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    "title": "FY 1977 - 11/22/75 - Security Assistance, Development Assistance, State Department, Ex-Im Bank (2)",
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    "ocrText": "The original documents are located in Box 9, folder \"FY 1977 - 11/22/75, Security\nAssistance, Development Assistance, State Department, Ex-Im Bank (2)\" of the White\nHouse Special Files Unit Files at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\ngitized from Box 9 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library\nDevelopment\nAssistance\n1977 Presidential Review\nInternational Development Assistance\nTable of Contents\nTAB A\nSummary tables and background\nnarrative.\nTAB B\nSummary of reductions and discussion of\nnon-issue reductions.\nTAB C\nIssue Papers and Background Papers.\nIssue\nEffect of issue on outlays\n(dollar in millions)\n1977\n1978\n1. Reduce AID country programs\n-8\n-64\n2. Reduce AID central programs\n-13\n-34\n3. Terminate American Schools and Hospitals\nProgram\n-5\n-7\n4.\nReduce P.L. 480 commodity levels\n*\n-514\n-514\n5. Reduce voluntary contributions to international\norganizations\n-23\n-34\n6. Terminate Housing Guaranty Program\n-\n-\nBackground Papers\n1. International Financial Institutions\n2. International Fund for Agricultural Development\nFORD & LIBRARY GERALD\n*\nAn issue paper on the 1976 P.L. .480 program is included in this section.\nInternational Development Assistance\n1977 Budget\nSummary Data\n(In Millions)\nAID Employment, end-of-year\nBudget\nFull-time\nauthority\nOutlays\nPermanent\nTotal\n1975 actual\n2,152\n2,695\n6,185\n6,591\n1976 February budget (as amended)\n3,373\n3,058\n8,700\n9,175\nsupplemental recommended\n(200)\n-\nXXX\nXXX\nagency request/OMB recommendation\n3,126\n3,092\n6,155\n6,630\nTQ February budget (as amended)\n377\n702\nXXX\nXXX\n1977 planning target\n3,445\n2,913\nXXX\nXXX\nreduction target\n-\n2,704\nXXX\nXXX\nagency request\n3,538\n3,065\n6,155\n6,630\nOMB recommendation\n2,699\n2,500\n6,155\n6,630\n1978 OMB estimate\n2,535\n2,318\n6,155\n6,630\na/ Outlay estimates in this table and all estimates in following tables do not include IFAD, for which no\nrequest has yet been received. OMB anticipates a supplemental request for $200 million in BA in 1976,\nwhich will result in $30 million in outlays in 1977.\nGERALD\nR.\nFORD\nLIBRARY\n2\nInternational Development Assistance\nGERALD\n1977 Budget\nOverview\nFORD\nProgram Level\n($ millions)\n1970\n1973\n1975\n1976\n1977\nActual\nActual\nBudget\nActual\nBudget\nRequest\nRecommendation\nAID Development Assistance\n1294\n1198\n1401\n1180\n1262\n1389\n1126\nP.L. 480 Food Aid\n1178\n937\n878\n1227\n1366\n1523\n1022\nMultilateral Assistance\n798\n870\n1169\n855\n1466\n1380\n1346\nTOTAL\n3270\n3005\n3448\n3262\n4094\n4292\n3494\nInternational Development Assistance has three major components which are roughly equal in size in the 1976 budget\nrequest. In addition, AID provides economic supporting assistance (part of the International Security Assistance\nProgram) to countries of political/military importance, and some of the P.L. 480 and multilateral aid goes to these\ncountries as well.\nThe 1977 Budget Issue\nThe agencies responsible for development assistance are seeking increases in most of their programs above the 1976\nbudget request levels. They point out that the proposed 1977 increases are, on the whole, in line with earlier\nPresidential guidance and they cite overriding foreign policy considerations in arguing against any cutback. OMB\nwhile recognizing these arguments, believes that the broad issue is whether foreign aid should be allowed to grow\nin a year when extraordinary budget stringencies require major reductions in domestic programs. OMB questions\nwhether, under the circumstances, such growth should be allowed.\nCongressional Considerations\nBoth the agencies' and OMB's views on 1977 foreign aid budget levels are heavily influenced by congressional\nconsiderations which differ with each major program component:\n(1) AID development assistance. Congress regularly cuts administration requests for the main elements of\nthe AID program by 15-25 percent although it periodically adds back some funds for humanitarian disaster\n3\nrelief, and other special purposes. This has led to an Administration practice of including \"cut\ninsurance\" in its budget requests, a cushion in excess of what is absolutely essential. The congressional\nauthorizing committees have also directed AID to focus its programs on the poorest people in the poorest\nnations, an approach which conflicts somewhat with foreign policy emphasis on some of the higher income\ndeveloping countries.\n(2) P.L. 480 food aid is a congressional favorite, in part because it helps maintain U.S. farm income and\nin part because food aid is perceived by large numbers of Americans as being the most appropriate U.S.\nresponse to humanitarian need abroad. As a result, Congress has given the Executive Branch broad authority\nto change program levels and the Executive Branch has frequently increased the P.L. 480 program over\ninitially budgeted levels. Because of the humanitarian appeal of the program Congress has resisted large\nscale food shipments for political/security purposes and has set tight limits on such users.\n(3) Multilateral assistance. The largest part of multilateral assistance is U.S. contributions to the inter-\nnational development lending institutions. The contributions are determined by international agreements\nthat provide for installment payments over periods of several years. The agreements seldom coincide with\nthe budget cycle. Thus each proposed set of installments is approved separately as it arises, committing\nthe Executive Branch to seek funds in several succeeding years. Congress cuts annual appropriation\nrequests erratically, and occasionally deeply, forcing postponement of payments which the United States has\nformally agreed to make.\nCongress has not yet acted on 1976 budget requests for AID or multilateral assistance. While authorizing legis-\nlation will soon be passed providing the full amounts requested by the Administration or more, it is likely that\nappropriations will be at about the 1975 levels.\nAgency Requests\nIn seeking 1977 program increases, the agencies have cited the need for cut insurance, the U.S. obligation to carry\nout international agreements, and the popularity of the flexible P.L. 480 program. Specifically:\n(1) AID is requesting a 10 percent increase in its own program over 1976 -- an 18 percent increase over the\nactual 1975 appropriations. If appropriated this would be adequate funding for both foreign policy\nrequirements and to carry out the congressional desire for more aid to poorer developing countries.\n(2) State and AID are also seeking an 18 percent increase in P.L. 480 over 1976 -- 24 percent above 1975.\nThis would permit shipments to an enlarged number of countries to meet a wide range of political,\ndevelopmental and humanitarian objectives.\nFORD\n4\n(3) The State and Treasury requests for multilateral assistance are slightly below 1976 levels and are\nmainly determined by formal commitments to international development banks.\nIn justifying these requests the agencies point to:\n- the need for foreign aid, which is particularly pressing now, because of oil price increases, world-\nwide inflation, and recession, especially among the poorest developing nations;\n- the foreign policy importance of continuing a number of individual bilateral programs including those\nin Indonesia, Korea, Chile, Panama, and P.L. 480 for the Middle East;\n-\nthe special importance of more foreign aid to implement the new United States approach to the third\nGERALD\nworld as set forth in Secretary Kissinger's address to the Seventh U.N. Special Session;\nFORD\nthe fact that the proposed increases for most AID and multilateral programs are consistent with the\nlevels in 1977 authorizing legislation requested by the Administration; and\nLIBRARY\n-\nthe adverse impact which reductions from proposed 1977 authorizing levels could have on congressional\naction on the pending 1976 foreign aid budget requests.\nOMB Recommendation\nIn proposing significant program reductions in development assistance OMB has aimed at reducing or eliminating those\nelements of the foreign assistance program which it judges to be least effective, as well as reducing 1977 outlays.\nSpecifically:\n1. AID development assistance: OMB has cut the total request from $1389 million to $1126 million. This is\nbelow the 1976 budget request and is $54 million below the 1975 actual program. When special disaster\nrelief activities in 1975 and 1976 are excluded from the totals, however, the OMB figure is about halfway\nbetween last year's actual and this year's budget request level.\nThe OMB recommendation would essentially eliminate the cut insurance cushion although it is not clear\nwhether this would actually result in substantially lower appropriations than would otherwise occur.\nOMB would reduce overseas development loans to the 1975 actual levels since increased multilateral\nlending, which the United States is encouraging, will more than compensate for the cuts. Also OMB\nquestions whether the United States loan program at even the request levels can contribute significantly\nto most countries' economic growth. At the same time, OMB would permit overseas grants, primarily\ntechnical assistance, to rise by 15 percent above the 1976 budget and would permit continuation of AID's\nWashington based grant activities at 1976 budget levels. Finally, the OMB recommendation would eliminate\ntwo AID programs which subsidize American schools and hospitals overseas and provide guarantees of\nhousing loans to developing countries.\n2. P.L. 480 food aid: OMB would reduce the AID request from $ 1523 million to $1022 million. In quanti-\ntative terms, the OMB recommendation would provide 5 million tons of food in 1977, 17 percent below the\ncurrently budgeted 6 million tons for 1976 and well below the AID request of 7 million tons. Because of\nits broad support and the absence of funding constraints, the P.L. 480 program has already grown substan-\ntially from the 3.3 million tons shipped in the food-shortage year of 1974. OMB questions whether the\nbenefits of the program warrant the high outlays requested. The OMB recommendation would permit the\nUnited States to provide one half of the 10 million ton food aid target set by last year's World Food\nConference.\nBecause a Presidential decision is also required on the 1976 P.L. 480 program, a separate 1976 issue\npaper is included in this book reflecting the congressional directives contained in the conference report\non the development assistance bill.\n3. Multilateral assistance. The OMB recommendation would provide for a program of $ 1346 million. Recognizing\nthe need to honor specific agreements and to carry out Presidentially approved multilateral initiatives,\nOMB has not cut back the Treasury Department's 1977 requests for the international development lending\nbanks. The $34 million reduction proposed for multilateral assistance for 1977 would be taken from U.S.