding that day's 4 p.m. meeting on the foreign aid message, during which a revised draft was circulated. He argued that there were only a few substantive concerns, but noted that the State and Treasury Departments and AID had all expressed satisfaction with the draft and were prepared to go ahead that day. Bergsten continued: "You should know that there is an absolutely overriding bureaucratic aspect to all this. I understand the President has already approved the formation of a Foreign Economic Policy Committee to be chaired by Treasury. I have strong sympathy for the need for such a coordinating mechanism, as you know. But the economic types want to handle foreign aid, as well as monetary policy and trade, and thus lift the issue out of the NSC machinery. I believe this factor--not substance--lies at the root of the last minute in-house backfire on the aid message. To be sure, we gave them opportunity by not having an NSC meeting and by the long delay in getting the decisions on the message." Bergsten urged Kissinger's strong leadership to keep foreign aid policy within the NSC framework and his making clear that the NSDM 76 decisions were firm, although minor changes in the details were possible. (Ibid.) No record of the 4 p.m. meeting has been found.

On August 13 Executive Secretary of the Department of State Theodore Eliot sent a memorandum to various State Department offices with an interest in the aid message informing them that the White House had decided to delay the message to Congress until after Labor Day. Eliot requested that all copies of the draft message be returned and that the contents be closely held. He emphasized the importance that the contents not be leaked. (Ibid., RG 59, S/S Files: Lot 83 D 305, NSDM 76)

In an August 14 memorandum, Bergsten informed Kissinger that James Schlesinger was amending the aid message and a revised draft would be available early the following week. Bergsten suggested there would be changes in the substance of the message, including possible modifications in the decision on the Development Council. Bergsten continued that September 15 would be the ideal date for the message because the House would probably pass a $3.7 billion authorization bill on September 14, to which the President could refer. The IMF/IBRD annual meetings would begin in Copenhagen on September 20, and the message would provide momentum to the U.S. delegation. In addition, the high-level meeting of the OECD Development Assistance Committee was to convene in Tokyo on September 15 and delivery that day would maximize its impact "when all the top aid types are meeting together." (Ibid., Nixon Presidential Materials, NSC Files, Agency Files, Box 194, AID, Volume III 8/11/70-9/10/70) Additional documentation on finalizing the text of the message, including significant differences between Bergsten and Schlesinger on a number of substantive points and Kissinger's comments, is ibid.

In his special message to Congress on September 15, President Nixon proposed "a set of fundamental and sweeping reforms to overhaul completely our entire foreign assistance operation to make it fit a new foreign policy." His message outlined six reform proposals: the creation of "separate organizational arrangements" for security assistance, humanitarian assistance, and development assistance; "a freshly conceived International Security Assistance Program" in support of the Nixon Doctrine unveiled at Guam in 1969, which had called for other countries to assume responsibility for their own defense; channeling "an increasing share of development assistance through the multilateral institutions as quickly as possible" with the remaining bilateral assistance "provided largely within a framework established by the international institutions;" the creation of two new and independent institutions, the U.S. International Development Corporation and the U.S. International Development Institute, to phase out the Agency for International Development and to reduce significantly the number of overseas U.S. Government personnel working on development programs; negotiation of a treaty with all nations that "would permit the utilization of the vast resources of the seabeds to promote economic development;" and the redirection of other policies bearing on development--the initiation of tariff preferences and in concert with other donor countries the complete untying of foreign aid, for example--"to assure that they reinforce the new approach."

In his message the President referred to the March 1970 report by the Peterson Task Force, which provided the basis for the President's proposals. He also indicated that the proposals in his message "in fact were foreshadowed by a number of policy changes and program innovations" already instituted in assistance programs for Latin America in response to the earlier Rockefeller Report. His message went on to provide additional details on the proposed reforms. For text of the message along with an accompanying Presidential statement, see Public Papers of the Presidents of the United States: Richard Nixon, 1970, pages 745-757.

 

138. Editorial Note

One aspect of the foreign assistance policy discussions in 1970 was a general, multilateral untying of foreign assistance. NSDM 76 (Document 136), which contained many of the proposals put forward in the President's September 15 foreign assistance message to Congress, provided for untying of U.S. assistance for worldwide procurement in low income countries, but did not address general, multilateral untying of assistance by all donors for worldwide procurement.

In his September 15 message, the President proposed "that all donor countries end the requirement that foreign aid be used to purchase goods and services produced in the nation providing the aid." He continued: "Complete untying of aid is a step that must be taken in concert with other nations and we have begun talks to that end with the other members of the Development Assistance Committee of the Organization for Economic Cooperation and Development." (Public Papers of the Presidents of the United States: Richard Nixon, 1970, page 754)

Telegraphic reporting on the untying initiative at DAC meetings and during bilateral consultations in OECD capitals is in the National Archives, RG 59, Central Files 1970-73, AID 1. A number of donors, including the Federal Republic of Germany and Japan, adopted sympathetic positions on the issue, but France was a notable holdout. Despite France's position, there was some hope that the June 1971 OECD Ministerial might reach agreement on the issue. To that end the U.S. Mission to OECD on May 11 sent the Department of State some text regarding multilateral contributions in the Untying Agreement that had been proposed by the Secretariat following a May 6 DAC discussion. The Mission saw some merit to the formulation and sought approval or suggestions for alternative language. (Telegram 7656 from USOECD; ibid.)

In Washington, the Department of the Treasury raised concerns about moving ahead rapidly with the issue at that time; see Document 139.

