176. Memorandum From the Director of the Office of Management and Budget (Shultz) to President Nixon 1

SUBJECT

  • Enrolled Bills S. 748, S. 749 and S. 2010—Contributions to International Financial Institutions
  • Sponsor—Sen. Fulbright (D) Arkansas

Last Day for Action

March 14, 1972—Tuesday

Purpose

Authorizes U.S. participation in, and appropriations for U.S. contributions to, capital increases for three international financial institutions as follows:

Institution Amount in $ millions
S. 748—Inter-American Development Bank, Fund for Special Operations 900
S. 749—Asian Development Bank, Consolidated Special Funds 100
S. 2010—International Development Association 960

Agency Recommendations

Office of Management and Budget Approval
Department of the Treasury Approval
Department of State Approval (signing statement attached)2
Council on International Economic Policy Approval (informal)
National Security Council Approval
Agency for International Development Approval
Export-Import Bank Approval
[Page 452]Department of Commerce Approval
Federal Reserve Board Approval
Department of Justice No objection
Council of Economic Advisers No objection

Discussion

These bills authorize the full amount requested by the Administration for the U.S. share of the capital increases of the three institutions. The contributions are to be paid in installments over several-year periods. Appropriations for U.S. installments, as provided in the 1973 budget or projected for 1974, are as follows:

(in millions of dollars)
FY 72 FY 73 FY 74
Inter-American Development Bank 450 450
Asian Development Bank 60 40
International Development Assoc. 320 320 320
Total 380 810 770

This will be the United States’ first contribution to the Asian Development Bank’s Special Funds. Accordingly, S. 749 contains a number of customary administrative provisions concerning loan terms, procurement policy, and burden-sharing as proposed by the Administration.

The House Banking and Currency Committee added two amendments which were enacted into each of the three bills. The first would require the Secretary of the Treasury to instruct the United States Executive Directors to these institutions to cast a negative vote on assistance to any country which the President determines has failed to take adequate steps to prevent illegal entry of narcotics into the U.S. or to prevent sales of narcotics to U.S. employees and their families abroad.3 It provides for removal of this requirement when the President determines that these steps have been taken. This amendment parallels a similar provision, applicable to U.S. bilateral foreign aid which was recently added to the Foreign Assistance Act at the Administration’s request.

The second amendment would require the President to instruct the U.S. Executive Directors to vote against any loan or other aid by the institutions to any country which expropriates property owned by U.S. citizens or takes other action equivalent to expropriation.4 This requirement [Page 453]does not apply, however, if the President determines that appropriate arrangements have been, or are being made to provide for adequate compensation. This amendment provides less Presidential discretion on two respects than that in your January 19, 1972, statement on expropriation policy. That statement (1) permitted the United States to abstain as well as vote against loans in international institutions and (2) allowed “major factors affecting U.S. interests” as a reason for not withholding support for loans in an expropriation situation.

In its letter on the enrolled bills, Justice states:

“The form of the bills is unusual in that they instruct the President as to how to cast votes in carrying out an aspect of United States foreign policy. We do not believe, however, that the bills sufficiently encroach on Executive power so as to present a substantial constitutional issue. It is relevant that the instruction is not absolute since the President does not have to follow it if he finds that an arrangement has been made for compensation, if the matter has been submitted to arbitration, or if negotiations are proceeding in good faith. Moreover, the Committee reports indicate that the amendment is consistent with the existing policy of the executive branch in this area.”

With respect to this amendment, the Treasury Department has suggested that you provide the Secretary of the Treasury with a memorandum making it clear that Executive Order No. 11269 of February 14, 1966, which delegated to the Secretary of the Treasury authority then vested in the President to instruct U.S. representatives to international financial institutions, applies to the President’s functions under this expropriation amendment.5 However, your January 19 statement set up interagency machinery under the Council on International Economic Policy to advise you on questions of terminating foreign assistance in expropriation situations. In view of the sensitivity of expropriation issues and their many implications for foreign policy, a single policy-setting and decision-making mechanism for both bilateral and multilateral assistance seems advisable to avoid confusion and embarrassment.

We think that the apparent contradiction between these two positions can be satisfactorily resolved by (1) having the President make the determinations upon advice from the Council on International Economic Policy and (2) having the Secretary of the Treasury convey those determinations to the U.S. Executive Directors of the designated international financial institutions. We will provide a memorandum along these lines for you to send the Secretary of the Treasury at an early date.

The Department of State has proposed a signing statement for your consideration. We understand that the staffs of the National [Page 454]Security Council and the Council on International Economic Policy are working on the question of a signing statement and, if appropriate, its content.

Geo. P. Shultz 6
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 219, CIEP. No classification marking.
  2. Not found. For text of President Nixon’s March 10 signing statement, see Public Papers of the Presidents of the United States: Richard Nixon , 1972, pp. 410-411.
  3. Reference is to the Rangel Amendment.
  4. Reference is to the Gonzalez Amendment; see footnote 5, Document 172.
  5. See Document 180.
  6. Printed from a copy that indicates Shultz signed the original.