75. Memorandum From Laurence E. Lynn, Jr., of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • PL 480 Program for Thailand

Introduction

I understand:

  • —the WSAG is considering a proposal to provide a PL 480 loan of up to $20 million to the Thai,2
  • —that this loan is intended to indirectly compensate the Thai for costs associated with possible Thai and Thai Khmer force deployments to Cambodia.

Although I have not seen all the cable traffic on this proposal, I understand the Thai have not asked for the PL 480 program or even an explicit quid pro quo for their Cambodian contribution. Rather, Ambassador Unger has suggested that such a program could be used to help the Thai defray the expenses of their Cambodian effort. We would give the RTG $20 million in PL 480 commodities (e.g., wheat, tobacco, cotton). Thai importers would purchase these commodities from the RTG with local currency (Baht). According to the Unger proposal, sixty percent of the budget receipts, $12 million, would be used by the RTG in agricultural development while the remaining $8 million would be allocated to U.S. uses. The theory is that the Thai would divert currently budgeted agricultural development funds to their Cambodian effort.

Ambassador Unger proposed this PL 480 program on May 19, 1970. It was not clear why Thailand needed the program at that time (the economic circumstances of Thailand do not warrant such a pro-gram—see below) and his proposal was not favorably received at the working level in State, AID, or BOB.3

[Page 152]

Raising this proposal again, as a possible quid pro quo for Thai assistance to Cambodia, may be justified by the desire to obtain Thai help in Cambodia. On the other hand, a PL 480 action in this context raises serious political and legal problems in addition to its questionable economic merits that should be addressed.

Incrementalism versus Fundamentalism

As a policy proposal the PL 480 program represents a clear case of “incrementalism.” It is an example of a policy proposal made in response to immediate circumstances, that has not been viewed in the larger context of U.S.-Thai relations, the total U.S. program effort in Thailand, the requirements of the Thai economy and U.S. strategy in Southeast Asia:

  • —In 1969, the Thai economy continued the high rate of economic growth it has achieved throughout the 1960’s:
  • GDP increased by 7.5%,
  • —budget revenues rose by 11.3%,
  • —foreign exchange reserves stood at a relatively high level of $875 million at the end of the year, having suffered a slight decline from the over $900 million level achieved in 1968 as a result of U.S. war-related expenditures in Thailand.
  • —Over the period 1971–1975 the Thai budget and balance of payments will come under serious pressure if the Thai expand their forces and if U.S. war-related military spending is reduced. This pressure could be alleviated by increases in U.S. military assistance and increases in the U.S. program assistance. Nevertheless, the NSSM 51 economic model indicates that in the near term the Thai economy clearly has the capacity to support increases in military and civilian expenditures.
  • —The Thai have been sensitive to U.S. press and Congressional criticism of our commitment to Thailand. They have repeatedly sought and obtained assurances of our commitment to defend Thailand. However, the NSSM 51 study concluded4 that by responding to these requests piecemeal the U.S. has broadened its commitment beyond what it can defend against its critics and possibly beyond what U.S. interests could justify. The study concluded that a diplomatic strategy more closely gauged to the basis of our commitments—SEATO as interpreted by RuskThanat—would be easier to defend, less likely to raise Thai expectations beyond what we can meet, and more consistent with stable [Page 153]U.S.-Thai relations instead of the hot-cold cycle we have experienced recently.
  • —The Thai view the level of U.S. program assistance to Thailand as one of the most important benefits of close cooperation with the U.S. and as a signal of U.S. intentions to back up its commitment. The NSSM 51 analysis concluded that our past program effort has been too diffuse and volatile to take full advantage of the Thai perception of it. The study concludes that we should focus our program effort in fewer areas, and set long-term program strategy and funding goals in consultation with the Thai. Such an approach would have the important ancillary benefit of improving Thai performance in key areas, e.g., ground force performance.
  • —The NSSM 51 study presents several U.S. assistance program packages. The package choices most consistent with the threats to Thailand, and therefore the most likely to be selected, will increase the level of U.S. assistance to Thailand. Assistance to the army and air force and possibly economic assistance can be expected to rise.
  • —You have asked for a study of U.S. strategy alternatives for Southeast Asia. A decision to embark on a new style of assistance to Thailand, which is what Ambassador Unger’s proposal amounts to, should be made after a review of alternative burden sharing arrangements, the forms of assistance we are able to give, etc. While all decisions cannot await the formulation of a Southeast Asian strategy, this one probably can.

Conclusion

In sum:

  • —the PL 480 proposal:
  • —is not justified on economic grounds,
  • —will probably not have any lasting impact on U.S.-Thai relations,
  • —is unlikely to result in Thai performance improvements.

In addition, major Congressional opposition can be expected on political and on legal grounds as soon as the PL 480 agreement is signed.

  • —an alternative approach would entail:
  • —assuring the Thai that our overall assistance will be responsive to the threats to Thailand.
  • —informing them that we have just completed an analysis of our supports to Thailand which will be reviewed for decision in the near future. The resulting decision will determine how our economic and military assistance programs will be modified in response to recent developments in Southeast Asia. We expect to make a major assistance contribution to the overall Thai defense effort in the foreseeable future, and our contribution will be in proportion to the overall Thai defense burden which we recognize is increasing.
[Page 154]

Recommendation

I recommend disapproval of the PL 480 proposal. If action is required to assure the Thai of our financial backing for additional defense costs they will bear as a result of the deteriorating security situation on their borders, I recommend the U.S. inform the Thai of the pending review of our assistance effort and assure them that the upcoming decision will be responsive to the requirement for an expanded Thai defense effort.

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 562, Country Files, Far East, Thailand, Vol. IV. Secret; Nodis; Khmer. Sent for action.
  2. See Document 76.
  3. In a July 9 memorandum to Kissinger, Assistant Secretary of Agriculture for International Affairs and Commodity Programs Clarence D. Palmby noted that his Department also opposed this program “based on normal economic considerations and normal Title I program criteria.” He added, however, that “if you believe that such a program is in the national interest, we will cooperate with other agencies in its implementation.” Palmby’s memorandum is also attached but not printed.
  4. See Document 82 for excerpts from the NSSM 51 Thailand Analysis Program Study.