Foreign Relations of the United States, 1964–1968, Volume XXV, South Asia

446. Telegram From the President’s Special Assistant (Rostow) to President Johnson in Texas¹

Washington, May 29, 1967, 1829Z.

CAP 67484. I am sorry to do this by wire, but the World Bank’s Pakistan consortium meets Wednesday² morning in London, and I would like to clear our position with you today if possible.

The Freeman-Gaud memo³ I have recommends: (1) We announce our willingness—subject to Congressional appropriations—to consider providing non-project aid at the same level as last year ($140 million). (2) We agree to negotiate a loan for $25 million of that $140 million now from FY 1967 funds for fertilizer imports. (3) We inform the Government of Pakistan that we are prepared to provide 1 million tons of wheat as an initial agreement against FY 1968 targets.

There is no question that Pakistan’s general economic and agricultural performance make it one of the most deserving of our aid recipients. As you read in Dick Gilbert’s memo,⁴ we’re looking for a major breakthrough in grain production in the next year or two. Moreover, Ayub will read our ability to announce a positive response Wednesday as an important signal of your intent to continue rebuilding our relationship.

Our $140 million would be 40–47 per cent of Pakistan’s overall requirement for $300–350 million in non-project aid, which the consortium is expected to endorse. This will support continued import liberalization.

The 1 million tons of wheat would permit Pakistan to import quickly against a projected need for about 2.25 million tons this year. Moving quickly would help undercut price increases. We would take a reading later in the year on Pakistan’s remaining needs after its crop is in, but would include now about $24 million in cotton, oil and tallow.

I recommend your approval of the basic package; Secretary Fowler and Charles Schultze are aboard.

There are two additional issues on which we need your judgement:

1. Freeman and Gaud recommend that we make clear to the Pak Government that we expect half of Pakistan’s remaining FY1968 commercial wheat purchases to be made in the US. Treasury endorses this recommendation. State recognizes that we have applied this formula to the huge Indian program but recommends against generalizing this condition to apply to other PL 480 agreements. Charlie Schultze supports State’s position because he fears that gain in sales under this small program (at most 250,000 tons or $15 million) is not worth the risk of being charged with bad faith under the Kennedy Round food aid and grain agreement. As you recall, all exporters agreed there not to preempt specified shares of commercial wheat markets as a condition for giving food aid. This was part of the price we paid to get other nations to share the food aid burden.

My compromise of this would be to let the Paks know our feelings but not tie them to any percentage. I understand your purpose in the Indian case which is so large as to be in a class by itself. But we probably ought to be careful in the smaller programs. They have already placed FY 1968 orders for 200,000 tons here.

Approve your compromise⁵

Approve strict 50 percent tying

Call me

2. Bill Gaud tried to get Harold Linder⁶ to come in on the consortium offer, at least to the extent of a $20–25 million non-project loan for added fertilizer imports. Harold refused, so there is no such recommendation before you. But I have been trying at every turn to get the Ex-Im Bank more fully engaged in our more promising less developed countries. Given our hopes of making Pakistan the next success story both for our aid program and for the war on hunger, this seems an excellent opportunity to bring Ex-Im along. However, at this stage the only way we could do that would be for me to call Harold on your instruction and ask him to reconsider. I would listen to his arguments but try to persuade him. Pakistan itself has delayed its steel mill—for which Ex-Im had set aside $85 million—to concentrate on agriculture. I think using some of that money to help the Pak fertilizer program would be a fair reward for good sense.

You may tell Linder I would like to offer

$20–25 million unless there are overriding arguments against

See if you can persuade him; just say I asked you to inquire⁷

don’t press this round

1. Source: Johnson Library, National Security File, Country File, Pakistan, Vol. VII, Memos, 10/66–7/67. Confidential. A handwritten “L” on the telegram indicates it was seen by the President.
2. May 31.
3. Reference is to a May 25 memorandum from Gaud to the President concerning the Pakistan aid consortium meeting. Gaud noted in his memorandum that the Department of Agriculture concurred in the recommendations. (Johnson Library, National Security File, Country File, Pakistan, Vol. VII, Memos, 10/66–7/67)
4. Reference is to a May 9 memorandum dealing with the assistance programs for India and Pakistan prepared by Richard V. Gilbert, an economist and specialist on South Asia. (Ibid., Memos to the President, Walt W. Rostow, Vol. 29, May 25–31, 1967) Rostow recommended Gilbert’s analysis to President Johnson in a May 25 memorandum. (Ibid.)
5. Johnson checked this option.
6. President and Chairman of the Export-Import Bank.
7. Johnson checked this option.