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

163. Letter From Secretary of State Rusk to the Chairman of the Senate Foreign Relations Committee (Fulbright)⁰

Washington, March 27, 1963.

Dear Senator Fulbright: I want to thank you very much for your very thoughtful letter of February 11¹ in which you expressed concern—using Czechoslovakian economic penetration into Bolivia as an example—about Communist bloc economic offensives in less developed countries. The Department has carefully examined the proposal that the United States take measures to forestall the communist countries from providing, on an aid basis, consumer goods to less developed countries. The dangers of penetration through such offensives, which you very correctly point out, are not, unfortunately, presently recognized by some of the less developed countries. Until that recognition exists we will not be able to forestall the acceptance of aid from the Communist bloc and if the attempt were made as suggested, we would be put in the position of reacting to every communist initiative.

We have consistently pointed out to the developing countries the “hidden strings” which are invariably attached to bloc offers. Unless the governments of the less developed countries can be convinced of the dangers of subversion resulting from an acceptance of bloc aid, any increases in United States aid which are aimed at precluding bloc economic penetration would instead act merely as supplements to bloc aid and would not eliminate the problems.

We believe that our approach, together with the unfortunate experience that some developing nations have had with bloc trade and assist-ance, is paying dividends. In Africa, for example, the launching of our aid program has helped to convince the Sekou Toure Government of Guinea that there is a successful alternative to dependence upon Soviet bloc aid. In Latin America, there is increasing evidence that the goals of the Alliance for Progress are gaining acceptance and genuine understanding is growing of the fact that the United States is sincerely interested in the problems of her neighbors to the South. Despite Bolivia’s past acceptance of Czech aid, there is resistance to the acceptance of future offers.

Under our present foreign aid legislation American suppliers can sell their products to importers in aid-receiving countries with the United States Government paying the American exporter in dollars and, in the case of grant assistance, the foreign government depositing local currencies received from importers to a counterpart account. The commodities made available through our various programs include surplus agricultural commodities, a wide range of industrial goods, and at times a limited amount of consumer-type goods. We are, in this sense, already doing part of what you suggest.²

Present legislation, however, does not permit the United States Government to use aid funds solely to meet or out-bid the Soviet bloc in a commercial trade offensive by matching or bettering bloc trade offers. There are obvious dangers to engaging in such a policy, both from an aid point of view as well as for commercial policy reasons. It would permit the bloc to blackmail the United States into increased aid and probably involve the United States in programs for which there would be little or no sound economic rationale. Some less developed countries might seek to increase United States aid offers by threatening to accept bloc offers. Additionally, to permit the commercial sale of United States goods at a fraction of their domestic price would subject the United States to accusation of dumping, or subsidizing exports—practices which we deplore when done by others.

In view of the complexities of this subject, I would suggest, providing that you agree, that Mr. G. Griffith Johnson, Assistant Secretary for Economic Affairs, call at your office to discuss this problem in greater detail at your convenience.

Sincerely yours,

Dean Rusk³

0. Source: Department of State, Central Files, FT (EX) US. No classification marking. Drafted by H.H. Barger and D.J. James on March 19 and cleared by eight Department of State officers and AID/LA.
1. Not found. A March 14 memorandum from G. Griffith Johnson to Secretary Rusk, attached to the source text, indicates that Fulbright wrote in reaction to an INR memorandum of January 9, “Soviet Bloc Economic Overtures to Bolivia,” which he enclosed with his letter. This INR memorandum has not been found.
2. For text of a joint AID/State Circular A-241, February 14, which provided policy guidelines for AID administration in countries receiving Communist bloc aid, see the Supplement.
3. Printed from a copy that indicates Rusk signed the original.