143. Memorandum From the Assistant Secretary of State for International
Organization Affairs (Wilcox) to the Counselor of the Department of State
(MacArthur)1
Washington, March 30,
1956.
SUBJECT
- Arguments for and against SUNFED
In line with our conversation in the hall yesterday morning I am sending
along a brief memorandum outlining the case for [and]
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against SUNFED. I should add that most people who have studied the
problem do not necessarily subscribe to the SUNFED proposal as it has been put forth in New York. Indeed I
think it is more appropriate to talk in terms of a multilateral assistance
program without specific reference to SUNFED inasmuch as that term has fallen into disrepute in some
quarters.
If we should decide to offer to participate in a multilateral assistance
program, I believe we should do it in the context of a broader program which
might envisage various steps by the recipient countries to encourage
productivity within their borders. For example, they might well agree to
create a more favorable climate for private capital which is so essential if
any economic development program is to succeed.
You may have noticed that Congressmen Hays and Merrow in
their report to Congress on the Tenth General Assembly commented very
favorably on multilateral aid programs. They state:
“It is our conviction that the delegation’s statement should have
included emphasis of the need for utilizing multilateral programs to
an increasing degree. It is urgently necessary that in the future we
make far greater use of the United Nations system for foreign aid
than we have in the past. This would not mean an increased amount of
money appropriated for foreign aid but rather the channeling of a
part of existing appropriations through United Nations
machinery.”
[Enclosure]
THE CASE FOR AND AGAINST SUNFED
The Case for SUNFED
- 1.
The underdeveloped countries want SUNFED. They want it urgently and persistently.
They want it whether it will be a small fund or a large fund,
whether it will be effective or ineffective. SUNFED has become a
symbol of their cause. It is entirely understandable
that they should be devoted to SUNFED. They would be partners in the allocation
and distribution of aid rather than dependent recipients; they
could avoid the political entanglements they believe to be
implicit in bilateral aid; by institutionalizing aid they could
assure its continuity. Moreover, they value the UN. It has given them prestige and
position. It is their forum. They want to strengthen the UN by giving it an active positive
role in promoting economic and social welfare.
By withholding support for SUNFED, we have been thwarting the underdeveloped
countries in the realization of an important aspiration. The
fact that we have responded to the most urgent and
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pressing needs of the
less developed countries through large programs of bilateral aid
has not quieted the clamor for SUNFED; it has blurred the public image of the U.S.
as the disinterested friend and benefactor of the less developed
countries; and it has deepened the conviction among them that we
wish to strengthen the United Nations only in its political
arm.
If we were now to support SUNFED, our decision to do so, although belated and
believed to be inspired by the Russian offensive, would
nonetheless be widely and genuinely acclaimed.
- 2.
- It is entirely possible that the Russians may decide to give
vigorous support to the early establishment of SUNFED. They have already indicated
their willingness to consider joining and to contribute in kind
although they entered some minor caveats about grant aid. While the
Russians, like us, prefer to provide aid on a bilateral basis, they
could make extraordinary capital at our expense by adopting an
aggressive pro-SUNFED position.
We have no guarantee that they will not do so. The cost in resources
would not be too great and the propaganda yield could be
enormous.
- 3.
- Our public position in the United Nations on this issue is tenable
but it does us no credit. It is not especially convincing even to
ourselves. We maintain that the resources that SUNFED could command at this time
would not justify establishing a complex international machinery.
Yet the United Nations Technical Assistance Program, the Children’s
Fund, the International Committee for European Migration and many
other multilateral programs make a contribution of some
effectiveness with smaller resources than SUNFED could certainly command if the United States
gave it support. Each year we are confronted with the SUNFED issue at the ECOSOC and at the General Assembly.
From time to time we are confronted with it at FAO, at UNESCO, at the ILO,
etc. On each occasion, our statement, whether strident or muted,
falls with a dull thud. It is difficult to determine how this
affects our relations in the United Nations. Our delegations to
these UN bodies have generally felt
that our negative posture was a divisive force in the UN, widening the rift between the
developed and underdeveloped countries, and not in keeping with the
position of leadership we should assume.
- 4.
- The same case can be made for an international development fund to
provide grants and soft loans that can be made for an international
bank; (a) it permits many countries to pool resources and share a
common burden; (b) an international agency can more easily set
onerous but necessary conditions of aid; (c) it eliminates the
resentment and ill-will that is often generated in the bilateral aid
relationship between magnanimous donor and dependent recipient;
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(d) effective
international cooperation for economic development strengthens the
United Nations.