\nvoluntary contributions to UN and OAS technical assistance programs. The U.S. commitment to these latter\nactivities is not clear cut and they appear to be of generally lower quality than the programs of the\ndevelopment banks.\nOMB believes that its recommendations are consistent with the tight 1977 budget policy and will not seriously\naffect the realization of any major high priority assistance objectives abroad. With regard to the broad justi-\nfications raised by the agencies:\n-\nThe emphasis on the new multilateral aid programs proposed in Secretary Kissinger's UN speech should\nprovide as much as $3-4 billion over the next several years if other countries participate, helping to\nGERMEET the pressing needs of the poorer countries.\nR.\nFORD\nLIBERTY\n-\nThe major U.S. bilateral foreign policy requirements can be met at the OMB recommendation level, and\ndeep congressional reductions in AID programs might be avoided by a concerted effort to make Congress\naware that the Administration has cut its request to the bone.\n-\nThe proposed multilateral programs are the most important initiatives for improving relationships with\nthe Third World. Secretary Kissinger pointed out in his speech that bilateral aid cannot be expected\nto rise significantly.\n-\nWith a $395 billion budget ceiling, it will be necessary to disregard previously proposed authorizing\nlevels proposed by the Administration for many programs. Increasing foreign aid while domestic program\nbenefits are being cut back would be difficult to justify.\n-\nWhile 1977 budget levels may affect 1976 congressional action on foreign aid, some reductions this year\nare inevitable. An alternative approach would be to reduce the 1976 request somewhat to obtain outlay\nsavings next year. The agencies have strongly opposed this approach.\nGERALD\nA.\nFORD\nLIBRARY\nTAR D\n1977 Budd\nInternational Development Assistance\nGERALD\n?\nSummary of Recommended Program Reductions\n($ in millions)\nFORD\n1976\nTQ\n1977\n1978\nLIBRANY\nFTP\nFTP\nFTP\n0\nEmploy.\n0\nBA\n0\nEmploy.\n0\nEmploy.\nCurrent base\n3,092\n6,155\n702\n3,538\n3,065\n6,155\n2,976\n6,155\nRecommended level\n3,092\n6,155\n702\n2,699\n2,500\n6,155\n2,318\n6,155\nReduction\n0\n0\n0\n839\n565\n0\n658\n0\nProgram reductions:\nCountry programs, reduce loans\nand grants\n0\n--\n0\n186\n8\n--\n64\n--\nCentrally administered pro-\ngrams, reduce\n0\n--\n0\n54\n13\n--\n34\n--\nOperating expenses, use 2%\nemployment lapse rate\n0\n0\n3\n2\n0\n3\n0\nAmerican Schools and Hospitals,\neliminate\n0\n--\n0\n10\n5\n--\n7\n--\nInternational Organizations and Programs,\nhold UNDP and OAS contributions to\n1975 levels\n0\n--\n0\n34\n23\n--\n34\n--\nInternational Narcotics Control, reduce to\nallow for project fall-outs\n0\n--\n0\n4\n0\n--\n2\n:\nP.L. 480 Title I, reduce programs\n0\n--\n0\n488\n454\n--\n454\n:\nP.L. 480 Title II, reduce programs.\n0\n:\n0\n60\n60\n:\n60\n:\nTotal Reductions\n0\n0\nn\n839\n565\n0\n658\n0\n1977 Outlay Reductions\nInternational Development Assistance\nAID operating expenses\n(dollars in millions)\n1976\nTO\n1977\n1978\nFTP\nFTP\nFTP\n0\nemploy\n0\nBA\n0\nemploy\n0\nemploy\nAmount:\nCurrent base\n165\n6,155\n46\n171\n173\n6,155\n171\n6,155\nRecommended level\n165\n6,155\n46\n168\n171\n6,155\n168\n6,155\nReduction\n0\n0\n0\n3\n2\n0\n3\n0\nActions required:\nSubmission of an appropriation request below the authorization request already submitted.\nProgram impact:\nOver the past seven years, AID's total employment has declined dramatically from a peak of 17,500 in 1968\nto 6,600 last June. During 1975 AID reduced FTP American employment by 753 (16%), of which about 300\nrepresented employees in Indochina programs. This was accomplished by two successive reduction-in-force\nactions undertaken in 1975 which are still in process. These have had an adverse impact on employee morale\nand efficiency.\nAID is attempting to restructure its work force to carry out its role more effectively. Specifically, the\nAgency is recruiting personnel who can manage development programs aimed directly at the rural poor in\ndeveloping countries. OMB agrees with the need for restructuring, and believes that additional personnel\nreductions at this time would thwart that effort and also further damage the morale and efficiency of\npersonnel already employed by the Agency. However, AID has historically been somewhat below the personnel\nceilings assigned, so a dollar saving can be achieved by realistically calculating operating expenses based\non a lapse rate of 2% between ceiling and on-board strength. OMB recommends that this be done, with no\nprogram impact but with the effect of reducing outlays by $2 million.\nGERALD\nF.\nFORD\nLISBARY\n1977 Outlay Reductions\nDepartment of State\nInternational Narcotics Control\n(dollars in millions)\n1976\nTQ\n1977\n1978\nFTP\nFTP\nFTP\n0\nemploy\n0\nBA\n0\nemploy\n0\nemploy\nAmount:\nCurrent base\n48\n12\n10\n34\n42\n12\n37\n12\nRecommended level\n48\n12\n10\n30\n36\n12\n34\n12\nReduction\n0\n--\n0\n4\n6\n--\n3\n--\nActions required: A reduced 1977 allowance consistent with current budget policy.\nProgram impact: The State Department requests $34M for International Narcotics Control Assistance in 1977.\nThis request is $8.5M below the planned 1976 program level and reflects an intention that host governments\nincreasingly conduct and finance their narcotics control programs from their own resources and with the\nequipment and supplies heretofore provided under this program. Proposed reduction anticipates some fall-\nout in project negotiations and some program reductions.\nOther considerations: Congressional criticism has focused on the size of the U.S. contribution to the\nUN Fund for Drug Abuse Control and on the large volume of equipment and supplies provided foreign\ngovernments under this program. Both of these areas could absorb a portion of the cut. This recom-\nmendation is consistent with the recommendations of the White Paper on Drug Abuse.\nThe State Department claims a $4 million reduction would defer or curtail some important activities and\nmake difficult any response to unforeseen events or potential new initiatives.\n0 TAB\nIssue Paper\nInternational Development Assistance\n1977 Budget\nIssue #1: AID Country Programs\nStatement of Issue\nShould AID development assistance to individual countries be cut back significantly?\nBackground\nAID country programs provide concessional development loans and technical assistance grants to more than 50\ndeveloping countries. In recent years, congressional appropriations reductions have cut country programs back\nconsiderably from budget request levels--for example, 23 percent in 1975. This has led to the inclusion of a\n\"cut insurance\" margin in executive branch budget requests.\nIn contrast to the hostile appropriations committee action, the congressional authorizing committees have\ngenerally supported Administration requests for country program funding. These committees, however, have set in\nlaw a \"mandate\" on the direction which the program should take. This calls upon AID to provide assistance to the\npoorest countries and the poorest people within those countries, particularly small farmers. In addition to\nagriculture, emphasis is to be given to population, health and education, and large-scale capital transfers are\nto be de-emphasized.\nThis mandate tends to conflict with U.S. foreign policy requirements which greatly influence the allocation\nof funds among countries and call for programs in some of the wealthier developing countries. Where foreign\npolicy considerations are the primary factor in providing aid, the developmental impact of the program is often\neroded. Foreign policy considerations have also dictated that the now rather limited country program funds be\nspread among a relatively large number of countries.\nAlternatives\n#1. Increase country programs by 15 percent in program terms (see attached table) over the 1976 request and\n41 percent over the 1975 actual, in line with proposed authorizing legislation--a total of $886 million\n(Agency req.).\nGERALD\n.i)\nFORD\nLIBRARY\n#2. Hold country programs to the 1976 budget request level, $767 million.\n#3. Reduce country programs, holding loans at the 1975 actual level and allowing grants to increase moderately\nabove 1976--a total program of $700 million (OMB rec.).\nAnalysis\n1975\n1976\nTQ\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nCountry Programs:\nAlt. #1 (Agency req.)\n319\n685\n672\n711\n176\n161\n832\n653\n832\n680\n832\n733\n832\n767\n832\n755\nAlt. #2\n319\n685\n672\n711\n176\n161\n713\n648\n713\n640\n713\n671\n713\n687\n713\n680\nAlt. #3 (OMB rec.)\n319\n685\n672\n711\n176\n161\n646\n645\n646\n616\n646\n631\n646\n638\n646\n610\n(A country breakdown is provided in a table attached.)\nAID has justified its 1977 request on the basis of country and project requirements, and the higher level of\nfunding could be applied against demonstrable project and country needs. Nevertheless, in defending its request\nagainst possible reductions in lower-priority and more tentative activities, AID again emphasizes the need for\ncut insurance.\nWithout a major change in appropriations committee leadership, it is likely that Congress will continue to\nreduce AID appropriations. It is not clear, however, how deep the cuts would be if the Administration were to\neliminate the cut insurance and seek appropriations near the 1975 actual levels as proposed by OMB. Clearly,\nmajor efforts would be required, emphasizing the bare-bones nature of the request, in order to hold actual appro-\npriations at or near the 1975 level. Nevertheless, OMB believes this approach is worth the risks, because in a\ntight budget year such as 1977, AID cut insurance will displace funding for other programs.\nBecause the congressional reaction is difficult to predict, it is also difficult to be precise about the\nprogram impact of the OMB proposal. OMB would reduce loans to 1975 actual levels and allow technical assistance\ngrants to increase somewhat above the 1976 budget request based on a judgment that technical assistance is\ngenerally more effective developmentally. Loans, however, are generally regarded as more useful for foreign\npolicy purposes.\nGERALD\nP.\nFORD\nIn country terms (see attached table), AID has concentrated its proposed 1977 program increases on the poorer\ncountries of South Asia and Africa in line with the congressional mandate. However, when faced with appropriations\ncuts, the poorest countries are reduced and the underlying foreign policy priorities emerge as in 1975 when Latin\nAmerica and East Asia received over half of the total funds.