125. Memorandum From Ruth H. Kupinsky to the Director of the Office of European Regional Affairs (Timmons)1
SUBJECT
- PL 480—Further Developments on the Cooley Amendment
It is now assumed that the Cooley Amendment to PL 480 will be approved by the Senate and incorporated in the PL 480 Act to be signed by the President. The Senate may act on PL 480 in the next few days if Senator Johnson’s request for a recess of discussion on the civil rights bill is accepted.2 As it now stands, the Cooley Amendment provides that a maximum of 25% of the currencies received from PL 480 agreements should be made available to U.S. business firms for business development and trade expansion in PL 480 countries and for assistance in increasing the consumption of and markets for U.S. agricultural products. These currencies would be made available through the Export-Import Bank for loans mutually agreeable to the Bank and the country with which the agreement is made.
I understand from Mr. Turnage of OFD that an informal interagency group has been working with the EX–IM Bank to establish procedures for implementing the amendment. When these procedures are further along, OFD is planning to consult with the geographic bureaus, possibly through a meeting to discuss the proposals under consideration. The preliminary thinking thus far indicates that most of the screening of the proposed loans will be done by the other countries rather than by the U.S., since the Cooley Amendment is drawn in such broad terms that EX–IM Bank considers that all that is required here is a general evaluation of the creditworthiness of the private borrower. Other countries, however, will probably set up much more comprehensive screening standards. In addition, EX–IM Bank is suggesting that interest rates charged to private borrowers should be similar to the interest rates for similar projects in the country in which the investment will be made. It is not expected to require a provision for maintenance of value. Repayment terms will probably be tailored to the project, rather than set at the normal 40 year repayment period for other PL 480 loans. It is [Page 316] OFD’s recommendation that in negotiating these loans, the U.S. start at the 25% figure so that there can be no allegations later that the executive agencies were responsible for damping down the program.
It is generally believed there will be very little business under the Cooley Amendment. The Latin American countries, where there would be the most interest, will have relatively small PL 480 programs in the next year. In the European area, Poland, Yugoslavia and Spain will probably receive the largest PL 480 allocations. It is unlikely that the Cooley Amendment will be drawn on in Poland and Yugoslavia, while in Spain there are likely to be so many uses for the local currencies, there will probably not be many calls for Cooley-type loans. All in all, it is considered that the amendment will involve severe negotiating difficulties in a program already replete with these. It is not expected that the U.S. will derive much leverage in PL 480 negotiations from the amendment.
- Source: Department of State, Central Files, 411.0041/7–3057. Official Use Only. Kupinsky was in the Office of European Regional Affairs.↩
- On August 5, the Senate passed the conference report which adopted the Cooley amendment as part of the Public Law 480 extension bill of 1957. For text of the act (P.L. 128), approved by President Eisenhower, August 13, 1957, see 71 Stat. 345.↩