- 5.
- SUNFED would not be an overly
costly operation. The proponents talk of an annual fund of $250
million (or less). If we followed the IBRD or UN budget
formula, the U.S. share would be roughly 1/3 or $85 million a year.
Short of substantial savings from disarmament, it is most unlikely
that other contributions would be so great that our 1/3 share would
rise above $100 million. It is more likely that our contributions,
if provided on a matching basis, would fall below $85
million.
For $80–$100 million a year we should have called forth contributions
from others, largely Western Europe, the Commonwealth, Japan, and
possibly the Soviet Bloc, of two times as much. If the organization were
reasonably efficient, the bulk of these funds would be used to construct
roads, dams, bridges, harbors, schools and hospitals in the less
developed countries, much as IBRD loans
do, and with the same general benefit to our foreign policy objectives.
The bulk of our foreign aid would continue to be made available on a
bilateral basis.
For $80–100 million a year we should have disembarrassed ourselves of a
most unsatisfactory position in the UN,
have given concrete evidence of our disinterest in promoting economic
development, be working with the less developed countries through the
instrument of their choice, and taken the initiative from the
Russians.
The Case Against SUNFED
- 1.
- We prefer to provide aid on a bilateral basis. We control the
funds; we determine the priorities. The recipient knows that we are
the source of aid. When our funds are merged in the common pool, our
contribution loses its identity, and such good will as the aid
creates is directed toward the United Nations rather than to
us.
- 2.
- While it is possible to have an efficient international
development fund, SUNFED might
well turn out to be a log-rolling operation with everyone sharing in
the pie regardless of need, domestic effort, or capacity to use aid
effectively.
- 3.
If we made our contribution to SUNFED contingent on the fulfillment of certain
conditions to insure efficiency and genuine pooling of
resources, e.g. weighted voting, affiliation with the IBRD, contributions in convertible
currency … ,2 we should find ourselves embroiled in a bitter
fight with the less developed countries, and much of the
political capital we might derive from supporting
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SUNFED would be dissipated.
By analogy, consider with what acclaim the President’s proposal
to establish an international atomic energy agency was first
greeted and compare the confusion, resentment, and ill-will that
was expressed at the last General Assembly on this issue.
We should, of course, try to set conditions that would be less
likely to generate friction and still achieve the same ends. We
might propose that the administration of the Fund be put in
charge of a manager—some distinguished person of international
reputation— who would report periodically to the members but who
would have full authority to make decisions during his tenure in
office. This would take the administration of the Fund out from
under political control, but we as well as the less developed
countries should then have given up our voice in formulating
policy. Alternatively we could protect ourselves by requiring
that no allocation of a member’s contribution be made without
the member’s consent in each case. This would not increase the
efficiency of the Fund nor would it ensure any pooling at all;
it would, however, insure our control over our own
contribution.
- 4.
- If we had a voice in policy (through control over the use of our
contribution or as a member of the Executive Board), we should have
a multitude of headaches. For example, we would be hard put not to
support Latin American requests for grant aid; or requests for funds
for government petroleum development; or requests from Soviet
satellites (unlikely but possible) for, let us say, the erection of
a hospital. Each use of our veto could have quite unsatisfactory
political repercussions.
- 5.
- If the Russians and satellites joined, and it is likely that they
would, we should be jockeying with them continuously for
position—unless we were prepared to turn the management of the Fund
over to an independent administrator.
- 6.
- While our decision to support SUNFED would be greeted with acclaim, within a few
years our annual contribution would be taken for granted. It would
have become an obligation, and if we reduced our contribution or if
Congress delayed voting funds (as in the case of the UNTA) we should be sharply
criticized.
- 7.
- We might have a hard time persuading the Congress to permit the
use of aid money through SUNFED,
in part because the Congress prefers bilateral aid and in part
because the Soviet satellites might be potential recipients of aid.
(To date the Soviet Bloc members have not requested technical
assistance through the UNTA; they
might be equally reluctant to ask for capital aid if this involved
SUNFED missions, examination
by an international staff of development programs, fiscal policy
etc.) If the Congress were persuaded, however, they might require
that any contribution to SUNFED
come
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out of or be in lieu
of Title II funds, the Asian Fund or the proposed Middle East Fund.
Before requesting funds, we should have to weigh in the balance the
loss of our foreign policy objectives that would result from the
possible diminution or extinction of these bilateral programs
against the gain to be derived from supporting a global development
fund. The balance would probably be struck in favor of continuing
bilateral programs and the regional funds.
