Foreign Relations of the United States, 1969–1976, Volume E–10, Documents on American Republics, 1969–1972

12. Minutes of an NSC Review Group Meeting¹ ²

Washington, October 9, 1969, 2:15–4:15 p.m.

Subject:

• Latin America (NSSM 15)

Participation:

• Chairman—Henry A. Kissinger
• State—William I. Cargo
  Charles Meyer
  Donald McHenry
• Defense—Richard A. Ware
• CIA—Edward W. Proctor
• JCS—LTG F.T. Unger
• OEP—Haakon Lindjord
• USIA—Frank Shakespeare
• BOB—James W. Clark
• Treasury—Paul A. Volcker
  Anthony Jurich
• Agriculture—Andrew Mair
• Commerce—Kenneth N. Davis, Jr.
• CEA—Paul W. McCracken
• STR—Carl Gilbert
• AID—Rutherford M. Poats
• Gov. Rockefeller’s Office—William Butler
• NSC Staff—Viron P. Vaky
  Arnold Nachmanoff
  Robert E. Osgood
  Fred Bergsten
  Jeanne W. Davis

SUMMARY OF DECISIONS

...Messrs Vaky and Meyer will rework the Agenda for NSC consideration to:

• a. identify the policy issues that require Presidential determination,
• b. define policy choices, adding the flavor of the pros and cons, outlining a bold and a safe option and including the costs (economic, domestic political, etc.) of each.
• c. illustrate options with specific issues lifted from the IA–ECOSOC paper.

...The NSC meeting should be structured so as to get basic directives useful in preparing specific US positions for the IA–ECOSOC meeting.

...CIA should assess the nature of the threat in Latin America: whether Nationalism or Communism presents the greater present danger.

Mr. Kissinger introduced Mr. William Butler of Governor Rockefeller’s staff and asked him to comment.

Mr. Butler explained that the Rockefeller Report had been developed hurriedly—actually in two weeks—and that it attempted in general to develop pragmatic approaches to the various problems encountered. He acknowledged that the report was uneven—in some cases taking the broad approach to problems and in others going into what he felt was too much detail. He referred to the section on aid, specifically the question of preferences for the LDCs, and said that this position and language had been developed with great care and in close touch with the AFL–CIO and that the position taken reflected their feelings possibly more than those of others.

Mr. Kissinger explained that there would be only one NSC meeting although if, at the end of the October 15 meeting, the President wishes another Council session this will of course happen. He referred to the President’s October 31 speech which would lay out the basic principles of a new U.S. approach on Latin America and said the NSC meeting must be geared to producing decisions. He thought the Review Group should focus on an attempt to structure types of decisions we need to get from the NSC meeting with some discussion of what decisions might be handled through interdepartmental papers. He thought we would then be ready for both the NSC meeting and the October 31 speech. He suggested we go through the headings of the Rockefeller Report and of the previous NSC discussion and see what to put up for decision. He asked if the issues in the Agenda paper were properly posed and if it was agreed that the Agenda annex was a fair statement of basic policy.

Mr. Volcker said Treasury found the Agenda incomplete on the economic side. He thought many issues raised strictly in the Latin American context have implications in other areas of the world, that other interests should be better reflected. He asked how this Agenda paper meshes with the IA/ECOSOC exercise, which was much more detailed and much more substantive.

Mr. Meyer said there were three or four facets of the same picture. While the Agenda paper focuses on broad policy, he acknowledged that each interested agency has in mind parallel specifics from the IA/ECOSOC exercise. He thought these would have been self-determining if the broad policy had been established prior to the preparation of the IA/ECOSOC paper.

Mr. Volcker asked if we could make broad policy in a vacuum.

Mr. Vaky noted that the IA/ECOSOC papers would be on the President’s desk prior to the NSC meeting. He thought the NSC could discuss premises and their principal implications and that the President could then decide on specific issues for the IA/ECOSOC.

