143. Memorandum From the Assistant Secretary of State for International Organization Affairs (Wilcox) to the Counselor of the Department of State (MacArthur)1


  • Arguments for and against SUNFED

In line with our conversation in the hall yesterday morning I am sending along a brief memorandum outlining the case for [and] [Page 373]against SUNFED. I should add that most people who have studied the problem do not necessarily subscribe to the SUNFED proposal as it has been put forth in New York. Indeed I think it is more appropriate to talk in terms of a multilateral assistance program without specific reference to SUNFED inasmuch as that term has fallen into disrepute in some quarters.

If we should decide to offer to participate in a multilateral assistance program, I believe we should do it in the context of a broader program which might envisage various steps by the recipient countries to encourage productivity within their borders. For example, they might well agree to create a more favorable climate for private capital which is so essential if any economic development program is to succeed.

You may have noticed that Congressmen Hays and Merrow in their report to Congress on the Tenth General Assembly commented very favorably on multilateral aid programs. They state:

“It is our conviction that the delegation’s statement should have included emphasis of the need for utilizing multilateral programs to an increasing degree. It is urgently necessary that in the future we make far greater use of the United Nations system for foreign aid than we have in the past. This would not mean an increased amount of money appropriated for foreign aid but rather the channeling of a part of existing appropriations through United Nations machinery.”



The Case for SUNFED


The underdeveloped countries want SUNFED. They want it urgently and persistently. They want it whether it will be a small fund or a large fund, whether it will be effective or ineffective. SUNFED has become a symbol of their cause. It is entirely understandable that they should be devoted to SUNFED. They would be partners in the allocation and distribution of aid rather than dependent recipients; they could avoid the political entanglements they believe to be implicit in bilateral aid; by institutionalizing aid they could assure its continuity. Moreover, they value the UN. It has given them prestige and position. It is their forum. They want to strengthen the UN by giving it an active positive role in promoting economic and social welfare.

By withholding support for SUNFED, we have been thwarting the underdeveloped countries in the realization of an important aspiration. The fact that we have responded to the most urgent and [Page 374]pressing needs of the less developed countries through large programs of bilateral aid has not quieted the clamor for SUNFED; it has blurred the public image of the U.S. as the disinterested friend and benefactor of the less developed countries; and it has deepened the conviction among them that we wish to strengthen the United Nations only in its political arm.

If we were now to support SUNFED, our decision to do so, although belated and believed to be inspired by the Russian offensive, would nonetheless be widely and genuinely acclaimed.

It is entirely possible that the Russians may decide to give vigorous support to the early establishment of SUNFED. They have already indicated their willingness to consider joining and to contribute in kind although they entered some minor caveats about grant aid. While the Russians, like us, prefer to provide aid on a bilateral basis, they could make extraordinary capital at our expense by adopting an aggressive pro-SUNFED position. We have no guarantee that they will not do so. The cost in resources would not be too great and the propaganda yield could be enormous.
Our public position in the United Nations on this issue is tenable but it does us no credit. It is not especially convincing even to ourselves. We maintain that the resources that SUNFED could command at this time would not justify establishing a complex international machinery. Yet the United Nations Technical Assistance Program, the Children’s Fund, the International Committee for European Migration and many other multilateral programs make a contribution of some effectiveness with smaller resources than SUNFED could certainly command if the United States gave it support. Each year we are confronted with the SUNFED issue at the ECOSOC and at the General Assembly. From time to time we are confronted with it at FAO, at UNESCO, at the ILO, etc. On each occasion, our statement, whether strident or muted, falls with a dull thud. It is difficult to determine how this affects our relations in the United Nations. Our delegations to these UN bodies have generally felt that our negative posture was a divisive force in the UN, widening the rift between the developed and underdeveloped countries, and not in keeping with the position of leadership we should assume.
The same case can be made for an international development fund to provide grants and soft loans that can be made for an international bank; (a) it permits many countries to pool resources and share a common burden; (b) an international agency can more easily set onerous but necessary conditions of aid; (c) it eliminates the resentment and ill-will that is often generated in the bilateral aid relationship between magnanimous donor and dependent recipient; [Page 375](d) effective international cooperation for economic development strengthens the United Nations.
SUNFED would not be an overly costly operation. The proponents talk of an annual fund of $250 million (or less). If we followed the IBRD or UN budget formula, the U.S. share would be roughly 1/3 or $85 million a year. Short of substantial savings from disarmament, it is most unlikely that other contributions would be so great that our 1/3 share would rise above $100 million. It is more likely that our contributions, if provided on a matching basis, would fall below $85 million.

