Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

289. Memorandum From the Assistant Secretary of the Treasury for International Affairs (Leland) to Secretary of the Treasury Regan¹

Washington, January 18, 1983

SUBJECT

• Developing a Congressional Constituency for IDA

This is a follow-up on your staff meeting comments regarding the desirability of developing Congressional support for the International Development Association (IDA) on the basis of IDA recipients’ economic importance to the United States.

U.S. participation in all of the MDBs has traditionally been justified to the Congress in terms of the linkage between such participation and overall U.S. humanitarian, security and economic interests. In the case of IDA, U.S. humanitarian interests are particularly important in that more than 80 percent of IDA’s commitments have been to countries that in 1980 had per capita incomes of $410 or less. IDA focus on the difficult development problems of Sub-Saharan Africa is also increasing.

You and other Administration spokesmen have also used Congressional testimony to point out the foreign policy and national security importance of selected IDA recipients, e.g., Kenya, Sri Lanka, Pakistan, and Sudan. In the past, we were also able to cite such former IDA recipients as the Philippines, Thailand, and Egypt. Attention has also been directed to the fact that IDA is a significant element of economic cooperation with our allies, and to the important, but difficult to quantify, linkage between development progress in the poorest countries and the political/social stability of critical regions.

While there appears to be a significant body of Congressional opinion which recognizes the importance of the MDBs to U.S. economic interests—and this may have been an important factor in the funding in full of the non-IDA component of the Administration’s FY 83 request—the specific linkage of IDA recipients to U.S. economic interests is relatively weak. There is a marked difference between the economic relevance of IDA recipients as compared to the more advanced LDCs receiving IBRD or other hard-loan window funds, or to the recipients of IMF resources based on quotas determined by a country’s economic size and importance in the world economy. The fact is that the poverty, underdeveloped resource base, and limited creditworthiness which justify IDA recipients’ need for highly concessional external assistance, also make most IDA recipients very marginal players in the world economy. Moreover, the two IDA recipients who do play major roles in the world economic and political system—India and China—are also the two most controversial IDA recipients. There has been considerable opposition in the Congress, particularly among conservatives, to both the large share of IDA resources allocated to India (traditionally 40 percent, but 33 percent in FY 82) and the prospect of China becoming a significant recipient of IDA funds.

The relative unimportance of most IDA recipients to overall U.S. economic interests is illustrated by a disaggregated look at recent trade data. In 1981, U.S. exports to the 51 current IDA recipients totalled $8.0 billion, or 3.4 percent of total U.S. exports, with exports exceeding U.S. imports from these countries by more than $1.8 billion. However, exports to India and China accounted for two-thirds of the total, with exports to the other 49 IDA recipients totalling only $2.7 billion or just over 1.1 percent to U.S. exports. U.S. exports to 38 pure IDA recipients (i.e. countries which, unlike the 13 current “blend” recipients, do not receive any IBRD funds) totalled $1.5 billion or 0.6 percent of U.S. 1981 exports. These IDA-only recipients accounted for 47.5 percent of IDA commitments in FY 82.

This low level of U.S. exports to IDA recipients makes it very difficult to directly link the benefits of U.S. participation in IDA to specific Congressional districts.

An additional factor is that in comparison with other MDBs, the U.S. share of IDA procurement has been substantially below our share of IDA contributions. This is not surprising since the types of projects IDA helps to finance generally do not require large amounts of imported equipment and many of IDA’s African and Asian recipients still retain strong commercial and trading ties with former colonial powers. Efforts are continuing, however, to promote increased U.S. procurement in IDA and the other MDBs.

In sum, it will be very difficult to develop a stronger Congressional constituency for IDA based on the importance of IDA recipients to the U.S. economy.

1. Source: National Archives, RG 56, Records of the Office of the Under Secretary for Monetary Affairs, Subject Files relating to Meetings, Working Groups, Trips, Summits, and Currency Talks, 1/1/1981–12/31/1985, UD–13W105, 56–89–45, Box 1, January Chron 1983. No classification marking. Sent through Sprinkel. Attached but not printed at Tabs A and B are charts entitled “United States 1981 Trade With IDA Recipients” and “Direction of FY 78–82 IDA Credits.”