4. Action Memorandum From the Assistant Secretary of State for Economic Affairs (Greenwald) to Secretary of State Rogers 1

SUBJECT

  • NSSM 4—Choices in Foreign Aid

You have the response to NSSM 4 at Tab A.2 It starts with objectives of foreign aid, runs through alternative budget levels and alternative techniques to the decisions required this spring.

Let me take it in a different order in giving my recommendations:

1.

The key is of course the budget. Normally a single year’s aid budget would not be critical for our foreign relations. The pipeline provides a cushion, and the relationship between our aid inputs and the internal politics and external orientation of most aid receivers is indirect.

However the President’s first budget request is a signal of his approach to development assistance. Another very small AID appropriation in FY 1970—on the order of the $1.3 billion passed last year—would mean that the actual aid resource flow—still about $2.0 billion in FY 1969—would be set on a downward trend which could not be reversed until late in this Presidential term.

2.
AID appropriations stabilizing at $1.3 billion over the next four years would fundamentally change both the prospects for the third world, and our role in it. In specific this means:
  • —A major U.S. withdrawal from participation in the third world’s efforts to develop;
  • —That the Alliance for Progress link would cease to be credible to the Latins, as we are forced to cut back an effort which they now regard as a minimum Congress forced on the Executive last year;
  • —Economic frustration in India/Pakistan, as we pass up the opportunity created by past aid (particularly in agriculture) for a true breakthrough;
  • —Undermining other rich countries’ aid efforts, as we fail to pick up our share.
3.
I do not regard such a medium-term outcome as acceptable, nor do I think the Administration should. This is one point to nail down at the NSC meeting.
4.
The problem is how to avoid it. There are two immediate choices to be made:
  • —Should the President’s asking figure for AID in FY 1970 be close to last year’s (say $2.2 billion) or significantly less (say $1.8 billion)? (This is the range under debate at BOB.)
  • —Should the President establish a distinctive style and approach to aid in this year’s budget—or should he put the whole question into a Special Commission and defer decision for a year?
5.

There is no way to say for sure that we would come out with higher appropriations than last year if we start at $2.2 billion. The request of course is only the first stop in a major Congressional effort, and Passman says that we can’t get more than last year no matter where we start.

But I believe the asking figure makes a crucial difference this year, for it establishes what the new President thinks we ought to be spending on foreign assistance. This is a second point to determine at the NSC.

6.

If the President decides to go for the $2.2 billion, he can improve his chances of coming reasonably close if he establishes his own style and direction for aid. This he can do by including in the package the private investment corporation, more multilateral aid (but basically within the burden sharing formulas), and sharper emphasis on technical assistance. These are all sound ideas, ready to go, and together they make a defensible new Administration program.

This combination ($2.2 billion budget request, plus new directions) is Package A on page 31 of the report. I strongly prefer it; so do John Hannah, Rud Poats, and the regional Assistant Secretaries. This is a third point to determine at the NSC.

7.

If the President decides to go for the $1.8 billion, I think he would do well to hold off on new directions—and instead throw the question to a Commission:

Deferral serves two purposes: (i) it reserves something attractive to put into a higher budget request next year, and (ii) it recognizes that the program of new departures won’t help much if the President gives an uncertain signal on his intentions for aid by coming in with the lower budget request.

8.

No matter what the budget decision, I believe we should establish generalized preferences (page 26) as U.S. policy (but in a trade policy context and at a different time). They have a big political payout (except possibly in Africa) for relatively little economic input.

We should also see whether we can persuade Congress to let us give easier terms on PL 480 ( page 28).

As a result of a meeting chaired by Under Secretary Richardson,3 there is interagency agreement we should not shift MAP out of the Foreign Assistance Act this year.

9.
One lesser issue the NSC should settle tomorrow is the U.S. contribution to the Special Funds of the ADB . The President has told Marshall Green he favors it, but we need a formal decision. Tab B gives details.4
10.
Finally, I suggest you emphasize development as a valid, long-term objective of this program. In the past we have emphasized near-term political and security benefits of aid. The security objective remains real in many cases—and is a significant basis for support of the program by the House Foreign Affairs Committee and conservative Congressmen in general. But in the future we will have to establish the development objective in Congress and gain greater recognition of longer-run political benefits of participating in the third world’s development.

  1. Source: National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 4. Confidential. Drafted by Thomas O. Enders (E/IMA) and cleared by Sisco (IO), Macomber (H), Barnett (EA), Dantzer (ARA, except for paragraph 6), Westerfield (AF), Clark (AID), and Poats (AID). The memorandum was also addressed to the Under Secretary.
  2. Not printed; entitled “The Choices in Foreign Aid,” March 24, prepared by the Ad Hoc Working Group. Regarding an earlier draft of the paper, see Document 1.
  3. Presumably the meeting held on March 14; see footnote 2, Document 3. An NSC Review Group meeting on foreign assistance was also scheduled for March 21. According to Kissinger’s decision on a March 19 memorandum from NSC Staff Secretary Jeanne Davis regarding scheduling, the meeting was to be chaired by Halperin in Kissinger’s absence. (National Security Council, Secretariat, Senior Review Group Meeting Folders, Box 90, 3/21/69 Review Group Meeting-Foreign Aid) There is no indication that the meeting was held.
  4. Tab B, not printed, is a paper entitled “U.S. Contribution to the Special Funds of the ADB.”