Foreign Relations of the United States, 1964–1968, Volume XXIX, Part 1, Korea

205. Action Memorandum From the President’s Special Assistant (Rostow) to President Johnson¹

Washington, October 9, 1968, 7 p.m.

SUBJECT

• PL–480 Rice for Korea

You asked me to look further into the Purcell amendment and the rice package for Korea. The Purcell amendment requires, in the case of the PL–480 credit portion of the sale, that the Koreans make an additional cash payment to cover U.S. expenses and other specified uses, unless you determine this would be inconsistent with the objectives of the Act.

The recommendation is that you so determine. These are the reasons:

1. The PL–480 rice is part of a 400,000 ton package that has an exceptionally good commercial portion.

• —245,000 pounds, valued at almost $42 million, is under PL–480 terms: This includes the usual 5 percent cash down payment and the balance payable in dollars over forty years. In itself this is a shift for Korea from local currency to dollar repayable terms. This shift is in accordance with the objectives of the Act.
• —100,000 tons, valued at $17 million, is a straight commercial CCC transaction repayable in dollars in three years, one-third each year.
• —55,000 tons, valued at $9 million, is for cash.

2. It would have been possible to apply the straight cash portion of the transaction to the PL–480 part of the package. This would have met the Purcell amendment requirement but would have been less advantageous to us. We would have gotten these dollar receipts over the course of a year but under the present package, we receive the cash payment immediately. Furthermore, the commercial part of the package would be smaller. This would be inconsistent with the stated objective in the Act to build up commercial markets.

3. As the previous memo pointed out,² we are competing with the Japanese. The Koreans, mindful of their long-term interest, might be pushed further but we cannot be sure. There would be a risk. In any event, there would be more delay and some balking at reopening what seemed in the preliminary negotiation to be a fair deal for both of us.

Our prospective rice surplus situation is a further point. If the 400,000 ton Korean sale does not go through, this rice would be added to our carryover at a storage cost of almost $3 million a year. In addition, we would lose the immediate budgetary and balance of payments gain of the cash part of the sale.

In the legislative history, Purcell and the full Agriculture Committee made it clear that the amendment was a best effort rather than a mandatory provision. Furthermore, in executive session, the Committee said that this and other amendments should be applied with maximum flexibility in the case of Korea and Vietnam. A Purcell waiver on this agreement should cause no problem on the Hill.

I believe that waiver of the Purcell amendment on this deal is consistent with the objectives of the Act and justified on commercial grounds. I recommend you approve negotiation of the agreement.³

Walt

Approve⁴

Disapprove

Call me

1. Source: Johnson Library, National Security File, Country File, Korea, Memos Vol. VI. Confidential.
2. Reference is to an October 2 memorandum with attachments from Rostow to President Johnson. (Ibid.)
3. Rostow added a handwritten notation at the bottom of this memorandum that reads: “The agreement will be negotiated if you approve. The actual signing of the waiver will come to you only after the negotiation is completed. W.”
4. The President approved the recommendation and added: “if you [Rostow] consult and is approved by Purcell and Poage.” In an October 11 memorandum Rostow informed the President that Poage and Purcell approved the package and the waiver and that negotiations with Korea would begin. (Johnson Library, National Security File, Country File, Korea, Memos, Vol. VI)