Foreign Relations of the United States, 1961–1963, Volume II, Vietnam, 1962

225. Telegram From the Department of State to the Embassy in Vietnam¹

Washington, June 21, 1962—4:46 p.m.

1474. Embtel 1626.²

1. Because blanket waivers of limited worldwide procurement policy represent serious departure from our basic policy to improve US balance of payments and because of internal political problems, now becomes necessary to withdraw authority to import on worldwide basis up to $12 million worth of industrial machinery (Deptel 1454).³ In addition waiver for industrial machinery would weaken our hand in arranging DAC countries assistance in program loans to Viet-Nam. Subject will be pressed by us in early meeting with participating countries. We hope to get European countries and Japan to finance many of these items.

2. We fully cognizant your efforts stimulate accelerated action counterinsurgency and assuage GVN preoccupation with dangers of deficit financing.

3. From US standpoint, our immediate objectives would be satisfied if agreement reached on (a) counterinsurgency PA procedure and (b) $10 million piastre purchase proposal. These two elements would take certain measure counterinsurgency funding out of competition other funding requirements and give it special status as to priority and normal procedures. It would also provide more effective mechanism.

4. GVN must face up to deficit problem; US not prepared grant waivers en bloc or make further cash grants in face pressing US and international considerations. $10 million piastre purchase plus US military purchases in VN will result in significant increase previously unanticipated free dollars.

5. Would not object proposals for shifting to commercial import program additional acceptable items. This would permit GVN financing of imports from Europe and Japan with GVN foreign exchange.

6. We prepared give sympathetic consideration other means you may deem useful in overcoming GVN concern its budgetary problem. Food for troops might offer possibility.

7. We are willing to maintain in force at reduced level the waiver granted for counterinsurgency imports on the understanding that the waiver will be utilized only in rare cases where the time factor does not allow timely delivery or when goods not available from an eligible source. Request prompt arrangements be made to plan requirements sufficiently in advance so that utilization this waiver authority will be extremely rare ($3 million maximum suggested).

8. If there is a priority requirement for commodities to be financed in commercial import program which cannot be obtained from a limited worldwide source, we would require more details concerning the type of commodities required and the extent to which alternate sources of financing have been explored to allow AID/W to consider waivers on a case by case basis. Note this connection that we have recently granted waiver for $4-1/2 million for spare parts but only for non-US machinery and for machinery which cannot be obtained in US.

Ball

1. Source: Department of State, Central Files, 811.0051K/6-1962. Confidential; Niact. Drafted by Furst, Silver, and Cottrell, and cleared with Peterson (State), Pelikan (Treasury), Furst (AID), Heinz (DOD), and Forrestal (White House). Repeated to CINCPAC for Polad.
2. Dated June 19, it pointed out that a contradiction existed between the procurement policy waiver granted by telegram 1454 (Document 220) and a subsequent AID message that severely limited the waiver in practice and requested clarification before beginning negotiations with the Government of Vietnam.
3. Document 220.