Attachment2
Washington,
August 23,
1962.
Memorandum From the Director of the
Office of Emergency Planning (McDermott) to President Kennedy
I am pleased to submit a report on “The Barter Program” that has been
prepared in response to your request made in NSAM No. 142 of April 10, 1962.3 It reflects the general consensus of the
Executive Stockpile Committee, and of the Department of Agriculture
whose representative was added to the Committee for the purposes of
this review.
The diverse opinions of the different Federal agencies about the
barter program have been carefully and exhaustively explored during
the preparation of this Report. At the time this review was
initiated early in May, the Department of Agriculture had almost
completed proposals for a revised barter program which had been
developed following consultations with a non-governmental task force
and with other Federal agencies. Recommendation No. 9 of the
attached Report proposes that:
“The Basic Principles and Rules of Application of the
proposed Revised Barter Program (Tab A) prepared by the
Department of Agriculture should be revised to reflect the
foregoing recommendations, and should be adopted as thus
revised.”
I believe it is important that the recommended revision be made and
adopted by the Department of Agriculture as soon as possible, and
without further detailed or prolonged consultations that may be
merely a repetition of the process that has just been completed by
the Executive Stockpile Committee.
Although the attached Report has been approved by the signatory
departments, there are individual views which I wish to call to your
attention:
Although the Department of the Treasury is not a member of the
Executive Stockpile Committee and is not a signatory to this Report,
its representatives participated fully in the staff and Committee
discussions which resulted in the Report. The Department
particularly feels that careful consideration must be given to the
general effects of barter transactions on the balance-of-payments
position of the United States and that, in this connection,
appropriate attention should be given to the extent to which barter
transactions might displace cash sales or are in
[Page 804]
addition to such cash sales, and to
their competitive relation to other methods of procuring goods and
services. The Department of Defense and other members share this
view.
The Department of Commerce limits its approval to the Recommendations
of the attached Report and specifically opposes any barter
transaction carried out while a disposal program involving the same
materials is in operation, as well as any multilateral barter
transaction.
The Committee is continuing its study of other phases of the
stockpile problem.
Respectfully,
Attachment4
Report on the Barter Program by the
Executive Stockpile Committee to President Kennedy
[Here follow 3 pages of comments and considerations on the barter
program.]
RECOMMENDATIONS
In light of the foregoing comments and its considerations of the
barter program, as briefly reviewed in the following pages, the
Committee recommends that:
- 1.
- Due regard must be given to foreign policy considerations and
balance-of-payment problems in carrying out the barter program.
The Secretary of Agriculture should consult with the Secretary
of State and the Secretary of the Treasury, respectively,
concerning the general impact which the barter program has on
these considerations.
- 2.
- Greater emphasis than in the past should be given to the use
of barter transactions for the procurement of
non-strategic-materials items (including, but not limited to,
offshore procurement) which meet approved program requirements
of U.S. Government agencies within funds currently available or
within procurement authority which extends over a period of
years and for which dollars would normally be spent
abroad.
- 3.
- The Department of Agriculture should review with appropriate
Federal agencies the opportunities for the enlargement of the
use of barter in support of currently budgeted programs or
programs which have procurement authority extending over a
period of years. The Department of Defense and the Agency for
International Development should cooperate with the Department
of Agriculture by effecting offshore procurement, using
qualified barter arrangements to the greatest practicable extent
when dollars would otherwise be spent abroad for the items being
procured. In carrying out such procurement, the Department of
Agriculture should absorb any increased cost incurred by the
procuring agency above that which would have been incurred had
dollar procurement been utilized. Off-shore military procurement
by barter should not be effected in West Germany or any other
country in which the United States has arrangements for payments
to offset U.S. military expenditures in that country, except
with the concurrence of the Secretary of the Treasury.
- 4.
- In addition to the foregoing, the Department of Defense and
the Agency for International Development should continue to
cooperate with the Department of Agriculture to convert to
barter arrangements dollar contracts for foreign-produced
items.
- 5.
- Barter should continue to be used to acquire strategic and
critical materials within established maximum objectives.
- 6.
- With the exceptions indicated below, barter should not be used
to acquire strategic and critical materials that are in excess
of National Stockpile objectives. The exceptions are those cases
where:
- a.
- In the judgment of the Secretary of Agriculture, after
consultation with the Secretary of State, and after
consultation with the Secretary of the Treasury
regarding U.S. foreign currency holdings, and consistent
with disposal policies, it would be more advantageous to
the U.S. to take a useful material in a barter
transaction than to acquire additional foreign
currencies;
- b.
- The barter acquisition of foreign materials would
involve in some cases domestic processing and thus help
in either maintaining the domestic materials processing
mobilization base or assisting areas of substantial
unemployment;
- c.
- In the judgment of the Secretary of Agriculture and
with the concurrence of the Secretary of State, the
barter transaction would further the international
economic or foreign policy interests of the United
States, including help for weaker independent states to
resist economic overtures and pressures from unfriendly
powers; and
- d.
- An existing contract for a cash purchase can be
converted to a barter arrangement on terms serving the
best interests of the United States, thus relieving the
United States of dollar payments.
- 7.
- Pending a decision on new legislation relating to the various
inventories of strategic and critical materials, the materials
acquired
[Page 806]
under
Recommendation No. 6 should be transferred to the Supplemental
Stockpile.
- 8.
- The Supplemental Stockpile Advisory Committee on Barter should
continue to be used by the Secretary of Agriculture for advice
and consultation regarding the barter program and the stockpile
materials eligible for barter acquisition.
- 9.
- The Basic Principles and Rules of Application of the proposed
“Revised Barter Program” (Tab A)5 prepared by the Department of Agriculture
should be revised to reflect the foregoing recommendations, and
should be adopted as thus revised.
[Here follow the final 10 pages of the report with sections on
Disposal of Agricultural Surpluses Through the Barter Program, Uses
of Barter, Future Bartering for Strategic Materials, and Barter’s
Effect on Cash Sales and Balance of Payments. Also omitted are the
signatures of George Ball, Roswell Gilpatric (Department of
Defense), John M. Kelly
(Department of the Interior), Orville L.
Freeman (Department of Agriculture), Luther H. Hodges (Department of
Commerce), Arthur J. Goldberg
(Department of Labor), Ray S. Cline (Central Intelligence Agency),
Bernard L. Boutin
(General Services Administration), and Edward A. McDermott, Chairman (Office of Emergency
Planning).]