 

139. Memorandum From the Assistant Secretary of the Treasury for International Affairs (Petty) to Secretary of the Treasury Connally/1/

Washington, May 20, 1971.

/1/Source: Washington National Records Center, Department of the Treasury, Secretary's Memos: FRC 56 74 A 17, Memo to the President 5-8/71. No classification marking. Sent through Under Secretary Volcker.

SUBJECT
Aid Untying

An effort is being made to push the OECD aid untying exercise to a conclusion shortly after the OECD Ministerial meeting in June. I think we should postpone for some time any attempts to reach a final agreement./2/

/2/In a May 20 note to Connally, attached to this memorandum, Volcker noted: "I have thought this whole exercise misguided from the start. However, the President has repeatedly expressed an opinion otherwise. Whether you want to get the President to go slow on this point, at the risk of torpedoing the entire exercise at this late date, is a nice question you will have to resolve in terms of your over-all strategy vis-a-vis foreign economic policy currently. In any event, our negotiators do need some warning about promising too much, in the light of Congressional sentiment." On Volcker's note, Under Secretary Walker wrote: "I strongly support sending the memo--unless you want to do it orally."

The Congressional atmosphere is very hostile to untying. An agreement now would significantly jeopardize our chances of obtaining action on various pieces of multilateral aid legislation as well as on the bilateral program.

There are also serious questions about the legal basis for entering into an aid untying agreement without the approval of Congress. Congress has neither provided express authority through legislation nor through ratification of the OECD Convention to enter into such an agreement. On the other hand, questions would be raised by reliance exclusively on powers of the President under the Constitution as a basis for this agreement since conditions on use of aid funds is a subject clearly within the jurisdiction of Congress. In the present atmosphere, if an agreement were made on the basis of this authority, citing it as a reason for staying the hand of Congress will surely result in claims of infringement of Congressional prerogatives and would be unlikely to deter Congressional action, thus putting the U.S. in violation of an OECD commitment. During the hearings on accession to the OECD Convention, Executive Branch witnesses gave assurances that no international arrangement would be made within the OECD which would put the Congress in the awkward position of either repudiating a given commitment or unhappily supporting one on the basis that to do otherwise would embarrass our foreign relations.

A clause providing for withdrawal on short notice might mitigate conflicts with Congress in case of subsequent contrary legislation and would be essential for avoiding violation of the agreement. I find it difficult, however, to see how we could enter, in good faith, into an untying agreement while insisting on such a withdrawal clause--one that may have to be used within a short time.

Attached is a memorandum to the President registering your concerns on the political and legal issues and recommending delay in entering into an agreement until the legal and legislative problems are worked out.

Recommendation: That you sign the attached memorandum to the President./3/

/3/Not attached. Reference is presumably to Document 140.

 

140. Memorandum From Secretary of the Treasury Connally to President Nixon/1/

Washington, June 9, 1971.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID, 1/1/71-12/31/71. No classification marking. Another copy of this memorandum bears a handwritten note that reads: "Sent via Special Messenger 6/9/71--11:30 am." (Washington National Records Center, Department of the Treasury, Secretary's Memos: FRC 56 74 A 17, Memo to the President May-August 1971)

SUBJECT
Aid Untying

A year ago you approved an initiative to negotiate a multilateral agreement on untying of bilateral and multilateral development assistance./2/ An effort is being made to push the negotiations to a point where an agreement can be reached shortly after the OECD Ministerial meeting in June.

/2/Not further identified.

I realize that we have gone quite a ways toward an agreement. However, my reading of the mood of Congress is that it would be most unwise to rush into final agreement on aid untying. To do so would mean taking serious political risks for our multilateral and bilateral aid legislation. We may also be entering into an agreement which Congress may force us to breach in the not too distant future.

Several events this month have led me to this conclusion:

First, Treasury's Congressional sounding on the multilateral institutions indicates that balance of payments safeguards on the IDA legislation (which I recently transmitted to Congress) will become a major issue.

Second, for the first time ever Congress has failed to appropriate authorized contributions to the multilateral lending institutions--clearly a sign of Congressional malaise in this area.

Third, the proposals for reorganization of the bilateral aid program have not been well received on the Hill.

Fourth, the foregoing three problems have been intensified by the mounting Congressional concern about our international position, accelerated by the recent international monetary disturbances.

Furthermore, there are complex legal and legislative questions arising from entering into a multilateral untying agreement without Congressional approval. We were promised that deep Congressional soundings would take place before making international agreements in this area. I understand that little if anything has been done to take the Congressional pulse on the proposed agreement./3/

/3/The President marked this paragraph (the last one on the first page) and wrote below it: "Peterson & K--I believe the changed Congressional mood bears out the need to slow down this [illegible] Latins won't like [illegible]." In a June 16 memorandum to Kissinger and Peterson, transmitting a copy of Connally's June 9 memorandum, Jon M. Huntsman wrote: "With reference to the last paragraph on the first page, it was suggested that the changed Congressional mood bears out the need to slow down this initiative. It was recognized that the Latins would not like such a move, but it was pointed out that they are doing little for the Administration." On Huntsman's memorandum Kissinger wrote: "Ernie [Johnston]--is that feasible? HK." (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71)

The legal questions and their political implications should be clarified. Consideration might be given to a request for an Attorney General's opinion.

In the meantime, our negotiators should receive very clear instructions that we are re-examining those aspects of the untying exercise that have to do with the authority and the timing for implementing an agreement.

