2. Memorandum From Secretary of the Treasury Kennedy to President Nixon1

The House Banking and Currency and the Senate Foreign Relations Committees are asking my view on last year’s unfinished business of authorizing U.S. participation in an internationally negotiated package for the second replenishment of the International Development Association. IDA was established as a World Bank affiliate for lending on concessionary repayment terms following the initiative of then Secretary of the Treasury Robert Anderson under President Eisenhower’s leadership. The pending legislation author-izes our participation with a 40 percent share of the total. We would provide $160 million in each of three years, starting in FY 1969. I believe it should have this Administration’s strong and early support. The Secretary of State concurs in this view.

It would be helpful if I could know of your support for this legislation before your European trip2 so that I might be in a position to testify positively should the House Banking and Currency Committee call a hearing next week as they now seem to contemplate.3 I do not recommend any other specific action on this by you at this time, but will inform you of any further actions that might be necessary as legislative consideration progresses. I should add that all the European countries you will be visiting approved the IDA replenishment agreement last year, and a number of them have made advance contributions to this replenishment pending our action.

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In addition to responding to a request for hearings, there are a number of advantages to my taking early action to urge Congressional approval of the IDA replenishment. First, it will demonstrate this Administration’s support for the multilateral approach. It will concentrate this support on legislation that has a reasonable chance of passage, where the previous Administration did not succeed in securing approval. Second, it would help return bargaining power to the U.S. vis-a-vis Europe for such multilateral endeavors, a position which was eroded by last year’s failure to obtain U.S. ratification. Finally, while it will not be easy, there is at least a fair chance to obtain legislative action before foreign aid and other major issues divert Congressional attention.

A sufficient number of other contributors to IDA have completed their actions to make the international agreement on the IDA second replenishment effective as of the date the United States acts. Unless we do act the agreement cannot become effective. While the amount of each country’s contribution is increased over the last replenishment, our share of IDA has been reduced from 43 percent when it was established to 40 percent in the current proposal. This compares with about a 60 percent share of world-wide bilateral assistance. The agreement provides for specific protection of the U.S. balance of payments by providing for others to accelerate their actual payments through FY 1971 should the U.S. balance of payments require it. While President Johnson’s budget makes provisions for this contribution, the actual additional budgetary costs will be substantially below the three annual contributions of $160 million each we would make in FY 1969, 1970 and 1971. We can be reasonably assured that IDA funds will be used effectively because IDA is administered by the World Bank, and we know that the funds are needed urgently because IDA’s existing resources are almost fully committed.

I would also hope to be in a position to indicate our support for a U.S. contribution to the Asian Bank Special Funds. A U.S. contribution of $200 million over a four-year period was recommended by the last Administration, particularly on the advice of Eugene Black. While there is not an internationally negotiated package, the legislative proposal would limit our contribution to a minority share and to pay for U.S. goods and services only. President Johnson’s budget provided for $25 million in each of the first two years. Authorizing legislation did not get as far in the Senate legislative process as the IDA proposal, but it is a worthwhile multilateral endeavor. Among other donors, the Japanese and Canadians have shown a tangible interest by unilaterally pledging contributions, but the major Europeans have been slow in coming forward. I would prefer to deal only with IDA [Page 5] legislatively at the outset, and then deal with the Asian Bank specifically, as soon as IDA is adequately on the legislative track.

If you agree with the above, I will proceed accordingly.4

David M. Kennedy
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 289, Treasury Volume I. Confidential. Forwarded to the President under cover of a February 20 memorandum from Kissinger reminding the President that Treasury Secretary Kennedy had already raised this issue with him and he had indicated his assent. Kissinger noted that both bills moved in the “desired direction of channeling our foreign aid through multilateral agencies” and warranted the President’s approval, although action on the ADB Special Fund could be delayed until after the NSC review (see Document 1). Kennedy’s memorandum was returned to Kissinger under cover of a March 3 memorandum from Kenneth Cole indicating the President had approved the IDA proposal and was not opposed to the ADB proposal but thought a firm commitment at that time would be premature. (National Archives, Nixon Presidential Materials Project, NSC Files, Agency Files, Box 289, Treasury Volume I) Bergsten informed Secretary Kennedy’s office of the President’s decision on March 3. (Ibid.)
  2. President Nixon traveled to Europe February 22-March 2.
  3. Secretary Kennedy testified before the House Committee on Banking and Currency regarding IDA replenishment on March 4. His remarks are in Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1969 (Washington: Government Printing Office, 1969), pp. 315-317.
  4. President Nixon initialed his approval.