Foreign Relations of the United States, 1955–1957, Eastern Europe, Volume XXV

229. Memorandum From the Deputy Assistant Secretary of State for Economic Affairs (Kalijarvi) to the Secretary of State¹

Washington, January 31, 1957.

SUBJECT

• Preparations for Economic Talks with Poland

Problem:

In the preparations for economic talks with representatives of the Polish Government, it is important to obtain your guidance on the amounts of available funds and authorities which could be utilized to meet selected priority requirements of Poland. The memorandum of conversation relating to Mr. Murphy’s meeting of January 23, 1957² with the Polish Ambassador and Deputy Foreign Minister Jozef Winiewicz at the Polish Embassy indicates that this is a propitious time to initiate talks with a view to ascertaining Poland’s priority requirements and to provide guidelines to the United States in taking suitable measures for helping Poland to lessen its economic dependence on the U.S.S.R. (Tab A).

Discussion:

My memorandum of January 7, 1957 recommended that you approve a request by the Department to the Secretary of Agriculture for the allocation of $15 million of Title I, Public Law 480 authority and that you request the Director of the International Cooperation Administration to reserve $10 million of funds under Section 401 of the Mutual Security Act for possible use in furnishing assistance to Poland on terms to be mutually agreed on in the course of our negotiations with the Polish Government (Tab B).³

In a memorandum dated January 10, 1957, the Under Secretary requested the advice of the Director of the International Cooperation Administration on the recommendations made in my memorandum.⁴ The Under Secretary’s memorandum indicated that your general reaction was that the $15 million of Title I, Public Law 480 authority was of a satisfactory order of magnitude and that the $10 million of Section 401 funds should, for the present, be restricted to a token amount for the most essential needs, and should be on the order of $5 to $10 million (Tab C).

The Director of the International Cooperation Administration, in a memorandum dated January 16, 1957,⁵ stated that while he believed the figures suggested in my memorandum of January 7 provided a suitable range within which to begin planning, he would hesitate to agree on a specific total without a more careful review of the supply and requirements situation than has been possible to date (Tab D).

The main purpose of seeking your guidance at this time is to ascertain the amount and character of funds and authorities available within which negotiations could be conducted on Poland’s economic requirements from the United States. More detailed and reliable information on Poland’s economic situation and needs would be forthcoming in the course of our talks with the Polish Government representatives. As of this time therefore the resolution of the question of the amount and character of funds available for negotiations with Poland requires essentially a political judgment.

The staff members continue to believe that it would be helpful to have available $25 million in funds and authority, composed of $15 million of Title I, Public Law 480 authority (equivalent to about $10 or $11 million of purchasing power for surplus agricultural commodities at world market prices), and $10 million of Section 401 funds which would most likely be made available on a loan basis. The provisions of the Battle Act would not permit the use of Polish currency generated by the sale of surplus agricultural commodities for loans to Poland. Such currency could be used for payment of United States obligations and for other United States uses. A Public Law 480, Title I transaction would not therefore involve a loan or grant of resources to Poland. The net addition of resources to the Polish economy would come primarily by the use of Section 401 funds. Moreover, the Poles have already indicated to us that their priority requirements include several items, such as coal mining equipment, which can only be procured under Section 401 authority. In view of the limitations imposed by the Battle Act on funds and authority (except for Section 401 of the Mutual Security Act) available for extending economic help to Poland, we believe that $10 million of funds from this section should tentatively be set aside at this time for possible use by Poland.

Mr. Hollister’s memorandum of January 16, 1957 also detailed a number of operating problems which might arise in the implementing stage of economic assistance furnished to Poland. Some of the listed problems would not arise if procurement is limited to the United States and the Section 401 funds are furnished on a loan basis, as we expect. Other possible problems can only be resolved in context of our talks with the Polish representatives. We have been discussing with the staffs of ICA, Commerce and other interested government agencies various problems in connection with United States aid to Poland and we will be able to continue such consultations more effectively as soon as you have provided the requested guidance as to the amount and character of funds available for Poland. A proposed reply to Mr. Hollister’s memorandum of January 16⁶ appears in Tab E and a proposed telegram to Embassy Warsaw instructing Ambassador Jacobs to invite the Polish Government to send representatives to Washington for economic aid talks is included in Tab F for your authorization to transmit.⁷

Recommendations:

1. That you approve a request by the Department to the Secretary of Agriculture to allocate $15 million of Title I, Public Law 480 authority for possible use in financing urgent Polish requirements for agricultural commodities in surplus supply in the United States on the condition that this amount probably will not be made available at one time but rather in installments depending upon the development of the negotiations.⁸

2. That you sign the attached memorandum (Tab E) to Mr. Hollister, Director of the International Cooperation Administration, acknowledging his memorandum of January 16 and requesting him to reserve $10 million of funds under Section 401 of the Mutual Security Act for furnishing assistance to Poland on terms to be mutually agreed on in the course of negotiations with the Polish Government.

3. That you sign a telegram instructing Embassy Warsaw (Tab F) to invite the Polish Government to send representatives to Washington for talks involving possible arrangements under which the United States would supply certain goods and commodities needed by Poland.

1. Source: Department of State, EE Files: Lot 76 D 232, US/Polish Talks—Basic Preliminary Documents, #1. Confidential. Drafted by W.H. Bray and James L. Colbert; also sent to Hoover and concurred in by EUR, EUR/EE, U/MSA, G, L/E, and OFD.
2. Not printed. (Ibid.)
3. Kalijarvi strongly recommended the initiation of talks with the Polish Government “as soon as possible.” (Ibid.) Tabs B through F are not printed.
4. Hoover observed that the Secretary of State had discussed the memorandum with Hollister that morning. (Ibid., Central Files, 748.5–MSP/1–1057)
5. Hollister noted that there were “a number of problems, both of policy and operations, which need rather careful review before final decisions on the amount and composition of the aid program are made.” (Ibid., EE Files: Lot 76 D 232, US/Polish Talks—Preparations)
6. In his February 6 reply, Dulles noted that the Department of State would recommend allocation of $15 million in P.L. 480, Title I assistance to Poland and $10 million of Section 401 funds to finance Polish requirements other than U.S. surplus agricultural products. (Ibid., Central Files, 411.0041/2–657)
7. Telegram 507 to Warsaw, February 6. (Ibid., 748.5–MSP/1–557)
8. Dulles initialed his approval of Recommendation 1 on February 6.