John B. Connally

 

141. Information Memorandum From Ernest Johnston of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, June 14, 1971.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 289, Treasury, Volume II, 1971. No classification marking. The memorandum is Tab A to a June 14 memorandum from Johnston to Kissinger suggesting items he discuss with Connally at lunch the next day. Johnston recommended that Kissinger "tell Connally that the decision to proceed with the OECD exercise and to expand aid untying is one which the President has strongly endorsed in a number of public statements. To attempt now to undercut the OECD exercise would be a serious public reversal in the President's development program. We look upon the OECD exercise as a means of increasing the benefits to the developing countries of a given amount of aid. We would concur in an OECD agreement only if we were sure that we would make a fair share of the aid shipments under other countries' development programs." Other items Johnston suggested Kissinger take up with Connally were Connally's tough statements on trade policy, offset with Germany, IFI legislation, and next steps in the international monetary field.

SUBJECT
Connally Attempts to Back-Up on Aid Untying

Secretary Connally has written a memorandum to the President, which was sent in on June 11 suggesting that we go slow in our OECD negotiations on multilateral aid untying (Tab A)./2/ Connally argues that completion of the untying negotiations is likely to cause us serious Congressional problems in regard to our total aid efforts.

/2/Document 140.

The President, however, has made a number of public commitments on this issue. His Aid Message of September 15, 1970, the Foreign Policy Message on February 1971 and the April 1971 Message transmitting aid legislation to Congress all endorsed a multilateral aid untying agreement./3/ (In fact, the negotiations are not going very fast now because of French opposition.)

/3/The September 15 address and the April 1971 message are printed in Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 745-756, and ibid., 1971, pp. 564-578, respectively. The February 1971 message was released as U.S. Foreign Policy for the 1970s: Building for Peace, A Report to Congress by Richard Nixon, President of the United States, February 25, 1971. It is also printed ibid., pp. 219-345.

Should the President accept Connally's suggestions, which went to the President without any White House staffing, this would mean a major reversal in U.S. aid policy. I have cleared in your name a memorandum which Peterson is sending to the President this morning asking the President not to make any decisions on the basis of the Connally memorandum until Peterson has had a chance to report to the President on the status of the issue./4/

/4/The memorandum was not found.

 

142. Memorandum From Robert Hormats of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, July 19, 1971.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. Confidential; Sensitive.

SUBJECT
Aid Untying

On June 9 Secretary Connally sent the President a memorandum (Tab A)/2/ stating that "the changed Congressional mood bears out the need to slow down" our aid untying initiative in the OECD. In response to this the President indicated (Tab B)/3/ that he agreed that we should "slow down this initiative" recognizing that the Latins "would not like such a move" but "are doing little for the Administration." On that you asked Ernie Johnston whether such a move was possible. Both Ernie and I agree that it is possible, though it would be costly in foreign policy terms. The main point, however, is that it is not necessary at this time./4/

/2/Document 140.

/3/See footnote 3, Document 140.

/4/At the top of Hormats' memorandum Kissinger wrote: "I agree that no move is necessary. It is our job to slow down Presidential hip shooting by emphasizing consequences of hasty notes."

Pete Peterson, who insisted that he have complete charge of this subject, has neither directed the bureaucracy to "slow down" nor sent a memorandum to the President urging against our doing so now. I have been promised by his staff that he would do the latter, but he has been sitting on a draft memorandum from his staff, in which I concurred, for over two weeks. Unless Peterson decides on one of the two above-mentioned courses in the next week, I shall propose that you suggest that he respond to the President's note. Even should we wish to go slow, no U.S. reversal is called for now, since at present untying negotiations in the OECD are moving very slowly--with a number of nations, led by France, remaining quite negative. No one expects an untying scheme to be worked out within the next few months./5/ We therefore have time to study the Congressional and legal implications raised by Secretary Connally before changing our negotiating strategy.

/5/On July 22 the Department of State sent a message to the Mission to OECD regarding aid untying that referred to the negligible chances of agreement during the current negotiating session. The telegram informed the Mission that the U.S. position concerning multilateral agencies was under interagency review and requested that DAC Chairman Martin be informed privately that some revisions might be required when talks resumed in September. The telegram concluded that since negotiations were not completed and were at a delicate stage, discretion was especially called for. (Telegram 133107; National Archives, RG 59, Central Files 1970-73, AID 1)

Moreover, a public "slowing down" gesture by us would mean our backing down from an important initiative which we have taken in conjunction with the Europeans and Japanese, and add further to the doubts of the lower income countries, especially in Latin America, that we are planning to do anything for them in the economic area. (Multilateral untying will increase the value of aid by twenty percent or more to many lower income countries as well as reduce political friction caused by tying. The Latins, Pakistanis, Indians, and Indonesians would particularly benefit from this.)

Thus, without questioning Connally's assertion that there is strong feeling in certain quarters of the American business community and Congress against our untying aid, it is not now necessary to change our negotiating strategy. An examination of the legal and legislative questions arising from our entry into a multilateral aid untying agreement could be made within the next month, and a report sent to the President so that he may direct a change in our negotiating strategy at that time if he so desires.

 

143. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) and Secretary of the Treasury Connally to President Nixon/1/

Washington, September 23, 1971.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 306, IBRD/IMF. Confidential.

SUBJECT
Reappointment of Robert S. McNamara as President of the World Bank

The Board of the World Bank has recently voted informally to reappoint Robert S. McNamara as its President./2/ His term is scheduled to terminate in April, 1973 with the new term running for five years from that date. Mr. McNamara will not accept reappointment unless he is confident that his acceptance would meet with your complete endorsement.

