Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

134. Memorandum From the President’s Deputy Affairs (Bator) to President Johnson¹

Washington, January 28, 1967, 1:30 p.m.

SUBJECT

• Replenishment of the International Development Association (IDA)

Your advisers are now agreed, subject to your approval, on the initial approach we should take with George Woods concerning more money for IDA, the soft-loan window of the World Bank. (You will recall Joe Fowler’s long memorandum on this (tab B),² and your instruction to me to get the relevant people together and work out an agreed recommendation.)³

The agreement is as follows:

1. Fowler would write Woods a letter setting forth the U.S. position. (Proposed text at tab A.)⁴

2. The letter would propose:

(i) An increase in total contributions to IDA from all donors from the present $250 million per year to $600 million in the first year of replenishment, $800 million in the second year, and $1 billion in the third. (A good part of the increase is required just to keep IDA operating at its present rate. Financed in part by carryover of old funds and from other sources, IDA is now lending at a rate of $450–$500 million per year.)

(ii) A cut in the U.S. percentage share from the present 42% to 40%—or $240 million in the first year, $320 million in the second, and $400 million in the third. These compare with current annual appropriations of $104 million. Because of the complicated way IDA is financed, new appropriations would not be needed until FY1969–70–71.

(iii) A complicated new arrangement to protect our balance of payments. This would (a) tie 40% of our contribution to U.S. procurement, and (b) give us the right to postpone use of the remainder for at least three years if we continue to be in balance of payments difficulties.

3. Fowler’s letter would also mention—but not propose—an alternative, less formal balance of payments arrangement. Under this alternative scheme, we could not demand that the Bank postpone use of the untied 60% of our contribution. But the Bank would promise to use this money only when funds from countries with payments surpluses were exhausted. (This procedure would probably provide about as much protection as the more formal one, but Fowler thinks it would be much less useful on the Hill. It would be mentioned in the letter as something we may be prepared to consider if it turns out that some softening of our position is necessary to get the other donors to cooperate.)

All of us—Rusk, Fowler, Katzenbach, Gaud, Schultze, Walt and I —believe it is very important to get more money for IDA. All of us are also agreed that we should start with the above, high money targets, and back George Woods to the limit when he goes after the Europeans for their 60%. Joe’s balance of payments proposal (or, the rest of us think, the alternative scheme) would give us ample protection, both in fact and in argument on the Hill.

Fowler’s memorandum at tab B contains his judgment of prospects in the Congress (marked in the margin). It is clear that the sledding won’t be easy, and that it will probably take your personal intervention to swing it. However, IDA is the key multilateral organization in the aid business. If we want to get the Europeans to face up to the development job, more money for IDA is the best way to do it.

FMB

Approve draft letter from Fowler to Woods (tab A)

Disapprove

Speak to me⁵

1. Source: Johnson Library, White House Central File, IT 14–1, International Development Association, Box 58. No classification marking. An attached note from Bator to President Johnson, January 31, reads: “Secretary Fowler is seeing George Woods tomorrow morning—between his bouts on the Hill—and is anxious to have a decision to communicate to Woods.” Two handwritten notes on this note read: “Fowler wants a meeting on this” and, “Juanita [Roberts]: This was used at 1:00 lunch today. W[alt]” On January 31 from 2:20 to 3:20 p.m., the President had lunch with General Taylor, Rostow, McNamara, Rusk, Komer, and Christian on Vietnam. (Ibid., President’s Daily Diary) No formal record of this luncheon meeting has been found.
2. A 6-page memorandum to President Johnson, December 31, 1966, not printed.
3. In a January 2 note, attached to the source text, President Johnson noted: “Get Bator to read that—it is too much for me to read. Get somebody to boil this down.” Bator “canvassed other parties in town,” and he and Edward Hamilton prepared a 4-page memorandum to the President, January 7, on the same subject. This memorandum noted areas of agreement and disagreement between the President’s advisers. (Johnson Library, National Security File, Subject File, International Bank for Reconstruction and Development, Box 20) Apparently this memorandum was still too long and complicated for the President who asked Bator to develop an agreed position, as set forth in the memorandum printed here.
4. Draft memorandum, dated January 17, not printed.
5. None of the options is checked.