\nOMB has not set any specific country allocation for its proposed program level. It has allocated funds illus-\ntratively in a way that it believes would permit the major foreign policy and developmental objectives to be met,\nincluding funding for Indonesia, the Philippines, Chile, and Panama. The lower level would, however, force some\nchoices as follows:\n- in Africa, the choice would be between large-scale loans and grants to the six very poor Sahelian\ncountries (which may be beyond their absorptive capacity) and increases for other countries in\nwhich the State Department believes it is important to demonstrate increased U.S. interest;\n- in the Near East and South Asia (excluding the Middle Eastern countries), the main choice would\nbe between continuing programs in Pakistan, Bangladesh, and smaller countries at traditional\nlevels and resuming large-scale aid to India in an effort to improve U.S. relations there; and,\n- in Latin America, some program reductions would be necessary in several countries whose need for\nU.S. assistance is not great but whose political importance is high.\nGiven the fact that most major foreign policy needs were met at the 1975 level, OMB believes that a program\nof the 1975 magnitude (even allowing for some congressional reductions in the proposed OMB request) should be\nsufficient to meet all the high-priority foreign policy requirements. If reductions were made in some of the\nprograms which are primarily motivated by foreign policy concerns (e.g., $52 million for Indonesia), the funds\ncould be used to further meet more urgent development needs in the poorer countries, especially in South Asia.\nThe proposed middle option has not been broken down geographically but would ease the choices outlined above\nand would send a less negative signal about Administration intent to meet its foreign aid obligations to developing\ncountries.\nAgency Request: Alternative #1. A program of $886 million, incorporating cut insurance and meeting a range of\ndevelopmental and foreign policy needs.\nOMB Recommendation: Alternative #3. A $700-million program, reducing cut insurance and probably meeting the\nhighest-priority requirements.\nAID Country Programs\nAttachment\n($ Millions)\n1975\n1976\n1977\nBudget\nActual\nBudget\nRequest\nRecommendation\nAfrica\n132\n105\n162\n226\n175\nSahelian countries\n26\n24d/\n54\n81\nOther\n106\n81\n108\n145\nEast Asia\n123\n127\n111\n116\n110\nPhilippines\n42\n55\n36\n44\n44\nIndonesia\n46\n43\n51\n52\n52\nOther\n35\n29\n24\n20\nNear East/South Asia\n289\n182\n253\n316\n215\nPakistan\n77\n69\n61\n88\nBangladesh\n62\n62\n67\n81\nIndia\n76\n--\n77\n77\nOther\n74\n51\n48\n70\nLatin America\n281\n212\n241\n228\n200\nChile\n26\n21\n23\n21\n21\nPanama\n22\n8\n22\n17\n17\nBolivia\n23\n20\n23\n35\nHaiti\n9\n4\n9\n23\nOther\n201\n159\n165\n132\nTOTAL\n825\n626\n767\n790\n886\n700\nLoans\n640\n453\n551\n610\n450\nGrants\n185\n173\n216\n276\n250\nIn addition, $38 million in disaster relief was provided to the Sahelian countries for a total of $62 million.\n14\nIssue Paper\nInternational Development Assistance\n1977 Budget\nIssue #2: AID Centrally Administered Programs\nStatement of Issue\nShould the centrally-administered programs increase rapidly?\nBackground\nCentrally-administered grant programs provide: 1) technical backstopping and research, including\ncontributions to international agricultural research centers and U.S. land-grant colleges; 2) support for\nU.S. private and voluntary organizations (PVOs) operating overseas including direct program financing, freight\ncost financing, and assistance in developing operational capability; and 3) funds for population control\nactivities, including contributions to the U.N. Fund for Population Activities (UNFPA) and to several PVOs\nconducting family planning programs abroad. In 1975 central programs amounted to $141 million, or 16 percent\nof total regular AID funding, up from 8 percent in 1970.\nAlternatives\n#1. Increase centrally-administered programs 73% over the 1975 level to $244 million (Agency req.).\n#2. Hold these programs to $190 million, about the 1976 level and 35% over the 1975 level by making cuts\nin poorly planned or less developmentally-oriented activities (OMB rec.).\nAnalysis\n1975\n1976\nTQ\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA 0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nCentral Programs:\nAlt. #1 (Agency req.)\n141\n143\n193\n140\n42\n34\n244\n176\n244\n204\n244\n222\n244\n232\n244\n237\nAlt. #2 (OMB rec.)\n141\n143\n193\n140\n42\n34\n190\n163\n190\n170\n190\n179\n190\n184\n190\n187\nAgency Request\nGERALD PEOJ\n(Difference from Alt. #1 (Agency request)\n1977 Outlays\n1978 Outlays)\n(\nAlt. #2 (OMB recommendation)\n-13\n-34\n)\n(A table detailing the centrally-administered programs is attached.)\nThe Agency seeks across the board increases in these programs. Although many of the activities are sound, OMB\nbelieves important weaknesses remain in each of the three main areas.\n-In backstopping and research, the international centers and some U.S. activities are well conceived.\nNevertheless, there are no clear cut criteria for allocating funds among activities or for eliminating\noutmoded projects. Funding for the U.S. land-grant colleges is more likely to strengthen their domestic\ninstitutional capabilities than to lead to overseas developmental benefits.\n-The PVOs make a useful contribution to the AID program as contractors managing country program activities.\nCentral funds for the PVOs, however, mainly finance activities with little or no relationship to AID's\ndevelopment objectives. These funds have been increased by Congress without regard for specific require-\nments, and AID has exercised little substantive supervision over their use.\n-Population control activities should receive high priority. However, neither UNFPA nor some of the\ngenerally efficient PVO contractors can effectively absorb the requested increases. Contraceptive commo-\ndity support for country program-funded activities is also in excess of probable needs.\nEach of the program components which OMB criticizes, and proposes to reduce, enjoys significant congressional\nsupport. Congressional initiatives in AID's 1976/1977 authorizing legislation include: 1) a new Title XII\nmandating increased support for land-grant institutions; 2) a suggested target figure of $25 million in 1977\nfor certain country and central funds for PVOs (OMB recommends $17 million); and 3) an increase in population\nand health program funding above the 1976 and 1977 Administration requests. The Agency will thus argue that\nreductions in centrally-administered programs will both limit programs they regard as important and unnecessarily\nanger the Congress, which may restore the funds and earmark their expenditure.\nAgency Request: Alternative #1. In proposing a $244 million program, AID seeks increases in virtually all\ncentrally-administered programs.\nOMB Recommendation: Alternative #2: OMB would reduce the request by $54 million by: 1) holding research\nactivities to the 1975 level; 2) reducing PVO funding by $8.1 million; 3) cutting back the proposed UNFPA\ncontribution by $9 million to the planned 1976 level and reducing grants to other population intermediaries by\n$4.5 million; and 4) taking several smaller cuts totalling $7.8 million.\nCERALD\nAttachment\nCentrally Administered Programs\n($ Millions)\n1975\n1976\n1977\nActual\nBudget\nAgency Req.\nOMB Rec.\nTechnical Assistance Bureau\n46.4\n65.6\n89.6\n65.6\nOf which: International Agriculture Research Centers\n10.7\n15.7\n20.6\n20.6\nOther Title XII\n12.5\n14.1\n23.2\n14.1\nInter-regional Population Programs\n64.0\n87.7\n109.1\n90.6\nOf which: UN Fund for Population Activities\n20.0\n21.0\n30.0\n21.0\nIntermediaries (including commodities)\n22.4\n32.2\n36.7\n32.2\nPrivate and Voluntary Organizations\n24.2\n33.0\n35.7\n27.2\nOf which:\nOcean Freight\n7.5\n15.0\n14.0\n8.0\nGeneral Program Support Grants\n10.2\n11.5\n11.2\n11.2\nDevelopment Program Grants\n5.0\n5.6\n8.6\n6.5\n200\nOther Programs\n6.6\n6.4\n9.2\n6.8\nTOTAL\n141.2\n192.7\n243.6\n190.2\nGERALD\nR.\nFORD\nLISHARY\nIssue Paper\nInternational Development Assistance\n1977 Budget\nIssue #3: American Schools and Hospitals Abroad\nStatement of Issue\nShould grants to American schools and hospitals abroad (ASHA) be terminated in 1977?\nBackground\nThe ASHA program was established to provide assistance to schools, libraries and hospitals overseas which\nare sponsored by U.S. citizens and can serve as demonstration centers for American ideas and practices. In\nfact, the program subsidizes institutions whose programs have little or no relation to development objectives\nand often serve only Americans and wealthy foreigners. Many recipients are located in countries where there\nare no bilateral development programs; e.g., Italy, Greece, and Poland. A significant portion of the funds\nhave been provided to institutions in Israel, diminishing fund raising pressures on American Jewish donors.\nIn recent years, Administration budget requests of $10 million have been regularly raised to $15-25 million\nby the Congress, as various Congressmen add their constituents' favorite institutions to the list of recipients.\nAlternatives\n#1. Stay with the traditional Administration request level of $10 million (Agency req.).\n#2. Eliminate the program (OMB rec.).\nAnalysis\n4.5\n1975\n1976\nTQ\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA 0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA 0\nBA\n0\n($ Millions)\nASHA:\nAlt. #1 (Agency req.)\n18\n21\n10\n15\n6\n6\n10\n13\n10\n11\n10\n11\n10\n10\n10\n10\nAlt. #2 (OMB rec.)\n18\n21\n10\n15\n6\n6\n0\n8\n0\n4\n0\n4\n0\n0\n0\n0\n18\nAgency Request\n(Difference from Alt. #1 (Agency request)\n1977 Outlays\n1978 Outlays)\n(\nAlt. #2 (OMB recommendation)\n5\n7\n)\nAID does not favor the program, but prefers to seek the traditional level in order to avoid antagonizing\nkey Congressmen and help protect its other programs. OMB sees the program as serving no useful public\nobjective. If a few of the institutions do, in fact, promote development, they will be eligible for grants\nfrom the regular AID program.\nAgency Request: Alternative #1. A $10 million request.\nOMB Recommendation: Alternative #2. ASHA was nominated for the list of worst Federal programs. Despite the\nlikelihood that Congress will restore funds, the Administration should not seek continuation in a very tight\nbudget year.\nGERALD P. FORD\nAmerican Schools and Hospitals Program\nDistribution of 1975 Program\nInstitution\nAmount\nAmerican Children's Hospital in Poland\n$ 750,000 1/\nAdmiral Bristol Hospital, Istanbul\n200,000\nAmerican Farm School, Greece\n600,000\nAmerican Hospital in Paris\n1,525,000\nAmerican Hospital in Rome\n250,000\nAmerican Library in Paris\n275,000\nAmerican University of Beirut\n6,000,000\nAmerican University in Cairo\n350,000 2/\nAthens College, Greece\n150,000\nBologna Center, Italy\n550,000\nCheng Hsin Rehabilitation Center, Taiwan\n160,000\nChemke Hospital, Nigeria\n150,000\nCh'san Sofer Chasan Yecheskel Institute, Israel\n75,000\nDamavand College, Iran\n200,000\nEducational Center of Galilee, Israel\n550,000\nEscuela Agricola Panamericana, Honduras\n125,000\nFeinberg Graduate School of Weizmann Institute, Israel\n1,500,000\nHadera Institute, Israel\n350,000\nInduk Vocational School, Korea\n250,000\nPresbyterian Medical Center, Korea\n100,000\nProject HOPE\n1,700,000\nRobert College, Istanbul\n150,000\nSogang University, Korea\n425,000\nUniversity of the Americas, Mexico\n650,000\nWorking Boys' Center, Ecuador\n250,000\nProgram Support\n215,000\n$ 17,500,000\n1/ Plus $4,462,811 equivalent in zlotys (FYs 74 and 75 funds).