Mr. Kissinger agreed that the IA/ECOSOC meeting could follow up the decisions made at the NSC. The NSC could make the basic decisions and we could concentrate on specifics in focusing on U.S. positions for the IA/ECOSOC meeting. He thought the two things are reinforcing, but agreed that a second NSC meeting may be required.

Mr. Davis said Commerce had noted in the sections on trade, investment, and development assistance an omission of any mention of non-U.S. foreign business presence in Latin America.

Mr. Kissinger asked if this were a policy issue.

Mr. Davis noted that the Rockefeller Report had recommended, for example, limiting project lending to certain sectors, with the result that we would turn over to other countries project lending opportunities in other sectors. He noted this would leave the door open for Japan and the European countries. He thought we should find a way to keep U.S. business presence in the picture, indeed to stimulate U.S. business presence, for example, by opening up hemisphere project lending, possibly encouraging U.S. companies to shift some activities to subsidiaries. He saw no mention of the rest of the world in the Rockefeller recommendations.

Mr. Butler commented that the Rockefeller Report did rely on international agencies for project lending and questioned whether the role of other foreign countries in this area was a major one.

Mr. Davis remarked that both Japan and the European countries were presently aiming their aid lending toward Latin American countries.

Mr. Volcker cited this as a particular example of the general problem with the Rockefeller Report which was that it looked at Latin America in a vacuum.

Mr. Kissinger asked for any other general comments.

General Unger said the military thought the military-security section should begin with a statement on the conflicting view of the nature of the threat in Latin America. He noted that the response to NSSM 15 cited nationalism as the real threat, with Communism as a potential longer-range problem, while the Rockefeller Report saw Communism as the real and present danger.

Mr. Vaky noted this point was made in the Agenda paper, to which General Unger replied that it was in the precis but not in the Agenda annex.

Mr. Kissinger agreed that the point should be made and asked CIA for an assessment of the problem to be attached as an annex to the NSC paper. He thought the difference in view in the recommendations was less than in the theory backing up the recommendations.

General Unger said that on the question of the military missions in Latin America, JCS would prefer to withhold any action pending the completion of various related studies, e.g., the response to NSSM 68 (The Military and the Church in Latin America), a Defense study now underway of all military missions, etc. He noted a statement at the July 9 NSC meeting concerning the importance of personal contacts in Latin America and said that all services were now compiling data on military personalities in the area. He also referred to a study of the value of SOUTHCOM in Panama and asked that these studs not be preempted by an early decision on the future of military missions in Latin America.

Mr. Kissinger agreed that we could delay the major decision in this area but thought we could discuss the problem of visibility and basic attitudes and relationships.

General Unger noted that the only rationale in the Rockefeller Report for their suggestion for closing the military missions was too much visibility.

Mr. Gilbert thought we must be careful that actions taken to favor Latin America do not run counter to our interests in other areas. He mentioned agricultural products, specifically beef, where the Rockefeller recommendations run directly counter to U.S. interests in Australia and New Zealand. He thought we should approach these with caution so that conflicting desirabilities are flagged.

Mr. Kissinger agreed.

Mr. Gilbert asked if there would be enough time to spot such things.

Mr. Kissinger assured him that all concerned agencies would get a crack at any major Presidential pronouncement. He cited the President’s remarks at Camp David, that he did not want a rehash of familiar positions. While he had no fixed ideas, he wants a new departure and bold policy suggestions with regard to Latin America. He thought we could include options which would be different from past consensus without being inconsistent with our interest in other areas. He reiterated that everyone would get a crack at any new proposals.

He then suggested we go through various items in the Agenda paper. He thought the theoretical issues had been settled at the previous NSC meeting (pragmatic approach, special relationship, etc.) and suggested the Review Group consider trade, development, private investment, political and security issues, in that order. With regard to trade, he thought the key issue was how to give effect to the special relationship, with regard the preferences, quotas, non-tariff barriers and the like. He suggested the NSC focus be on general principles with specific proposals to be a part of the IA–ECOSOC package.

