358. Summary of the Council on International Economic Policy Executive Committee Meeting1

[Omitted here is summary material on International Capital Markets.]

II. Most Seriously Affected LDCs: It was agreed that on the issues related to the LDCs most seriously affected (MSAs) by the increase in oil and other prices that:

A background statement containing our assessment and approach to the problem (see attached) would be made available to all interested agencies and become the basis for U. S. action bilaterally and in the UN, World Bank, IMF, C–20 “Development Council,” OECD, EEC, and other relevant forums.
These problems should be examined on a case-by-case basis, and the U. S. should resist pressures in multilateral forums for overall schemes and solutions requiring special country contributions. Within the U. S., we would proceed on the established course seeking Congressional approval on the multilateral and bilateral aid programs with decisions in July–August on the FY 75 P. L. 480 program.
An interagency working group would be established to monitor the changing developments affecting the MSAs and to assure that a uniform U. S. position reflecting any necessary changes is maintained in the different international forums. The work of this group would be related to and affected by the OMB (Bridgewater) group on P. L. 480.
Ray Sternfeld of the CIEP and Charles Cooper of NSC would discuss organization of the group, which would include representatives [Page 1017] of State, Treasury, Agriculture, CIA, AID, FEA, NSC, OMB, and CEA. Names should be submitted to the CIEP Executive Secretariat (Phone: 456–2937).

[Omitted here is summary material on the U.S. Position on Expropriation and MNCs in International Forums.]


Background Statement

Problems of Developing Countries Most Seriously Affected (MSA) by Higher Petroleum and Other Prices

There are about 25 LDCs (see annex)3 which do not appear to be able to offset the effects of higher petroleum and other prices on their economies (particularly their balance of payments) without substantial reductions in living standards and interruptions in their economic development. The most recent USG analysis concludes that the financing problem for these MSAs is $1.0 to $1.5 billion in 1974 and 1975, probably towards the bottom of the range for 1974 and towards the top of the range in 1975. The hard core problem is thus equal to less than 10 percent of the normal capital flows from developed to developing countries, but significant for some individual countries.

The U.S. approach to the MSA problems is as follows:

The dimensions and timing of dealing with the problem appears manageable.
A reduction in oil and other prices is of course the preferred means, but it is unrealistic to believe that a rollback to early 1973 levels will take place. However, this reinforces the need to sustain and increase pressures on the oil exporters to provide more assistance to the MSAs on concessional terms.
Donors should utilize all viable channels for providing and coordinating assistance. While the UN has a role, the U.S. does not believe that the UN can be involved in the operational management of funds provided for this effort. We expect that the Joint Ministerial [Page 1018] Committee of the IMF and World Bank—”International Development Council”—originally proposed by the LDCs will become the most effective coordinating body involving the developed countries, oil exporters, and the LDCs. As a first order of priority it has the MSA problem.
The U.S. response will be primarily a case-by-case approach through established channels. To support this effort, it is seeking to obtain congressional approval on the pending multilateral and bilateral aid programs and by July–August will be in a position to decide the levels of P.L. 480 programs.
Further analysis is necessary on other proposed international schemes, such as the sale by the IMF of gold on the private market with profits being made available for assistance to the MSAs.
Given the fast changes in world prices and other developments there will be periodic reviews of the impact on the MSA problem.

  1. Source: National Archives, RG 429, Records of the Council on International Economic Policy, 1971–77, Records of Executive Committee Meetings 1973–74, Box 252, File 53665, July 2, 1974 Meeting. No classification marking. Submitted by Flanigan to members of the Executive Committee on July 3. A copy was sent to Cooper and Maw.
  2. The attachment is marked “Draft.”
  3. The annex, “LDCs Most Seriously Affected,” is attached but not printed. The countries listed in it are: Bangladesh, Cameroon, Chile, Costa Rica, Honduras, India, Ivory Coast, Kenya, Pakistan, Senegal, South Vietnam, Sri Lanka, Tanzania, Uruguay, Botswana, Cambodia, Guyana, Lesotho, Chad, Mali, Mauritania, Niger, Upper Volta, Sudan, and Swaziland.