471. Memorandum From the President’s Special Assistant (Rostow) to President Johnson1
SUBJECT
- PL 480 Grain for India
You will recall authorizing Freeman and Gaud to start negotiations with India on the basis of a 3.5 million ton package to cover the first six months of 1968. The Indian side of the bargain was a strong self-help package headed by abolition of the inefficient zonal boundaries which now restrict movement of food between stages. The package [Page 921] also contained other important steps to keep farm prices up, get the central government into a position to smooth out price fluctuations, and continue to build up imports of fertilizer, pesticides and improved seeds. You asked them to report back to you when the results of the negotiation were clear and before anything was signed.
At Tab B,2 Freeman and Gaud report that they have been able to get Indian agreement on every aspect of the package except immediate elimination of food zones. The Indian Food Minister has told us that he wants and intends to eliminate the zones, but that it would be political suicide to try to do it before next fall when the current crop is in and there is a fairly solid estimate of next year’s crop. Freeman and Gaud are inclined to agree. They recommend that we go ahead with the package on the assurance that the Indians will move next fall if conditions improve as expected. Charlie Schultze supports this conclusion; his memo (Tab A)3 is a good summary of the proposal. (You will note that this step would involve no additional budgetary costs.) Joe Fowler asked us to tell you that his views haven’t changed since October (he would like to see more contributions from others and a specific quid pro quo on commercial sales), but he is not inclined to press them again now.
Congressional Attitudes
As agreed in October, Freeman’s Congressional consultations have been limited to the people you sent to India last December. Congressmen Poage and Dole support the proposal as recommended, but Senator Miller would prefer to insist on full matching from other donors and to cut down the size and/or extend the duration of the agreement. (Miller’s suggestions are discussed on pages 2–3 of the Freeman/Gaud memo at Tab B.) Freeman does not believe Miller can be persuaded to agree to his proposal, but he states that “he has no reason to believe” Miller will make a public fuss if we go ahead.
On the merits of Miller’s first suggestion, Freeman and Gaud believe—and I agree—that if we insist upon matching from other donors, we won’t move much more than 1 million tons of wheat to India in all of 1968. The result would be lower U.S. wheat prices, higher CCC costs, and no pressure on India to make agricultural policy reforms. We have a matching rationale for 1968 in the Kennedy Round Grains Agreement which requires the Europeans to provide 2.3 million tons of grain per year in food aid beginning July 1, 1968. We can represent [Page 922] that Agreement as the multilateral matching formula we have been after, replacing our 1967 insistence on bilateral matching. Miller is right that this would result in much less than even matching of U.S. food aid. But if we want to come anywhere near the 11 million tons of wheat Agriculture wants to move next year to support domestic prices and keep CCC costs within reason, we must have a policy which allows us to provide much more to India than the other donors—rightly or wrongly—are willing to provide. Even so, the Freeman/Gaud memorandum pledges that we will keep the heat on the others as much as possible.
Miller’s other suggestions would (a) cut the new agreement to 2 million tons over four months or (b) keep it at 3.5 million tons but make it cover all of 1968 rather than just the first six months. The Indians might accept the first, but only at the price of eliminating some or all of the policy reforms promises they are now prepared to make. They would consider the second totally inadequate to provide a resource base for the buffer stock/price support operation we are trying to get them to set up—and they would be right. In either case, negotiations would drag on for weeks and perhaps months, during which we would not be shipping any grain and our negotiating position would be deteriorating as the bumper Indian crop hit the market.
For these reasons, Freeman recommends we proceed without further contact with Miller.
Timing of Announcement
There is one other small issue. Freeman and Schnittker want to announce our offer immediately to get a domestic price effect. Gaud & Company would rather wait a day or two to nail things down with the Indians. It would be better international relations to wait until we have solid agreement with the Indians, but it would not cause us major problems to announce now if you agree that the domestic price needs an immediate jolt.
1. Approve Freeman/Gaud/Schultze proposal4
2. Freeman to have another talk with Miller, but to go ahead whatever Miller says
3. Freeman to have another talk with Miller and report results to me before my decision
4. Disapprove
5. Speak to me
- Source: Johnson Library, National Security File, Country File, India, Vol. X, Memos and Miscellaneous, 8/67–2/68. Confidential.↩
- Reference is to a November 22 memorandum from Freeman and Gaud to the President entitled “Food Aid for India in 1968.” (Ibid.)↩
- Reference is to a November 27 memorandum from Schultze to the President entitled “Food Aid for India.” (Ibid.)↩
- Johnson checked this option.↩