Foreign Relations of the United States, 1955–1957, Foreign Economic Policy; Foreign Information Program, Volume IX

163. Memorandum From the Director of the Office of International Economic and Social Affairs (Kotschnig) to the Deputy Assistant Secretary of State for International Organization Affairs (Hanes)¹

Washington, October 26, 1957.

SUBJECT

• Counter-Proposal to SUNFED—Emerging Difficulties

The counter-proposal to SUNFED is running into serious difficulties within the United States Government and it will not be possible to report to the Secretary by Monday, as we had planned, that we more or less had the green light on our proposal.

1. Through a friend in the Treasury Department, I received a memorandum, handed by Secretary Anderson² to Mr. Dillon, on October 25 (Tab 1). Point 4 of that memorandum states in emphatic terms that the Treasury is “firmly opposed to the special projects fund proposal”. I discussed the issue for over an hour with a member of the international staff in Treasury and it became quite clear that what has happened is that the same people who advised Mr. Humphrey against any kind of U.S. participation in any kind of an International Development Fund have prevailed upon Mr. Anderson to oppose our proposal. Throughout the discussion I had, reference was made to “Mr. Humphrey’s position” rather than “Mr. Anderson’s position”.

2. You have probably seen Mr. Paarlberg’s³ letter of October 24⁴ to Francis Wilcox which more or less repeats the position taken by Paarlberg and Roberts in the meeting in Mr. Wilcox’s office a few days ago. While this letter is not as categorical in its opposition to our project it raises very serious reservations.

In the light of these developments I have cancelled my trip to New York on Monday (a) because it would not be proper for me to talk in any way about our proposal in New York, even in the most guarded form, as long as the project is in the present uncertain state; and (b) because it is evident that a great deal still has to be done here in Washington and done quickly.

Before proceeding with the discussion of the next steps which I believe ought now to be taken, I have got two items of better news:

1. I was called by Mr. Palmer, who works under Bob Macy,⁵ to furnish additional information on our counter-proposal. In a telephone conversation lasting for over 1½ hours, I believe I was able to satisfy Palmer regarding the soundness of the proposal. Mr. Palmer was particularly concerned with the type of machinery which would be required to administer the special projects fund. I told him that while we did not have that part of the proposal clarified in all details, we fully expected that it would be possible to use largely existing machinery and to make the necessary arrangements with the Economic Department of the UN and the Headquarters of the IBRD to obtain the necessary expert consideration of proposed projects before they are acted upon by an intergovernmental body such as TAC. It became quite clear to me in the course of the conversation that, as far as those who have so far dealt with this question in the Bureau of the Budget are concerned, we can count on support of the Bureau. Palmer is apparently working on a paper to be submitted to Mr. Brundage.

2. I discussed the counter-proposal in a long luncheon meeting at the IBRD with Mr. Richard Demuth, Director of the Technical Assistance and Liaison Staff, and Mr. Davidson Sommers, Vice-President and General Counsel. I was very much encouraged both by their interest and sympathetic approach. They definitely feel that our counter-proposal has real merit and would be useful also to the operation of the Bank. They too, however, are concerned over the question of machinery. Without committing themselves fully they agreed that we should use UN machinery. At the same time, they suggested that it might be necessary, in order to make appropriate expert advice available, to increase the staff of the Bank which they thought “could be done”.

In the light of all that has gone before, it is evident that while there is considerable support for the counter-proposal we are up against a real problem with the Treasury and to a lesser degree with the Department of Agriculture. Considering that there is literally not a day to lose if we are to be effective in New York, I feel convinced that an all out effort will have to be made within the next few days unless the ship is to flounder on the rocks of the Humphrey school of thinking in the Treasury Department. I therefore urge:

1. That steps be taken immediately to arrange for a more extensive meeting between Mr. Dillon and Mr. Anderson, together with Mr. Wilcox and yourself, and some supporting staff both from Treasury and the Department. This would be in the nature of a “show down meeting” which should enable us to defeat the arguments of the lower echelons in the Treasury.

