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300. Summary of Conclusions of a Policy Review Committee Meeting1

SUBJECT

  • U.S. Debt Policies

PARTICIPANTS

  • State
  • Richard Cooper—Under Secretary for Economic Affairs
  • Robert Hormats—Deputy Assistant Secretary, Bureau of Business and Economic Affairs
  • AID
  • Governor John Gilligan
  • David Bronheim—Special Assistant to the Administrator
  • Defense
  • Charles Duncan—Deputy Secretary
  • Ellen Frost—Deputy Assistant Secretary for International Economic Affairs, ISA
  • USUN
  • Ambassador Melissa Wells—Ambassador to UN for Economic Affairs
  • JCS
  • Lt. General William Y. Smith
  • NSC
  • Guy Erb—Staff Member
  • CIA
  • Dr. Robert Bowie—Deputy to the Director for National Intelligence
  • [name not declassified]—Analyst, Office of Economic Research
  • White House
  • David Aaron
  • OMB
  • Bowman Cutter—Executive Associate Director for Budget
  • Randy Jayne—Associate Director for National Security and International
  • Treasury
  • C. Fred Bergsten—Assistant Secretary for Monetary Affairs
  • Robert Pelikan—Director of Development Nations Finance
  • Agriculture
  • Howard W. Hjort—Director for Economic Policy Analysis and Budget

SUMMARY OF CONCLUSIONS

The PRC met on February 22, 1978 to discuss U.S. policy toward the official debts of developing countries, and in particular (1) a forthcoming meeting at the ministerial level of the Trade and Development Board of the United Nations Conference on Trade and Development (UNCTAD) (March 6 through 10) that will discuss international debt issues; and (2) Section 208 of the International Development Cooperation Act of 1978 (Humphrey Bill), that would authorize the U.S. to adjust outstanding loans to the poorest countries, making them equivalent to the grants that the U.S. now provides to those countries.

The US/EEC Proposal

The PRC considered possible U.S. actions regarding the debt proposal that the United States and the EEC tabled at the Conference on International Economic Cooperation last year. The PRC agreed that the US/EEC proposal should be tabled at an appropriate moment during the UNCTAD Ministerial meeting.

Retroactive Terms Adjustment

The PRC also considered the possibility of a case-by-case retroactive adjustment of the terms of loans outstanding to least developed developing countries, or to those countries plus those eligible for credits from the International Development Association.

The PRC agreed that the Administration, if asked, will support the Humphrey Bill provisions on least developed country debt.2 The U.S. delegation to the UNCTAD Ministerial will so state, in the context of discussions of retroactive terms adjustment, and will indicate that U.S. policy on this subject will depend on the outcome of the legislative process.

Other Issues

The PRC also agreed to request further study of (1) the possible role of aid consortia and creditor clubs in debt rescheduling operations; and (2) whether clauses that allow a debtor to skip a few payments of [Page 950]principal if it faces a debt servicing problem could be added to U.S. loan contracts (bisque clauses).

  1. Source: Carter Library, National Security Council, Institutional Files, Box 68, PRC 053, 2/22/78, International Economics. Confidential. The meeting took place in the White House Situation Room. Erb sent the Summary of Conclusions to Brzezinski under cover of a February 27 memorandum in which he noted that it “reflects the discussions after the PRC meeting between Dick Cooper and Tony Solomon that resulted in a decision to support, if asked, the section of the Humphrey Bill on retroactive terms adjustment of the debt of the least developed developing countries.” Erb reported that “[o]ther agencies have agreed to approve the decision to support the debt section of the Humphrey Bill and State, Treasury, and AID have approved the summary as it now stands.” (Ibid.) In a February 27 memorandum to Aaron, Erb commented that “Treasury resisted change hedgerow-by-hedgerow. State, AID, and NSC were in favor. OMB acquiesced, but with little enthusiasm. Agriculture supported the decision. Defense was indifferent.” (Carter Library, National Security Council, Institutional Files, Box 25, PRM 08 [1 of 3] [1])
  2. In a March 6 memorandum to Owen and Erb, Brzezinski noted that Carter had “directed that in each case, we must assess the impact on the budget.” (Carter Library, National Security Council, Institutional Files, Box 68, PRC 053, 2/22/78, International Economics)