168. Memorandum of Conversation0
SUBJECT
- International Development Association
PARTICIPANTS
- Prime Minister Macmillan
- Foreign Secretary Lloyd
- Ambassador Caccia
- Secretary Anderson
- Secretary Strauss
- Mr. Dillon
The Prime Minister briefly recapitulated his views regarding the heavy electrical case2 and expressed the hope that there could be a rapid decision on the woolen tariff quota with some arrangements made for special treatment of high-priced fabrics and then asked Secretary Anderson to speak on the IDA.
Secretary Anderson outlined the U.S. position stating that he saw in the IDA the only really effective counter to the movement toward some sort of UN activity in this field such as SUNFED, and also a useful means of providing some check on the appetite of the underdeveloped countries for soft loans. This check would operate through the requirement that the underdeveloped countries put up a certain amount of capital in convertible currencies. Secretary Anderson then said he had in mind that each country would put up maybe 10% to 15% of the capital in gold and the rest in convertible currency of one [Page 323] sort or another, and that the stock holdings of the IDA should be roughly in accord with those of the World Bank. He said the U.S. might want to put in some of our own local currency in addition in the form of non-voting stock.
The Prime Minister indicated sympathy for the basic idea of IDA and inquired as to our views regarding the size of the institution and the length of time it would take to expend its funds. Secretary Anderson said that as a very preliminary guess he was thinking of something on the order of about $1 billion capital and said that it would probably take some time to utilize its funds. He did say, however, that it would probably be necessary to have a replenishment of IDA’s convertible funds from time to time.
The Prime Minister said that what the UK was really interested in was not so much the size of their subscription as the amount of funds that were drawn down from year to year and the effect of this on their balance of payments. Both the Prime Minister and Secretary Anderson were in full accord that the IDA should be operated as an adjunct or subsidiary of the World Bank, with the same officers and staff as the World Bank. Secretary Anderson expressed a desire to talk in further detail about the IDA with the Chancellor of the Exchequer. He said there was some problem in finding a way of their getting together without too much publicity. It was agreed by all concerned that such a meeting would be desirable. The British suggested that it might take place if Secretary Anderson found it convenient sometime late in May when there was an important meeting scheduled in England of American business people.
After the meeting broke up, Selwyn Lloyd told me that he was a great backer of this idea within the British Cabinet. He said that the one chief concern that he had was that this was somehow tied in with our program for disposal of agricultural surpluses and would be in effect a means by which we would hope to dispose of larger amounts of agricultural surpluses. This, he said, was the problem with the Commonwealth countries. I reassured him that this was not the case at all, and that our idea of contributing local currencies to this institution was merely to make use of them wherever the World Bank might find them useful, and there would be no attempt to force these currencies on the IDA, or to use the IDA as an excuse for increasing the PL 480 program. Mr. Lloyd said he was reassured to hear this as it had given the British cause for concern.