2. That you have lunch with Don Paarlberg to get straightened out with Agriculture.

3. That you enlist the active support of Mr. Hauge.

4. That the Vice-President, Mr. Nixon, be approached immediately. When I talked about this with Phil Claxton before this latest crisis Phil told me that Mr. Macomber did not feel it necessary to talk to Mr. Nixon about this. In the light of recent developments I feel sure that this is now essential.

5. That you give consideration to calling on Ambassador Lodge for his aid.

6. That consideration be given to bringing Neil Jacoby to Washington to work on all and sundry. This last proposal is not essential but might be helpful.

I am not giving this memorandum any distribution, but I attach four additional copies in case you need them.⁶

[Tab 1]

⁷

Proposed U.S. Counter Proposal to “Sunfed” at 12th UN General Assembly

1. It is proposed that the U.S. delegation should offer as a substitute for the Sunfed resolution a resolution calling for a considerable expansion of the UN Technical Assistance program. This expansion would involve:

(a) An increase in the financial resources of the program from its present $30 million a year to about $50 million to enable the program to operate more effectively within its present scope, and

(b) A further increase of about $50 million a year (i.e., to a total of $100 million) to enlarge the scope of the program. This $50 million would constitute a special fund to be used for pre-investment projects, such as systematic and intensive surveys of water, power, and soil resources, engineering surveys, industrial research and productivity centers.

2. The Treasury recognizes the advantages of the present type of UN Technical Assistance program and has no objection to the U.S. favoring an increase in its financial resources to $50 million. However, with our percentage contribution scheduled to be reduced from its present level of about 50 percent to 33⅓ percent by 1960, almost all the additional money would have to be put up by other countries. It seems doubtful whether they would prove willing to do this. In any event the $50 million target might not be reached for several years.

3. The contributions we have made in the past to the UNTA program, and which we would still be making even if our percentage contribution should fall to 33⅓ percent, afford clear evidence of our willingness to participate—and far more substantially than the USSR—in established and realistic UN multilateral assistance programs.

4. Treasury is, however, firmly opposed to the special projects fund proposal, for the following reasons:

(a) The proposed resource and engineering surveys would, in our view, be unlikely to make much appeal to the underdeveloped countries unless the surveys encouraged expectations that they would lead to the provision, through UN channels, of substantial financial assistance for carrying out various development projects—with the money being put up largely by the U.S. The U.S. delegation might well find it difficult to negotiate a special projects fund resolution as a substitute for the Sunfed resolution without affording some encouragement to such a belief. If we did this we would be setting the stage for an abrupt disillusionment at a later stage when we did not provide funds for the development through Sunfed of projects that had been surveyed under the pre-investment program.

(b) If the U.S. put forward the special projects fund proposal, the view would, we believe, gain ground in the UN that the U.S. had softened its position on Sunfed and was in fact prepared to participate in what was tantamount to an incipient Sunfed. If such a special projects fund were established, we would anticipate steady pressure in the UN to convert the fund progressively into an actual Sunfed.

(c) The special projects proposal appears to stem from the May 1956 “Forward Look” report of the UN Technical Assistance Board. The replies received from the relatively few governments which responded to the Secretary General’s request for comments on the report leave room for doubt whether even a build-up to $50 million for the present type of UNTA program could be achieved. The replies indicate, furthermore, that little support could be expected for the suggested expansion of the program into the special projects area. Certain governments in fact questioned the advisability of any such expansion and regarded projects of the pre-investment type as more appropriate for Sunfed.

1. Source: Department of State, Central Files, 398.051/10–2657. Confidential.
2. Robert B. Anderson succeeded George M. Humphrey as Secretary of the Treasury, July 29.
3. Don Paarlberg, Assistant to the Secretary of Agriculture.
4. Not found in Department of State files.
5. Robert M. Macy, Chief of the International Division, Bureau of the Budget.
6. The following handwritten postscript by Kotschnig appears at the end of the memorandum: “An early Wilcox–Smith (ICA) meeting is also highly desirable. I feel pretty sure we can get his active support and Jack Ohly is willing to help us actively.”
7. Official Use Only.