/2/As early as July 14, Samuels sent Secretary Rogers an information memorandum advising him that McNamara's term expired in 1973. Noting that a decision would be required no later than the Annual Meeting in September 1972, Samuels commented that Canada had already begun to line up support for McNamara's reappointment and that the Bank would soon be requesting the views of the Executive Directors. Samuels noted that, due to retirements among the Bank's senior officials, whoever served as President would have considerable influence on the Bank's future management. (Ibid., RG 59, Central Files 1970-73, AID (IBRD) 9)

It would be most desirable if you would meet briefly with Mr. McNamara and urge him to accept the reappointment./3/ As President of the Bank, Mr. McNamara has been of invaluable assistance to the Administration. He has meticulously followed our advice even on occasions when that advice did not necessarily parallel his own personal convictions as is the case with our assistance efforts associated with the East Pakistan situation. As a former member of the Democratic Administration, he has remained absolutely steady and supportive of your policies on Vietnam although he has undoubtedly been under a great deal of pressure to bolt. Perhaps more importantly, Mr. McNamara has been a most efficient and capable President of the Bank whose reputation and competence has added a great deal to the effectiveness and prestige of that organization.

/3/In a September 15 memorandum to Kissinger regarding a meeting with McNamara scheduled for the next day, Staff Secretary Davis included McNamara's tenure as IBRD President as an item for discussion. Davis commented that McNamara might raise the rumor that the President wanted him removed when his term expired in 1973. She suggested that Kissinger indicate he had no evidence to that effect. She added, parenthetically, that if the rumor were true, it might be Connally's doing, and suggested that Kissinger pursue the matter with him. (Ibid., Nixon Presidential Materials, NSC Files, Agency Files, Box 306, IBRD/IMF)

Recommendation

That you endorse the reappointment of Robert S. McNamara for an additional term as President of the World Bank and that you meet with him briefly to assure him that you look with favor on his accepting reappointment./4/

/4/The President underscored "you meet with him briefly to assure him" and initialed the "Approve" option. At the top of the memorandum, Kissinger wrote: "Set up appointment soonest. I need to attend." On October 14 Kissinger sent the President a briefing memorandum for his October 15 meeting with McNamara. One of the suggested talking points read: "You would personally consider it a benefit and a service to the United States and to the international community if McNamara were to accept a second term as President of the World Bank." (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 306, IBRD/IMF) The President met with McNamara from 10:08 to 10:37 a.m. on October 15; Connally and Kissinger also attended the meeting. (Ibid., White House Central Files, President's Daily Diary) No record of the discussion was found. McNamara was elected to a second term in 1973.

Henry A. Kissinger
John B. Connally

 

144. Editorial Note

The third UN Conference on Trade and Development (UNCTAD III) was held in Santiago, Chile, April 13-May 19, 1972. In preparation for this meeting, Under Secretary of State John Irwin, on October 18, 1971, sent a memorandum to Assistant Secretary Philip Trezise (Policy Analysis Study Memorandum (PASM) 3) requesting the Bureau of Economic Affairs to conduct a review of U.S. objectives and strategy for UNCTAD III. (National Archives, RG 59, S/S Files: Lot 82 D 126, PADM 11) Deputy Under Secretary Samuels conducted a review of the issues on January 13, 1972, and on February 14 Irwin sent a memorandum to Julius Katz (E) and Charles Meyer (ARA) (Policy Analysis Decision Memorandum (PADM) 11), which set out the recommended approach the Department of State should take in preparation for the Conference. The State Department approach was that the United States should adopt a low profile at UNCTAD III, but support new initiatives that had merit and were consistent with U.S. political and economic interests, in the context of UNCTAD as a consultative rather than a negotiating or decisionmaking mechanism. The issues the State Department proposed to support were sufficient in number and importance to make the U.S. image a mildly positive one. (Ibid., S/S Files: Lot 82 D 126, Box 5195, PADM 11)

On October 19, 1971, CIEP Chairman Peter Peterson sent CIEP Study Memorandum 16 to the Chairman of the CIEP Operations Group regarding the UNCTAD III in Santiago. The Operations Group was asked to recommend by January 15, 1972, U.S. positions on the issues on the UNCTAD agenda. (Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 A 15, CIEP Study Memoranda) For the paper prepared by the Operations Group, see Document 146.

The Latin American nations were also concerned about UNCTAD III. On January 27, 1972, the Embassy in Bogota informed the Department of State that Colombia had called for a special CECLA meeting in March in Bogota because of its unhappiness with the outcome of a G-77 meeting in October-November 1971 in Lima, where the Afro-Asian bloc was seen as taking positions contrary to Latin American interests. (Telegram 526 from Bogota; National Archives, RG 59, Central Files 1970-73, E 2 CECLA) See Document 145 for the Department's guidance on the CECLA meeting.

In a March 23, 1972, memorandum, Secretary of State Rogers informed President Nixon that Under Secretary Irwin would head the U.S. delegation for the first few days of the UNCTAD conference, when many countries would be represented at the Ministerial level. Bernard Zagorin, U.S. Ambassador to the UN Economic and Social Council, would succeed him for the full 5 weeks of the conference. The delegation would include representatives from the Departments of Treasury, Commerce, Agriculture, and Labor. Rogers also informed the President that inter-agency discussions were progressing to work out detailed U.S. positions, but the conference would be difficult because the United States had little to offer the developing world and the venue posed a special problem because of sensitive U.S.-Chile relations. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 286, State, Volume 16)

 

145. Telegram From the Department of State to the Embassy in Colombia/1/

Washington, February 16, 1972, 2004Z.