For $80–$100 million a year we should have called forth contributions from others, largely Western Europe, the Commonwealth, Japan, and possibly the Soviet Bloc, of two times as much. If the organization were reasonably efficient, the bulk of these funds would be used to construct roads, dams, bridges, harbors, schools and hospitals in the less developed countries, much as IBRD loans do, and with the same general benefit to our foreign policy objectives. The bulk of our foreign aid would continue to be made available on a bilateral basis.

For $80–100 million a year we should have disembarrassed ourselves of a most unsatisfactory position in the UN, have given concrete evidence of our disinterest in promoting economic development, be working with the less developed countries through the instrument of their choice, and taken the initiative from the Russians.

The Case Against SUNFED

We prefer to provide aid on a bilateral basis. We control the funds; we determine the priorities. The recipient knows that we are the source of aid. When our funds are merged in the common pool, our contribution loses its identity, and such good will as the aid creates is directed toward the United Nations rather than to us.
While it is possible to have an efficient international development fund, SUNFED might well turn out to be a log-rolling operation with everyone sharing in the pie regardless of need, domestic effort, or capacity to use aid effectively.

If we made our contribution to SUNFED contingent on the fulfillment of certain conditions to insure efficiency and genuine pooling of resources, e.g. weighted voting, affiliation with the IBRD, contributions in convertible currency … ,2 we should find ourselves embroiled in a bitter fight with the less developed countries, and much of the political capital we might derive from supporting [Page 376]SUNFED would be dissipated. By analogy, consider with what acclaim the President’s proposal to establish an international atomic energy agency was first greeted and compare the confusion, resentment, and ill-will that was expressed at the last General Assembly on this issue.

We should, of course, try to set conditions that would be less likely to generate friction and still achieve the same ends. We might propose that the administration of the Fund be put in charge of a manager—some distinguished person of international reputation— who would report periodically to the members but who would have full authority to make decisions during his tenure in office. This would take the administration of the Fund out from under political control, but we as well as the less developed countries should then have given up our voice in formulating policy. Alternatively we could protect ourselves by requiring that no allocation of a member’s contribution be made without the member’s consent in each case. This would not increase the efficiency of the Fund nor would it ensure any pooling at all; it would, however, insure our control over our own contribution.

If we had a voice in policy (through control over the use of our contribution or as a member of the Executive Board), we should have a multitude of headaches. For example, we would be hard put not to support Latin American requests for grant aid; or requests for funds for government petroleum development; or requests from Soviet satellites (unlikely but possible) for, let us say, the erection of a hospital. Each use of our veto could have quite unsatisfactory political repercussions.
If the Russians and satellites joined, and it is likely that they would, we should be jockeying with them continuously for position—unless we were prepared to turn the management of the Fund over to an independent administrator.
While our decision to support SUNFED would be greeted with acclaim, within a few years our annual contribution would be taken for granted. It would have become an obligation, and if we reduced our contribution or if Congress delayed voting funds (as in the case of the UNTA) we should be sharply criticized.
We might have a hard time persuading the Congress to permit the use of aid money through SUNFED, in part because the Congress prefers bilateral aid and in part because the Soviet satellites might be potential recipients of aid. (To date the Soviet Bloc members have not requested technical assistance through the UNTA; they might be equally reluctant to ask for capital aid if this involved SUNFED missions, examination by an international staff of development programs, fiscal policy etc.) If the Congress were persuaded, however, they might require that any contribution to SUNFED come [Page 377]out of or be in lieu of Title II funds, the Asian Fund or the proposed Middle East Fund. Before requesting funds, we should have to weigh in the balance the loss of our foreign policy objectives that would result from the possible diminution or extinction of these bilateral programs against the gain to be derived from supporting a global development fund. The balance would probably be struck in favor of continuing bilateral programs and the regional funds.
  1. Source: Department of State, Central Files, 398.051/3–3056. Confidential.
  2. [Enclosure]
  3. Ellipsis in the source text.