Foreign Relations of the United States, 1958–1960, Eastern Europe; Finland; Greece; Turkey, Volume X, Part 2

98. Memorandum of Conversation⁰

Washington, March 25, 1960.

SUBJECT

• Call of the Polish Deputy Prime Minister Piotr Jaroszewicz

PARTICIPANTS

• US Side
  • The Under Secretary
  • Mr. Katz, EE
  • Mr. Glenn, LS
• Poland
  • Piotr Jaroszewicz, Deputy Prime Minister of Poland
  • Romuald Spasowski, Polish Ambassador
  • Bohdan Lewandowski, Director, American Desk, Polish Ministry of Foreign Affairs
  • Tadeuz Lychowski, Economic Minister, Polish Embassy

After opening greetings, Mr. Jaroszewicz began the conversation by referring to problems which were raised in part with Mr. Nixon¹ and which should be discussed further. In particular there seemed to be agreement on both sides as to the desirability of increasing trade between the two countries. Possibilities in that direction exist, according to Mr. Jaroszewicz. Specific discussions between the two countries should begin as rapidly as possible as to the means for bringing about such a development, and for obtaining loans for Polish purchases in the United States. It seemed, he said, that the basic difficulty was the question of claims; however, now that agreement on a lump sum has been obtained these questions could and should be resolved. The solution of a number of other problems could proceed apace. These problems were, first of all, the granting to Poland of Most-Favored-Nation treatment, and secondly, the purchase by Poland of an electrolytic tinning line with the savings effected under a previous agreement. Thirdly, there was also a question of the purchase of a list of investment goods by Poland in the United States.

Mr. Dillon asked whether it was clear that the tinning line was to be purchased with funds already allocated for Polish purchases.

Mr. Lychowski said that such was indeed the case. The funds represented savings from the third Export-Import Bank loan on funds allocated for the purchase of polio vaccine and transportation of surplus agricultural commodities. The amount in question is $2.8 million.

Mr. Dillon said he did not foresee any difficulties in this matter.

Turning to other questions, Mr. Dillon stated that we favored increased economic cooperation between our two countries. It would be most helpful in this connection if the claims settlement were to be concluded as soon as possible. While the most difficult of the problems concerning claims, that of the over-all amount, had been settled, there remain other problems, such as the schedule of payments of compensation by Poland. The US side would show understanding in this matter, Mr. Dillon said, and would give consideration to the over-all balance of payments situation of Poland.

With regard to the question of Most-Favored-Nation treatment, Mr. Dillon stated that there apparently was a misunderstanding here. He had heard that the Polish side understood that we would move ahead on MFN treatment following agreement on the lump-sum. This, he said, had never been our intention. It had always been our position that the conclusion of a claims settlement and the granting of MFN would occur at about the same time. Mr. Dillon explained that in order to grant MFN to Poland, the President would in effect have to set aside a law passed by the Congress eight or nine years ago.² The Congress gave the President authority to do this under certain circumstances on the basis that the situation had changed from the time of enactment of the law. Consultations with key members of Congress have revealed that the conclusion of a claims agreement would have a significant effect on the attitude of Congress with respect to increased economic cooperation with Poland. Mr. Dillon stated that he had requested a study of the record to determine how the Polish impression with respect to the granting of MFN might have arisen. He assumed that this might have resulted from statements by Mr. Beale and Ambassador Beam that we would be prepared to give consideration to additional agreements when significant progress had been made in the claims negotiations. Since considerable progress had been made in the claims negotiations, we had been flexible and had agreed to supplementary PL 480 agreements and we were glad to proceed now with the reprogramming of the Export-Import Bank credit to provide for a tinning line. Mr. Dillon asserted that our position did not differ importantly from the Polish point of view. We saw no reason why we could not proceed to reach rapid agreement on the claims settlement and the granting of MFN treatment would therefore not be significantly delayed.

Mr. Jaroszewicz thanked the Under Secretary for his position on the question of the tinning plant. With regard to questions of trade, not only MFN treatment, but also agreement on easy payment terms was of the highest importance for Poland, as Poland must be careful to husband her resources and avoid signing any agreement which she could not honor. It was quite clear that the payment of claims compensation would tax Polish resources in hard currencies, and, therefore, the timing in this area had to be considered in connection with the burden of other Polish obligations to the US.