/1/Source: National Archives, RG 59, Central Files 1970-73, E 3 CECLA. Confidential. Drafted by R.M. Ogden (E/OT/GCP), cleared in ARA and IO, and approved by J.C. Leary (E/OT/GCP). Repeated to the Mission in Geneva, USUN, and USOECD in Paris.

27096. Subject: Colombia Calls CECLA Meeting. Ref: Bogota 0528./2/

/2/Dated January 27. (Ibid.) See also Document 144.

1. The following points may be helpful to Embassy in discussions with Foreign Office prior CECLA meeting. Background material on Lima Ministerial and general developments pouched separately./3/

/3/Not found.

For Embassy Background:

(1) US planning low key approach to Conference. We hope to avoid confrontation and keep focus on economic issues. While we are seeking to make US posture forthcoming, no dramatic new initiatives now planned.

(2) US positions on individual agenda items currently in process of preparation. Consequently, not much specific information can be given.

(3) LDCs naturally desire draw out DCs prior to Conference on positions. Developed countries in Geneva and US have been careful to avoid commitment to detailed discussions which likely create misunderstanding, arouse false expectations, and serve as signal to LDCs for more pressure at Conference in certain areas. Nevertheless, we wish to be cooperative and have no objections Embassy's participation in general and informal discussions of type proposed by Colombians.

(4) Major new development at Lima Ministerial was 77 split between Latins and Afro Asians over issues such as: 1) special measures for least developed, 2) relative power and influence in international organizations, 3) benefits commodity agreements and 4) negotiating tactics with DCs. US very interested this development but wishes remain neutral and uninvolved. Embassy should be careful to avoid any action which later construed as US effort widen LDC split.

(5) Colombian initiative interesting, particularly since Colombia has not played active role in UNCTAD recently. Would appreciate Embassy assessment of primary motives for Colombian move, i.e. 1) opportunity to re-open idea of LA regional preferences, 2) increased interest in UNCTAD, 3) concern over coffee agreement, 4) effort to increase influence in LA regional context.

2. Points for Colombians

(1) The US is giving active and careful consideration to all issues on the UNCTAD III agenda. We are seeking to make US posture forthcoming, but there are many restraints on our flexibility; in any case, the LDCs should be realistic in their expectations.

(2) We plan to cooperate fully in examination of key economic issues. We hope confrontation at the Conference can be avoided.

(3) We share LA concerns about European preferential arrangements that may adversely affect western hemisphere exports. We have consistently pointed out the ill effects of such arrangements.

(4) We do not believe the solution to this problem is western hemisphere regional preferential arrangement. Although submission of our generalized preferences legislation has been delayed, we continue to believe that proper approach is a global system of tariff preferences for all LDCs.

(5) We agree that UNCTAD should not be involved in the operations of international commodity arrangements such as the coffee agreement. Problems should be resolved in the framework of the Agreements, not at international Conferences.

Rogers

 

146. Memorandum From the Chairman of the Council on International Economic Policy Operations Group (Samuels) to the President's Assistant for International Economic Affairs (Flanigan)/1/

Washington, March 3, 1972.

/1/Source: National Archives, RG 59, S/S Files: Lot 73 D 288, Box 835, CIEPSM 16. Confidential.

SUBJECT
CIEP Study Memorandum 16 UNCTAD III

The third United Nations Conference on Trade and Development (UNCTAD III) is scheduled for April 13-May 19 in Santiago, Chile. It will be an important event in the evolution of DC-LDC relations. Attached is the general strategy and position paper for that Conference requested in CIEP Study Memorandum No. 16. There is general inter-agency agreement on U.S. positions to be taken on all major UNCTAD III issues except debt relief and an interest equalization fund where Treasury has expressed opposition./2/ The dissenting Treasury positions on these two issues are spelled out in the paper.

/2/According to a March 27 memorandum from Flanigan, the CIEP Review Group was scheduled to meet on March 29 to discuss debt relief and interest equalization issues, which needed further interagency discussion. Flanigan also suggested other issues the Group might take up. (Washington National Records Center, Department of the Treasury, Files of Under Secretary Volcker: FRC 56 79 A 15, CIEP Study Memoranda)

The study calls for a generally forthcoming but low key approach to the Conference. We are not proposing major new initiatives on behalf of the LDCs, but plan to support LDC requests when these are reasonable and consistent with U.S. economic and political objectives. The proposed position is designed to make the best of a difficult situation in which demands of the LDCs are excessive and the prospects for new DC measures are not promising. Our general approach appears to be consistent with the strategy which other developed countries will follow at the Conference.

At UNCTAD III, we can expect the LDCs to press the U.S. hard on a number of issues: aid volumes, LDC participation in monetary reform, the SDR link, negotiation of a cocoa agreement, improved market access for LDC exports, investment problems, etc. What the U.S. does or does not do on GSP will have a particularly important impact on our posture and image at the Conference.

Significant U.S. positions contained in the attached paper are as follows:

1. SDR Link--In parallel with other DCs, the U.S. should indicate at UNCTAD III support for a study in the IMF of the relevance and desirability of a link between the creation of new reserve assets and development finance within the context of international monetary reform.

2. Debt Relief--The U.S. should be prepared to support further IBRD work on general guidelines for debt relief so as to make it as consistent as possible with development needs if this is sought by the developing countries, it being understood that such guidelines are not intended to indicate a broad policy of debt rescheduling. (Treasury does not support this position.)

