Foreign Relations of the United States, 1964–1968, Volume XXVI, Indonesia; Malaysia-Singapore; Philippines

344. Memorandum for the Record¹

Washington, September 15, 1966, 5 p.m.

SUBJECT

• Final Conversation Between President Johnson and President Marcos

(This memorandum was prepared by Mr. Bundy and cleared by Mr. Rostow. Since it has not been personally seen by the President, and in view of the sensitivity of the discussion at some points, it should be used solely for working reference, and its distribution is being limited to the following on an Eyes Only basis: Secretary Rusk, Secretary Fowler, Secretary McNamara, Mr. Ball, Mr. Rostow, and Mr. Bundy. A copy will also be given to Ambassador Blair for his personal use on his return.)

Present were:

• President Johnson, Mr. Ball, Mr. Rostow, Ambassador Blair, and Mr. Bundy.
• President Marcos, Secretary Ramos, Secretary Romualdez, Secretary Umali, Mr. Aspiras, Dr. Mapa, and General Menzi.

1. Stabilization credit. The President explained the reasons why the Secretary of State and the Secretary of the Treasury could not agree either to a general undertaking to support the peso or to a specific stabilization credit. He pointed out that we had never given an undertaking of support for any foreign currency, and that we had extended stabilization credits only in a multilateral framework involving the IMF. To depart from these principles would be a serious problem in our relations with other countries.² The President and Mr. Bundy also argued that the peso was now in sound shape, and that any reference to the subject might cause doubt in many international circles.

President Marcos and Secretary Romualdez argued that, while the peso was in sound shape, there were many speculators who were contending that the expenditures under the Marcos program would lead to inflation.

In light of President Johnson’s position, there was some discussion whether the paragraph should be retained with general language as proposed on the American side. President Johnson finally asked whether the paragraph was necessary, and made clear that it was not important from a US standpoint. President Marcos, in consultation with Secretary Romualdez, finally suggested that the paragraph be dropped altogether, and this was accepted.³

2. Offshore procurement.⁴ President Johnson explained that the creation of a special committee would appear to give favored status to the Philippines, and that this would cause us embarrassment in other countries. He urged acceptance of our draft language.

President Marcos did not press for the special committee, but did ask for a reference to a “procurement office.” Mr. Bundy explained that the DOD simply had to keep the executive responsibility for Far East procurement in Tokyo, and that a separate action office in Manila would be inefficient. Mr. Bundy noted that the present Procurement Information Office should provide full information, and was closely wired to the Tokyo action office. Thus, with the assurance of participation on a “full and equitable basis,” we believed we were going as far as we could.

President Marcos said that the problem was that a lot of Philippine sales under the program were now going through middlemen in Hong Kong and elsewhere, who had better information and connections to the US procurement authorities than the Philippine businesses did for themselves. Mr. Bundy said that this was a problem that should be remedied as the new Procurement Information Office took hold, and that we would take all necessary steps that this was the case.

President Marcos asked specifically about offshore procurement of drugs. Mr. Bundy explained that the US had engaged in such procurement only in very special cases where there was a marked quality and price advantage, as in one Italian situation. Mr. Bundy said that this had to be our policy, since our general attitude was one of limiting offshore procurement in every possible way for balance of payments reasons. If Philippine suppliers could qualify on the basis of such special advantages, they could participate, but only if this were the case. Mr. Bundy also referred to current US policy, under which steel products were not being purchased under offshore procurement, and explained that this was due in part to strong Congressional pressures.

President Marcos finally agreed to the basic American language, but suggested the deletion of the last two sentences referring to the Procurement Information Office. This was accepted by President Johnson.

3. Military construction. President Marcos asked acceptance of the Philippine language. President Johnson explained that this would carry the implication of an enlarged US undertaking, and that we simply could not do this, particularly at a time when we were cutting back military construction within the US. President Johnson said that we would simply have to leave it that we would go forward with any plans that were fully justified, but could make no undertaking in the communiqué.

President Marcos accepted President Johnson’s position.

4. Over-all settlement of veterans matters. President Johnson referred to the proposed Philippine sentence that would have called for an over-all, Congressionally-approved settlement of all veterans matters. President Johnson explained that any further Congressional action in this area was out of the question. President Marcos accepted President Johnson’s position, and the language was removed.

5. Special Fund for Education. President Marcos asked that the Philippine language be accepted, releasing the Fund to the Philippines and handing over its administration to a joint commission, with specified categories of use. President Johnson said that he was prepared to release the funds as rapidly as projects were approved, and specifically indicated that if President Marcos wished to go ahead with the allocation of $3 million for the cultural center he would be prepared to approve this and to start the machinery. (President Marcos did not himself refer to the cultural center, or pick up this specific offer.) However, President Johnson said that the existing joint panels had been established to develop project proposals, and that the thing to do was to have them get on with it. Finally, President Johnson said that we could not release the Fund to the Philippines for balance of payments reasons.

After some brief discussion, President Marcos accepted the deletion of the Philippine language, and it was agreed that the American language would be revised to constitute a direction to the joint panels to accelerate their work, with the two Presidents concurring that there should be rapid payout as projects were approved.

6. Paragraph order. President Johnson began by saying that he might have made a mistake in suggesting that the science paragraphs come first, and that of course he would be prepared to accept another order if President Marcos desired. Nonetheless, he wanted to make clear that his reason for putting the science paragraphs first was to get the “dollar sign” out of the communiqué, and to make clear that the two Presidents had talked of broader and more fundamental things. He enlarged on this point at some length, referring to the problem of a large country appearing to give largesse to a smaller country. Basically, President Johnson stressed his belief that the proposed paragraph order was in the interests of President Marcos himself.

President Marcos seemed to take to this argument, and there was some lighter exchange. Finally, President Marcos turned to his delegation and asked who had suggested the transposition, implying that it had never been his idea in the first place. Secretary Romualdez said that he had suggested the changes. President Marcos finally said that of course he would accept President Johnson’s paragraph order and thought it was fine. This ended the substantive discussions on a light and friendly note.

1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL PHIL–US. Secret; Exdis. Drafted by Bundy. According to the President’s Daily Diary, the meeting lasted from 5:08 to 6:03 p.m. (Johnson Library) Prior to this meeting, Marcos met with McNamara at the Pentagon from 4 to 4:30 p.m. A memorandum of their conversation by McNaughton, September 15, I–1307066, is in the Washington National Records Center, RG 330, OASD/ISA Files: FRC 70 A 6648, Philippines 00.1—333.
2. President Johnson received a memorandum from Under Secretary of the Treasury Joseph Barr, September 15, strongly recommending against including in the Joint Communiqué issued at the conclusion of the Marcos visit a U.S. pledge to support the Philippines’ peso. With the Department of State’s concurrence, Treasury stated that the United States had never done this except on an ad hoc basis and it would “open up a Pandora’s box of requests throughout the world.” Both Treasury and State opposed standby credit for the Philippines from the Exchange Stabilization Fund. Such assistance should only be used in conjunction with financial support from the International Monetary Fund and World Bank. (Johnson Library, National Security File, Country File, Philippines, Marcos Visit Papers, Memos, 9/14–16/66)
3. he text of the communiqué as released is printed in Department of State Bulletin, October 10, 1966, pp. 531–534 and American Foreign Policy: Current Documents, 1966, pp. 726–730.
4. William Bundy sent Johnson a memorandum, September 15, recommending the positions on offshore procurement and the rest of the issues discussed at this meeting. (Johnson Library, National Security File, Memos to the President, Walt Rostow, Vol. 13, 9/15–30/66)