398. Letter from McGovern to Rusk, November 61

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Dear Mr. Secretary:

Several members of the Congress have expressed their concern over the question of loans and grants in P.L. 480 Title I agreements. As you know, Senator Ellender stated his view on this subject in a letter to you dated September 29, 1961.

The success of our Food For Peace Program depends not only upon Public Law 480, but also upon vigorous and imaginative execution of that Law. We are realizing more and more that the Law can be a powerful and effective instrument of economic development abroad. I have long believed that our agricultural resources represent a tremendous national asset which ought to be meshed into our foreign policy objectives. Indeed, this was the President’s chief reason for creating the Food For Peace office with his Executive Order of January 24, 1961. Likewise, the Secretary of Agriculture has publicly underscored the economic development possibilities in Food For Peace.

If such a broad purpose is to be accomplished, it is my view that we need to exercise more, not less, flexibility in the grant-loan component of Title I agreements.

I am persuaded to this view further because of the accumulation of inconvertible currency derived from Title I sales and the repayment of Title I loans. As was so clearly pointed out in the “Mason Report” instigated by Secretary Dillon in 1960, the accumulation of these currencies far beyond any practical U.S. use constitutes a serious political danger for us and a potential fiscal hazard for the host country. It is certainty a political risk for the United States to acquire a potential claim on the resources of a country to a degree that we could dictate the development plans and fiscal conditions of that country.

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It would not seem to be very good sense, therefore, for us to follow a tough line on grants in those countries where we have already accumulated more currency than we can ever use to good advantage.

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I am informed that an interagency group of experts is now working on the problem of grants as defined in Senator Ellender’s letter. May I suggest that this group broaden its effort to cover the problem in its full setting, including the areas covered by the Mason study.

After informal interagency discussions have proceeded to the proper point. I would like to convene a meeting with yourself or your designee, the Secretary of Agriculture, the Secretary of the Treasury, the Administrator of AID, and the Director of the Bureau of the Budget for the purpose of developing an Administration position on the great problem and the related matter of currency accumulation.

I should appreciate learning whether this procedure meets your approval.

Sincerely yours,

George McGovern
Special Assistant to the President
Director, Food For Peace
  1. Congressional concern regarding loans and grants in PL–480 Title I agreements. No classification marking. 2 pp. Washington National Records Center, RG 286, AID Administrator Files: FRC 65 A 481, Agriculture, FY 1962.