Mr. Butler noted that while Governor Rockefeller feels strongly on special treatment for Latin America, he would support a move for generalized tariff preferences rather than specific preferences. With regard to quotas, Governor Rockefeller thought it was in the U.S. interest to pay greater attention to the Latin American share in the growth of markets.

Mr. Kissinger asked if there were counter arguments.

Mr. Mair noted that of the 175 items (presumably refers to IA–ECOSOC proposal to eliminate “nuisance duties”) 60 percent were agricultural. He noted that with the cut in production of coffee, bananas and cocoa, they were no longer competitive. Because of Cuba, we had shifted quotas on sugar primarily to the other Latin American countries with some to the Philippines. He noted that many decisions in this area were controlled by legislation.

Mr. Vaky noted that there were areas in which we could move administratively without requiring new legislation.

Mr. Volcker commented that there was no quantitative indication of how these recommendations related to position of U.S. industry, domestic political problems, balance of payments problems, etc.

Mr. Meyer noted that he did not disagree with Mr. Volcker but there had not been time for any quantitative cross-analysis.

Mr. Vaky agreed that the paper had attempted to establish what to do subject to certain realities.

Mr. Kissinger asked how we could frame this as a proposal on which the President could act. Should we not give him a rough order of magnitude of various factors?

He asked if any of the proposals in the Rockefeller Report or any of the items in the Agenda paper were non-controversial.

All agreed on tourism as a non-controversial item!

Mr. Bergsten commented that all agencies were agreed to support some sort of general tariff preferences, and Mr. Volcker commented the question was how much to shape these programs toward Latin America.

Mr. Kissinger thought the question might be how it would be possible within a general scheme to pay special attention to Latin America.

Mr. Gilbert noted that general tariff preferences would work to the advantage of Latin America. He saw as a prerequisite that regional organizations would agree to forego any other preferences, accordingly the European Community, the African group, and to some extent the Commonwealth would make themselves ineligible for special preferences, which would leave only Latin America eligible for general preferences. He also thought the State Department uses hortatory language on the question of special preferences and reverse preferences. He thought the agreement by regional groups to forego other preferences should be a prerequisite so that our negotiators should return for further instructions if they are unsuccessful in getting agreement on this point.

Mr. Kissinger thought the Rockefeller Report agreed that a general system would favor Latin America. If we can establish a general system, would that give the President enough until the end of October. Could we then go to specific recommendations? Could we give the President the options as to how to take the next step and do what would be necessary to get the thing moving?

Mr. Gilbert referred to the possible necessity for legislation but Mr. Bergsten thought this could be handled in the negotiating instructions to the U.S. delegation to IA/ECOSOC. He noted that the U.S. needs to develop a position on what types of preferences should be included.

Mr. Cargo noted that there was an interagency paper on the tariff preferences question. While the European countries all have schemes on the table on this issue, we have not, and there had been an attempt to develop a position at the Under Secretaries Committee to go to the President.

Mr. Bergsten remarked that this paper had arrived last night and was ready to go to the President.

Mr. Kissinger asked that this basic issue be brought in to the NSC consideration and in a way which will allow everyone to be heard on the subject.

Mr. Gilbert commented that the tariff preference memo was not distinguished for the clarity of its presentation of the issues for Presidential decision. He thought one had to look hard in the paper for these issues.

Mr. Kissinger said he assumed there was a large range of possibilities between the extremes of a liberal and a restricted approach to the problem.

Mr. Gilbert questioned the implication contained in the memoranda of conversations with various members of the Congress that described the tariff preferences as self-limiting because of the competitive needs of various departments. He thought there was in fact a major legislative problem.

Mr. Kissinger said he had no view on the substance of this issue except to make sure that it was clearly defined for the President. He assumed the President could not make a major speech on Latin America without referring to it. He thought, however, we should focus on the big issue—on the policy which will permit development of a negotiating position. The President will need to know the options he has—various shades between a liberal and a restricted position. Was it possible to get a brief statement of these?

Mr. Bergsten said it was. He thought the issue was stated well in the tariff preference paper although the arguments were not as clear.

