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245. Memorandum From the Under Secretary of State for Political Affairs (Johnson) and the Under Secretary of Treasury for Monetary Affairs (Volcker) to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Chinese Representation in the International Financial Institutions

In your memorandum of July 11, 1972,2 you advised us that the United States Government could support Mr. McNamara’s proposal to convene, prior to the annual meetings (September 25–29), an ad hoc committee to study the Chinese representation question in the World Bank and the International Monetary Fund. U.S. support was subject to the provisos that Mr. McNamara’s preliminary inquiries indicate key country support for the proposal, and that Mr. Schweitzer 3 concur as well. Because he was unable to obtain support from several key countries, Mr. McNamara decided not to take this initiative.

At this point, there is general agreement among the ROC, Bank and Fund managements, Executive Directors of several key countries, and ourselves, that any further pre-emptive action with respect to the China question before the annual meetings is inadvisable. Our attention, therefore, is focused on possible responses to the tabling of a resolution at the annual meetings which would have the effect of expelling the Republic of China (ROC). We do not have any further information that such a challenge will in fact be made, but the general consensus remains that it is a possibility. However, contacts with Executive Directors of key member countries, as well as responses from our Embassies on continued contacts in capitals, indicate the strong desire among the major developed countries and several lesser developed countries to avoid any debate or vote on the China question at the annual meetings.

In light of this background, Mr. McNamara currently believes that the best way to avoid a substantive vote on China representation would be to respond to any challenge resolution at the annual meetings with a proposal to establish a committee to study the problem. The committee would be given a general mandate to study legal and financial implications of the question, with its report scheduled for late spring of 1973.

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The committee could conclude that the status quo should remain unchanged in the absence of an expressed PRC intention to assume the obligations of Fund and/or Bank membership. The committee could also reach conclusions about the financial implications of the problem, which avoid the representation issue and permit the ROC to continue its participation in the Fund and the Bank. The committee could also conclude that the Bank and the Fund have been dealing with a member which in effect is a currency area in which the New Taiwan dollar is the legal tender, and that this member should continue to participate in the Fund and the Bank. Ideally, under any of the foregoing possibilities, the report of the committee would be presented in a way which would not require any vote. It is, of course, also possible that the committee will be pressured to expel the ROC, which is why its composition is crucial and a low key report desirable. In any event, formation of a committee would buy time.

The study committee proposal is favored by the ROC. Several Executive Directors, including the French, Belgian, British, Canadian and New Zealand, have initially responded favorably to the idea of forming a study committee, but need to check with their capitals to confirm their reactions. The German ED indicated that his Governor would probably abstain if the study proposal were put to a vote. The Japanese ED personally is inclined to favor the idea, but doubts whether a decision will be forthcoming at this time from the new government. In the next few weeks, we hope to have a clearer picture of the degree of support for this idea.

We understand that Mr. McNamara is currently concentrating on a strategy whereby the study committee would be created by a resolution which would be offered immediately after submission of an exclusion resolution. This resolution could take the form of an amendment to the exclusion resolution or it could be presented as a separate resolution coupled with a motion for priority in voting. Assuming majority support for this resolution, we would not anticipate a serious procedural problem over such issues as voting priority.

We intend to support this strategy.

We are also considering other strategies which could result in the creation of a study committee without public debate or a vote on the question. One such strategy would have the Chairman of the annual meetings, Mr. Ali Wardhana of Indonesia, rule, provided there was no objection from the floor, that the complexity of the representation question requires it to be submitted to a study committee. Alternatively, he could refer the matter to the Joint Procedures Committee, which might then recommend creation of a study committee. The Chairman would then attempt to have the Committee’s report accepted without objection. Of course, a PRC supporter could challenge either the ruling of [Page 1042]the Chairman or the report of the Procedures Committee, and thus precipitate a vote on the question.

Although it is possible that circumstances may change by the time of the annual meetings, our soundings lead us to believe currently that an alternative form of counter-resolution, proposing that the question be shelved until the PRC expresses an intention to assume the obligations of membership, would have significantly less chance of success than the study committee proposal.

Against this background, we intend to take the following specific actions in the coming weeks before the annual meetings:

1.
We will maintain close contact with Mr. McNamara and Mr. Schweitzer to learn the results of their further discussions with Executive Directors.
2.
We will follow on our already established contacts in key capitals to ascertain the exact degree of support of these governments for the various proposals.
3.
We will approach Chairman Wardhana to explore his own feelings and discuss procedural tactics.
4.
In the event a counter-resolution is required, we would prepare for this and, if necessary, the U.S. would offer it, although we would support Mr. McNamara’s efforts to get a “neutral” country to take on this task.
5.
Assuming success in forming a committee, we would be prepared in advance to deal with the question of its composition.

We will continue to keep you apprised of the situation as it develops.4

  • U. Alexis Johnson
  • Paul A. Volcker
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 523, Country Files, Far East, China, Vol. XI. Secret.
  2. See footnote 5, Document 237.
  3. IMF from 1963 to 1973.
  4. Froebe prepared an action memorandum on this issue for Kissinger on August 31, which included a memorandum to the President for Kissinger’s signature. Apparently the memorandum was not forwarded to Nixon. (National Archives, Nixon Presidential Materials, NSC Files, Box 523, Country Files, Far East, China, Vol. XI) The attached NSC Correspondence Profile sheet contains the notation: “No further action necessary,” dated September 21. On October 19 Rogers wrote to the President that “To the surprise of many observers, no challenge was raised to the Republic of China at the World Bank/IMF Annual Meetings on September 25–29.” Rogers noted that they had persuaded the ROC to “lower its profile in the World Bank and IMF.” He added that the Department of State had contacted key member governments and obtained support for a counter-resolution to refer the China issue to the Executive Directors. He concluded: “Knowledge of our strength may have discouraged Peking and its friends from raising the issue.” (Ibid.) In an October 25 memorandum to Davis, Hormats noted that the President was already aware of these facts through other memoranda, and that the Rogers memorandum need not be forwarded to him. (Ibid.)