\n2/ Plus $5,000,000 equivalent in Egyptian pounds.\n1988817 GERALD FORD\nTotal P.L. 480\n1976*\n1977\n1975\nState/AID Req.\nMid-Level\nOMB Rec.\nState/AID Req.\nMid-Level\nOMB Rec.\nActual\nAlt. #1\nAlt. #2\nAlt. #3\nAlt. #1\nAlt. #2\nAlt. #3\nTitle I\n763\n1,121\n983\n876\n1,043\n765\n616\nTitle II\n331\n337\n337\n337\n310\n274\n274\nSubtotal\n1,094\n1,458\n1,320\n1,213\n1,353\n1,039\n890\nFreight\n149\n184\n176\n171\n209\n169\n158\n- Receipts\n-294\n-261\n-261\n-261\n290\n290\n290\nTOTAL Outlays\n949\n1,381\n1,235\n1,123\n1,272\n918\n758\n* From 1976 outlays, deduct initial payment by recipients:\nAlternative #1 - $27 million\nAlternative #2 - $24 million\nAlternative #3 - $21 million\nGERALD\nP.\nFORD\nLIGHARY\nTitle 1 Country Programs\n(Commodity costs in $ millions)\n1975\n1976\n1977\nCountry\nState/AID\nMid-option\nOMB Rec.\nAlt. #1\nAlt. #2\nAlt. #3\nReq.\n(AID)\n(OMB)\nMajor Political Importance\n261\n312\n306\n304\n267\n182\n182\nMiddle East\n98\n213\n213\n213\n170\n150\n150\nChile\n48\n54\n48\n46\n32\n32\n32\nIndonesia\n4\n30\n30\n30\n35\n-\n-\nPortugal\n-\n15\n15\n15\n30\nI\n-\nIndochina\n111\n-\n-\n-\n-\n-\n-\nKorea\n74\n150\n114\n102\n174\n84\n84\nSouth Asia\n405\n456\n382\n291\n454\n247\n247\nBangladesh\n204\n184\n159\n156\n239\n-\nIndia\n103\n155\n123\n59\n96\n-\nPakistan\n79\n105\n88\n64\n100\n-\nSri Lanka\n19\n12\n12\n12\n19\n-\nSmall Country Programs\n23\n67\n43\n43\n82\n-\n-\nGuinea\n10\n5\n5\n5\n6\n-\nHaiti\n2\n5\n4\n4\n7\n-\nHonduras\n5\n13\n6\n6\n12\n-\n-\nTanzania\n6\n5\n5\n5\n8\n-\n-\nMalagasy\n-\n-\n-\n-\n-\n-\n-\nMorocco\n-\n15\n7\n7\n6\n-\n-\nMozambique\n-\n4\n1\n1\n4\n-\n-\nAfghanistan\n-\n2\n2\n2\n3\nI\n-\nEthiopia\n-\n4\n3\n3\n6\n-\n-\nLiberia\n-\n-\n-\n-\n1\n-\n-\nMali\n-\n-\n-\n-\n6\n-\n-\nPhilippines\n-\n-\n-\n-\n2\n-\n-\nSenegal\n-\n-\n-\n1\n8\n-\n-\nTunisia\n-\n6\n2\n2\n4\n-\n-\nZaire\n-\n8\n8\n8\n9\n-\n-\nCarry-in\n-\n138\n138\n138\nReserve\n-\n100\n252\n123\nTotal Title I\n763\n1121\n983\n876\n1077\n765\n636\n117\nTotal Title I Tonnages\n(000 metric tons)\n1975\n1976\n1977\nActual\nAlt. #1\nAlt. #2\nAlt. #3\nAlt. #1\nAlt. #2\nAlt. #3\nTotal Tonnage\n3607\n5893\n5197\n4810\n5717\n4822\n3775\nWheat\n2779\n4482\n4157\n3967\n4400\n4116\n3139\nRice\n769\n839\n814\n589\n700\n700\n630\nFeed\n14\n399\n174\n174\n350\n-\n-\nOther\n45\n173\n52\n80\n267\n6\n6\nFORD is LIBRARY GERALD\nP.L. 480 Title I\nAlternative Program Levels\n1976\nCountry\nAlternative 1\nAlternative 2\nAlternative 3\n(State/AID Req.)\n(Mid-level)\n(OMB Rec.)\n$300 per capita or less\nAfghanistan\n2\n2\n2\nBangladesh\n184\n159\n156\nEgypt\n170\n170\n170\nEthiopia\n4\n3\n3\nGuinea\n5\n5\n5\nHaiti\n5\n4\n4\nIndia\n155\n123\n59\nIndonesia\n30\n30\nFORD\n30\nJordan\n9\n9\n9\nMorocco\n15\n7\nPakistan\n105\nLIBRARY\n7\n88\n64\nSri Lanka\n12\n12\n12\nTanzania\n5\n5\n5\nZaire\n8\n8\n8\nSub total\n708\n625\n533\n$300 per capita\nChile\n54\n48\n46\nHonduras\n13\n6\n6\nIsrael\n15\n15\n15\nKorea\n150\n114\n102\nMozambique\n4\n1\n1\nPortugal\n15\n15\n15\nSyria\n19\n19\n19\nTunisia\n6\n2\n2\nSub total\n275\n220\n205\nCarry-in\n138\n138\n138\nTotal\n1121\n983\n876\nTonnage levels\n(000 metric tons)\nWheat\n4482\n4157\n3967\nRice\n839\n814\n589\nFeed\n399\n174\n174\nOther\n173\n52\n80\nTotal Title I\n5893\n5197\n4810\n% food volume to\ncountries under $300\n75%\n75%\n75%\nIssue Paper\nP.L. 480 Food Aid\n1976 Budget\nStatement of Issue\nShould P.L. 480 be increased above the current 1976 budget ceiling?\nBackground\nThe initial budget ceilings for P.L. 480 have always been subject to later adjustment because of the sub-\nstantial uncertainties about U.S. commodity availabilities, prices and recipient country needs. For 1976 most\nof the major factors bearing on the program are now sufficiently certain to permit a final decision on the\nbudget level.\nState and AID have requested an increase of $258 million, 23 percent, in the Title I portion of the P.L. 480\nprogram which provides food on very soft credit terms. USDA has affirmed that the requested commodity levels are\navailable. The agencies responsible for P.L. 480 and food aid policy, which also include the Department of Agri-\nculture, Treasury, Commerce, OMB, NSC, CIEP and CEA, have agreed on three 1976 P.L. 480 budget alternatives for\nyour consideration.\nAlternatives\n#1. Increase the program to take full account of domestic farm price maintenance objectives for rice and to\nmeet all of the foreign policy needs identified by State/AID, at $1381 million total outlays.\n#2. Increase the program by a smaller amount to respond to domestic agriculture objectives and to provide a\nportion of the higher foreign policy requirements which State and AID believe are necessary at a $1235\nmillion total outlay level.\n#3. Hold to the original 1976 budget level of $1123 million in total P.L. 480 outlays.\nAnalysis\n9401\nP.L. 480\nAlternative Outlay Levels\n1976\nAlternative 1\nAlternative 2\nAlternative 3\n(State/AID Req.)\n(Mid-level)\n(OMB (Rec.)\nTitle I\n1121\n983\n876\nTitle II\n337\n337\n337\nSubtotal\n1458\n1320\n1213\nFreight\n184\n176\n171\n-Receipts\n-261\n-261\n-261\nTotal Outlays\n1381\n1235\n1123\nVolume (million metric tons)\n7.3\n6.6\n6.1\n(Attached is a table of illustrative country program levels.)\nFactors affecting a decision\nFour major factors bear on the 1976 P.L. 480 decision.\n(1) Legislative requirements. A congressional conference committee has just completed action on amendments\nto P.L. 480. In line with similar action last year, Congress will require that 75 percent of the total\ntonnage of food commodities allocated under Title I be provided to the poorest developing countries--\nthose with annual per capita incomes of $300 or less. The intent is to restrict Executive Branch flexi-\nbility in meeting foreign policy requirements for food aid. Because foreign policy requirements generally\nrequire substantial programs for high income recipients within the total, meeting those requirements\nfully under the congressional stricture would tend to push up the level of aid to lower income countries\nand thereby increase the total. The alternatives have been constructed to conform to the conference\naction.\n(2) Rice. This year the United States has a record rice harvest and total world rice production is also at a\nGERALD LIBNARY FORD\nrecord high. Domestic rice consumption will only use up one third of our total crop. Rice growers\nare counting on P.L. 480 to dispose of a substantial portion of their crop to help maintain prices.\nUSDA believes that about 850,000 tons of P.L. 480 rice must be shipped this year as in alternatives 1\nand 2 in order to maintain rice prices at the price support loan level (equivalent to about $315 per\nmetric ton export price). At the alternative 3 level the 589,000 tons of rice proposed by State\ncould lead to a drop in rice prices of $15-25 per ton according to CEA and USDA. Under the lower\nP.L. 480 rice level, current commodity program legislation could also force the government to take\nownership of some quantities of rice.\nBecause of their good rice crops, many potential large P.L. 480 rice recipients (India, Bangladesh\nand Korea) have no particularly pressing need for rice this year. AID and USDA believe that those\ncountries are more likely to take larger amounts of rice if also provided with wheat, for which they\nhave a more urgent need and which they would have to buy on world markets in the absence of P.L. 480.\n(3) Country Requirements. The major differences between the alternatives are in program levels for Korea,\na high income country, and India and Pakistan, lower income countries.\n-- Korea. State/AID believe it is essential to maintain the Korea program at $150 million, particularly\nwith the phasing out of other forms of economic assistance. This is possible at the high level but not\nat the low or mid level. The Korea program is part of a long term commitment in return for restraints\non textile exports to the United States, and is a symbol of U.S. support in the aftermath of Vietnam\nwithdrawal. Primarily because of high petroleum prices Korea will also have a large balance of payments\ndeficit. Nevertheless, because of its otherwise strong economy (which led to phase out of regular AID\nprograms) Korea has been able to tap many public and private sources of foreign exchange to meets its\npayments deficit. Finally the increase proposed from the budget level will not ease rice pressures;\nall of the increase will be feedgrains and cotton. However, it may make Korean acceptance of planned\nrice amounts more likely.\n-- India. The India program would rise from $59 million under the low alternative to $155 million\nat the proposed high level. State/AID believe that the increase would contribute to an improvement of\nU.S. Indian relations and would offer a possible outlet for 200,000 tons of rice. Although India will\nprobably need to import as much as 6 million tons of foodgrains this year, its crops are much improved\nover last year. Thus its needs for food aid are less pressing than last year.\nGERALD\nR.\nFORD\nLIBRARY\n--Pakistan. The Pakistan program would rise from $64 million to $105 million. The increase would\nease Pakistan's balance of payments problem and help demonstrate U.S. support for the Bhutto government.\nPakistan will receive large scale dollar aid from the United States this year ($60 million).\nAlthough its crops have been good this year, it still will need to import about 2 million tons of grain.\nNone of the proposed increase is in rice because Pakistan is a rice exporter.\n-- Other countries. The differences between the options in other countries are considerably smaller\nthan for the three countries above. The proposed increases are requested to meet balance of payments\nrequirements and for foreign policy purposes.\n-- Bangladesh. This country remains very needy and its economy has been further disoriented by politi-\ncal turmoil. The proposed high level would provide 50,000 additional tons of rice, plus some wheat.\nThe Bengali rice crop has been relatively good this year. The $156 million in food aid provided by the\nlow alternative, plus $67 million in dollar aid represents generous support.\n-- Morocco and Tunisia. Food aid to these countries is to demonstrate political support for moderate\nArab countries. Neither has any serious foreign exchange requirements this year.\n-- Chile. The Chile program both demonstrates support for the pro-U.S. government and helps ease\nChile's pressing short term balance of payments requirements. The $5 million increase at the high level\nwould be helpful but probably not have a significant economic impact.\n(4) Transition Quarter Financing. The budget currently provides for $118 million during the transition\nquarter for P.L. 480 Title I. This amount is substantially less than one-fourth of the 1976 Title I.\nprogram because it reflects the recent seasonal pattern of P.L. 480 shipment. State/AID have not yet\nprepared a country plan for use of these funds.