He thought the agencies were developing separate papers which would refine the pros and cons of various arguments.

Mr. Kissinger thought we should present the President with his choices with related costs including domestic, political and economic costs. He thought we should make sure to get a Presidential expression at the NSC meeting or later.

Mr. Cargo noted that, under Item III on Trade in page 3 of the Agenda paper, State would prefer that the second option be phrased more within the framework of worldwide policy—that it should read, “...providing preferred treatment for Latin America, wherever possible, without a significant breach of our worldwide commercial policy.”

Mr. Kissinger noted the discussion of the Rockefeller recommendations on page 16 of the Agenda annex.

Mr. Davis noted that textiles had crept back into the IA–ECOSOC. He thought textiles was a whole separate issue, and should be taken out of the IA–ECOSOC paper.

Mr. Vaky thought we had a forum for decision on specific issues in the IA–ECOSOC memorandum, and that we could discuss concepts in the NSC with regard to textiles and other specific issues. He thought the State Department was still receiving comments on the IA–ECOSOC paper.

Mr. Kissinger said the only concern was to keep the NSC meeting from becoming a statement of platitudes—could we affirm the special relationship without boring people?

Mr. Volcker thought the Agenda paper was one-sided on what the U.S. can do. He thought the Latin Americans could do more on private investment and in other areas, and that all of their problems are not external ones.

Mr. Poats said this point was being written into the draft of the President’s speech.

Mr. Volcker thought the net result of the agenda paper was misleading. Mr. Vaky said these issues were covered in the IA–ECOSOC paper.

Mr. Kissinger said we should give the President some illustrative examples of the sort of things listed under the various headings on pages 15 and 16 of the Agenda paper. Otherwise, the NSC meeting would be spent on theology, and it would be necessary to renegotiate on all the specific items. He asked Mr. Vaky and Mr. Meyer to redo the paper with this in mind. They should pull out those recommendations which can be quantified, should outline various options including a bold option and a safer option, and should incorporate some of the specifics from the IA–ECOSOC paper.

Mr. Volcker asked what was meant by the Rockefeller recommendation for a hemisphere conference on the division of labor.

Mr. Nachmanoff said he thought this implied a longer-term approach to the gradual elimination of trade barriers, and that the conference was conceived as a first step to discussion of the gradual reduction of barriers in the hemisphere.

Mr. Gilbert said he had read this as an international conference to enact a doctrine of comparative advantage.

Mr. Kissinger asked who wrote this section?

Mr. Butler replied that it was a suggestion by the President of Colombia.

Mr. Bergsten suggested that this looked toward a system of tariff preferences to be developed within the hemisphere.

Mr. Poats commented that the Latin American countries could not agree among themselves.

Mr. Kissinger noted that we were under no injunction to accept every Rockefeller recommendation. He suggested we move on to the development issue.

Mr. Kissinger said the key issue was whether the U.S. should take increased responsibility for the Latin American countries on the use of development assistance or whether we should shift to a partnership through strengthening the regional institutions. The Rockefeller Report suggests that we move in the multilateral direction, while the Budget Bureau suggests transferring some Alliance program funds from AID to the IADB and some to the World Bank.

Mr. Butler thought the Agenda paper was a good statement of the options. With regard to debt rescheduling, he thought the problem should not be aired publicly—that a public statement would be an open invitation to some countries to behave irresponsibly. He thought both the U.S. Government and international agencies should be concerned with the problem, but that they should not comment in a speech or public statement.

Mr. Gilbert thought it should be made clear that any rescheduling should be in cooperation with other countries.

Mr. Volcker thought it should be made plain that debt rescheduling was not the solution.

Mr. Kissinger said the question was how to move more into partnership.

Mr. Volcker thought the drafting of the Agenda paper was misleading in this area, since most aid to Latin America already goes through international organizations. There is a question of the feasibility of imposing another body between the U.S. and Latin America in administration of the bilateral aid program. He thought the Budget Bureau’s proposal would raise problems with the Congress—for instance, which committee would have jurisdiction if some bilateral aid were channeled through international institutions? He thought we should put down the pros and cons—can we evade our responsibility for the administration of U.S. aid? He thought the Rockefeller recommendations envisaged a role for an international agency in bilateral assistance.