3. Adjustment Assistance--The U.S. can accept recommendations at UNCTAD III, couched in general terms, that developed countries should seek to develop programs for adjustments to deal with the problems caused by increasing imports from the developing countries.

4. Export Development--As part of our planning for the Conference, the U.S. is exploring opportunities for expanding technical and financial assistance for export development. However, the U.S. would oppose recommendations which call on DC Governments to develop domestic programs designed specifically to encourage and promote the sale of imports from developing countries.

5. Foreign Private Investment--Without highlighting private investment as an issue in the UNCTAD forum, we should make clear the contribution of private investment to the development process.

6. AID Untying--We have indicated the current international trade and monetary situation must be clarified before negotiating a final untying agreement. Under present circumstances we cannot be forthcoming on this issue at the Conference.

7. Multilateral Interest Equalization Fund--The U.S. should oppose resolutions calling for the establishment of a multilateral Interest Equalization Scheme. However the U.S. could support an LDC initiated and supported resolution calling for the IBRD to study the feasibility of establishing a modest fund to subsidize interest-cost differentials. (Treasury supports the first but not the second position.)

8. Institutional--The U.S. should continue to recognize and support UNCTAD as an institution for discussion and consultation on problems and policies connected with trade and development. We should firmly resist pressures to make it more operational and a forum for negotiations.

9. Least developed--The U.S. should be willing to assist the least developed countries in terms of program proposals and to consider financial contributions possibly through the UNDP, the regional banks, or through bilateral programs

Nathaniel Samuels

 

Attachment

CIEP STUDY MEMORANDUM 16--UNCTAD III

I. Situation

1) UNCTAD III (April 13-May 19 in Santiago, Chile) will be one of the longest and largest international economic Conferences of recent years. Like UNCTAD I in 1964 and UNCTAD II in 1968, it will be a major event in the evolving dialogue between developed and developing countries. The LDCs have a long list of grievances and demands to present which were agreed to in November, 1971 at the LDC Ministerial level preparatory meeting in Lima./3/ They have prepared carefully for UNCTAD III, attach great importance to it, and will press hard for new DC actions.

/3/Reference is to the G-77 meeting in Lima October-November 1971.

2) We do not expect major new agreements to be reached at the Conference to relieve the economic frustrations which now exist in the developing world. The developed countries generally do not appear prepared to undertake important new development commitments at this time of uncertainty and transition--over future aid levels, trade arrangements, the new monetary system, etc. Many LDCs understand the situation and have adopted realistic expectations for the Conference. However, some LDCs will adopt a very hard line with many of their sharpest attacks directed against the United States. There is a possibility that the Conference will be marked by confrontation between rich and poor along the lines proposed by the radical LDCs. We hope this situation can be avoided. With appropriate co-operation by all members, the Conference can make a constructive contribution to the development process.

3) The developed countries have been co-ordinating their positions for the Conference in the OECD and at Geneva. It is clear that they are not prepared to take major new initiatives for the LDCs, although certain DCs could propose surprise concessions at Santiago. Most DCs are prepared to be forthcoming on a number of relatively less important issues (least developed, export development) where they can demonstrate good will at little cost, but this clearly will not be enough to satisfy the LDCs. Cooperation among developed countries has been good. In contrast, the Group of 77 is widely split over issues such as special measures for the least developed, tactics for the Conference, and influence in international organizations such as UNCTAD. In general, US preparations and proposed positions are in step with those or other major developed countries. However, we can expect some criticism from other developed countries over our failure to implement GSP and our role in cocoa negotiations. We also can expect sharply divergent views on commodity issues; the US favors a commodity by commodity approach emphasizing market access whereas the Europeans, and particularly the French, support commodity arrangements to stabilize and raise prices.

4) The August 15 action by the President imposing the import surcharge and the ten percent aid cut drew criticism from the LDCs. The negotiations in the Group of Ten leading up the December 18 currency realignment decision brought forth LDC demands for greater participation in the decision making process affecting the international monetary order. The lifting of the surcharge and Secretary Rogers' announcement of our intention to submit GSP legislation to Congress early in 1972 have improved the atmosphere somewhat./4/ What the US does or does not do on GSP will have a particularly important impact on our posture and image at the Conference. In any event, we expect the LDCs will press the US hard on a number of difficult issues: aid volumes, GSP, cocoa, investment problems, the SDR-link, participation in monetary reform, etc.

/4/Following the Smithsonian Agreement of December 1971 (see Foreign Relations, 1969-1976, vol. III, Document 221), President Nixon announced the lifting of the 10 percent import surcharge during his Summit meeting with Prime Minister Heath in Bermuda on December 20, 1971. See Department of State Bulletin, January 17, 1972, p. 63. Secretary Rogers, at his press conference on December 23, 1971, expressed satisfaction with "the measures we have been able to take this week which will benefit the developing nations, especially those of Latin America. I refer to the lifting of the 10-percent surcharge and the President's decision to present legislation to the next Congress establishing generalized trade preferences." (Ibid., p. 49)

5) Although currency realignment is a positive development, the mood of the country and Congress is not favorable to new trade and aid measures for the developing countries at this time. This general climate, together with the timing and site of the Conference and other economic policy considerations, will make it especially difficult for the United States to adopt, and later defend, forthcoming positions in response to LDC requests. We believe our participation at the Conference will have a significant, if short term, impact on our relations with the developing world. We should keep in mind that UNCTAD III is partly a Latin American event, and consequently the nature of our participation will have repercussions on our hemispheric economic and political relations.

