Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

260. Memorandum of Conversation¹

Washington, March 9, 1977, 8:15 a.m.

SUBJECT

• Foreign Assistance

PARTICIPANTS

• The President
• Secretary Vance
• Secretary Blumenthal
• Secretary Bergland
• Director-designate Gilligan
• Senator Sparkman
• Senator Inouye
• Senator Humphrey
• Senator Long
• Senator Case
• Senator Young
• Speaker O’Neill
• Congressman Mahon
• Congressman Zablocki
• Congressman Harrington
• Congressman Long
• Congressman Cederberg
• Congressman Stanton
• Congressman Foley
• Congressman Reuss
• Congressman C.W. Young
• Douglas J. Bennet, Jr.

The President opened by stating that he was willing to take a large share of the political heat for this year’s foreign aid bill because of its importance to our foreign policy at a critical moment. We have new opportunities for gains in Africa and Latin America if we have the flexibility to deal with them. OPEC is willing to help. We must back up our human rights commitment.

Secretary Vance then outlined the components of the $1.7 billion increase—$1.3 billion for IFI’s, of which $1 billion is callable capital being appropriated for the first time.

The President then acknowledged difficulties with the aid program in the past which have become important symbols: World Bank salaries, the fact that 40 per cent of IDA funds go to India alone, the over-concentration of administrators who live in relative opulence in Washington and other capitals. The Administration is seeking to address each of these issues.

Congressman Reuss agreed on the need to support IFI’s. He volunteered the desirability of a “Congressional declaration supporting the Administration view that human rights are important and that we will use our vote and any other leverage in the IFI’s to advance human rights.” The Administration faces a moment of truth tomorrow on two multilateral loans to Argentina.

The President replied that the Administration would “err on the side of human rights” decisions involving multilateral loans. He stated, however, that there can be no absolute standards as the Korean case shows.² A declaration by Congress with regard to human rights in the IFI’s would be fine, the President said, as long as it left the Administration some flexibility.³

The President noted that the IFI’s have exerted “conservative lending pressure” on borrowers which has been healthy for inflation control.

Senator Humphrey noted that while India gets 40 per cent of IDA loans, it is not at the top of the list on a per capita basis. The President stated that India had made remarkable progress recently not only because of good crops, but in human rights as Mrs. Gandhi has taken steps away from totalitarianism.

Senator Case switched the discussion to his concern that foreign assistance decisions should not be contingent upon any U.S. domestic pressures. It has been argued, he said, that U.S. assistance is actually spent in the U.S. and benefits American industries, that P.L. 480 helps American agriculture, and so forth. In the long run, it would be better to separate our parochial interests from our foreign policy objectives to achieve flexibility in meeting the latter. Congressman Long nodded approval throughout Case’s remarks. Senator Humphrey subsequently noted that Case’s position was not realistic politically because much of the support for our aid program came from farmers, for example, who perceived the benefits of P.L. 480.

Senator Inouye noted that the Senate had supported foreign aid vigorously for the last four years but expressed several concerns of his own:

—U.S. IFI contributions should be no more than 25 per cent. The President subsequently agreed that this was a desirable policy objective, but as Secretary Blumenthal concurred, it would take several years to achieve.

—We are picking up 70 per cent of the cost of the U.N. drug agency whose work is largely devoted to Europe and which has a very small impact on heroin imports to the United States.

—While others charge that we contribute only .26 per cent of our gross national product to aid, that figure covers development assistance alone, does not include military assistance (including aid to Israel), callable capital, Ex-Im Bank loans, P.L. 480, etc. Nor does it include the fact that we spend 6 per cent of our GNP for defense while nations like Japan, whom we in fact defend, are spending less than 1 per cent. Senator Humphrey observed that the figures can hardly be totalled since the Ex-Im Bank is a money maker, the callable capital hasn’t been called, and P.L. 480 does as much good for our farmers as its beneficiaries.

Chairman Mahon stated that foreign aid in general was highly unpopular in Congress and that it passed only because of the Middle East package. The House will not approve a $7 billion package, he predicts. Chairman Zablocki, Congressman Cederberg and Congressman Long agreed. The President reiterated the Administration’s intention to deal with Congressional concern, but also stated that the public will support a cleaned up program adequately focused on human needs.

Congressman Long expressed concern about contradictions he perceives within the Administration’s position. The same Administration which preaches openness wishes to turn over a larger share of aid dollars to international institutions which escape Congressional control, whose operations are secret, and for which no adequate audit is available. This is why he opposed the 40 per cent increase in aid to multilaterals.

Secondly, he said we preach reduction in conventional arms availability at the same time we give countries (who are spending their own resources for arms) IDA loans which are virtually free.

From these contradictions, Congressman Long concludes that our best option is to improve our own already excellent bilateral aid program and reduce emphasis on IFI’s.

Congressman Cederberg supported Reuss’s initiative to retain the President’s flexibility on IFI’s. Congressman Stanton emphasized the need to reach new members of the affected committees to build up support.

Secretary Blumenthal stated that we are appointing strong new directors to the IFI’s who, he hoped, would be able to deal with many of the concerns that had been raised. Achieving the 25 per cent limit would require time, and he hoped it could be done by getting contributions increased from others.⁴

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 34, Memcons: President: 3/77. Confidential. The meeting, which took place in the Cabinet Room, began at 8:15 and ended at 9:06 a.m. (Carter Library, Presidential Materials, President’s Daily Diary)
2. Speaking before the Senate Appropriations Subcommittee on Foreign Operations on February 24, Vance announced reductions in U.S. assistance to Argentina, Uruguay, and Ethiopia on the grounds of their poor human rights records; Vance noted, however, that assistance to strategically important countries like South Korea would not be cut. (Bernard Gwertzman, “Security Links Cited,” The New York Times, February 25, 1977, p. 1)
3. In a March 11 memorandum to Carter, Blumenthal noted that after Carter’s March 9 meeting with Congressional leaders, “ Henry Reuss agreed informally with Treasury and State on a draft of legislation directing the U.S. to advance the cause of human rights in its participation in the international financial institutions. The draft would leave intact the legislative requirements (the Harkin amendment) that already exist for the Inter-American Development Bank, which we feel is necessary if Harkin and other proponents of mandatory voting provisions are to be brought along. We feel that the Reuss draft is the best obtainable in the circumstances.” Carter initialed Blumenthal’s memorandum. (Carter Library, National Security Affairs, Brzezinski Material, Agency File, Box 21, Treasury Department: 2/77–3/78) The Harkin Amendment was attached to P.L. 94–302, a 1976 law governing U.S. participation in the IDB and ADF. The amendment authorized the U.S. IDB Executive Director and the U.S. ADF Governor to vote against loans for countries whose governments violated human rights.
4. On March 16, Hormats forwarded this memorandum of conversation to Brzezinski, noting that it “essentially square[d] with” his notes on the meeting. Hormats asserted: “The tone of this meeting demonstrated the importance of the President putting a significant amount of political capital behind the aid program if appropriation requests are to be passed by the Congress. As I have noted before, foreign assistance is the area in which we can do the most for the developing countries. Without a strong aid performance by the US, our credibility as a nation concerned with poverty will be eroded, our influence in other areas of the North-South dialogue will be jeopardized, and our ability to resist some of the more extreme demands of the developing nations will be weakened.” (Memorandum from Hormats to Brzezinski, March 16; Carter Library, National Security Affairs, Brzezinski Material, Subject File, Box 34, Memcons: President: 3/77)