71. Memorandum of Conversation0
SUBJECT
- Call of the Polish Ambassador Concerning PL 480 Negotiations
PARTICIPANTS
- The Secretary
- Mr. Edward Drozniak, Polish Ambassador
- Dr. Marian Dobrosielski, Counselor, Polish Embassy
- Mr. Julius L. Katz, EE
The Ambassador called this morning at the invitation of the Secretary, to discuss the impasse in the current PL 480 negotiations. The Secretary said that in reviewing the background in the negotiations he found it difficult to understand why the Poles should have been surprised or shocked at our proposal for cash purchase requirements. This proposal seemed to be a reasonable one. The Ambassador replied that there were two aspects of the US proposal which were disturbing. First, the PL 480 offer was too small and [Page 146] did not take into account Poland’s real needs. Secondly, the cash purchase requirement was burdensome, especially at this time when Poland’s balance of payments was so seriously strained. The Ambassador elaborated on this point as he did in his meeting on December 6 with Under Secretary Ball,1 and presented to the Secretary the attached Memorandum2 explaining the Polish position. He added that as a former banker he could not advise his Government to take on the cash purchase obligations since he saw no possibility of meeting these obligations.
In commenting, the Secretary said that he wished to put aside any thought whether this problem was being considered from a sympathetic or hard point of view. As a former banker, the Ambassador should appreciate our situation. We were in effect offering some $60 million of commodities on terms of about one-third in cash and the balance over forty years. These terms, the Secretary thought, were considerably more favorable than what the Poles obtained elsewhere. Pointing out that the US also faced a serious balance of payments problem, the Secretary said that we found it most difficult to be in the position of subsidizing Polish purchase of commodities elsewhere. Moreover, we had to be careful that we were not subsidizing Polish exports of animal products in competition with our own. The Secretary emphasized that the unwillingness of the Polish Government to assume any cash purchase obligations made it very difficult for us to conclude an agreement. He therefore urged the Ambassador to seek new instructions.
The Ambassador said that the US view had been reported not only by cable, but Deputy Foreign Minister Winiewicz had personally carried back to Warsaw information on the negotiations. In view of the absence of any significant change in the US position he did not believe Warsaw would provide new instructions.
The Secretary suggested to the Ambassador that if he felt he could not seek new instructions, he send a letter to Foreign Minister Rapacki stating that the Secretary wished the Foreign Minister to review the problem in the negotiations. The Secretary emphasized that he was not soliciting a counterproposal, since he could not hold out any prospect that such a proposal would be accepted. But there was no reason why we could not continue to exchange views in order to find a solution to our problem. There might be other ways to solve our problems. Why, for example, couldn’t the Poles seek some relief from other creditors, pointing out the contribution the US was making in its very liberal credit terms. The Ambassador hastened to say that to do so would destroy [Page 147] Poland’s credit. But the Secretary pointed out, the Ambassador had impaired Polish credit here by saying that they are unable to accept cash purchase obligations. The Ambassador coughed nervously and muttered something about the difficult situation in which Poland presently found itself.
In concluding the meeting, the Secretary reiterated his request that the Ambassador ask Mr. Rapacki to review the problem from the viewpoint of the trade problems of both sides.
- Source: Department of State, Central Files, 611.4841/12–2162. Confidential. Drafted by Katz and approved in S on January 6, 1963.↩
- See Document 69.↩
- Not printed.↩