II. General Strategy

The US should adopt a generally forthcoming but low key approach to UNCTAD III. We should carefully examine the issues and support new initiatives that have merit and are consistent with US political and economic interests. We should continue to seek a unified Group B position on major conference issues and cooperate in the OECD to achieve this objective.

At the Conference, the US should avoid confrontation with radical LDCs where possible and seek to win the cooperation and support of moderate elements. US statements at UNCTAD should be low keyed, emphasizing the economic merits of issues, and avoiding political polemics. Where there are reasonable grounds for LDC requests, we should support these. We should not highlight the private foreign investment issue in this forum, but should make clear the contribution of private investment to the development process.

In addition to responding to LDC initiatives, we should be prepared to offer sound initiatives of our own and to encourage other DCs to be forthcoming. An important US objective should be increased UNCTAD and LDC attention to LDC trade and development policies to promote their trade and development. This would be in accord with the self-help principle and their recognition in the Lima Declaration that the primary responsibility for the economic development of the developing countries rests upon themselves. Other important objectives should be to keep political attacks against the US out of the UNCTAD forum when possible, and to appropriately underscore our many past contributions to the welfare of the LDCs. To the extent possible, we should continue to recognize and support UNCTAD as an institution for discussion and consultation on problems and policies connected with LDC trade and development, while at the same time firmly resisting pressures to make it more operational and a forum for negotiations.

The proposed US position is designed to face the realities of a difficult situation since it is neither politically nor economically feasible to satisfy most of the LDC demands. However, if we demonstrate we are prepared to consider and discuss reasonable proposals and where possible to take action to support these, our posture will be defensible and in addition will make some contribution to development. Such an approach may discourage some polemics and acrimony; it should at least encourage constructive discussion of the issues and possibly even some atmosphere of good will.

As part of our preparation for the Conference, we believe the Administration should press for prompt and favorable Congressional action on International Financial Institutions (IFI) legislation including the IDA replenishment, Special Funds for the ADB and ordinary capital as well as the Fund for Special Operations (FSO) of the IDB. Approval of these requests would fulfill past and current US commitments to IFIs and reduce LDC criticism of US assistance levels.

[Omitted here are Section III, "Conference Issues," and three attachments: an 8-page "Item by Item Review of UNCTAD III Agenda," an 11-page paper entitled "UNCTAD III--Group of 77--Declaracion de Lima," and a 3-page paper summarizing UNCTAD I (Geneva, 1964) and UNCTAD II (New Delhi, 1968).]

 

147. Draft Memorandum From Secretary of State Rogers to the Assistant Secretary of State for International Organization Affairs (De Palma)/1/

PADM 56

Washington, undated.

/1/Source: National Archives, RG 59, S/S Files: Lot 82 D 126, PADM 56. Secret. Attached to an October 5 memorandum from Claus Ruser (S/PC) to the Deputy Secretary advising him that the Policy Analysis Decision Memorandum (PADM) stemmed from a PARA review that Ruser chaired on September 8. Ruser recommended that the draft memorandum be sent to the Secretary for his review and approval considering his "deep interest and involvement in UN matters." There is no indication that the memorandum was sent to Secretary Rogers. The Policy Analysis and Resource Allocation (PARA) process was internal to the Department of State and did not include clearances from other agencies.

SUBJECT
PARA Review on UN Prospects, Opportunities and Problems Over the Next Five Years

The following is a summary of the conclusions reached at the review on the five-year prospects of the UN system chaired by the Deputy Secretary on September 8, 1972./2/ It is intended to serve as basic policy guidance to the Bureau of International Organizations and the United States Mission to the United Nations.

/2/A 25-page paper entitled "PARA on the United Nations," dated August 28, is attached but not printed.

Part I--Guidance

The UN five years hence probably will not be substantially different from the UN of today.

--Much of what the UN does is not directly relevant to the primary interests of the United States. Nevertheless, the facilitative and supportive functions of the UN system have become part of the essential infrastructure of the international community, including the United States. The importance of the UN as international manager of a multiplicity of social, economic and technical services will grow over the next five years.

--The political-security dimension of the UN will remain distinctly secondary to the economic-social-technical work of the UN. Although there may be improvement in the Security Council's peacekeeping and peacemaking ability, this will be slow in coming.

--The confrontation will sharpen between the undeveloped majority, who see the UN primarily as a means of obtaining developmental and trade advantages, and the affluent minority. African "liberation", colonialism and apartheid will be an increasing focus of General Assembly attention.

--UN budgets in the Ô70s will continue to rise, but at a slower rate than in the Ô60s.

Given this forecast, our basic policy toward the UN should be oriented along the following lines:

1. We should concentrate our efforts on the technical, scientific and social areas, working to establish international regimes on matters such as seabeds, drug control, hijacking, environmental pollution, etc. This is the area in which the UN has been most successful to date, and in which we can further real interests of our own.

2. While maintaining bilateral aid programs, we should contribute our fair share to UNDP and allied programs. For dollar inputs that are small in comparison with our bilateral aid total, we reap a significant political payoff. We must be careful, however, to keep the international financial institutions well insulated from third world political pressures.

[Omitted here are 3 paragraphs unrelated to development issues.]

