139. Memorandum From the Assistant Secretary of the Treasury for International Affairs (Petty) to Secretary of the Treasury Connally 1


  • Aid Untying

An effort is being made to push the OECD aid untying exercise to a conclusion shortly after the OECD Ministerial meeting in June. I think we should postpone for some time any attempts to reach a final agreement.2

The Congressional atmosphere is very hostile to untying. An agreement now would significantly jeopardize our chances of obtaining action on various pieces of multilateral aid legislation as well as on the bilateral program.

There are also serious questions about the legal basis for entering into an aid untying agreement without the approval of Congress. Congress has neither provided express authority through legislation nor through ratification of the OECD Convention to enter into such an agreement. On the other hand, questions would be raised by reliance exclusively on powers of the President under the Constitution as a basis for this agreement since conditions on use of aid funds is a subject clearly within the jurisdiction of Congress. In the present atmosphere, if an agreement were made on the basis of this authority, citing it as a reason for staying the hand of Congress will surely result in claims of infringement of Congressional prerogatives and would be unlikely to deter Congressional action, thus putting the U.S. in violation of an OECD commitment. During the hearings on accession to the OECD Convention, Executive Branch witnesses gave assurances that no international arrangement would be made within the OECD which would put the Congress in the awkward position of either repudiating a given commitment or unhappily supporting one on the basis that to do otherwise would embarrass our foreign relations.

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A clause providing for withdrawal on short notice might mitigate conflicts with Congress in case of subsequent contrary legislation and would be essential for avoiding violation of the agreement. I find it difficult, however, to see how we could enter, in good faith, into an untying agreement while insisting on such a withdrawal clause—one that may have to be used within a short time.

Attached is a memorandum to the President registering your concerns on the political and legal issues and recommending delay in entering into an agreement until the legal and legislative problems are worked out.

Recommendation: That you sign the attached memorandum to the President.3

  1. Source: Washington National Records Center, Department of the Treasury, Secretary’s Memos: FRC 56 74 A 17, Memo to the President 5-8/71. No classification marking. Sent through Under Secretary Volcker.
  2. In a May 20 note to Connally, attached to this memorandum, Volcker noted: “I have thought this whole exercise misguided from the start. However, the President has repeatedly expressed an opinion otherwise. Whether you want to get the President to go slow on this point, at the risk of torpedoing the entire exercise at this late date, is a nice question you will have to resolve in terms of your over-all strategy vis-a-vis foreign economic policy currently. In any event, our negotiators do need some warning about promising too much, in the light of Congressional sentiment.” On Volcker’s note, Under Secretary Walker wrote: “I strongly support sending the memo—unless you want to do it orally.”
  3. Not attached. Reference is presumably to Document 140.