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

454. Memorandum From George W. Ball to President Johnson¹

Washington, August 15, 1967.

I have reviewed the supplemental memorandum with regard to the India Food Aid Program, submitted by Bill Gaud and Eugene Rostow,² and have the following comments.

The basic question emerged clearly from our Saturday³ morning discussion: should you stretch the concept of matching beyond what the average man (including the average Congressman) would ordinarily understand by the term in order to send an additional 1.5 million tons of grain to India?

In answering the question one must take into account a number of considerations:

a. Would Congress believe an assertion that other nations have met the matching test? If not, what effect would this have on your other programs?

b. Has the Indian political performance been such as to justify our stretching a point to provide them additional grain?

c. Have other donor nations been led to offer additional help on the assumption that, on the basis of their offers, we would now put up the remaining 1.5 million tons?

d. How seriously would India’s development be prejudiced by the need to pay for all or part of the 1.5 million tons from its own resources?

You might wish to ask State and AID to submit answers to these questions. In appraising their answers I would suggest that the following considerations be kept in mind:

1. The question of providing grain should not be determined as though it were a humanitarian matter. It is not a question of whether Indians starve but of how the Indian Government uses its finite store of resources. We know that it is now using some of those resources injudiciously—for an inflated defense budget and some unrealistic development schemes. If they had the will to do so, the Indians should be able to fund the additional 1.5 million tons by simply cutting out some of the floss.

2. The Indians have been characteristically bloody-minded about the Middle East (their active support of Nasser) and about Vietnam (Ho Chi Minh’s birthday telegram). They have certainly not earned the right to special consideration on the basis of performance.

3. I would not worry much about the reaction of other donor countries. We have carried this burden for a long time and they have done damn little.

4. A credible case has not been made that other donor nations have met the matching test by any qualitative standard. This becomes clear if one asks the following questions:

a. Could we expect Congress to agree that the World Bank’s willingness to grant a one-year postponement of $50 million of debt repayment is the equivalent, for purposes of “matching,” to an American offer of $50 million of wheat on PL 480 terms? The same question can be asked with regard to the “debt relief offers” of $33.6 million made by the United Kingdom and $14.5 million made by West Germany; in fact, 80 percent of what is represented as “matching” comes in the form of debt relief.⁴

The critical point, it seems to me, is that, in view of India’s hopeless repayment schedule, most of this debt will have to be rolled over any-way, and this raises the point that has haunted us so long: since we have furnished help on a long-term basis while other countries have provided assistance on a shorter term basis, the Europeans constantly get credit for additional aid by extending old debts while we have to put up new money.

b. Should the Administration take the position that there has been matching when some items are clearly not additional and we cannot know whether others are additional until after the October Consortium meeting?

I would be inclined to answer the foregoing questions in the negative, without meaning in any way to diminish the achievement of Gene Rostow and others in the Government who have certainly obtained concessions that donor countries would not otherwise have made.

Clearly there has been matching with respect to the first step of 96.7 million dollars, but most if not all of the rest is arguable and ambiguous and I heartily disagree with the implication in the Gaud-Rostow memorandum that we can rest any part of our case for matching on the ground that the Indian Government and the IBRD consider that contributions by others have “more than matched” our 190 million dollar offer. They are scarcely disinterested parties.

On the other hand, I would agree with Messrs. Gaud and Rostow that you are not legally bound by the fifty-fifty matching principle. The decision must be made in terms of what is the wisest course after all the issues have been balanced. I think Congress would accept your decision to go ahead with some additional food aid to India (I would stop short of the full 1.5 million tons). But if you decide to do this, I would recommend that you do not overstate what has been done by other donor countries although the Administration should certainly take credit for inducing other nations to grant aid and make concessions that would not otherwise have been forthcoming.

The realistic option, it seems to me, is either to provide no additional wheat or to offer perhaps one-half or two-thirds of the 1.5 million tons requested. This would make clear to Congress that you are not accepting the matching performance of other donor nations at face value but are discounting it on qualitative grounds. Nonetheless, it would be a generous offer and should go far toward enabling India to meet her food requirements while still protecting her development program.

GWB

1. Source: Johnson Library, National Security File, Country File, India, India’s Food Problem, Vol. IV. Secret. Ball left his position as Under Secretary of State on September 30, 1966, and was counsel with the law firm of Cleary, Gottlieb, Stein and Hamilton, and chairman of Lehman Brothers International, Ltd., in New York. Rostow sent Ball’s memorandum to the President on August 16 under a covering memorandum. (Ibid.)
2. Reference is to an August 8 memorandum from Gaud and Rostow to the President, entitled “India Food Aid Program.” (Ibid.) Johnson sent a note to Rostow on August 10 instructing him to send the memorandum to Ball for comment. (Ibid.)
3. August 12.
4. Ball sent another memorandum to President Johnson on August 18, expressing second thoughts about what constituted matching contributions. He suggested that before making a decision, Johnson get a good appreciation of what had been agreed upon with the other donors concerning the standards governing matching contributions. (Johnson Library, National Security File, Country File, India, Vol X, Memos and Miscellaneous, 8/67–2/68)