Part II--Discussion

We and our European allies who founded the United Nations in 1945 saw it preeminently as an organization to provide political security. Although the UN did have an economic and social dimension from the outset, our principal concern was the creation of an organization which would prevent the rise of a state bent on international hegemony, ˆ la Nazi Germany. Additionally, we expected the five major powers who formed the permanent membership of the Security Council to cooperate in settling disputes among lesser powers so that such disputes would not reach the point of open warfare.

During the Cold War years, we found the UN useful as a forum in which to denounce Soviet ambitions and actions. But the massive influx of newly independent states in the 1960s ended the almost automatic pro-US majority in the General Assembly and a more moderate Soviet stance enabled them to work successfully with the new majority on many political issues.

The "third world" countries which now form the overwhelming majority in the Assembly see the UN primarily as a means to obtain a transfer of skills and resources from the developed world. And the political issues debated in the Assembly are those which seize the attention of undeveloped Asia and Africa: colonialism, white minority rule and apartheid. With political and security functions dependent upon cooperation among the five permanent members--and therefore spasmodic and uncertain--the economic and social dimension has become predominant. In 1971, about 94% of UN expenditures went for economic, social and human rights activities; only 6% went for political and security functions.

We are substantially wealthier and militarily stronger than the bulk of the UN membership, and therefore our concerns and needs are quite different from those countries. Because we are so different, and because we have only one vote in the Assembly, we find our concerns often untreated and our views frequently ignored. And because we pay so substantial a proportion of the UN's bills, we instinctively find this situation anomalous. We have thus come to see the UN system as a whole as a rather uncomfortable environment for the US. However, this is because we fail to perceive that the world itself has changed. In its priorities, the UN does reflect the concerns of a majority of the world community.

Looking ahead five years, we have little reason to expect any basic change in UN orientation. As long as the interests of the Big Five remain divergent, peacekeeping will remain uncertain, though it is possible that more can be done through good offices and fact-finding missions to prevent disputes among minor powers from reaching the boiling point. The confrontation between the undeveloped majority and the affluent minority over economic and trade questions will, if anything, sharpen. And the demand will grow for action against South Africa, Portugal and Rhodesia, and for UN assistance to African "liberation groups." On these latter issues, the prospects are that by 1977, the UN will be voting substantial sums to assist "liberation groups" and that, as the UK integrates her foreign policies more closely with her EC partners, the US will increasingly find itself isolated on African issues.

Given this prospect, what orientation should the US adopt toward the UN?

We begin with the assumption that despite petty annoyances, we will continue to be able to prevent the UN from taking actions which would go directly against vital US interests; that while many UN actions and programs will not be directly relevant to our primary concerns, we have a real interest in the success of most of the economic, social and technical work of the UN system. The facilitative and supportive functions of the UN and its specialized agencies have become part of the essential infrastructure of the international community, including the US. The UN will thus have usefulness for us as it manages a multiplicity of social, economic and technical services.

This combination of no threat, a lack of relevance in certain areas but also growing and essential benefits for us in others, dictates that we remain engaged in the UN system. We also have an interest in preserving and fostering the UN's potential for action in the political-security area. Indeed, if we believed the UN to be useful or necessary at the peak of our relative power and influence, it would be strange to find the UN unnecessary at a time when our ability to control international military and economic situations unilaterally has diminished.

Given present realities and our forecasts for the next five years, however, we should take a fresh look at the role we will wish to play in the UN system.

--We should concentrate efforts on using the UN system to establish international regimes on matters such as law of the sea and seabeds, drug control, hijacking, environmental protection, telecommunications, epidemic control, etc. That is, we should recognize that it is the scientific, technical and social areas in which the UN has been most successful to date, and that we can use this area to further real interests of our own. The LDCs will cooperate, but their major interest in programs affecting their economic development will have to be taken into account.

--The UN Development Program (UNDP) is and will remain the UN activity most important to the majority of the UN membership. Its performance has improved recently, and though high quality is hardly uniform, the same may be said of our own aid programs. For political reasons, we certainly will wish to maintain our bilateral aid operations. Moreover, we will always find some UNDP projects far from our liking in conception or administration. Nevertheless, we should recognize that (1) UNDP and allied programs play an essential role in convincing the undeveloped majority of our willingness to provide the UN with at least the minimum resources needed to deal with economic and technical needs; and (2) our dollar inputs amount to little more than 5% of our (now reduced) bilateral aid total. In short, with relatively modest inputs we derive certain political and public relations benefits stemming from the fact that UNDP is the most important UN activity to most of the membership.

We must be careful, however, to keep the international financial institutions well insulated from third world political pressures.

--We must recognize that UNDP and allied programs, even though inexpensive in terms of our total aid commitment still involve appropriation of substantial funds. It will be necessary to educate the Congress and the public on the point that our own interest dictates such programs be adequately funded, requiring an increase in the level of our contribution if we are to pay our fair share.

--We should substantially lower our profile in the General Assembly on matters which do not affect our vital interests, particularly on African issues. Resolutions that we would consider unwise or extreme will continue to be offered in the Assembly and will continue to pass by large majorities. Our general approach should be that, rather than attempting to improve bad resolutions--for example on African issues--we either abstain or vote against as interests and circumstances dictate. As a rule, however, we should avoid a vote against such resolutions if in doing so we would find ourselves in the company of only South Africa and Portugal. If some matter of principle is involved, our position should be succinctly explained for the record. Certainly we should attempt to end the US public impression and concern that in the General Assembly we are constantly arrayed against the rest of the world.

[Omitted here is a paragraph on UN peacekeeping.]

William P. Rogers/3/

/3/Printed from a copy that bears this typed signature.