This brought Mr. Jaroszewicz to the second problem he wanted to raise, that of longer range agreements for the purchase of surplus commodities. He had already mentioned to Mr. Benson a three year agreement in this field. Poland would also like to see the dollar repayment clause eliminated, with the substitution of a repayment in zlotys, which could be used for a domestic investment program, particularly in the area of roads and watershed management, which in itself would improve the efficiency of the Polish economy and make Poland a better payer.

Mr. Dillon agreed that a three year agreement could be studied; the burden of claim payments was something understood by the US side and would be taken into consideration in future discussions. In regard to future agreements the question of the dollar repayment clause could be reconsidered; it is probable that certain rights to repayment in dollars would have to be retained by the US, although it was too soon to express any specific opinion on this question. In any case, negotiations on such questions could proceed parallel with the final stage of negotiations on claims. As for agreements presently in force, the situation was different since it would be difficult for the US to give up the dollar repayment clause without creating a dangerous precedent in regard to other countries.

Mr. Jaroszewicz stated that he interpreted Mr. Dillon’s remarks to mean that the US was agreeable to opening talks to resolve the remaining problems.

Mr. Dillon expressed his agreement with this interpretation.

Mr. Jaroszewicz said that this brought him to a third problem he wanted to raise and which concerned the question of purchases on credit of investment goods, in particular for the Polish steel and chemical industries. This was an area in which legal obstacles exist with respect to the granting directly of Export-Import Bank loans to Poland. This was an area of highest importance for the Polish balance of payments situation; the latter had grown more acute recently because of the decrease in the price of coal and the effects of the European Common Market on Polish exports. Some relatively slight investments in the steel, chemical and machine tool industries would result in great savings of foreign exchange for Poland and in consequence improve the prospects of the repayment of Polish debts. It would be useful to create conditions under which Poland could borrow from the Export-Import Bank and to obtain Export-Import Bank guarantees for private loans.

Mr. Dillon said that we could study the question. There was a particular bill which was sent to Congress; it was, however, uncertain whether Congress would pass it in the current session, since this was an election year and the session would be short. The fact remains that the solution of the claims problem would improve atmosphere in the Congress and it might be possible to find other ways to extend loans. In any case the US would be happy to study any concrete needs presented by the Polish side. In respect to the private loans, there is indeed a law which was passed about twenty-five years ago, the Johnson Act of 1934, concerning the floating of loans to countries in default of payments for previous loans;³ there again a settlement of the question of claims would be helpful.

Mr. Lychowski noted that one solution to the problem of the Johnson Act would be Polish membership in the International Monetary Fund.

Mr. Dillon said that he was not up to date on this matter. Our attitude was quite clear in supporting Poland’s association with the GATT. The IMF and the IBRD were, however, more difficult. He suggested that the Poles discuss the matter with Messrs. Black and Jacobsson.⁴ Mr. Lychowski observed that a green light from the US would be helpful. Mr. Dillon said that this of course was unnecessary.

Mr. Jaroszewicz hoped that this question also could be studied in the conversations which were about to open. He asked what might be the date of the opening of such talks.

Secretary Dillon agreed that the talks should start as soon as possible; he noted that some difficulties on the US side existed in regard to personnel. Mr. Beale on the American side had been replaced as Deputy Assistant Secretary by Mr. Martin.⁵ The latter, however, was Acting Assistant Secretary in the absence of Mr. Mann⁶ and could not devote his time at present to the talks. It was expected that Mr. Mann would be back in the United States in ten days or two weeks and that the talks could begin thereafter.

0. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199. Confidential. Drafted by Glenn and Katz and approved by Brewster on April 6.
1. See Document 74.
2. Section 5 of the Trade Agreements Extension Act of 1951 provided that as soon as practicable the President would “suspend, withdraw, or prevent” trade agreement benefits to imports from the Soviet Union or “any nation or area dominated or controlled by the foreign government or foreign organization controlling the world communist movement.” (65 Stat. 72)
3. Reference is to the Johnson Debt Default Act, April 13, 1934; see footnote 7, Document 46.
4. Eugene R. Black was President of the International Bank for Reconstruction and Development; Per Jacobsson was Managing Director and Chairman of the Board of Executive Directors of the International Monetary Fund.
5. Edwin M. Martin, Deputy Assistant Secretary of State for Economic Affairs.
6. Thomas C. Mann, Assistant Secretary of State for Economic Affairs.