Mr. Vaky mentioned the use of CIAP.

Mr. Volcker asked how soon CIAP could take on the responsibility. He thought there was a conceptual problem—how can U.S. funds be given away through an agency in which we do not have a primary role?

Mr. Meyer commented that the broad framework of the paper is built on the fact of a special relationship. The President has said it is there and let’s do something about it. The Rockefeller Report is, by its genesis, a report of what Governor Rockefeller heard. The IA–ECOSOC recommendations were made in response to a Latin American consensus of what they think is wrong, what they need, and what they expect. It is agreed that there is a lot the Latin American countries should do that they have not done. However, the question is not what the U.S. can’t do, but what we would like to do if we could. The Latin American countries take the position that they are grown up—that they would rather do it themselves, of course, with our money or with other low cost money. The restructuring of CIAP is one approach. All Latin American nations go annually to CIAP with their programs, budgets, etc. Representatives of IADB and other institutions sit in on these discussions. He noted that multilateralization was a thread which ran through all reports and studies on Latin America. He noted that Under Secretary Richardson, in connection with the review of the IA–ECOSOC paper, had commented that to recommend multilateralization is one thing, but we should specify how CIAP should work. He thought Congressional committees (Foreign Affairs and Foreign Relations Committees) consistently emphasize multilateralization; but that they must recognize that we, the shareholders, would lose more control than we would in a bilateral context. The General Accounting Office cannot look down the throat of an international organization. He thought one real thrust for more multilateral lending was that the Latin Americans think they may avoid a strict U.S. examination thereby.

Mr. Volcker raised a specific issue on channeling of the bilateral portion of our aid.

Mr. Meyer commented that he would keep bilateral aid pure.

Mr. Kissinger said he saw two issues: (1) should we move increasingly toward a multilateral approach in Latin America and (2) if so, what should be the chosen mechanism? The Rockefeller Report and the Budget Bureau had made recommendations and there may be others.

Mr. Clark noted one alternative can be to put U.S. dollars for private investment through the IADB. The IADB is already in the field and has a certain capability. We could take our bilateral program in this area and let them administer it for us. This would be a concrete action to give expression to general policy which would result in only a small diminution of U.S. control and effectiveness. There was a legal bar that only 15 percent of the bilateral program could be put through international bodies, but the President could ask for a change in the Foreign Assistance Bill now under consideration in the House.

Mr. Kissinger asked if he referred to all bilateral assistance.

Mr. Clark replied only to private investment assistance.

Mr. Vaky noted that the plan would channel bilateral aid through CIAP and the IADB in a fashion similar to the channeling of Marshall Plan funds through the OEEC.

Mr. Poats said it was not timely to deal with organizational changes. Indeed the Latin America countries were not asking for organizational changes. He thought we should await the results of the Petersen Commission study. He also thought we would need legislation for any such changes and, since the House Foreign Affairs Committee has finished its mark-up of the Foreign Aid Bill, it was too late to go to Congress this year. He also thought we would not be successful in getting agreement to go through the IADB since the Bank already had an oversupply of uncommitted funds and Congressman Passman had threatened to appropriate no more money until these funds had been used. He thought the NSC should seek a Presidential decision on a new organizational arrangement and that the Budget Bureau’s proposal should not be discussed. He questioned whether the Agenda paper’s posing of the issue as to whether the U.S. should begin to share responsibility for development assistance with the Latin America countries was too much “either/or” in the back-up discussion on pages 21 and 22 of the Annex. He thought the report recognized that there must be a continuation of bilateral programs and the question was whether a feasible mechanism could be developed for introducing a multilateral review, performance standards, etc., into the system. He thought the President and our IA–ECOSOC representatives should say that we are interested in any proposals for strengthening CIAP or otherwise introducing Latin American group judgment. We should let them propose the specifics.