\nState/AID believe it important to increase transitional quarter funding at least to the normal prorata\nlevel of most other federal programs during the period (one-fourth of the current 1976 budget level),\nbut this will probably not be essential if you approve the high option. If you approve either the high\nor middle option, Treasury and OMB would prefer to fund all or part of the increase in the transition\nquarter. At the middle option, this approach would permit you to avoid an increase in the 1976 P.L. 480\nbudget level at a time you are having to seek rescissions and deferrals on domestic programs, while merely\nbringing the transition quarter level up to a more normal level. At the high option an increase in\ntransition quarter funding would reduce the necessary increase in the 1976 program level.\nGERALD\n?\nFORD\nLIBRARY\nSUMMARY\nAlternatives\n#1. This alternative would fully meet the country and rice shipment requirements. However, given State/AID/\nUSDA doubts that food aid recipients would accept large rice programs even when combined with other\ncommodities, this alternative may result in an increase in outlays without achieving the desired volume\nof rice shipments. Moreover, if this quantity of rice were shipped under P.L. 480, it would lead to\nlarger acreage allotments next year, larger production and possibly result in a buildup in CCC rice\nstocks. State/AID and NSC support this alternative. USDA also supports it, provided the increase is\nnot offset by reductions within the USDA budget.\n#2. This middle option, would meet domestic rice requirements and would come close to meeting the needs\nidentified by State/AID in India, Pakistan and Bangladesh. It would leave Korea $36 million below the\nrequested level. CIEP supports this alternative.\n#3. This alternative at the original budget level would be consistent with the tight 1976 budget policy\nbut would not meet the country requirements or ship rice at levels State/AID and USDA believe to be\nessential. With regard to rice, OMB and Treasury believe that reducing wheat and other commodity ship-\nments to the smaller, less important countries in this alternative and by eliminating the program to\nIndonesia, which does not need food aid, rice shipments might be raised to nearly 750,000 tons at the\nbudget level. This would improve price prospects and reduce the quantity of rice the government might\ntake over. State/AID and USDA believe that it would not be possible to move this quantity of rice\nunless combined with substantially larger. quantities of other commodities. OMB, Treasury and Commerce\nsupport this alternative.\nFORD is LIBRARY\nP.L. 480 Title I\nAlternative Program Levels\n1976\nCountry\nAlternative 1\nAlternative 2\nAlternative 3\n(State/AID Req.)\n(Mid-level)\n(OMB Rec.)\n$300 per capita or less\nAfghanistan\n2\n2\n2\nBangladesh\n184\n159\n156\nEgypt\n170\n170\n170\nEthiopia\n4\n3\n3\nGuinea\n5\n5\n5\nHaiti\n5\n4\n4\nIndia\n155\n123\n59\nIndonesia\n30\n30\n30\nJordan\n9\n9\n9\nMorocco\n15\n7\n7\nPakistan\n105\n88\n64\nSri Lanka\n12\n12\n12\nTanzania\n5\n5\n5\nZaire\n8\n8\n8\nSub total\n708\n625\n533\n$300 per capita\nChile\n54\n48\n46\nHonduras\n13\n6\n6\nIsrael\n15\n15\n15\nKorea\n150\n114\n102\nMozambique\n4\n1\n1\nPortugal\n15\n15\n15\nSyria\n19\n19\n19\nTunisia\n6\n2\n2\nSub total\n275\n220\n205\nCarry-in\n138\n138\n138\nTotal\n1121\n983\n876\nTonnage levels\n(000 metric tons)\nWheat\n3967\n4157\n4482\nRice\n589\n814\n839\nFeed\n174\n174\n399\nOther\n80\n52\n173\nTotal Title I\n4810\n5197\n5893\nfood volume to\ncountries under $300\n.75%\n75%\n75%\n20\nIssue Paper\nGEBALD\nInternational Development Assistance\n1977 Budget\nFORD\nIssue #4: P.L. 480\nStatement of Issue\nWhat should the level of P.L. 480 be for 1977?\nBackground\nThe P.L. 480 program of food aid was established in 1954 to dispose of surplus farm products while serving\ndevelopment and foreign policy goals. The Title I program, about two-thirds of the total, provides food on a\nloan basis for development and foreign policy purposes; the Title II program provides food on a grant basis for\nhumanitarian purposes.\nDuring the period 1954-72, the P.L. 480 program averaged 10-million tons of food aid commodities per year.\nWith world grain shortages, rising prices, and the disappearance of U.S. surplus food stocks, the food aid\nprogram was reduced to 3.3-million tons in 1974. This sharp reduction restricted food aid to the highest-priority\npolitical and humanitarian programs, with more than half the entire program in 1974 going to Indochina.\nIn 1975, when some easing of food availabilities and prices permitted a program of 4.9-million tons, sub-\nstantial humanitarian-oriented food aid was provided. In great part, this emphasis was dictated by a congressional\nlegislative initiative requiring that 70 percent of Title I shipments be provided to countries most seriously ;\naffected by food shortages. For 1976, the budget provides for 6-million tons and State and AID are requesting\nthat this level be increased to over 7-million tons.\nCongress has recently raised to 75 percent the portion of Title I food aid that must go to the poorer coun-\ntries. Thus, the flexibility of the Title I program as a foreign policy instrument will continue to be constrained.\nAlternatives\n#1. Expand the 1977 program to 7.3-million tons of commodities, including 5.8-million tons for Title I and\n1.5-million tons for Title II, to provide increased shipments to major traditional recipients and add\na number of new country recipients at a cost of $1,272 million in outlays (AID req.).\n#2. Undertake a P.L. 480 program at 6-million tons of commodities, the level planned for 1976, including\n4.7-million tons for Title I and 1.3-million tons for Title II, providing for large political programs,\nlarge humanitarian programs, and a substantial reserve for contingencies or some small country programs\n21\nat a cost of $918 million.\n#3. Hold the 1977 program to 5.0-million tons, including 3.7-million tons for Title I and 1.3-million tons\nfor Title II, limiting shipments to countries of high political priority and major humanitarian need,\nat a cost of $740 million (OMB rec.).\nAnalysis\n1975\n1976\nTQ\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nTitles I and II:\nAlt. #1 (Agency req.)\n778\n934\n1,089\n1,104\n146\n206\n1,413\n1,272\n1,254\n1,254\n1,217 1,217\n1,217\n1,217\n1,217\n1,217\nAlt. #2\n778\n934\n1,089\n1,104\n146\n206\n1,025\n918\n900\n900\n863\n863\n863\n863\n863\n863\nAlt. #3 (OMB rec.)\n778\n934\n1,089\n1,104\n146\n206\n865\n758\n740\n740\n703\n703\n703\n703\n703\n703\n(Illustrative country distribution shown on table on last page.)\nAgency Request\n(Difference from Alt. #1 (Agency request)\n1977 Outlays\n1978 Outlays)\nAlt. #3 (OMB recommendation)\n-514\n-514\n(\nAlt. #2\n-354\n-354\nWhile definitive P.L. 480 decisions may not be made until 1977 begins, judgments must be made on the broad\noutlines of the program now.\nThe 1977 AID request for Title I breaks down into four major categories.\n- Countries of Political Priority. This group includes the Middle Eastern nations, Chile, Indonesia,\nand Portugal. Despite the high priority of many of these countries, a case can be made for elim-\ninating shipments to them. Indonesia has no pressing need for concessionary commodity import\nfinancing and food aid to Chile could be phased down as that country begins to return to economic\nnormalcy. OMB's analysis of needs in the Middle East and Portugal (see international security\nassistance materials) indicates that P.L. 480 is probably only necessary in Egypt.\nGERALD\n?\nFORD\nLIBRA\n22\n- Korea. State proposes large programs to show support for the government and to pay for voluntary\ntextile export restraints. There are strong U.S. domestic pressures to dispose of excess U.S.\nrice in Korea. Nevertheless, Korea is an economically advanced developing country with access\nto substantial amounts of private foreign capital.\n- South Asia. These countries have received large-scale shipments on humanitarian grounds, partic-\nularly because of crop shortfalls in recent years. With more normal weather, continuation of\nlarge shipments could constitute a disincentive to necessary agricultural reforms.\n- Small Country Programs. Programs in these countries are not undertaken when the Title I program\nis relatively constrained--an indication of their low priority. Food aid shipments primarily\nserve as a signal of U.S. interest in these countries.\nAgency Request: Alternative #1. AID seeks to enlarge Title I to 5.8-million tons, well above 1975 and the 1976\nbudget levels. Title II would be increased to 1.5-million tons. This program will meet a variety of political\nand humanitarian objectives. AID argues that these programs will be more developmentally oriented than in recent\nyears, particularly in the smaller countries.\nMid-Level Program: Alternative #2. The 6-million-ton program in 1977 indicates, for the moment, that domestic\ncommodity pressures do not appear to require heavy use of P.L. 480 as a farm-income maintenance instrument. This\nlevel will provide for major political and humanitarian programs with a generous reserve for contingencies or for\nsome small countries.\nOMB Recommendation: Alternative #3. OMB sees no convincing argument for raising Title I shipments back toward the\nhigh levels of the 1960s. Despite AID's claim of making Title I more development-oriented, there is no evidence\nthat this is taking place. OMB proposes a 3.7-million-ton Title I program, balancing the need for outlay savings\nagainst the highest political and humanitarian priorities. This level could be achieved by:\n- eliminating the Indonesia, Israel, Syria, Jordan, and Portugal programs;\n- restricting the Korea program to rice shipments only;\n- cutting back on shipments to South Asia by eliminating non-grain commodities (vegetable oil and\ncotton); and,\ndenying requests for small-country programs.\nAMAZON\n23\nA large Title I commodity reserve would be available to meet unforeseen political and humanitarian requirements.\nThe Title II program would be held to 1.3-million tons, the minimum set by Congress in this year's foreign aid\nbill. The OMB reduction in Title II should not seriously disrupt the program.\nLISSANY GERAID FORD\nTitle 1 Country Programs\n(\n(Commodity costs in\nllions)\n1975\n1976\n1977\nCountry\nState/AID\nMid-option\nOMB Rec.\nAlt. #1\nAlt. #2\nAlt. #3\nReq.\n(AID)\n(OMB)\nMajor Political Importance\n261\n312\n306\n304\n267\n182\n182\nMiddle East\n98\n213\n213\n213\n170\n150\n150\nChile\n48\n54\n48\n46\n32\n32\n32\nIndonesia\n4\n30\n30\n30\n: 35\n-\n-\nPortugal\n-\n15\n15\n15\n30\n-\n-\nIndochina\n111\n-\n-\n-\n-\n-\n-\nKorea\n74\n150\n103\n103\n174\n84\n84\nSouth Asia\n405\n456\n408\n291\n454\n247\n247\nBangladesh\n204\n184\n169\n156\n239\n-\nIndia\n103\n155\n139\n59\n96\n-\nPakistan\n79\n105\n88\n64\n100\n-\nSri Lanka\n19\n12\n12\n12\n19\n-\nSmall Country Programs\n23\n67\n28\n43\n82\n-\n-\nGuinea\n10\n5\n5\n5\n6\n-\nHaiti\n2\n5\n4\n4\n7\n-\nHonduras\n5\n13\n6\n6\n12\n-\n-\nTanzania\n6\n5\n5\n5\n8\n-\n!