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

33. Action Memorandum From C. Fred Bergsten of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)¹

Washington, December 9, 1969.

SUBJECT

• Urgent Need for Presidential Decision on Balance of Payments Program for 1970

Issue

The President approved two contradictory options for the 1970 investment control program (Tab A).² The issue is now quite urgent because the hundreds of companies covered by the program are already making their plans for next year; Commerce and Treasury are both agitating daily for a decision. I urge you to take up the matter orally with the President as soon as possible to reconcile the inconsistencies.

Option 1 (your recommendation in Tab A)

1. Increase level of foreign investment exempted from control for each firm from $1 million to $3 million.

2. Exempt from control up to an additional $2 million per firm for investment in LDCs, on a case-by-case basis. (This would meet the President’s pledge to modify the controls to facilitate private investment in the LDCs, which he made in the Latin America speech.)

3. Recommended by Secretary Kennedy, with the concurrence or acquiescence of all relevant parties. The Secretary worked this out as a compromise between Secretary Stans’ desire for greater liberalization and Arthur Burns’ desire for no liberalization at this time.

Option 2 (cited as “fully acceptable” to you in Tab A).

1. Increase level of foreign investment exempted from control from $1 million to $5 million for investment in LDCs only, as a general rule (not case-by-case).

2. Pros:

• —Would redeem President’s pledge to promote investment in LDCs more than Option 1.
• —Would hurt U.S. balance of payments less.

3. Con: less popular with U.S. business community, which expects liberalization of investment to all areas.

4. Strongly supported by Arthur Burns and Peter Flanigan. (Tab B)³

Evaluation

Either approach is fully acceptable from a foreign policy standpoint. Option 2 is more clearly directed toward the LDCs. It also runs less risk of later problems with the Europeans, if our balance of payments turns sour and requires drastic U.S. actions, because it will hurt our balance of payments less; we would then be less susceptible to charges of having induced a crisis ourselves.

The main virtue of Option 1 is bureaucratic: Secretary Kennedy worked it out in a series of lengthy sessions with Stans and Burns. You favored it in your earlier memo. And Stans will be even more unhappy if Option 2 is chosen.

Recommendation:

That you recommend to the President that he choose Option 2—the Burns proposal, strongly supported by Flanigan, that we liberalize for investment in LDCs only.⁴

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 309, Balance of Payments. No classification marking.
2. See Document 31 and footnote 7 thereto.
3. Not printed. On December 4 Flanigan sent Kissinger a memorandum noting the President’s conflicting decisions, recalling his December 3 memorandum to the Staff Secretary (Document 32), and strongly urging that when Kissinger asked the President for clarification he guide him toward the Burns proposal.
4. At the top of the first page of this memorandum, Kissinger wrote: “OK—Let’s take Burns option.” The date of December 11 is stamped below Kissinger’s note. Another note by Haig indicates he routed the memorandum back to Bergsten for action.