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 You are in: Under Secretary for Public Diplomacy and Public Affairs > Bureau of Public Affairs > Bureau of Public Affairs: Office of the Historian > Foreign Relations of the United States > Nixon-Ford Administrations > Volume IV
Foreign Relations, 1969-1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969-1972
Released by the Office of the Historian

Summary

(This is not an official statement of policy by the Department of State; it is intended only as a guide to the contents of this volume.)

Since 1861, the Department of State’s documentary series Foreign Relations of the United States has constituted the official record of the foreign policy and diplomacy of the United States. Historians at the Office of the Historian collect, select, arrange, and annotate the principal documents that make up the record of American foreign policy. The standards for preparation of the series and general guidelines for the publication are established by the Foreign Relations of the United States statute of October 28, 1991. (22 USC 4351, et. seq.) Volumes in the Foreign Relations series are published when all necessary editing, declassification, and printing steps have been completed.

The documents in this volume are drawn primarily from the Nixon Presidential Materials Project at the National Archives and Records Administration and from the Department of the Treasury records at the Washington National Records Center. Also included are records from the Department of State Central Files and the decentralized lot files of the Department of State, which are also available at the National Archives. Several Nixon White House tape recordings of conversations between President Nixon and his key economic advisers are summarized in Editorial Notes printed in the volume.

Almost all of the documents printed here were originally classified. The Information Response Branch of the Office of IRM Programs and Services, Bureau of Administration, Department of State, in concert with the appropriate offices in other agencies or governments, carried out the declassification of the selected documents in accordance with the applicable provisions of Executive Order12958.

The documents in this volume cover only the first Nixon administration, 1969-1972. Foreign Relations, 1969-1976, volume III, Foreign Economic Policy; International Monetary Policy, 1969-1972, published in March 2002, covers general U.S. foreign economic policy and the international monetary crisis and negotiations, including President Nixon's August 1971 New Economic Policy. The following is a summary of the most important issues covered in the volume. Parenthetical citations are to numbered documents in the text.

Foreign Assistance Policy, 1969-1972

The Nixon administration inherited the Javits Amendment to the Foreign Assistance Act of 1968 that required a report to Congress in March 1970, with a comprehensive reassessment of foreign assistance programs. To help meet that reporting requirement the President's Assistant for National Security Affairs, Henry A. Kissinger, issued National Security Study Memorandum (NSSM) 4 on January 21, 1969, mandating a study of foreign assistance policy for consideration by the National Security Council (NSC). As that study progressed, differences, which would continue throughout the first Nixon administration and are the subject of many documents in this compilation, between the Departments of State and Defense surfaced over whether military assistance should be separated from economic and humanitarian assistance and put into the Defense Department budget where it would be considered by the armed services committees rather than the foreign relations committees. (1) About half of the documents in this compilation pertain to debates within the administration and with the Congress over the funding level and administration of various military, economic, and humanitarian assistance programs.

The NSC met on March 26, 1969, to consider recommendations developed pursuant to NSSM 4. Among the Presidential decisions growing out of that meeting were that aid should not be built on expectations of immediate political returns to the United States; that foreign assistance in FY70 should be on the generous side (bucking the trend in Congress); that greater emphasis should be put on technical assistance; that a corporation should be set up to promote private investment abroad (presaging the creation later in the year of the Overseas Private Investment Corporation (OPIC); that military assistance should remain part of the Department of State-administered foreign assistance program; and that consideration should be given to the establishment of a non-governmental commission to review foreign aid during early FY70 to provide a basis for additional changes in the U.S. programs and, perhaps, guidance to the report to Congress pursuant to the Javits Amendment. (6)

That latter recommendation gave rise to the establishment later in the year of the Task Force on International Development (TFID) chaired by Bank of America President Rudolph Peterson. (119, 120) The TFID's work is primarily treated in the following compilation on international development policy, but cannot be disassociated from the foreign assistance issues in this compilation. The President issued a foreign assistance message in September 1970, and legislation to reorganize the foreign assistance program went to Congress in April 1971, and was the subject of intense efforts to bring it to a vote, efforts that ultimately did not bear fruit. (40, 50-55, 57, 58, 60, 65, 81, 82)

