Foreign Relations of the United States, 1969–1976, Volume III, Foreign Economic Policy; International Monetary Policy, 1969–1972

141. Telegram From the Department of State to the Mission to the United Nations¹

Washington, October 24, 1969, 2330Z.

181169. Subject: GA Committee 2—Comments Relative to Syrian Statement on International Monetary Reform and Link between Economic Assistance and SDRs. Ref: US/UN 3621.² Concerning link of SDRs to assistance, recommend U.S. spokesman avoid volunteering comment on this subject in speeches or addresses. If public statements necessary suggest US Del confine itself to reference to approach taken by Secretary Kennedy in his press conference on the record October 3, 1969 in Washington. This statement follows:

“Question: Do you think, sir, that the creation of Special Drawing Rights will enable you to give some additional aid to developing countries, efforts to assist them, inasmuch as the system has become richer?

Secretary Kennedy: Well, I should think that adding to their volume of reserves does have an indirect relationship to what the nations can do in the way of developing. That doesn’t mean a linkage, such as they are talking about, of SDRs with the developing process. I think at the present time the effort should be made to get these SDRs activated and handled and managed in such a way that they contribute to international stability, and that those questions can be looked at and deferred until later.”

In private conversations with other delegations US Del may draw on following as and when appropriate:

(1) During the negotiation of the Special Drawing Rights Amendment there was very strong sentiment against any direct linkage of an organic character between the Special Drawing Rights and the provision of assistance for development. It was felt that decisions to create Special Drawing Rights should be entirely governed by monetary considerations and should not be subjected to the pressures that arise for a steadily enlarging flow of real resources from industrial countries to developing countries.

(2) It is important that the Special Drawing Rights become well established as an international monetary asset and this should be our primary consideration during the period ahead. It would be most unfortunate if the question of linkage with economic assistance should lead to reluctance on the part of industrial countries to carry on in future the work that has begun of establishing a facility to provide an adequate rate of growth in world reserves. The latter is a key to adequate growth in world trade and investment and a healthy world economy is vitally important to economic growth of developing countries.

(3) The allocation of Special Drawing Rights is made in proportion to quotas in the International Monetary Fund which was generally accepted as an equitable and reasonable method of allocation. This will make available to the developing countries nearly $2.7 billion in additional reserves during the next three years, a very substantial sum. (FYI. This is about 28% of allocations to be made in three tranches of $3.5 billion in Jan. 1970, and $3 billion each in January 1971 and 1972. End FYI)

(4) Special Drawing Rights involve both rights and obligations, and the obligation for surplus countries is twice as large as the drawing right.

(5) Economic assistance is a matter of political decision in donor countries. Most countries have budgetary and parliamentary procedures governing the provision of development assistance. There are major questions whether countries should abandon these regular procedures, and whether Parliaments would be receptive to doing so. Attempts to introduce new procedures related to SDRs would need to be assessed against the complications introduced into considerations governing the provision of international liquidity.

Rogers

1. Source: National Archives, RG 59, Central Files 1967-69, FN 17-1. Limited Official Use. Drafted in Treasury by Willis and cleared by Volcker and Petty; cleared in State by Trezise and Kerrigan (IO/OES) and approved by Assistant Secretary of State for International Organization Affairs Samuel De Palma. Repeated to the Mission in Geneva and the Consulate in Vancouver for the U.S. delegation to the Colombo Plan meeting in Victoria.
2. Not printed. (Ibid.) Cables between the Department of State and USUN on the Syrian proposal in Committee 2 are ibid.