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

68. Letter From the Administrator of the Agency for International Development (Hannah) to President Nixon¹

Washington, October 15, 1971.

Dear Mr. President:

Next Thursday² the annual High Level Meeting of the Development Assistance Committee of the Organization for Economic Cooperation and Development convenes in Paris. The meeting is at the Ministerial level. I will be heading the United States delegation.

The Development Assistance Committee is composed of 16 aid-giving countries. It meets regularly to discuss matters of mutual concern relating to the provision of development assistance to the low-income countries.

The other donor nations have expressed much interest in the 10 percent cut in foreign economic assistance expenditures that you announced on August 15.³ They are deeply concerned as to its meaning, particularly from the standpoint of the longer term U.S. interest in the development process.

I believe they are attaching too much weight to what is essentially a short-term adjustment to an immediate U.S. need. But I find myself unable to allay their fears because we still have no guidance on how the cut is to be handled some two months after your announcement.

I believe that if I—as head of a Ministerial-level delegation—am unable to provide details on the cut at next week’s meeting, a major ruckus will develop that will be embarrassing to the United States and damaging to our foreign policy interests. I do not believe we should let this happen. Accordingly, I plan to make the following four points at the meeting unless you instruct me otherwise:

• —Expenditures for regular development assistance programs were $1.194 billion in the President’s FY 1972 budget. These will be reduced to $1.076 billion, a cut of $118 million or about 10 percent.
• —Expenditures for U.S. contributions to the International Financial Institutions were $352 million in the President’s FY 1972 budget. These will be reduced to $314 million, a cut of $38 million or about 10 percent. Our contributions to the International Development Association and the Inter-American Development Bank will not be affected.
• —Expenditures for Supporting Assistance were $648 million in the President’s FY 1972 budget. The amount of the cut, if any, remains to be decided.⁴
• —The proposed cuts are in expenditures. We have not reduced our requests for New Obligational Authority to the Congress and are strongly supporting the amounts originally requested. Naturally, if past experience is a guide, we can expect Congress to cut our requests by 10 percent or more.⁵

The proposed cuts in expenditure for regular development assist-ance programs and the International Financial Institutions present no problem. We have explained in detail to the Office of Management and Budget on several occasions how we would accomplish them. A cut in Supporting Assistance expenditures would present a more difficult problem. Because of the rapid growth of cash grants and similar fast-disbursing arrangements associated with several new Supporting Assistance activities proposed for FY 1972, the original budget estimate—which previously looked comfortable—now appears very tight. We must keep in mind that unless we wish to alter significantly the nature of these new programs—which fall primarily in Vietnam, Cambodia, and Jordan—we may have to equal or exceed the FY 1972 budget figure. We need to give this careful thought before making final decisions.

I believe the proposals I have outlined above are responsive to your announcement of August 15 which I fully support. If I am able to inform the other donor nations of the four points listed above, I believe we can head off a highly undesirable situation.

I have discussed this matter with the Under Secretary of State. He fully shares my concern and supports the proposal outlined above.

Respectfully yours,

John A. Hannah

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 195, AID 1/1/71-12/31/71. Limited Official Use. Attached to an October 21 letter from Shultz to Haig, which confirmed OMB’s concurrence (with minor revisions) with Hannah’s proposed statement at the OECD. Also attached is an October 28 memorandum from Hormats to Haig indicating that Hannah’s letter had had the effect of “smoking out a decision” on whether the 10 percent reduction in foreign aid (from $1,840 to $1,653 million) would be handled administratively (i.e., frozen) or through legislation (see footnote 4 below). Hormats’ memorandum indicates that the letter did not go forward to the President.
2. October 21.
3. See footnote 2, Document 62.
4. In an October 19 memorandum to Shultz, attached to Hannah’s letter, Haig wrote: “As to Hannah’s expressed concern over the cut in Supporting Assistance, he was unaware when he wrote his letter that the decision to administratively freeze 10 percent had been taken. He has since been informed by Weinberger. In any event, his prepared statement to the effect that the amount of the cut is undecided is a reasonable one—we do not want to get into a discussion in OECD of our Security Assistance Program.”
5. In an October 20 memorandum, which Shultz attached to his October 21 memorandum to Haig (see footnote 1 above), Weinberger wrote: “The Committee action apparently will be generally consistent with the President’s proposed 10 percent cut in foreign aid, even though we do not formally recommend a budget amendment in that amount.” The reference is presumably to action by the Senate Foreign Relations Committee; see Document 69.