Foreign Relations of the United States, 1961–1963, Volumes VII, VIII, IX, Arms Control; National Security Policy; Foreign Economic Policy, Microfiche Supplement

372. Telegram 1524 from Bonn, March 22¹

Bonn, March 22, 1961, 7 p.m.

Paris for Ball; Brussels for BUSEC. Embassy telegram 1504. US and Federal Republic technical affairs discussions held March 20 and 21 on quantitative and qualitative elements of foreign aid. At meeting morning 22nd attended by Under Secretary Ball, Ambassador, Van Scherpenberg (Foreign Office) and others, suggestions of US experts on possible areas of agreement were examined. Van Scherpenberg expressed substantial agreement with US suggestions but proposed some minor modifications. Also stated he would discuss suggestions more fully with Federal Republic experts and possibly with Cabinet prior DAG meeting London on March 27. Both sides agreed this morning’s discussions would be set forth in informal minutes, and these follow:

“Possible areas of agreement:

“1) With respect to the principles of burden sharing and their application the following points of possible agreement were identified:

“A. A figure of roughly one percent of the combined GNP’s of the DAG countries is an appropriate general target for foreign aid.

“B. The DAG should serve as an instrument for discussing and proposing a fair allocation of this joint aid effort.

“C. The determination of fair share should not await agreement by experts on a precise formula since the final determination of what is fair is necessarily a political matter.

“D. The principal test of what is each country’s fair share is ‘capacity to pay’, as measured by its national product or income, adjusted to take due account of the use of its population demand perhaps of divergences between actual exchange rates and the purchasing power of national currencies.

“E. The final allocation should reflect some measure of progressivity—the richer nations should contribute a larger fraction of their income than those who are less rich. The reduction of gross national product or national income by an exemption of 100–200 dollars per capita to arrive at a ‘contribution base’ might be a good way to achieve such progressivity.

“F. In determining fair share for aid, appropriate account should be taken of contributions to the common defense.

“2) With respect to qualitative aspects of aid, i.e., the types of financial flows to less developed countries which will qualify as aid, the following points of agreement were reached:

“A. Private and public financial aid which is extended to the less developed countries on commercial terms is both useful and to be encouraged.

“B. The appropriate composition of assistance of the less developed countries—the combination of grants, long-term soft loans, long-term hard loans, short and medium term assistance—should be determined by the needs and stage of development of the recipient country.

“C. There is today a need for a substantial expansion of long-term assistance on terms more liberal than appropriate for private finance.

“D. The governments of the DAG countries must meet this need for long-term non-commercial assistance.

“E. In the determination of fair shares, account must be taken of the fact that aid provided on such terms constitutes a greater burden on the donor country than public or private finance on commercial terms.”

US experts accompanying Under Secretary Ball inclined believe that foregoing maximum Federal Republic willing explicitly agree to at this stage.

Dowling

1. Readout of bilateral foreign aid discussions. Confidential. 3 pp. Department of State, Central Files, 611.62A/3–2261.