As foreign assistance legislation was considered, the administration faced decisions on whether or not to seek legislation to repeal numerous "barnacles" written into foreign assistance law in earlier years that restricted aid to certain countries for acts deemed contrary to U.S. interests, e.g., trading with Cuba or expropriating the foreign investments of U.S. persons and firms. (8, 9, 10, 31, 54) The Hickenlooper Amendment, which required foreign assistance sanctions on countries that expropriated U.S. property, was such a problem for the Nixon administration that expropriations are documented in a separate compilation later in this volume.

Much of the administration's foreign assistance focus during its first year related to developing a policy toward Latin America. To that end Nixon sent New York Governor Nelson Rockefeller on a study mission to Latin America, and his recommendations played an important role developing a Latin America policy and a general foreign assistance policy. (12, 22, 122)

At the start of the Nixon administration, there was a predilection to tilt in favor of multilateral rather than bilateral assistance (2, 4, 23, 43), but by 1972 that inclination had faded with the President flatly stating "that was no longer his view." (94) Part of the multilateral approach were efforts to replenish the funds of the International Development Association (2, 17, 23, 24) and the Inter-American Development Bank (25, 100), as well as other multilateral, international financial institutions. (43, 44, 102) The administration also addressed the question of reaffirming, in the context of the UN system, the target of one percent of gross domestic product going to broadly defined foreign assistance. (34, 36, 38)

International Development Policy, 1969-1972

On February 13, 1969, President Nixon sent a memorandum to Secretary of State William Rogers requesting an analysis of a proposal to create a federally chartered corporation to promote private capital formation in developing countries. (106) This set in motion the process that resulted in the establishment of the Overseas Private Investment Corporation (OPIC) later in 1969. (107, 108, 113, 114)

On April 12, 1969, the President sent a letter to Secretary Rogers setting out his views on aid programs and relations with developing countries, including his belief that the United States should not be put in the "position of being blackmailed" by developing countries that might go Communist if they did not receive their desired level of economic and military assistance. (109) Helmut Sonnenfeldt of the NSC Staff brought the President's letter to Kissinger's attention in an April 17, 1969, memorandum. Sonnenfeldt had a number of concerns related to how countries might come under Soviet or Chinese influence but thought the more important question on aid policy was why it was desirable for the United States to "assist or otherwise cooperate with other countries." (110)

NSSM 45, dated April 21, 1969, informed addressees that the President had "directed the preparation of a paper on the objectives of the U.S. economic assistance program and its relationship to overall U.S. foreign policy." (111) The internal government report eventually was prepared under the direction of the U.S. Ambassador to Chile, Edward Korry. The NSSM said that the Korry report, which was never completed (123, 124), along with that of an "outside commission being set up at the President's direction" would help with the administration's response to the Javits Amendment. The "outside commission" was the Task Force on International Development chaired by Rudolph Peterson, which was established in September 1969. (119) During his meeting with Peterson on September 2, the President's views included the belief that the United States should "get away from government to government aid. … The success stories to date have occurred mainly in environments where the private sector played a major role." (120) When he met with the Task Force on October 16, 1969, Kissinger said "the President had opted for the multilateral approach in contrast to the entrenched bias in favor of bilateralism." (121)

The President met again with Peterson on February 11, 1970 (125), and following receipt of the Task Force's report on March 5, issued a memorandum directing the NSC Under Secretaries Committee to prepare a paper on issues raised in the report, and elsewhere, regarding the future of the U.S. foreign assistance program. (128) Pursuant to the interagency review process and a number of presidential decisions (129-136), the President sent a special message to Congress on September 17, 1970, proposing "a set of fundamental and sweeping reforms to overhaul completely our entire foreign assistance operation to make it fit a new foreign policy." (137) One aspect of that new policy was a proposal for multilateral untying of aid to donors' exports. (127, 138-142) The foreign assistance reform legislation never came to the floor for a vote in Congress.

