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

90. Memorandum for the Files¹

Washington, July 30, 1964.

SUBJECT

• DAC High Level Meeting, July 23–24, 1964

1. Chairman Thorp opened the meeting. He said the new machinery arising from UNCTAD will accelerate the discourse on development and will require DAC members to take public positions on a series of issues. This will require a major effort to coordinate national positions in DAC—both positive and negative positions. Henceforth DAC meetings should be scheduled so as to permit effort to develop common position in advance of international conferences. He made it clear that the other work of DAC should continue, but his emphasis on need to coordinate positions for UN meetings was strong. He said this need represented a “great and new change of focus of DAC’s work”. [While the balance of the two day meeting was largely a desultory procedural discussion of work schedule, the atmosphere was definitely one of a revitalized DAC, with a real job to do and one which it felt institutionally capable of doing. Virtually all delegations explicitly recognized the political importance of UNCTAD and the corollary necessity for coordination among DAC members in the face of the 75.]²

2. Thorp asked how trade policies were to be adjusted if one wants to add acceleration of economic development as an objective of such policies. [While there was no further elaboration of this theme, Thorp clearly suggested that classical commercial policy theories may have to be modified in the light of problems of developing countries.]

3. Other questions raised by Thorp were:

a) How to judge whether more aid is needed;

b) How to judge what to require from the developing countries;

c) Terms of aid and debt service problem—suppliers credits, etc.; and

d) How best to coordinate aid operations.

4. At the end of the two day meeting, Chairman Thorp summarized results, as follows:

a) Establishment of Working Party on UNCTAD, to review conference and examine background and report to DAC. Also, to serve as focal point of greater effort of DAC members to find common ground on UNCTAD issues. The WP would be made up of individuals who participated at Geneva. [I would hope Karazy³ could participate for IBRD. Presumably this would be restricted to Committee III matters; as in other organizations, OECD will have to work out jurisdictional questions over various UNCTAD issues.]

b) Establishment of Working Party on aid requirements and supply. This would use as its raw material work AID (Chenery) is doing this summer to determine what internal and external resources would be required by the 10–15 developing countries to which most U.S. aid goes on alterative assumptions of economic and population growth rates.

c) Revival of Working Party on Terms of Aid. This time to include study of problems created by suppliers credits, swaps and other short-term indebtedness; how to cope with countries that have or may be approaching a debt crisis (including extent to which creditor countries are institutionally equipped to do this efficiently), and how to cooperate—both as among creditors and with debtor—to avoid such a situation arising. [Obviously Avramovic⁴ should play a large role in the analytical work; on questions of how to avoid or cope with problems, Fund should also be involved.]

d) There would be a meeting of DAC this Fall to analyze results of various coordinating efforts; i.e., India and Pakistan consortia, Colombia consultative group, OECD consortia for Greece and Turkey, etc. [Presumably an IBRD Vice President should attend this meeting.]

e) The suggestion was made by several delegations and generally agreed that the DAC Chairman should, in confidence, write each country concrete suggestions on how to improve its aid effort, along the lines of WP-3. Chairman Thorp had already planned to send a letter to each country summarizing his comments at the completion of its Annual Aid Review, and it was agreed that the experience with these letters would be analyzed before proceeding further.

f) The question of greater publicity for the common aid effort (as distinguished from DAC, the institution), including DAC meetings outside Paris, would be studied.

g) Work on (b) and (c) above would go forward with a view to achieving sufficient progress to warrant a DAC ministerial meeting early in 1965. [It might be possible for George Woods to attend this meeting.]

5. Other comments of interest were as follows:

a) Kristensen⁵

i) Any fear of OECD countries seeming to “gang up” on developing countries dispelled at Geneva, where 77 preferred to deal with the developed countries as a group.

ii) Mentioned approaches to OECD for organizing financial assistance from Argentina, Brazil, Rwanda Burundi, Trinidad.

b) U.K. (Rickett)⁶

i) While mutual examination in DAC should continue, it now has a new task—to work out common policies. These need not be negative—in fact, DAC countries should present as favorable a posture as possible.

c) France (deLattre)⁷

i) Geneva calls for harmonized attitude, even if we can’t achieve identity.

ii) France will not reduce aid, but it is not likely to increase, either, so that it will decline in relative terms.

iii) Thought Chairman’s Report optimistic on future volume of aid. While he thought volume should increase, he wasn’t sure it would. Also critical of complaisance about “pipeline” problem. He pointed out the pipeline had not increased because commitments hadn’t increased—not because expenditures had accelerated. Expenditures are not rapid enough because of lack of feasibility studies. Perhaps if more could be done by CIAP, IDB, IBRD, aid givers would have assurance of good projects and could move ahead faster.

iv) It’s fine to talk about private enterprise, but budget aid is the really important factor, since private capital doesn’t come in until take-off point has been reached.

v) Outside of Argentina and Brazil, no major countries have debt consolidation problem.

d) Germany (Sachs)⁸

i) Developed countries must be strongly affected by Geneva, which was not an end, but a beginning.

e) IBRD (Miller)⁹

i) In the course of producing reports requested by UNCTAD, IBRD will want to consult from time to time with DAC.

ii) Miller also said the Bank doesn’t consider aid terms its business, although on an ad hoc basis in Indian and Pakistan consortiums the Bank had put pressure on countries. [The attitude that the general problem of aid terms—and therefore of LDC’s indebtedness—is not proper Bank business, while not commented upon, came as a surprise to me. I would think in the future the Bank should be a good deal more, rather than less, concerned to exert whatever and however pressure is available to it—both in general and specific cases—to bring about softer terms.]

iii) Noted Mr. Woods’ desire to be of help in bringing UN resolutions along and in cooperating with DAC. Thorp commented that he hoped DAC can be of help to the Bank, as the Bank has been to DAC.

John C. Bullitt ¹⁰

1. Source: Washington National Records Center, RG 286, AID Administrator Files: FRC 68 A 2148, PRM 7–1, Development Assistance Committee, FY 1965. No classification marking. Copies were sent to Bell, Gaud, and AID/IDOS. In an attached note to Gaud, July 31, Bullitt wrote that he also sent a copy to George Woods.
2. All brackets are in the source text and have been added by hand.
3. Not further identified.
4. Presumably Dragoslav Avramovic, Yugoslav international bank official and Director of the Economic Staff at the IBRD.
5. Thorkil Kristensen, Danish business economist and OECD Secretary-General.
6. Sir Denis Rickett.
7. Andre de Lattre.
8. Presumably Hans-Georg Sachs, Acting German Representative to the European Economic Community.
9. John Duncan Miller, British international banker and Director of the European Office of the IBRD.
10. Printed from a copy that bears this typed signature.