50. Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon1

SUBJECT

  • Economic Assistance Program to Korea for FY 1970

State requests your approval of a FY 1970 economic assistance program for Korea of $128 million, comprised of $93 million in PL 480 Title I loans, $20 million in Development Loans, $10 million in Supporting Assistance, and $5 million in Technical Assistance (Tab A).2 It is designed to support Korea’s large defense effort and economic development program. The amounts have now all been appropriated by Congress. All agencies concur.

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The Korean GNP has risen at a spectacular rate of 11 percent per annum since 1964. However, growth has been accompanied by rising inflationary pressures, balance of payments problems, and a rapid increase in external debt. The proposed program will be accompanied by self-help conditions, supporting economic stabilization and debt control measures recommended by the World Bank and IMF. It maintains the declining trend in our economic assistance to Korea, as the country moves toward a self-sustaining economic position.

A $39 million credit for Korean purchases of U.S. rice, which (270,000 tons) is part of the proposed PL 480 package, involves a proposed waiver of Korea’s local currency downpayment. Section 103 of PL 480 permits such a waiver where you determine that a downpayment would be inconsistent with the Act, and it was done on a similar deal in 1969.

Agriculture, responding to pressures from California rice growers anxious to dispose of a large surplus, recommends that you authorize the waiver to reduce our terms below those of the Japanese and thus to assure our rice a portion of the Korean market. The remaining portion (230,000 tons) of Korea’s estimated 500,000 ton import requirement will probably be supplied by the Japanese on concessional terms.

Next month the National Security Council is scheduled to consider U.S. long-range posture with respect to Korea, including our level of military presence, military and economic assistance programs, and trade policies. The present proposal pertains only to the rest of FY 1970, and in no way prejudges any future decisions, e.g. an increase in economic assistance as a quid pro quo for possible decreases in U.S. military force levels. Such assistance would be provided out of AID’s and/or Agriculture’s budget for FY 1971 and beyond.

Recommendations:

1.
That you approve the Korean economic assistance program as proposed by State. Budget (Tab B),3 Treasury, and Agriculture concur.
2.
That you waive the local currency downpayment on the $39 million credit rice sale. Agriculture, Treasury, and Budget concur.4

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 541, Country Files, Far East, Korea, Vol. II, 10/69–5/70. Secret. Sent for action.
  2. Attached but not printed at Tab A is a December 30, 1969, memorandum from Richardson to Nixon, recommending a $128.2 million FY 1970 economic assistance program for Korea. Richardson noted that the Departments of Treasury and Agriculture concurred.
  3. Attached but not printed at Tab B is a January 17 memorandum from Mayo to Nixon, recommending approval of the Department of State’s proposal noting that the “program proposed here does not foreclose a decision to increase economic assistance as a quid pro quo for possible adjustments in U.S. military force levels. Such increase could be provided from AID’s FY 1971 budget and from Agriculture’s FY 1971 budget for P.L. 480 concessional sales.”
  4. Kissinger initialed approval for Nixon of recommendations 1 and 2 on January 31.