\nMalagasy\n-\n-\n-\n-\n-\n-\n-\nMorocco\n-\n15\n-\n7\n6\n-\n-\nMozambique\n-\n4\n-\n1\n4\n-\n-\nAfghanistan\n-\n2\n-\n2\n3\n-\n-\nEthiopia\n-\n4\n-\n3\n6\n-\n-\nLiberia\n-\n-\n-\n-\n1\n-\n-\nMali\n-\n-\n-\n-\n6\n-\n-\nPhilippines\n-\n-\n-\n-\n2\n-\n-\nSenegal\n-\nI\n-\n-\n8\n-\n-\nTunisia\n-\n6\n-\n2\n4\n-\n-\nZaire\n-\n8\n8\n8\n9\n-\n-\nCarry-in\n-\n138\n138\n138\nReserve\n-\n100\n252\n123\nTotal Title I\n763\n1123\n983\n879\n1077\n765\n636\n25\nIssue Paper\nInternational Development Assistance\n1977 Budget\nIssue #5: Multilateral Assistance--International Organizations and Programs\nStatement of Issue\nShould budget requests for 1977 voluntary U.S. contributions to three international organizations be\ncut back sharply?\nBackground\nThe United States provides voluntary contributions to 10 international programs, primarily oriented\ntoward economic development, including (a) the UN Development Program (UNDP), the largest multilateral\nentity financing pre-investment studies and technical assistance; (b) the UN Environment Program (UNEP), a\nfund proposed by President Nixon in 1972; and (c) Organization of American States (OAS) development\nassistance activities.\nAlternatives\n#1. Seek an appropriation of $193 million in 1977, including $105 million for UNDP, $21 million for\nGERALD\nOAS, and $10 million for UN Environment Fund (Agency req.).\n4.\nFORD\n#2. Seek an appropriation of $179 million in 1977, including $100 million for UNDP, $15 million\nfor OAS, and $7.5 million for UN Environment Fund, which adequately provides for \"cut insurance.\"\nLIBRARY\n#3. Seek $159 million in 1977, reducing the three contributions to 1975 actual levels (OMB rec.).\nAnalysis\n1976\nTQ\n1977\n1978\n1979\n1980\n1981\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nInternational Organizations\nand Programs:\nAlt. #1 (Agency req.)\n230a/\n217\n24\n30\n193\n187\n193\n193\n193\n193\n193\n193\n193\n193\nAlt. #2\n230a/\n217\n24\n30\n179\n176\n179\n179\n179\n179\n179\n179\n179\n179\nAlt. #3 (OMB rec.)\n230a/\n217\n24\n30\n159\n164\n159\n159\n159\n159\n159\n159\n159\n159\nIncludes $32 million final payment for Indus River Basin project.\n26\nAgency Request\n(Difference from Alt. #1 (Agency request)\n1977 Outlays\n1978 Outlays)\nAlt. #3 (OMB recommendation)\n-23\n-34\n)\n(\nAlt. #2\n-11\n-14\n)\nInternational Organizations and Programs\n(Program in $ Millions)\n1977\nRequest\nRecom.\n1975\n1976\nTQ\nAlternative #1\nAlternative #2\nAlternative #3\nUN Development Program\n78\n120\n--\n105\n100\n78\nOrganization of American\nStates\n(15)\n21\n6\n21\n15\n15\nUN Environment Fund\n5\n7\n--\n10\n7\n5\nOther IOP\n56\n82\n18\n57\n57\n61\nTotal\n139\n230\n24\n193\n179\n159\nb/ Financed in 1975 from regular AID funds.\nAgency request: Alternative #1. The State Department has revised its 1977 request downward from $221\nmillion to $193 million. The revised request is lower than the 1976 budget request which will undoubtedly\nbe reduced by the Congress to about the 1975 level. While there is no evidence that Congress will be\nmore generous in 1977, State believes:\n-- A $105 million contribution to UNDP is the minimum required to maintain U.S. influence in the\nprogram and to illustrate the U.S. commitment to aiding developing countries as expressed at the recent\nSeventh Special Session of the United Nations;\n-- A $21 million contribution to the OAS program is consistent with the Secretary's commitment to\nthe maintenance of U.S. aid levels in Latin America. Any sizable unilateral U.S. reduction risks political\nrepercussions.\n-- A $10 million contribution to the UN Environment Program Fund is needed because the Fund has\nsurmounted its early organization and management problems and is ready to undertake several projects.\nA lower contribution would be interpreted as a failure of the U.S. to live up to its pledge to contribute\na fair share to this program which the U.S. originally sponsored.\ni,\nOMB recommendation: Alternative #3. Budget austerity in 1977, together with realistic expectations of\nsignificant congressional reductions in these programs in 1976 and 1977, make a reduction to 1975\nrequest levels appropriate. Furthermore, these programs do not appear particularly effective:\n-- The UNDP is not sufficiently concentrated on the most underdeveloped countries. Despite UNDP\nefforts to channel more funds to the poorer LDC's, current plans call for too many projects in countries\nsuch as Iran, Korea, Venezuela, Argentina, Mexico, Greece and the United Arab Emirates, which can afford\nand do have access to alternative sources of technical assistance.\n-- Contributions to OAS programs are justified almost entirely on political grounds. Neither\nState, AID, nor the OAS appear to have evaluated the substantive value of the programs. Additionally,\nmuch of the increase is for a new activity which is progressing more slowly than planned.\n-- Contributions to the UNEP Fund should not increase until its EARTHWATCH program is better\ndefined and U.S. agencies determine their appropriate participation.\nCERALD\nguos\nIssue Paper\nInternational Development Assistance\n1977 Budget\nIssue #6: Housing Guaranty Program\nStatement of Issue\nShould the Housing Guaranty (HG) program be terminated?\nBackground\nThe HG program guaranties loans of private U.S. investors--principally the Federal Home Loan Bank and savings\nand loan associations-- in housing projects in developing countries. The projects are intended to further the\ndevelopment of financial institutions and the construction of housing projects and related community facilities\nfor the benefit of low-income families. The guaranties are a contingent liability of the U.S. government and\nwould require appropriations and outlays only if defaults exceeded the program's $50-million reserve.\nIn the 1976 foreign assistance authorizing bill, the Administration sought an increase of $250 million in the\nprogram's guaranty authority to enable the program to maintain previous levels of activity in 1976 and 1977. (The\nprogram has been guarantying about $100 million per year.) The Senate version of the bill increases the authority\n$250 million while the House does not provide for any increase. In addition, the House bill includes a number of\nrestrictive provisions designed to force the program to more directly benefit low-income families and develop new\nsolutions to housing problems.\nAlternatives\n#1. Permit the program to continue at current levels with the expectation that increased authority will be\nrequested for 1978 (Agency req.).\n#2. Continue the program until increased authority from the 1976 authorizing bill is utilized, then terminate\nthe program.\n#3. Eliminate the program by terminating new loan authorizations after September 1976, and by allowing use\nof only current unused authorizing authority, $186 million (OMB rec.).\nAnalysis\n1975\n1976+TQ\n1977\n1978\nNew Loan Authorizations/Increased Authority\nNLA\nIA\nNLA\nIA\nNLA\nIA\nNLA\nIA\n($ Millions)\nHousing Guaranty Program:\nAlt. #1 (Agency req.)\n95\n50\n147\n50\n160\n200\n160\n150\nAlt. #2\n95\n50\n80\n50\n/\n100\n100\n/\n150\n--\nAlt. #3 (OMB rec.)\n95\n50\n186\n--\n95\n50\n--\n--\n1/ Assumes that increased authority of $150 million of the $250 million requested will be obtained.\nAID and its Office of Housing have been sharply criticized in the past few years by the GAO, Treasury, OMB,\nand AID's own Auditor General for failing to meet the program's objectives. In particular, the loans guarantied\nby the HG program have generally financed subsidized housing for the middle- and high-income families in the\ndeveloping countries. AID management has recently adopted new guidelines to reorient the program. However, the\nprogram continues to be characterized by poorly developed projects or projects that do no more than finance\nportions of national housing programs that were previously approved. The poor performance results from attempts\nto maintain high annual program levels and an inability by AID's management to enforce normal loan standards on\nHG projects. Although the program does not result in budget outlays, it does divert credit from the U.S. housing\nmarket by making foreign loans more attractive.\nAgency Request: Alternative #1. The Agency considers the HG program to be a significant, discretionary resource\nin its development program and would argue that the recent reorientation of the program justifies its continuation\nat current levels. AID emphasizes that the program does not result in budget outlays and program termination\nwould not generate any budget savings.\nOMB Recommendation: Alternative #3. The program has been badly administered and ineffective in promoting new\nhousing policies and solutions in the developing countries. AID's attempt to reorient the program in 1973 and\n1974 has changed program rhetoric and emphasis but has not yet produced significantly better projects. The main\nargument against the OMB recommendation is that it will terminate the program prior to giving AID the opportunity\nto complete the reorientation of this program.\nBackground Paper\nInternational Development Assistance\n1977 Budget\nMultilateral Assistance: International Financial Institutions\n1975\n1976\nTQ\n1977\n1978\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nInternational Financial\nInstitutions:\nAgency req. /OMB rec.\n619\n569\n1,076\n966\n--\n277\n1,027\n902\n1,027\n830\nThe International Financial Institutions (IFIs) comprising the World Bank Group of institutions and the\nInter-American, Asian, and African Development Banks make loans to developing-member countries from funds paid\nby developed-country members and from commercial borrowings backed by members' guarantees. Ordinary capital\nloans are made at near-market terms and special fund loans are highly concessional.\nFor 1977, OMB recommends the amounts proposed by the Treasury Department, which manages this program. The\nproposed amounts represent payments to carry out firm international commitments and new initiatives which you\nhave approved previously or in connection with Secretary Kissinger's speech at the Seventh UN Special Session\nlast September.\nFunds would be provided to the following institutions:\n- International Development Association - The $375 million proposed for this special fund of the\nWorld Bank represents the second installment of a $1.5-billion U.S. contribution to a multinational\nreplenishment of IDA funds.\n- Inter-American Development Bank - Paid-in funds and loan guarantees of $440 million will provide\nreplenishment installments for the Bank's ordinary and special funds. The current replenishment\nwas included in the 1976 budget and authorizing legislation is before the Congress.\n- Asian Development Bank - The proposed $171 million in payments and guarantees will replenish\nARALD\nordinary and special funds for loans to countries in East and South Asia.\nis\n2803\n31\n1\n- International Finance Corporation - Treasury proposes up to $42 million to be paid-in in 1977 as\nthe first installment of a three-year, $100-125 million U.S. contribution to the multiyear\nreplenishment proposed by the United States.\nOMB is not recommending reductions in the Agency request for 1977 because of the international commitments\nalready made and the fact that the funds will spend very slowly and have a negligible impact on 1977 budget\noutlays.