In connection with development of a policy toward Latin America, the Nixon administration, in mid-1969, set in motion plans to complete the last major unfinished section of the Pan American Highway through the Darien Gap in southern Panama and northern Colombia. (117) In order to make a positive gesture toward Latin America, the President, during a conference in June 1969, ordered that additionality requirements in foreign assistance programs be eliminated (116, 118), measures that had been adopted during the Johnson administration for balance-of-payments reasons and that had been the subject of interagency review earlier in 1969. (112, 114-116) The President made a major address on policy toward Latin America on October 31, 1969. (122) There was a flurry of additional activity on economic policy toward Latin America in 1972 in preparation for the UNCTAD III conference in Santiago, Chile, during the Presidency of Salvador Allende. (144-146)

Expropriation Policy, 1969-1972

A major barnacle on the foreign assistance legislation was the Hickenlooper Amendment that required terminating foreign assistance to countries that had expropriated U.S. citizens' property without providing prompt, adequate, and effective compensation; submitting the dispute to binding international arbitration; or returning the property within 6 months. (148)

The Nixon administration inherited the unresolved Peruvian expropriation of the International Petroleum Company (IPC) in 1968, and in 1969 was also confronted by Chilean President Frei's possible actions against U.S. copper companies, a problem that would deepen when Salvador Allende ascended to the Chilean Presidency in the fall of 1970. (148, 149) The Peruvian and Chilean cases festered, largely unresolved, throughout the Nixon administration, along with others in Bolivia, Algeria, Zambia, and other non-Communist countries. A May 8, 1971, memorandum from Acting Secretary of State John Irwin to the President informed him that there were 56 active expropriation cases then under negotiation or litigation in 16 non-Communist countries. Reports of 200 expropriation cases were erroneous because of the difficulty of differentiating between trade complaints and expropriations. In addition there were thousands of unsettled claims in Communist countries. Irwin also noted that more than a dozen cases had been settled since the beginning of 1970. (153) Despite these successes, on June 11, 1971, Treasury Secretary John Connally sent a memorandum to the President regarding "snowballing expropriations" of U.S. investments in Latin America and the Caribbean, particularly in Bolivia, Chile, Guyana, and Jamaica. (154, 156)

On June 23, 1971, Kissinger issued NSSM 131 informing addressees that the President had directed an urgent study of U.S. policy in connection with expropriation. Not only was policy on direct U.S. assistance to be studied, but also the issue of how the United States would vote on loans to expropriating states from the multilateral financial institutions. (155) On July 31 a draft, interagency Response paper was circulated for consideration by the interagency NSC Senior Review Group (SRG) on August 4. (157) The State Department's Bureau for Inter-American Affairs strong exception to the "retrograde" draft and the expected hard line Treasury would take at the SRG meeting. (159)

In preparation for the SRG meeting and in its aftermath, a number of interested Departments and Agencies developed memoranda expressing their views. (160-168) On October 8, 1971, Kissinger issued National Security Decision Memorandum (NSDM) 136 reporting the President's decision that "in each case of an expropriation of a significant U.S. interest there will be the presumption that the U.S. will suspend new bilateral economic benefits to the expropriating country." The President also directed the preparation of a public statement announcing the expropriation policy. (169) On January 18, 1972, Kissinger issued NSDM 148 informing addressees that in connection with new lending by multilateral development institutions the presumption would be that in countries where there had been an expropriation of a significant U.S. interest the United States would attempt to have new loans deferred or, if a vote was necessary, to abstain or vote negatively. (173) On January 19, 1972, the President issued his public statement on expropriation policy. (174, 175)

