124. Memorandum From the Director of the Office of International Financial and Development Affairs (Corbett) to the Deputy Under Secretary of State for Economic Affairs (Dillon)1
SUBJECT
- Cooley Amendment to PL 480
The Committee of Conference on the disagreements between the House and Senate versions of the extension of PL 480 agreed to adopt the Cooley amendment in only slightly modified form (Tab A).2 This amendment provides for the use of not more than 25% of the local currency funds for loans to United States private firms for business development and trade expansion in the foreign country. These loans would be through and under the procedures of the Export-Import Bank. Any funds set aside for this purpose and any [Page 314] specific loans made under this authority would of course be mutually agreeable to the United States and the other country.
The executive agencies concerned with PL 480 were unanimously opposed to the amendment and our position was expressed in a letter from Acting Secretary Morse to Senator Ellender (Tab B).
In a statement accompanying the Conference report the House conferees further elaborated their views on the Cooley amendment (Tab C).
When it became apparent that despite our expressed position the conferees might adopt some version of the Cooley amendment, alternative language was suggested which would in effect formalize present practices with respect to local currency loans to United States private firms. The conferees did not choose to accept our alternative language.
There does not now seem to be much disposition among the agencies concerned to fight the amendment on the Senate floor at this late stage.
Assuming that it might be possible to negotiate agreements containing provisions to make loans in the manner prescribed by the Cooley amendment, the interested agencies must reach a meeting of minds concerning general terms and conditions, specific procedures, etc., in order to incorporate mutually agreed provisions in PL 480 sales agreements. Guidance is needed concerning these matters which will probably be considered in the NAC.
To this end it is recommended that the Department favor interest rates and repayment periods on such local currency loans to United States private firms which are similar to the terms available to private firms in the money market within each particular country. More favorable terms on loans under this authority to United States firms as compared with terms available to local firms would doubtless give rise to sharp criticism and ill-will and would mitigate against the willingness of other countries to enter into such agreements.
It is believed that Cooley amendment loans would not be administered through or by the other government. It is recommended therefore that for these loans the Department oppose the maintenance of value provision which is standard policy for loans made to the other governments. The other government would be understandably reluctant to agree to such a provision on funds it did not manage and a private borrower would not find a loan attractive which required this condition.