\nPotential 1978 Budget Issues\nThe budget control act requires that authorizing legislation for the 1978 budget be sent to Congress by\nMay 15, 1976. Two major foreign aid decisions that will have to be made at that time concern the World Bank\nGroup: (1) the fifth replenishment of IDA; and, (2) an increase in the ordinary capital of the Bank. OMB will\nprepare a decision memorandum on authorizing legislation and the 1978 budget-planning targets for you in February\nor March 1976, which will lay out the options available to you.\nInternational Development Association - International negotiations on the fifth replenishment of IDA will\nbegin in Paris this month, with a target agreement date of September 1976. The new replenishment is intended\nto finance IDA for the period 1978-1980. The current replenishment, IDA IV, calls for contributions over the\nperiod 1975-1977. However, because of congressional delays and opposition to previously proposed higher\nlevels, the United States' contributions to IDA IV have been delayed until the period 1976-1979. This\nschedule, if adhered to, means that the U.S. will be two years behind other donors and would not make its\nfirst payment to IDA V until 1980. This Congress might not be willing to commit the U.S. to payments which\nwould not begin until the 95th Congress and other countries might not be willing to sign-up if the U.S. was\nnot in a position to seek appropriations until 1980. Because IDA is the most important multilateral agency\nproviding concessionary assistance to developing countries, State is considering the feasibility of requesting\nadditional funding for IDA in 1978 and 1979 to enable the United States to catch-up and participate in IDA V\non schedule-- in effect, doubling-up contributions for both IDA IV and V in the same year. Additional funding\nfor IDA in 1978 under these circumstances would be in the range of $375-500 million, with outlays of $50-100\nmillion.\nOMB and Treasury believe that it is premature to judge the feasibility of seeking additional IDA funding in\n1978 because the first installment on IDA IV, sought in the 1976 budget, has not yet been acted on.\nBERRED\n?\nFORD\nLIBRARY\n32\nWorld Bank: Selective Capital Increase - The World Bank is proposing a capital increase to parallel an\nupcoming increase in member-country quotas in the International Monetary Fund. The United States share in\nthis capital increase could call for an estimated $150-200 million in paid-in funds. The State Department\noriginally sought inclusion of these funds in the 1977 budget. Treasury did not request funds for this\ncontribution, however, because the proposal is still tentative and the United States is not committed to it.\nIn addition, the Bank's schedule calls for authorizing legislation to be completed in 1977, but payments\nwill not be required until 1978 at the earliest. Therefore, this is not a 1977 budget issue, but may be a\nbudget issue in 1978, when it could raise outlays $50-100 million.\n33\nBackground Paper\nInternational Development Assistance\n1977 Budget\nMultilateral Assistance: International Fund for Agricultural Development\n1975\n1976\nTQ\n1977\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nIFAD\n--\n--\n200\n0\n0\n0\n0\n30\nWith your approval, Secretary Kissinger committed the United States to support the establishment of an\nInternational Fund for Agricultural Development (IFAD) and to contribute $200 million (20 percent) to a\n$1-billion fund, provided that international negotiations are satisfactorily completed. IFAD was an OPEC\ninitiative at the November 1974 World Food Conference, and OPEC countries have been expected to contribute\nhalf the total fund. Other developed countries would provide the remaining $300 million.\nInternational negotiations to obtain final agreement on a charter are currently underway. Several issues\nconcerning IFAD operations are still unresolved. Moreover, the OPEC countries may be unable to provide $500\nmillion leading to pressures to reduce all other donors' contributions.\nGiven the prominence of the U.S. commitment to IFAD, State and AID will probably seek to include funds in\nthe budget--as a contingent item for 1976 indicating that a budget request will be transmitted later, upon\ncompletion of negotiations. OMB supports this approach.\nState\n1977 Presidential Review\nDepartment of State\nTable of Contents\nTAB A\nSummary tabulation of the 1977 Budget amounts requested and\nrecommended\nTAB B\nIssue papers\nEffect of issue on outlays\nIssue\n(dollars in millions\n1977\n1978\n1. International organization\nassessments\n-21\n-34\n2.\nUNESCO arrearages and\nassessments\n-66\n-8\n3. Salaries and expenses\n-7\n-16\n4. Exchange of persons\n-8\n-23\n5. Foreign buildings deferral\n-6\n-3\n6. Construction of Moscow\nembassy complex\n-4\n-11\nGERALD FORD\nTAB A\n1\nDepartment of State\n(excludes Int'l Boundary and Water Commission)\n1977 Budget\nSummary Data\n(In millions)\nEmployment, end-of-year\nBudget\nFull-time\nAuthority\nOutlays\nPermanent\nTotal\n1975 actual\n1,175\n812\n22,011\n23,305\n1976 February budget\n911\n881\nenacted\n897\n1,190a/\nXXX\nXXX\nsupplementals recommended\n37\n37\nXXX\nXXX\nagency request\n939\n1,232\n22,578\n24,182\nOMB recommendation\n934\n1,227\n22,578\n24,182\nOMB employment ceiling\nXXX\nXXX\n22,578\n24,182\nTQ February budget\n400\n355\nXXX\nXXX\nenacted\n363\n372\nXXX\nXXX\nsupplementals recommended\n35\n34\nXXX\nXXX\nOMB recommendation\n398\n406\nXXX\nXXX\n1977 planning target\n1,112\n1,079\nXXX\nXXX\nreduction target\nXXX\n1,015\nXXX\nXXX\nagency recommendation\n1,210\n1,110\n22,584\n24,188\nOMB recommendation\n1,068\n996\n22,584\n24,188\n1978 OMB estimate\n1,300\n1,200\n22,584\n24,188\nIncludes $271 outlays for Indochina refugees not in February budget.\n2\n1977 Budget\nDepartment of State\nSummary of Recommended Program Reductions\n($ in millions)\n1976\nTQ\n1977\n1978\nFTP\nFTP\nFTP\n0\nEmploy.\n0\nBA\n0\nEmploy.\n0\nEmploy.\nCurrent base\n1,231\n22,578\n409\n1,100\n1,031\n22,584\n1,234\n22,584\nRecommended level\n1,227\n22,578\n406\n1,068\n996\n22,584\n1,200\n22,584\nReduction\n-4\n--\n-3\n-32\n-35\n:\n-34\n--\nProgram reductions:\nSalaries and expenses\n(Issue Paper #3)\n-8\n-7\n-8\nExchange of persons\n(Issue Paper #4)\n-2\n-2\n-10\n-8\n-9\nForeign buildings:\n1976 deferral (Issue Paper #5)\n-2\n-1\n-6\n-3\n1977 program\n-14\n-14\n-14\nTotal reductions\n-4\n-3\n-32\n-35\n-34\nTAB B\n3\nIssue Paper\nDepartment of State\n1977 Budget\nIssue #1: International Organization Assessments\nStatement of Issue\nShould the President's budget reflect the Department's best estimate of the amounts expected to be\nassessed against the U.S. in 1977 for international organizations or should the budget reflect assessments\nbased on a U.S. evaluation of what appropriate program levels should be?\nBackground\nThe U.S. is legally bound to pay assessments to 41 international organizations. Although the U.S.\nis usually out-voted, the Department generally tries to hold organization budgets down. The introduction\nof the new fiscal year requires that the President's 1977 budget include estimates of U.S. assessments\nagainst several international organization budgets not yet firmly determined. The President's budget\ncan be based on the Department's best estimate of what final organization budgets will be, as the Depart-\nment proposes, or it can be based on a more conservative U.S. negotiating position reflecting Department\nanalysis of program requirements from the U.S. point of view.\nAlternatives\n#1. Request estimated assessments that reflect the Department's best estimate of finally approved\ninternational organization budgets. (Agency req.)\n#2. Request estimated assessments best reflecting a U.S. position on each organization's budget.\n(OMB rec.)\nAnalysis\nFORD\nJuly 1 - Sept.\n1976\n30, 1976\n1977\n1978\nBudget Authority/Outlays\nBA\nOL\nBA\nOL\nBA\nOL\nBA\nOL\n($ Millions)\nAlt. #1 (Agency req.)\n218\n218\n228\n209\n288\n280\n367\n364\nAlt. #2 (OMB rec.)\n218\n218\n228\n209\n269\n259\n341\n330\nDifference\n:\n:\n:\n--\n-19\n-21\n-26\n-34\n4\nAgency Request: Alternative 1. The Department prefers 1977 appropriations large enough to cover its\nbest estimate of U.S. contributions that will eventually be assessed so that shortfalls are less likely\nto have to be made up in supplementals or following year budget requests. The Department points out\nthat U.S. positions on organization budgets are seldom adopted and that a 1977 budget request based on\na conservative U.S. position will inevitably have to be augmented later.\nOMB recommendation: Alternative 2. OMB believes that the U.S. negotiating posture will be unduly\nweakened if the President's budget assumes finally approved organization budgets which will be generally\nhigher than the U.S. believes is necessary. Furthermore, the OMB approach should force the Department\nto analyze each organization's programs, budgets, and processes at an earlier date to determine the\nU.S. position. The Department has generally done a poor job of this. OMB recognizes that its approach\nwill lead to shortfalls which will have to be made up in 1978. No hardship will result for any\norganization since 1978 appropriations will be available well before the end of the calendar year budget\n(1977) for which the U.S. will have been assessed.\nIf the OMB recommendation is approved, the Budget Director will advise the Secretary and request follow-up\naction by the Department to assure that future budgets of international organizations are analyzed at an\nearly enough time to ascertain low-priority activities which the U.S. should seek be reduced and high\npriority activities the U.S. should support.\nFORD\n:\nLIBRARY\n5\nIssue Paper\nDepartment of State\n1977 Budget\nIssue #2: UNESCO Arrearages and Assessments\nStatement of Issue\nShould appropriations be sought in 1977 to pay overdue and 1977 assessments of UNESCO or not?\nBackground\nThe Department's 1977 request includes $43M for 1974, 1975, and 1976 arrearages legally owed to\nUNESCO and $31M for estimated 1977 assessments. Congress has prohibited payments to UNESCO until the\nPresident certifies that the organization has taken \"concrete steps\" (1) to allow Israel to join the\nEuropean Regional Group of UNESCO and (2) to restore $26K of technical assistance revoked because of\nIsraeli archeological diggings in Jerusalem.\nAlternatives\n#1. Request $74M of UNESCO arrearages and estimated 1977 assessments in 1977. (Agency req.)\n#2. Request no appropriations for UNESCO in the 1977 Budget. (OMB rec.)\nAnalysis\nJuly 1 - Sept.\n1976\n30, 1976\n1977\n1978\nBudget Authority/Outlays\nBA\nOL\nBA\nOL\nBA\nOL\nBA\nOL\n($ Millions)\nAlt. #1 (Agency req.)\n:\n--\n--\n--\n74\n66\n--\n8\nAlt. #2 (OMB rec.)