Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

101. Telegram From the Embassy in the United Kingdom to the Department of State⁰

London, March 28, 1961, 11 a.m.

3897. From Ball. This reports on Monday¹ morning session DAG meeting.

Meeting chaired by Selwyn Lloyd who made short welcoming speech and emphasized need to provide assistance to less developed countries collectively. He referred to US note on joint aid program² and asked Under Secretary Ball to speak first.

US (Ball) stated that since last DAG meeting three events of importance have taken place in US: 1) national elections and installation of new administration, 2) ratification by US of OECD Convention,³ and 3) transmittal by President Kennedy of message to Congress calling for increased effort assist less developed countries.⁴

Ball explained evolution of US attitude toward OEEC/OECD. In contrast with period after World War II, today economic cause and effect is two-way street and major industrial powers live in world of great economic interdependence.

Ball stated that we regarded broadening cooperation to embrace common responsibility of industrialized countries for assisting LDCs as the most important feature of transformation OEEC to OECD. This common task of aiding LDCs is more difficult and complex than problem encountered in connection Marshall Plan. LDCs not only have great need for capital but also for skills and administrative talents. This task requires not only contribution of our resources but also our ingenuity.

Ball emphasized that present decade must be decade of development. No task confronting us is more important. If we succeed there is real chance that LDCs may be able direct their energies to constructive tasks. But if they become convinced that benefits of industrialization are not being attained there is a great chance that their energies will be turned to destructive ends.

Even a substantially increased effort to assist LDCs will require only small portion of our total resources. Assistance in magnitude of one percent of our aggregate GNP is relatively small and we must think in terms of sustained effort of approximately this magnitude.

In assessing contribution of each country to such a joint aid effort account must be taken of other contributions to the common welfare, with particular reference to defense expenditures. Also an assessment of proper share for each country should be based on capacity to pay, with richer countries making proportionately greater effort than those less well off. Balance of payments considerations are most relevant to form of aid. Countries with persistent payment surpluses should make aid to LDCs available on untied basis. Countries with payments deficits could extend aid on tied basis.

Concerning quality of aid, Ball said it essential recognize that aid should be tailored to requirements of LDCs. There is substantial difference between usefulness to LDCs and burden on industrialized countries of short-term export credits and grants and long-term loans. He warned against putting too much emphasis on short-term loans. Industrialized countries must be careful not put LDCs in position of having become capital exporting countries because of necessity repaying short-time loans. Type of assistance that contributes most to economic development is that made available by official grants and long-term loans as part sustained governmental program. If LDCs are to make necessary sacrifices they need to be assured that economic assistance will be sustained over period longer than one year.

Ball then made following procedural suggestions:

1. Expansion and improvement of reporting facilities with emphasis on current information concerning what each member is making available to each LDC. Expanded and improved information would provide sound basis for further coordination of aid efforts.

2. DAG and later DAC should have full-time chairman.⁵ He should be assisted by Secretariat of OEEC/OECD.

3. Representatives to DAG should be senior officials in position speak for their governments.

4. On basis improved reporting and strengthened mechanism, we could then develop common enterprises and improve efficiency our national programs.

Ball concluded by indicating that this proposal on joint aid effort reflected US determination to move forward with our partners in common endeavors in OECD. In view magnitude of task and shortness of time, he urged others to approach problem of assisting less developed countries in same spirit.

UK (Barber) welcomed US statement and characterized it as inspiring, constructive and extremely important. Barber said that task was of immense proportions and great importance and that DAG members should strive to respond positively to US proposal.

Barber said US proposal was complex and would require careful study. He made following preliminary remarks: he stated that DAG/DAC was proper place to discuss levels of aid and country contributions. Concerning question of taking into account defense expenditures, Barber said that this was relevant factor for UK with worldwide commitments. He was not, however, ready to agree at present that defense effort has general relevance in assessing aid contributions.

Barber welcomed emphasis placed by US on type of assistance most likely to help LDCs. He considered that it would be useful to arrive at some agreement on what constitutes aid.

Concerning US procedural suggestions Barber said UK was willing to consider what steps might be usefully taken to facilitate transformation of DAG and DAC so that DAC could take over going concern full of vitality and purpose when OECD comes into force.

In conclusion Barber said that all must do as much as possible to help LDCs and respond to US proposal in that spirit.

Germany (Westrick) welcomed President Kennedy’s aid message and Ball’s statement. He said DAG countries must not fail respond to US initiative. Germany welcomed basic points of US proposal. He thought it useful set goal for general aid effort and welcomed opportunity discuss principles pertaining capacity to pay—most important of which in German eyes was concept of progressivity. He cautioned against examining defense expenditures in DAG.

Westrick welcomed idea of permanent chairman for DAG and considered it desirable expand exchange information as basis intensified coordination aid policies. He proposed that first permanent chairman be American.

Italy (Aggradi) characterized US proposals as far-reaching and requiring careful study. He presented preliminary Italian reaction in very general terms as follows: He said it absolutely essential prevent increased disparity between standards of living in developed and less developed countries. Italy agreed in principle to joint program of aid to LDCs sustained for long period. Aggradi said that Italian experience in southern Italy demonstrates that long-term loans and grants are much more useful than short-term credits.

France (Sadrin) expressed agreement with many features of US proposal. He stated his understanding that US does not intend formulate precise mathematical formula for burden sharing. Sadrin stated that all DAG countries should undertake aid effort of about one percent GNP and that we should take opportunity provided by OECD to harmonize aid efforts. He agreed to concept permanent chairman for DAG.

Canada (Plumptre) welcomed inspiring initiative so ably presented by Ball. He pleased that US should have given question of aid to less developed countries such high priority and stressed need for common effort. He welcomed Ball’s comments on quality as well as quantity of aid, indicating that unbridled extension of short-term loans could be harmful.

He agreed aid should be increased and improved. However, he had some question as to whether it would be wise put forward as goal one percent of income. With this qualification Plumptre welcomed substance and spirit of US proposal and agreed to strengthening DAG by appointing permanent chairman.

Japan (Shimoda) expressed appreciation to US for putting forward such extensive plan. He said that while unable make drastic increase Japan will do best and will cooperate with other countries.

Concerning burden sharing, Shimoda considered it essential take fully into account per capita income. He also cautioned against referring in public to common defense because of probable reaction of LDCs.

Netherlands (Van Houten) welcomed US initiative and stated that aid effort of all industrialized nations should be intensified. Concerning goal of one percent GNP, Van Houten expressed agreement with Canadian position. He agreed with US proposal for permanent chairman.

Belgium (Daufresne de la Chevallerie) said that aid is problem common to all and that coordination of aid efforts is essential. He agreed that DAG, within framework OECD, should be forum for discussing aid coordination.

Portugal (Pereira) said it premature to establish program of any given size. He thought that it important discuss coordination commercial policies with view to stabilize commodity markets.

Barbour

0. Source: Department of State, Central Files, 398.00-LO/3-2861. Confidential. Repeated to the OEEC mission in Paris, Reykjavik, Oslo, Stockholm, Copenhagen, Luxembourg, Athens, Ankara, Madrid, Vienna, and Bern. A typewritten note on a draft copy indicates that the telegram was repeated to the DAG capitals. (Department of State, Conference Files: Lot 65 D 366, CF 1821)
1. March 27.
2. See Document 98.
3. See footnote 2, Document 97.
4. See Document 100.
5. The Development Advisory Council (DAC) took over the functions of the DAG after the OECD treaty entered into force on September 30, 1961.