298. Memorandum From Secretary of State Kissinger to President Ford 1

SUBJECT

  • Budgetary Implications of the UNGA Speech

As you know, over the past several months I have concentrated on putting together the U.S. position for the Seventh Special Session of the UN General Assembly. In so doing, I have worked closely with other agencies and Congressional interests to ensure an approach which has firm support within the Administration and the country at large.

The proposals the United States makes at the Seventh Special Session will transcend the work of the Session itself and set the tone of U.S. relations with the developing world for at least the next year. A positive American approach can help ensure a constructive dialogue which is politically and economically advantageous to this country. I have therefore attempted to put together a package of proposals which will meet in a concrete fashion some of the critical problems of the developing [Page 1022]countries and will provide a work program on which international organizations can usefully focus their time and energy over the next two or three years. This approach will demonstrate constructive U.S. leadership, take the initiative from and blunt the criticism of the developing countries, as well as point out that we expect to receive as well as to provide benefits in our relations with the developing world.

I have, of course, been very much aware of the budgetary impact of our proposals, and have discussed these measures at length with Jim Lynn. Most of the package can be implemented with little or no impact on the budget. The centerpiece—an export earnings stabilization proposal which would mobilize as much as $10 billion through the IMF—requires no budgetary outlay. The proposal on U.S. food aid contributions can be accommodated within the existing budget levels for PL–480. The budgetary impact of the proposals on commodities is minimal or non-existent. The same is true of the proposals on trade and private investment.

There are two major proposals, however, which would require the commitment of U.S. funds for their implementation.

First, I would propose to announce our readiness to make a direct contribution to the International Fund for Agricultural Development (IFAD) of $200 million, if others are prepared to make appropriate contributions. We would seek appropriations of a maximum of $100 million in FY 76 only if the negotiations moved rapidly and such a payment were an essential element of them. IFAD is an extremely important initiative—a major follow-up item to the World Food Conference. Since the creation of the fund was originally proposed by the OPEC countries, our support for it would be a concrete signal to the producer countries that we are prepared to respond positively to constructive ideas from them. Without a direct contribution from us, however, there is little likelihood that IFAD will get off the ground.

Second, I would propose a substantial replenishment of the resources of the International Finance Corporation (IFC). In order to be meaningful, a replenishment of $400–$450 million would be required of which the U.S. share would be $100–$125 million with budget outlays of $33–$42 million beginning in fiscal year 1977.

This replenishment would serve two objectives.

On the one hand, it would enable the World Bank group to increase its involvement in the development of mineral resources. The traditional sources of capital for the minerals sector are not prepared to invest the amounts of money necessary to guarantee sufficient supplies of basic minerals at reasonable prices in the years to come. An imaginative program of the World Bank and its affiliate organization, [Page 1023]the International Finance Corporation (IFC), working together to complement private investment, can make a significant contribution to more stable commodity supplies.

In addition, the replenishment would provide funds to enable the establishment of an investment trust within the IFC as a device to expand the access of enterprises in the middle-level developing countries to international capital. This proposal is designed to focus particularly on the needs of a group of developing countries of political significance to us, e.g., Brazil, Mexico, Taiwan, and Korea.

Both Bill Simon and I strongly feel that the IFC proposals should be implemented because of their political impact but also because of the significant impact they would have on the private sector of the developing countries.

I realize that 1976 will be a difficult year for the budget. For that reason I have strongly emphasized the need to come up with proposals with a minimum budget impact. I think we have been successful in this regard. Our financial support for both the IFAD and IFC proposals should receive substantial Congressional support.

I request your approval to include these proposals in my speech at the Special Session.2

Henry A. Kissinger
3
  1. Source: Ford Library, L. William Seidman Papers, Box 37, Economic Policy Board Subject File, Action Memoranda. Secret.
  2. Owing to a last minute trip to the Middle East to broker the September 1 Egyptian-Israeli disengagement agreement, Kissinger was unable to deliver his speech to the Seventh Special Session of the UN General Assembly. Moynihan read the speech in Kissinger’s stead. The text of the speech, entitled "Global Consensus and Economic Development," is in Department of State Bulletin, September 22, 1975, pp. 425–441. On the funding of IFAD, Moynihan said: "President Ford has asked me to announce that he will seek authorization of a direct contribution of $200 million to the fund, provided that others will add their support for a combined goal of at least $1 billion." (Ibid., p. 440) On the IFC funding issue, Moynihan announced that "the United States will support a major expansion of the resources of the World Bank’s International Finance Corporation, the investment banker with the broadest experience in supporting private enterprise in developing countries. We propose a large increase in the IFC’s capital, from the present $100 million to at least $400 million." (Ibid., p. 430) Excerpts from the speech were printed in The New York Times, September 2, 1975, p. 20.
  3. Scowcroft signed on Kissinger’s behalf above Kissinger’s typed name.