Mr. Butler said we did not intend to channel U.S. dollars through CIAP but that we envisaged that CIAP would have a strong influence on all lenders and all recipients.

Mr. Meyer thought the Under Secretaries Committee paper came close to Mr. Poats position. It does not look at an international organization as a disbursing agent but rather thought CIAP could be a Latin American OEEC.

(3:55 P.M.—Mr. McCracken left the meeting.)

Mr. Vaky asked if we should suggest several proposals for a possible CIAP role.

Mr. Davis commented that the IA–ECOSOC paper noted several specific issues on the untying of assistance which were not carried over as issues in the Agenda paper.

Mr. Butler commented, with regard to private investment, that the main responsibility was on the Latin Americans. We should do what we can but it is reasonably marginal. He thought the Rockefeller Report was too detailed in this area. He thought much was already being done. He thought there was a proposal that the World Bank could sell dollar bonds in Brazil for projects in Latin America.

Mr. Davis again asked how the IA–ECOSOC issues on untying aid could be tied in with the issues in the Agenda paper. He noted that in para. 2 on page 21 the Agenda paper refers to measures which could be taken to improve the current development assistance program but that the IA–ECOSOC requires specifics.

Mr. Kissinger said he thought we should always go in the direction of specificity. He did not think we could do with a general proposal unless it represented a major policy change. He thought we should give the President two or three specific illustrations in each area and that in this respect we could work in some of the IA–ECOSOC proposals.

(4:00 P.M.—Mr. Butler left the meeting.)

Mr. Kissinger thought we should shape the NSC meeting so as to get directives which would be useful for the IA–ECOSOC meeting and then work backwards to the President’s speech, except in those areas where the State Department needs general policy guidance.

Mr. Davis asked if there would be another Under Secretaries Committee meeting on the IA–ECOSOC papers.

Mr. Cargo said he did not know.

Mr. Vaky asked if we should use the IA–ECOSOC papers as the NSC Agenda.

Mr. Kissinger thought we might but that we should add the general policy issues that require Presidential determination—- a move toward multilateralization, etc.

Mr. Cargo proposed instead that we use the Agenda paper if it were expanded to include certain IA–ECOSOC specific issues.

Mr. Kissinger agreed to that.

Mr. Poats suggested that we might list items from the Agenda paper on separate sheets of the paper to be followed immediately by the relevant sections of the IA–ECOSOC paper.

Mr. Kissinger thought we should then add a bold option and a safe option in each instance.

Mr. Volcker asked with whom a Treasury man could be in touch on the preparation of the new paper and Mr. Kissinger replied Mr. Vaky and Mr. Meyer would put the paper together.

Mr. Vaky said he intended to keep the present Agenda format but illustrate it with specific issues, most of them lifted from the IA–ECOSOC paper.

Mr. Kissinger said that where possible we should define the policy choices, adding the flavor of the pros and cons, outlining the bold and safe options, and including something on the costs of the various choices.

Mr. Bergsten thought we should count the costs in the context of the entire package rather than of individual items.

Mr. Kissinger thought we must give the President some order of magnitude.

Mr. Kissinger and Mr. Meyer discussed the mechanics of the drafting of the President’s speech and Mr. Kissinger asked that the State Department draft be submitted soon.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–111, SRG Minutes, Originals, 1969. Secret. The meeting took place in the White House Situation Room. The agendas for the October 15 and 17 meetings were forwarded to the NSC Review Group under the cover of an October 4 memorandum from Davis. (Ibid., NSC Files, Box 797, Country Files, Latin America, Latin America General, volume 2, September–October 1969) The IA–ECOSOC paper was forwarded to Nixon under the cover of an undated memorandum from Kissinger. (Ibid., NSC Institutional Files (H-Files), Box H–211, NSDM Files, NSDM 30) The proposals for the IA–ECOSOC are published as Document 15. The minutes of the October 15 NSC meeting are published as Document 14.
2. The Review Group discussed U.S. economic policy towards Latin America and the upcoming IA–ECOSOC meetings.