Foreign Relations of the United States, 1969–1976, Volume XX, Southeast Asia, 1969–1972

114. Memorandum of Conversation¹

Bangkok, April 8, 1971.

SUBJECT

• PL–480 Rice Sales

PARTICIPANTS

• Mr. Suthi Nartworathat, Deputy Under-Secretary of State, Ministry of Economic Affairs;
• Mr. Vicharn Nivatvong, Director-General, Department of Foreign Trade, Ministry of Economic Affairs;
• Mr. Herman H. Barger, Deputy Assistant Secretary of State;
• Mr. Laurence G. Pickering, Political Counselor, Embassy;
• Mr. Konrad Bekker, Economic Counselor, Embassy;
• Mr. Norman L. Smith, Economic Officer, Embassy;
• Mr. Victor L. Tomseth, Political Officer, Embassy.

During the course of a wide-ranging luncheon conversation on Thailand’s present rice marketing difficulties Mr. Barger reviewed actions the United States has taken or is prepared to take with respect to our PL–480 food assistance to Indonesia. He noted first that this past year the total amount of U.S. PL–480 rice provided to Indonesia totaled 350,000 tons as compared to their original request for 600,000 tons. He said that part of this reduction—50,000 tons—had been in direct response to an appeal made by the Prime Minister to President Nixon.

Moreover, we began early consultations with the Thai on next year’s program. Such consultations have been virtually continuous on this subject between the State Department and the Thai Embassy in Washington and Thai and American officials in Bangkok since the problem was originally raised several months ago. Out of these consultations had come our decision to stay out of the Indonesian market during the peak period of Thai rice sales. This had come at the specific request of the Thai Government and we had duly informed the Foreign Ministry of our willingness to cooperate. Mr. Barger also said that the U.S. would try to avoid piecemeal sales and attempt to cover all PL–480 rice sales to Indonesia for the year under one agreement. Furthermore, the U.S. was willing to discuss at the IGGI a “Usual Marketing Requirements” provision in agreements with the Indonesians. This would guarantee that Indonesia would then procure a fixed proportion of her rice import needs on the commercial market.

At various points in the conversation Mr. Barger pointed out that the real problem facing Thailand stemmed from the “Green Revolution” and the desire of almost all countries to be self-sufficient in rice. The essential task is to come to grips with this phenomenon but the issue of U.S. PL–480 rice sales has tended to divert Thai attention from it.

Mr. Suthi said that the U.S. decision to stay out of the Indonesian market during the period immediately following the Thai harvest, which is the time when the bulk of Thailand’s commercial sales abroad are made, was really meaningless since the Indonesians would attempt to avoid buying from Thailand during that period. First, he said, the Indonesian warehouses were full then, making it impossible to import more rice at that time. Moreover, they wanted to know the size of their own harvest before making any decisions on import requirements. They would then seek to cover as much of their deficit as possible through aid. Even if they were finally forced to make some commercial purchases the effect of their waiting would have been to force down the price of Thai rice. Mr. Barger said that the Thai Government’s view as expressed to us through the Foreign Ministry was that it was important for us to stay out of the Indonesian market during Thailand’s peak trading period.²

At another point Mr. Vicharn said the new principle of the World Food Organization was that food aid should not only benefit the recipient country but should also help the other developing countries that could supply that country’s needs. He said that it was in accordance with this principle that the Japanese had agreed last year to purchase part of the rice it had undertaken to supply to Indonesia from Thailand. He said that Thailand would be very pleased if the U.S. could also adhere to this principle in supplying Indonesia with rice.

Mr. Barger pointed out that there was a significant difference between the U.S. and Japan in this instance. The U.S. is already supplying Thailand with considerable aid in other forms. Moreover, Thailand does not have a payments deficit with the U.S. Finally, since the U.S. has balance of payments problems of its own and a rice surplus the U.S. Congress is hardly likely to provide money for rice purchases in Thailand. Mr. Vicharn said that the amount would not have to be large whereupon Mr. Barger said that if Thailand was only interested in a cosmetic effect it could be done with a pencil; all that would be necessary would be to make a slight adjustment in the accounting procedures we are now using for the aid we are already providing to Thailand.

Comment. Suthi’s comment should not be regarded as overly significant. In the first instance it probably reflects the usual lack of Thai interministerial coordination. Beyond that it is indicative of the Thai frustration over their lack of success in capturing a significant proportion of the Indonesian commercial market during the last few years. Suthi was right to the extent that U.S. activity in the Indonesian market whenever it may occur is not likely to affect Thailand’s lack of competitiveness. Vicharn’s proposal was certainly not new. He realizes, however, that political considerations effectively eliminate such action from the realm of possibility. His advancement of it was more in the way of a pro forma plea rather than as a serious proposal.

1. Source: National Archives, RG 59, Central Files 1970–73, AID (US) 15–8 INDON. Confidential. Drafted by Tomseth with the concurrence of Bekker and Barger, and approved by Pickering. The meeting was held at the American Embassy.
2. Telegram 5615 from Djakarta, June 30, reported the sale of 100,000 tons of Thai rice to Indonesia and emphasized “how crucial our numerous representations with Indonesians (President Suharto, Fonmin Adam Malik, Widjono and others) were” to that success. It added that the “Indonesians were not disposed to buy rice from Thais against whom they harbor resentment for what they consider past price gouging. This resentment could be exacerbated if Thais again agitate about U.S. supply of PL 480 rice to Indonesia during critical period of Indonesia’s development (apparently Thais have at Indonesian insistence agreed desist for one year.)” (Ibid., RICE 17 INDON–THAI)