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

306. Memorandum From Roger Robinson of the National Security Council Staff to the President’s Assistant for National Security Affairs (McFarlane)¹

Washington, December 6, 1983

SUBJECT

• Approval of U.S. Funding for IDA VII

Dave Wigg and I have prepared the attached (Tab I)² decision memorandum from you to the President along with a request (Tab A)³ from Secretary Regan to hold the U.S. IDA VII contribution to $750 million annually in FY 1985–87. Also attached are the following:

○ A memo to the President from Secretary Shultz strongly arguing for a minimum contribution of $900 million (Tab B).⁴

○ A memo to you from Alton Keel (OMB) supporting Treasury’s position (Tab D).⁵

○ A letter to the President from Chancellor Kohl (Tab C)⁶ encouraging a U.S. pledge above the $750 million level.

As you will note, we refrain from taking a strong advocacy position on this issue in your memo to the President, preferring to lay out the positions of the agencies as fairly as possible and limiting discussion of the NSC’s views to your oral presentation to the President. The level of acrimony between Treasury and State, the long period of arduous interagency debate, persuasive budgetary and legislative considerations, and our inability to fully penetrate the extent of Byzantine maneuvering among the responsible players leaves us at a decided disadvantage and argues for a carefully crafted “honest broker” role for you and the NSC.

Dave and I worked closely together in canvassing the agencies and gathering relevant facts concerning the Treasury and State positions on IDA VII. This effort included double checking the Treasury and OMB positions as they appeared in this cover memo and in the memo to the President. Interestingly, Treasury backed off some of its earlier more strident assertions. In delineating this issue, we agree with the compelling foreign policy rationale for seeking a $950 million contribution and believe that State (supported by Commerce) has the high ground on this issue for the following reasons:

— It would represent a tangible demonstration of our commitment to long-term stability and growth in the Third World during a period of serious strains caused by the international debt crisis.

— It would stimulate a multiplier effect of additional pro-rata contributions by all other donors resulting in a substantially higher overall ceiling on available IDA funding.

— This action would be enthusiastically received by the allies, the World Bank and LDC’s alike which have lobbied heavily on this issue, with State, NSC and the office of the VP. (Sir Oliver Wright made a strong demarche to the VP only yesterday, and a letter from Chancellor Kohl is attached to the package to the President.)

— It would be a relatively cheap price to pay ($150–200 million) for substantial foreign policy benefits or, perhaps more importantly, avoiding the international acrimony of stonewalling an increase in the ceiling.

— It would avoid the U.S. being fingered as the “spoiler” of the efforts of other donors to enhance IDA’S financing capabilities and preclude the possibility of unjustified blame being allocated to the President by the LDC’s for their own policy failures and the international community in the event a country or countries are forced into default in the coming months or beyond.

— It would be consistent with our vigilant approach to increase IMF quotas and at least not be a surprise to Congressional critics of our efforts to stabilize the international financial system.

— It would also be viewed as a logical outgrowth of our role as founder of the World Bank and IDA with the latter’s principal mandate being to support open economic systems among the LDC’s.

— Finally, the average contribution of $772 million quoted by OMB is somewhat misleading. The overall pledge for 1981–84 was allocated unevenly among the annual budgets: $500 million in 1981; $700 million in 1982; $945 million in 1983; and extended at the $945 million level in the continuing resolution for 1984.

On the opposing side, Treasury takes a hardline view of IDA institutionally, questions the effectiveness of the U.S. contribution (much of which will be channeled to China and India) and raises the specter of a Congressional battle similar to that on IMF. Secretary Regan has been out front on this matter and probably considers the outcome an important test of his credibility.

The major arguments of Treasury and OMB are as follows:

— A $750 million ceiling on IDA VII is considered to be one element of the Hill’s willingness to consider the Supplemental Appropriations Bill.

— Treasury foresees the same “out year” funding problems with a high level of IDA VII that have been incurred with IDA VI. They are still sweating out the last $150 million appropriation under that program.

— Failure to gain assured Congressional support for increased funding for IDA VII in FY 86 and 87 would mean the potential for renewed antagonism among our allies and the Third World in coming years.

— OMB has made clear that increased IDA VII funding would be taken, dollar-for-dollar, from State’s bilateral programs, contradicting Administration policy favoring a move toward bilateral, rather than multilateral, programs.

— State’s FY 85 budget is presently $600 million above OMB’s target, with IDA VII support penciled in at $750 million. An additional $200 million resulting from acceptance of State’s position on IDA VII would presumably either have to come from trade-offs in other crucial areas of foreign assistance, or require relief from the currently imposed OMB targets for foreign assistance levels in FY 85 and would probably require a Budget Review Board meeting.

— Treasury has effectively exploited State’s holding back on IDA VII out of concern for exacerbating Congressional antagonism over IMF and IDA VI, portraying their “eleventh hour” request as ill-timed.

One of the key unanswered questions in this policy debate concerns the position of the Hill. Treasury asserts that two key players (Senators Kasten and Kemp) are willing to support the $750 million level, and that going for more might jeopardize their cooperation. This view must, however, be weighed in the context of a rather poor track record of Treasury judgments concerning attitudes on the Hill as evidenced by the torturous IMF experience. State believes that strong leadership by the Administration could win the day. If properly tasked, we believe Congressional approval is probably obtainable, but even a Hill fight could be argued to be relatively less costly overall than our “playing it safe.”

Finally, this issue offers an opportunity to be supportive of an initiative to which Secretary Shultz personally attaches great importance. Supporting the Shultz position in your verbal presentation to the President (win or lose) could therefore be another important building block in the State-NSC relationship. You may also wish to telephone Secretary Shultz in Europe to discuss this issue as a courtesy prior to sending the package up to the President.⁷

RECOMMENDATION:

That you sign the attached decision memorandum to the President (Tab I).⁸

That you telephone Secretary Shultz as a courtesy prior to sending the package to the President.⁹

Ty Cobb, Doug McMinn, Don Fortier, Bill Martin, and Fred Wettering concur.

1. Source: Reagan Library, Roger Robinson Files, Chronological File, Robinson Chron 1983; NLR–487–10–11–19–8. Secret. Sent for action. The word “signed” is stamped on the memorandum.
2. Not attached. The memorandum is printed as Document 307.
3. Not attached. The memorandum is printed as Document 302.
4. Not attached. The memorandum is printed as Document 303.
5. Not attached. The memorandum is printed as Document 304.
6. Not attached. A copy of the letter is in the Reagan Library, Executive Secretariat, NSC Subject File, [Security Assistance] Foreign Aid (December 1983).
7. Shultz was in Bonn December 6–7 to meet with Kohl and Genscher and in Brussels December 7–9 to attend the NATO Ministerial meeting.
8. McFarlane placed a checkmark next to the “Approve” option.
9. McFarlane did not indicate his approval or disapproval of the recommendation.