Trade and Commerce, 1969-1972

During the 1968 Presidential campaign, candidate Nixon on August 21 informed Congressional Republicans that as President he would effectively administer the Long-Term International Cotton Textile Agreement and take steps to extend international textile agreements to all other textiles (184), a promise he would be repeatedly called upon to honor throughout his administration. (230-231, 233, 249) In its opening days the Nixon administration received the report of a Task Force on Foreign Trade Policy chaired by Alan Greenspan, which suggested parameters for trade policy initiatives. (181) On February 5, 1969, Kissinger issued NSSM 16 informing addressees that the President had directed the preparation, by March 31, of a trade policy paper for consideration by the NSC that would address legislative needs, East-West trade issues, tariff preferences for developing countries, sectoral issues such as steel and textiles, and the administration of trade policy. (182) The NSC prepared a summary and issues for decision paper for an April 9 NSC meeting (192), and on April 15 Kissinger sent the President a memorandum regarding actions resulting from that meeting. (195) The President, inter alia, affirmed his commitment to free trade, thought the American Selling Price (ASP) method of customs valuation should be eliminated, and authorized additional NSSMs on U.S. Trade Policy, NSSM 49 (199), and Tariff Preferences for Developing Countries, NSSM 48 (198).

A modest trade bill was sent to Congress on November 18, 1969, reflecting decisions at the April 9 NSC meeting (213, 217), but, as NSDM 49 suggested, additional study of trade issues was needed. In his November 18 message to Congress, the President flagged publicly his intent to appoint a commission to study trade issues, and on April 7, 1970, the President announced that former IBM President Albert Williams would chair the President's Commission on International Trade and Investment Policy. (229) The Williams Commission tendered it report, United States International Economic Policy in an Interdependent World, in late July, 1971. Coinciding with the developing international monetary crisis (see Foreign Relations, 1969-1976, Volume III), policy makers' attention was on other matters, and along with concerns about the report itself, it received scant attention at the time. (256) The monetary negotiations, which unfolded in late 1971, were closely linked to parallel trade negotiations with other members of the G-10. (260-262, 279)

As the November 18 trade legislation was considered, Congress added new elements, led by Wilbur Mills, Chairman of the House Ways and Means Committee. Of particular interest were quotas on textiles and shoes. (233, 235-243, 247) The Mills bill and other protectionist measures persisted throughout the administration and were constantly in the background as additional legislative proposals were developed. (274)

Tariff preferences for developing countries received widespread consideration during the first year of the new administration (193, 196, 200, 208-210, 214-216), and during subsequent years. (232, 234, 244-246, 253, 257) On October 31, 1969, the same date as the President's major address on policy toward Latin America (see above), Kissinger issued NSDM 29 informing addressees that the President had approved U.S. participation in a system of tariff preferences for all developing countries (218, 220), not just for those in Latin America as had been mooted early in the development of this policy initiative. The initiative would be included in the broad trade legislation the second Nixon administration would send to Congress in 1973, legislation that would be passed by Congress in the closing days of 1974 and signed by President Ford in January 1975, providing the United States with the negotiating authority to participate in the Tokyo Round of GATT trade negotiations. (264, 265, 268, 272, 273, 286, 287)

A number of bilateral trade and other economic issues with the European Community confronted policymakers. (277-279, 285) One was the European position on trade in agricultural products. (183, 250) Another was the evolving EC preferential trade agreements with Mediterranean countries, especially Israel and Spain, that did not meet the standards for a GATT most-favored-nation (MFN) exception for customs unions and free trade agreements. (221-224, 226, 258, 266, 281-284) On March 2, 1970, NSDM 45 informed addressees that the President had decided the United States would oppose the proposed EC-Spain trade agreement but would concur if the agreement were renegotiated to conform to GATT rules. (227)

U.S. trade negotiators also had many bilateral issues with Japan (269), but textiles probably came at the top of the list. (187, 202, 203, 219, 225, 249) President Nixon and other senior administration officials met with Japanese Prime Minister Tanaka several times during the summer of 1972 to discuss trade and other bilateral economic issues. (275, 276)

