Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

51. Action Memorandum From the Assistant Secretary of State for Economic Affairs (Trezise) to Secretary of State Rogers¹

Washington, undated.

SUBJECT

• Your Authority under New Aid Legislation

Problem

I see an opportunity for you now to influence the President’s decisions on aid reorganization in a way that may spare his new program from a possible Congressional rebuff and will also strengthen your grip on foreign aid policy. This opportunity arises in the form of two issues the President must shortly decide.

• First, the Office of Management and Budget (OMB) will raise again with the President the issue of what basic form the new aid legislation should take.² The choice is between an act by which Congress authorizes specific new institutions, or a briefer, general bill which leaves all powers in the President to delegate as he sees fit to existing or new institutions created by executive order. The principals of the agencies concerned with aid reorganization, State, AID, Treasury, OMB, NSC, have been requested to state their views on this issue.
• Second, Rudolf Peterson has told the President that his consultations indicate a very strong desire among key Congressmen that the President’s proposals provide a coordination locus, in the form of a single man concerned with both operations and policy whom the Congress can look to on all foreign assistance issues.³

Discussion

Issue of Legislative Form

At the March 4 meeting of the interagency Steering Group headed by OMB,⁴ Assistant Director Schlesinger stated that OMB feels the new aid act should not create institutions, but merely authorize programs—capital assistance, technical assistance, etc.—and appropriate funds to the President. The President would then delegate his authority to new institutions created by executive order. These institutions could to some extent reflect the institutional structure proposed in the Peterson Report but several basic features would lapse. For example, the capital lending institution could not be incorporated nor have a board of directors, as such. OMB claims that last December the President did state a preference for having all powers left with the President, although at that time he probably did not understand that this precluded setting up an International Development Corporation. OMB favors this approach because it believes this leaves the President full control over foreign assistance, whereas the alternative, independent institutions authorized by Congress, gives the Presidents and Boards of these institutions significant authority in an important area of foreign policy.

The NSC and AID representatives in the Steering Group took the view that the new legislation should take the form of Congressional authorization of the specific new institutions, including the major features of their structures and modes of operation. The NSC representative stressed that the President in his Foreign Assistance Message last September, based on NSDM 76,⁵ publicly stated his decision to create an International Development Corporation. Also, virtually all the work done on reorganization so far presupposes new institutions created by law.

If the President wants to undertake a meaningful reform of foreign assistance, he should be strongly inclined to this latter option and against the OMB approach. The basic newness of his proposals is their institutional reform and unless he places this before the Congress, the result is likely to be no meaningful reform. The type of act OMB desires is basically the structure of the present Foreign Assistance Act with all the administrative and foreign policy restrictions removed. But if asked to give the President such broad authority, the Congress is likely to concentrate on restricting his use of it, leading to an end-result that may differ very little from the current Act and may even further restrict his foreign policy flexibility.

Rudolf Peterson apparently received the impression that the President does want meaningful reform along the lines of the Peterson Report and that he is willing to give his proposals a strong kick-off and follow-up in terms of Congressional contacts. The President also told Peterson that he had rejected totally the tactic of seeking an FY 72 aid appropriation on the old basis—a possibility which Peterson told the President some Congressmen had heard about.

Issue of Coordination

The Steering Group, March 4, was briefed on Rudolf Peterson’s report to the President that Congress wants a single man who is responsible for aid coordination and responsive to Congressional queries.⁶ The NSC representative argued that this man should logically be Peter Peterson, although he recognized that the problem of executive privilege will require that someone else do the testifying. James Schlesinger stated that the Congress should be told that it is not going to get one man but 7 or 8 (the heads of IDC, IDI, OPIC, ISDI, people from State in charge of humanitarian and UN programs, etc.). We stated that State should play an important role in coordination and that we would have specific suggestions to put forward shortly.

I feel strongly that neither the Peter Peterson nor multi-headed approach are responsive to the Congressional concern or realistic in terms of the foreign policy coordination problems involved in foreign aid. The strong Congressional reaction which Peterson reported to the President confirms our view that the President’s proposals will be imperiled unless he provides a foreign policy coordination point, responsive to Congress. Congress, like OMB, has a legitimate concern that an array of new independent agencies not operate without policy and operational coordination with other foreign affairs interests. The Congress also feels strongly that this coordinator should be one to whom it can turn on all foreign assistance issues, security as well as development.

This can only be the Secretary of State, given your responsibility for foreign affairs, your role in both security and economic assistance, your position in both the NSC and the International Economic Policy Council, and your position vis-a-vis the Congress.

There are various ways you could mold the structure of the Department to support you in this role as coordinator of foreign assistance. You should consider the alternatives here at an early date. It is clear, however, that the Department can gear up to provide this coordination and do so in a way that focuses on the role of development in our longer-term foreign policy interests—the point the Peterson Report considered so important.

To be in a position to exercise this coordinating responsibility, we will need a strong section in the new aid legislation making you responsible for coordination and creating the new institutions subject to your policy guidance. In carrying out our coordinating role we could use the International Economic Policy Council as a vehicle for consideration of major issues of policy coordination, the Council’s Operations Group for coordination of country program issues and our board memberships in the new institutions to facilitate oversight of operations. We could look at foreign policy as a whole and not disparate elements unmeaningfully forced into a single context.

Recommendations

I, therefore, recommend that you:

1. Support establishment of the new aid institutions by law, as appears necessary to follow through on the President’s commitment to a new approach along the lines of the Peterson Report.

2. Urge the President to have the legislation on development aid designate the Secretary of State, under the direction of the President, as responsible for coordination of all economic aid agencies to the extent required to assure the consistency of their operations with the foreign policy of the U.S. (This modification of the legislation will meet Congress’s concern about coordination and thereby greatly improve prospects for passage. It will also meet the sense of OMB’s objection to legislative creation of the new institutions, because the President’s control over these institutions is assured through you. This approach does not conflict with Peter Peterson’s role because the Council on International Economic Policy is a creature of the President, under whose direction you serve, and because you, as Vice Chairman of the Council, and the Department as head of the Operations Group will use the Council as a vehicle for your coordination.)

3. Request the President to have the legislation create each new institution under the foreign policy guidance of the Secretary of State, the language used in OPIC’s statute.

4. Inform the President that the Department promptly can be structured and staffed to carry out this role.

These recommendations have been discussed with the Under Secretary who agrees with them.⁷

Attached at Tab A is a memorandum to the President which incorporates these four points.⁸

1. Source: National Archives, RG 59, Central Files 1970-73, AID (US) 5. No classification marking. Drafted by Paul H. Boeker (E/IFD/ODF) on March 5; cleared by Weintraub (E/IFD), in substance by Carter (L) and Schnee (H), and by Arthur Hartman (S/PC).
2. See Document 53.
3. See Documents 50 and 52.
4. This meeting has not been further identified.
5. NSDM 76 is Document 136. The September 15, 1970, message to Congress is printed in Public Papers of the Presidents of the United States: Richard Nixon, 1970, pp. 745-758.
6. For the Peterson Report, see Document 128.
7. None of the Approve/Disapprove options under the recommendations is checked.
8. Tab A, a March 5 memorandum from Secretary Rogers to President Nixon, urged the President to designate the Secretary of State as the focal point for coordinating U.S. economic assistance policies and agencies. The memorandum assured the President that this approach would not conflict with Peter Peterson’s role on the Council on International Economic Policy.