247. Memorandum From Richard Kennedy and Charles Cooper of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Handling Reductions in PL–480

On September 6, the Senior Interagency Committee, chaired by Bridgewater2 of OMB, approved a preliminary PL–480 country allocation for the remainder of FY–74 (Tab A).3 The commodity availabilities in this preliminary program are far below the availabilities expected when the FY–74 budget was prepared over a year ago. The reduced availabilities reflect the short supply situation and high prices for almost all PL–480 commodities, particularly for wheat, corn, cotton and rice.

In fact, considering the short supply situation, Agriculture has stretched the literal interpretation of the law to find even these limited amounts of wheat and cotton are "surplus." This does not mean that additional availabilities will not be feasible later in the fiscal year. A review of the entire program and availabilities is scheduled for December.

During this planning exercise, we have had very much in mind the foreign policy importance of avoiding export controls if at all possible. Thus, we have not pressed Agriculture to go beyond the availabilities they have offered at this time.

Agriculture has been particularly sensitive to the foreign policy implications of providing the minimal needs of South Vietnam, Thailand, and Cambodia, and the domestic pressure to continue the humanitarian programs of the voluntary agencies and certain international organizations. Almost all the commodities available will go to the Southeast Asian and humanitarian programs, including Sahel relief. Even the voluntary agency programs have been cut substantially. Modest amounts of wheat are also available for Pakistan (100,000 tons), Bangladesh (100,000 tons), Bolivia (38,500 tons), Sudan (20,000 tons), [Page 862]and Jordan (20,000 tons). A small amount of cotton is provided for Indonesia, and small amounts of commodities for a few other countries.

The preliminary plan will be implemented only gradually in a way which retains flexibility to make shifts as unexpected highest priority needs may develop.

However, this program does not provide commodities to meet a substantial number of high-priority requirements in important countries and to cover many existing commitments. We can expect the curtailment of PL–480 to lead to major problems with some countries and that many countries will increase their appeals to you and to the President to provide them more PL–480. The cutback in U.S. provision of food on highly concessional terms comes at a time of worldwide food shortages and prices more than double those of even a year ago.

Indonesia. The most serious country problem is Indonesia. We had planned to provide Indonesia over $150 million in commodities (at current prices) which will not be available under the preliminary program. We will fall far short of our consultative group pledge of food aid and, unless offsetting AID action is taken, short of our financial pledge to Indonesia because part of the pledge would normally be met with PL–480 cotton.

Pakistan. Without the recent flood4 no PL–480 would be planned for Pakistan under the reduced allocation. As a result of our pressure we squeezed in the 100,000 tons of wheat already announced. Of this, 40,000 came from South Vietnam reducing its allocation to a minimum. Williams is now recommending 40,000 tons of feed grains and 40,000 tons of vegetable oil. We are examining shifts in the program to meet these requirements.

Title II. A substantial portion of the PL–480 program for the remainder of the year is allocated to voluntary agency and other humanitarian programs scattered in more than 50 countries. These programs are strongly supported by church groups, CARE and numerous Congressmen. These programs were cut substantially last year, particularly when milk was no longer available under PL–480. Substantial additional cuts are being made now. Agriculture and AID both argue that further cuts would risk a major public, press and Congressional reaction against the Administration and the PL–480 program if these feed-the-poor programs are further reduced and the strong U.S. voluntary agencies forced to further dismantle their feeding programs—a major part of their international efforts. We also would risk some charges internationally that we were backing away from our traditional support of humanitarian programs which were not "politically oriented."

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Other important commitments which would not be fulfilled include:

  • —Korea: About $175 million of commodities—the entire program—has been cut; most of this program is part of the offset for the textile agreement.
  • —Israel: About $6 million of commodities in already signed agreements will not be available.
  • —Portugal: About $8 million of feed grains—part of the Azores Agreement.
  • —Bangladesh: An additional 250,000 tons ($45 million) of wheat promised in the consultative group.

Because of the virtual doubling of prices, even if the commodities were available, the original PL–480 program would have to be cut sharply to stay within budget allocations. The reduced program will use 80 percent of the budget allocation.

Later this year, modest additional availabilities may meet some of the most essential requirements listed above. We do not believe this is the time to press Agriculture for additional availabilities. We should first examine in some detail the full implications of living with the present program. In some cases, such as Indonesia and Pakistan, reallocations of AID funds might provide at least partial offsets, although AID funds will be limited this year. In some cases, we may be able to reach agreement with recipients to postpone shipment to FY–75. In some cases we shall have to bite the bullet and tell countries we simply do not have the commodities. Virtually all our commitments were made subject to the availability of commodities.

At our request State is preparing a paper laying out the implications of the PL–480 curtailment, including the alternative ways of offsetting the cuts and/or negotiating strategy for minimizing the effects on our foreign policy objectives.5

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 368, Subject Files, PL–480. Confidential. Sent for information. The attached NSC correspondence profile indicates that Kissinger noted the memorandum.
  2. Bernard Bridgewater was the OMB Associate Director of Defense and International Affairs.
  3. Tab A, a September 4 memorandum from Assistant Secretary of Agriculture for International Affairs and Commodity Programs Carroll Brunthaver to Bridgewater, is attached but not printed.
  4. During the final 2 weeks of August 1973, Pakistan experienced devastating floods.
  5. The paper, entitled "PL–480 Cutbacks: Implications, Alternatives, Negotiating Tactics," was sent by Pickering to Scowcroft under cover of an October 1 memorandum. (National Archives, Nixon Presidential Materials, NSC Files, Box 368, Subject Files, PL–480)