East-West Trade, 1969-1972

NSSM 35, dated March 28, 1969, set out the President's desire for a fuller review of U.S. Trade Policy toward Communist Countries than was possible under the NSSM 16 rubric. (288) Administration officials understood that it was the President's desire "to move from a period of confrontation to a period of negotiation vis-a-vis the Soviet Union and other Eastern European countries." (292, 294, 295, 298) As the opening with the People's Republic of China (PRC) progressed (300-302, 304, 308, 309, 324, 329-331, 333, 353-355), the question of equality of treatment of the PRC with the Soviet Union arose. (322) On April 27, 1971, Nixon sent Kissinger a memorandum informing him that "our final objective … is that trade with China should be on the same basis as trade with the Soviet Union and other Communist countries. The question is whether we should consider now the timing of such announcements and whether this might not be a good move to make at an earlier time than we had anticipated for reasons that are obvious." (330) A policy of parity in trade treatment of the PRC with the Soviet Union was formally approved in early February 1972, on the eve of the President's visit to China. (356)

There were a number of issues related to trade with Communist countries. These included the COCOM list of strategically sensitive technologies that required a validated export license for export to Communist countries (the subject of the following compilation); MFN treatment for Communist countries; and Export-Import Bank (EXIM) credits for Communist countries. These and other issues were summarized in Commerce Secretary Maurice Stans' April 9, 1969, memorandum to the President (290) and in the NSSM 35 Response paper prepared in the NSC for a May 7 Review Group meeting. (292) The Departments of State and Treasury saw scope for new openings for trade with the Communist countries (294, 295), but Secretary of Defense Melvin Laird was less forthcoming. (296) The NSC met on May 21 to take up issues related to trade with European Communist countries. (298) NSDM 15, dated May 28, 1969, set forth the President's decisions drawn from that meeting; among them was that present legislation was adequate at that time, but "we should be prepared to move generously to liberalize our trade policy toward the Soviet Union and other Eastern European countries whenever there is sufficient improvement in our overall relations with them." (299) In Congress there was a flurry of activity during 1969 over extension of the Export Control Act (303, 306, 307, 310), and when the Export Administration Act of 1969 was passed in late December it contained "a strong Congressional endorsement of expanded trade with Eastern Europe." (311) A number of documents deal with measures to implement this liberalization. (314-318)

NSDM 99, on March 1, 1971, informed the Secretaries of State, Defense, and Commerce that the President had "decided to defer any decision on new Administration initiatives to liberalize U.S. trade policy toward the Communist countries in regard to most-favored-nation treatment or Export-Import Bank transactions. The President has also decided, however, that Congressional initiatives in these areas should be opposed only in a very low key way." (325) As follow-up, however, CIEP Study Memorandum #2, dated March 13, forwarded the President's request for "a more definitive understanding of the size and nature of trade and investment opportunities in the USSR and Eastern European countries and of any special commercial problems (e.g. financing) should circumstances arise in which a change in policy might be wise." (327)

The Fino Amendment to the Export-Import Bank Act of 1945, as amended in 1968, precluded EXIM credits to countries engaged in or supporting countries in conflict with the United States, and therefore prohibited credits to Communist countries due to their support for North Vietnam, unless the President determined a national interest exception. (292, 294, 340) The availability of export credits was an especially important issue in relations with the Soviet Union. (e.g., 350) President Nixon would visit the Soviet Union in May 1972, and EXIM financing, MFN treatment, grain sales, and numerous other issues were on the agenda for the Summit. The many pre- and post-Summit documents from 1972 on these and other East-West trade issues will be included in Foreign Relations volumes dealing with bilateral relations with the Soviet Union and Eastern European nations.

