313. Memorandum From Secretary of the Treasury Blumenthal to President Carter 1
- Common Fund
I understand that you will shortly be considering whether the Administration should initiate consultations with the Congress on U.S. participation in the Common Fund. I want you to know that I have very strong reservations about the whole enterprise, for three fundamental reasons.
First, the economic justification for any Common Fund which we could support is extremely small. Even its supporters agree that the real impact on developing countries would be tiny.
Second, we have a large number of far more important development issues under consideration by the Congress. The major effort that would be required to win Congressional approval of U.S. participation would clearly divert support from much more fundamental U.S. programs—including bilateral and multilateral aid, the Witteveen Facility at the IMF, individual commodity agreements and trade measures which help the developing countries. The game would simply not be worth the candle. I feel that even raising the issue on the Hill may adversely affect these much more important programs.
Third, there is little chance that Congress would support U.S. participation at all unless you personally invested a great deal of effort and prestige in the project. Even then, success is not assured. In any event, as just indicated, your doing so would clearly hurt us on much more important issues by diverting your own time and that of much of the Administration.
I therefore believe that we should stick to the present U.S. negotiating position, excluding mandatory contributions to the Common Fund of the type envisaged by the LDCs which would clearly turn it into an aid institution. If necessary, I believe we can fashion a more limited approach based on contributions to a contingency reserve fund against possible losses by the organization, which the LDCs would accept if we—and the other industrialized countries—make it clear that we can go no further. 2[Page 994]
In combination with a narrowly defined “second window” this approach could thus avoid any significant foreign policy costs and might even generate modestly positive reactions. If we go to the Hill, I would thus start with this alternative—or quickly fall back to it—to avoid the larger costs outlined above. Even this modest version, however, may not be acceptable to the Congress without your heavy personal involvement.