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

379. Memorandum From the Deputy Assistant Secretary of State for Economic Policy, Bureau of Inter-American Affairs (Palmer) to the Deputy Coordinator for the Alliance for Progress, Agency for International Development (Fowler)¹

Washington, December 19, 1968.

SUBJECT

• A.I.D. Policy and the Coffee Agreement

1. Attached is a joint memo from you and me to Paul Clark clearing the revised proposal on A.I.D. policy towards the International Coffee Agreement.²

2. I should point out to you that Phil Glaessner declined to be associated with the clearance memo but indicated that he would not oppose an affirmative attitude should you and I decide that this proposal was beneficial. This Bureau, of course, initiated the proposal in a somewhat stronger form several months ago.

3. You may recall Phil’s memo to you dated December 6, in which he spelled out his objections. (Copy attached for your reference.)³ In its revised form, the draft action memo and airgram, I believe, should satisfy most of Phil’s objections. In fact, the present proposal is, in many ways, less harsh than Phil’s alternative proposal. In the first place, Phil seems to relate export quota violations to the proposed policy. Actually, export quotas are not mentioned because it was realized that the responsibility for quota enforcement is hard to pinpoint as between exporters and importers. This policy is directed only at the establishment of production goals (Article 48) and diversification efforts (Article 54) where appropriate. In this regard, we would seek self-help performance commitments which would evidence the recipient country’s intent to comply with the ICA requirements under those articles. These conditions would apply to program loans and other loans related to the agriculture sector, including PL-480, if possible. (Note that Agriculture did not object to commitments along these lines in the Ecuador PL-480 case.)

4. While it is hoped that the proposed policy would facilitate better enforcement of the ICA, the intent is not to set ourselves up in a police role. Obviously, we could not go beyond the standards set by the ICO. The most important objective of this policy would be to assure ourselves that we are not providing assistance to countries which are benefiting from the resource transfer the ICA represents while refusing to cooperate in making the ICA work. Regarding Phil’s question as to whether we could refuse assistance to Guatemala or other “politically hot” countries simply because they flaunt Articles 48 and 54 of the ICA, I think it is also fair to ask whether it would be politically (not to mention economically) wise for us to provide new assistance to such countries if the ICO indicated its dissatisfaction with their performance under these articles, or if it were invoking the sanctions called for in the agreement.

1. Source: Department of State, Central Files, AID(US) 1. Limited Official Use. Drafted by J. Krizay (ARA/ECP). The source text bears a handwritten note from Fowler that reads: “Agree—I’ve cleared memo to PPC.”
2. Not printed.
3. In this memorandum, not printed, Glaessner examined the question of what actions should be taken against countries that exceeded their export quotas under the International Coffee Agreement. Although he believed that “overriding reasons of a political nature” made U.S. sanctions against such countries unlikely, Glaessner suggested that authorization of future development loans and P.L. 480 agreements could be linked to compliance with Articles 48 and 54.