A number of documents in this compilation deal with specific export licensing initiatives, such as the sale of a truck foundry to the Soviet Union. (312)

Coordinating Committee on Export Controls, 1969-1972

The Coordinating Committee on Export Controls (COCOM) was a group of industrial democracies whose membership closely resembled that of NATO, plus Japan. COCOM, which met from time to time in Paris, maintained lists of sensitive technologies whose export to non-COCOM countries required the consensus of the entire membership. Most of its cases dealt with exports to Communist countries of advanced technologies, many of which had military, nuclear and encryption uses. In general the United States favored a more extensive list of controlled technologies than some European nations and Japan, which sought new commercial opportunities in the controlled technologies. For instance, in August 1969, France raised its desire to export technologies to manufacture silicon transistors to Poland, a technology the United States had always prohibited U.S. firms from exporting to Eastern Europe. (360)

NSSM 71, dated August 14, 1969, mandated in the President's name a review "of our policies governing the access by foreign countries to certain advanced technologies vital to our national security. The review will consider nuclear power reactors, ballistic missile systems, advanced computers, and other scientific and technological devices and information whose acquisition from the United States by other nations would assist in the development or improvement of independent national nuclear weapons capabilities or strategic delivery systems." The review was to be completed by September 30. (361) Judging from a June 22, 1971, memorandum from Defense Secretary Laird to the President, in which he expressed concerns over the recent approval of French sale of transistor technology to Poland and British export of advanced computers to the Soviet Union, the NSSM review, which had been in progress, was for some reason cancelled. (376)

Most of the documents in this compilation deal with the aforementioned French and British export proposals and shed light on the interagency debates over how to deal with proposals to export sensitive technologies to Communist countries. A May 13, 1971, memorandum to members of the NSC Under Secretaries Committee informed them that the President had approved the British sale of advanced computers to the Soviet Union. (374) NSDM 159, dated March 29, 1972, set out the President's determination that British and French firms could sell integrated circuit technology to Poland and a U.S. firm could make similar sales to Romania. It also mandated "a basic examination" by the NSC Under Secretaries Committee "of how the COCOM system should be used in the future to control exports to Communist countries." (380) The results of that examination are a report submitted to the NSC Under Secretaries Committee, dated November 20, 1972. (383) A December 29, 1972, draft memorandum from the chairman of the NSC Under Secretaries Committee to the President summarized the results of the examination and conveyed to the President a revised version of the November 20 paper. (387)


Commodities and Strategic Materials, 1969-1972

This compilation contains documentation on activities pursuant to the International Grains Agreement, particularly relating to international wheat trade and wheat pricing; meat imports, especially lamb from Australia and New Zealand, which led to an exchange of messages between the President and their Prime Ministers (391, 398, 405, 411, 418); and the management of the Stockpile of Strategic and Critical Materials, particularly sales from the stockpile that were typically resisted by both countries supplying those materials and the Department of State, which saw foreign policy reasons for not making disposals.

The President was personally involved with many of the decisions on these issues. For instance, in August 1970, he approved Secretary Rogers' recommendation for a further, temporary suspension of tin sales from the stockpile for fear of an adverse reaction in Bolivia that might endanger American lives and property. (434) He again approved delaying tin sales pursuant to a January 20, 1971, recommendation from Kissinger (439), and in April 1971, decided that tin sales from the stockpile be "postponed indefinitely." (440)

The level of stockpile requirements for national security purposes was frequently reviewed (389, 416, 421, 429), and some favored elimination of the stockpile. (415) On December 26, 1972, Kissinger sent President Nixon a memorandum reporting on a review of the Stockpile of Strategic and Critical Materials, "which shows that our present inventory of materials far exceeds national security requirements." Kissinger recommended the President approve a draft NSDM reducing stockpile requirements. Kissinger said that if the President approved, he would coordinate the development of a disposal program. Regarding the NSDM, the President wrote: "Change [the NSDM] to reflect my very dim view of this whole program. Unless cuts mortally affect the economy in the U.S.--make them." The NSDM was released on February 6, 1973. (446)


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