\n--\n--\n--\n--\n0\n0\n--\n0\nDifference\n--\n--\n--\n--\n-74\n-66\n--\n-8\n6\nAgency request: Alternative #1. The Department believes that the President's budget should include\nUNESCO arrearages and 1977 assessments because they are legal obligations, because the U.S. has always\nopposed other nations' non-payment of assessments, and because of the serious financial situation of\nUNESCO. If the UNESCO General Conference in October 1976 takes sufficient action for the President to\ncertify that \"concrete steps\" have been taken, the Department believes appropriations should be in\nhand for early payment of U.S. assessments.\nOMB recommendation: Alternative #2. OMB believes no funds for UNESCO should be sought until the 1976\nGeneral Conference takes sufficient action for the President to certify to the Congress the \"concreteness\"\nof those actions. Until the President certifies, the Congress will likely delete all 1977 appropriations\nfor UNESCO as it has deleted appropriations for CY 1975 and 1976 assessments. By not requesting a 1977\nappropriation, pressures will increase on UNESCO to take corrective actions. If so taken, the President\ncan seek a 1977 supplemental next October.\n7\nIssue Paper\nDepartment of State\n1977 Budget\nIssue #3: Salaries and Expenses\nStatement of Issue\nShould the Department's operating level be reduced in 1977?\nBackground\nThis appropriation finances almost all of State's personnel and supporting expenses such as travel,\nequipment, and rentals. The Department has reduced its employment by 15% since 1967 and has requested\nno additional personnel for 1977, planning to reprogram several hundred positions to meet increasing\nvisa workloads and important new requirements throughout the world. Although the Department originally\nrequested a $16M increase for improved communications and other non-personnel logistical support, it\nhas withdrawn the request in response to the President's desire to reduce programs to minimum levels.\nIt proposes that its 1977 activities be carried on at the 1976 level. The question is whether non-\npersonnel operations should be reduced in 1977.\nAlternatives\n#1. Continue operations in 1977 at the 1976 level, absorbing necessary increases by offsetting\ncurtailments in low-priority activities (Agency req.).\n#2.\nAnalysis\nReduce travel, supplies, and equipment purchases by 15% in 1977 5% (OMB\nrec.).\nJuly 1 - Sept.\n1976\n30, 1976\n1977\n1978\nBudget Authority/Outlays\nBA\n0\nBA\n0\nBA\n0\nBA\n0\n($ Millions)\nAlt. #1 (Agency req.\n425\n419\n119\n118\n531\n497\n598\n579\nAlt. #2 (OMB rec.)\n425\n419\n119\n118\n523\n490\n575\n563\nDifference\n-\n-\n-\n-\n-8\n-7\n-23\n-16\n8\nAgency Request: Alternative #1: To continue the 1976 program in 1977 requires an increase of $40M\nbecause of higher foreign national salaries and inflationary price increases overseas. In addition,\nthe transfer to State of administrative support operations previously financed by other agencies adds\n$66M to the Department's budget (with corresponding reductions in budgets of other agencies and no\nincrease in overall budget totals). In terms of level of activity, therefore, the $531M requested\nfor 1977 will provide the same total program as the 1976 appropriation of $425M. The Department\nargues strongly that this level of resources must be maintained so that urgent foreseen and unforeseen\nrequirements can be met and absorbed by reprogramming.\nOMB Recommendation: Alternative #2: The Division believes that a 15% reduction in travel, supplies\nand equipment ($8M) is not excessive in view of the austerity required of all agencies by the\nPresident's budget policy. The 1976 program is a comfortable one and can accommodate a 15% cutback if\nmanagement sets about the task now.\nGERALD\nP.\nFORD\n9\nIssue Paper\nDepartment of State\n1977 Budget\nIssue #4: Exchange of Persons\nStatement of Issue\nShould 1977 outlays be significantly reduced by proposing 1976 and TQ rescissions and a 1977 al-\nlowance below the current appropriation level?\nBackground\nThe main objective of the program is to increase international communication and cooperation between\nkey elements of American and foreign societies to improve the environment, both here and abroad, for\nAmerican and foreign political, economic, scientific and cultural interrelationships. Since 1969, the\nDepartment has directed the program more toward long-range foreign policy objectives. The Department is\nincreasingly trying to utilize the program to emphasize interdependence of nations and societies and to\nbuild relationships with countries that do not receive much attention from private commercial, academic,\nscientific, cultural, and media interchange.\nAlternatives\n#1. Maintain the 1976 program level appropriated by the Congress to provide sufficient reprogramming\nflexibility for diplomatic initiatives in key areas. (Agency req.)\n#2. Reduce 1977 outlays by proposing rescissions in 1976 and the TQ and continue program at a\nreduced level in 1977. (OMB rec.)\nAnalysis\n1976\nTQ\n1977\n1978\nBudget Authority/Outlays\nBA\nOL\nBA\nOL\nBA\nOL\nBA\nOL\n($ Millions)\nAlt. #1 (Agency req.)\n60\n56\n13\n19\n64\n56\n85\n79\nAlt. #2 (OMB rec.)\n55\n54\n10\n17\n54\n48\n59\n56\nDifference\nGERALD\n-5\n-2\n-3\n-2\n-10\n-8\n-26\n-23\n55/54\n10\nAgency Request: Alternative #1: In response to the President's budget policy, the Department reduced\nits initial request of $79M to $64M allowing only cost increases associated with higher travel, tuition\nand living costs of grantees. The Department is convinced that over time the program improves foreign\nunderstanding of American society, government, and institutions which in turn facilitates the achieve-\nment of our foreign policy objectives. Department leadership believes that this program becomes\nincreasingly important as the U.S. reduces its presence in many countries in other ways. It has been\nthe goal of the Department to build the program to a $100M level over a period of a few years and\nincreasingly to utilize private, non-profit contractors and grantees to carry out the program.\nOMB Recommendation: Alternative #2: Budget policy requires substantially reduced Department outlays.\nThis is one of the few Department grant programs where reductions can be made reasonably quickly. OMB\nbelieves a 1976 rescission of $5M, a TQ rescission of $3M, and a 1977 allowance of $54M is necessary\nto obtain significant 1977 outlay reductions. Although these reductions would result in a program 15%\nlower than the 1975 level it would still provide a viable exchange program sufficient to support our\nforeign policies.\nGERALD\n?\nFORD\nLIBRARY\n11\nIssue Paper\nDepartment of State\n1977 Budget\nIssue #5: Foreign Buildings Deferral\nStatement of Issue\nShould two large embassy construction projects be deferred in 1976-7?\nBackground\nEach year the Department normally constructs or purchases two or three major embassy office buildings,\nas well as smaller buildings and staff housing. Although the Department originally requested continuation\nof the program in 1977, it agreed to a moratorium in 1977 to accomplish outlay and program reductions.\nThis means a one-year deferral to 1978 of new embassy office buildings at Helsinki, Lisbon and Dacca, and\nof 40 smaller office and housing projects, saving $14M in 1977 outlays. The issue is whether, in addition,\noffice buildings at Geneva and Nairobi, estimated to cost $8M and $5M respectively, scheduled for contract in\nthe last half of 1976 should be deferred to 1978 in order to produce further savings of $6M in 1977 outlays.\nAlternatives\n#1. Allow the Geneva and Nairobi projects to proceed as planned (Agency req.).\n#2. Defer the two projects until FY 1978 (OMB rec.).\nAnalysis\nJuly 1 - Sept.\n1976\n30, 1976\n1977\n1978\nBudget authority/outlays\nOblig.\n0\nOblig.\n0\nOblig.\n0\nOblig.\n0\n($ Millions)\nAlt. #1 (Agency req.)\n39\n27\n-\n6\n-\n21\n37\n24\nAlt. #2 (OMB rec.)\n26\n25\n-\n5\n-\n15\n33\n21\nDifference\n-13\n-2\n-\n-1\n-\n-6\n-4\n-3\nGERRED FORD\n12\nAgency Request: Alternative #1: The Department argues that specific circumstances make the proposed\ndeferrals highly undesirable: At Geneva, delay in the availability of a new U.S. -owned building will\nrequire our mission to international organizations to undertake an expensive and disruptive move to a\ntemporary location when the lease on present rented space expires. At Nairobi, failure to construct\npromptly on a site made available by the Kenyan government will result in loss of the site, waste of the\narchitectural and engineering work already accomplished on the project for that site, and large construc-\ntion cost increases by the time a new site is found and a new building designed.\nOMB Recommendation: Alternative #2: Under normal circumstances, OMB would not recommend these two\ndeferrals, which will cause substantial disruption and eventual higher costs to the Government. OMB\nbelieves, however, that the other alternatives for achieving equivalent outlay reductions -- i.e.,\npersonnel reductions in addition to the 15% State has accomplished in recent years, or further cutbacks\nin exchange of persons beyond the 15% reduction recommended by OMB -- would be even more disruptive.\nGERALD\n9893\nLIBRARY\n13\nIssue Paper\nDepartment of State\n1977 Budget\nIssue #6: Construction of Moscow Embassy Complex\nStatement of Issue\nShould funds be sought in the 1977 budget for the construction of new office and housing facili-\nties in Moscow?\nBackground\nThe United States has agreed with the USSR on the construction of new embassy facilities in\nMoscow and Washington. The office buildings, when completed, are to be occupied simultaneously. It\nhas been U.S. policy not to allow the USSR to begin construction in Washington until we are ready to\nbegin in Moscow in order to constrain the USSR from applying undue conditions on our project in Moscow.\nThe Soviet design has proceeded more rapidly than ours. The State Department is under Soviet pressure\nto move faster or to let the Russian building proceed now. State feels it is necessary to budget in\nFY 1977 in order to show the USSR that we are proceeding as fast as possible. However, final design,\nalready funded, will not be completed until mid-1977 and price negotiations with the Soviets would then\nfollow. Signing of the major construction contract is estimated in September 1977, the last month of\nthe fiscal year.\nOMB staff have reviewed the project and find it within normal design criteria, except for special\nsecurity features and recreational facilities required by the isolation of the diplomatic community in\nMoscow. OMB staff understand that the key congressional figures who would deal with the authorization\nand the appropriation request support the project. The only issues are the amount and the timing of\nthe request to the Congress. About three-fourths of the construction will be done by the Soviets, who\nexpect to base their charges on American wage rates. U.S. negotiators will argue that Soviet rates\nshould be used. Unable to ascertain what Russian rates actually are, State estimates an overall $100M\ncost based on U.S. rates and recent other U.S. embassy construction abroad. This compromises the U.S.\nnegotiating position.\nAlternatives\nCERALD\n#1. Seek a $30M initial appropriation to assure the USSR we intend to proceed as fast as possible\non the mutually agreed project. (Agency req.)\nYORD\nAMERGIT\n+\n#2. Seek no 1977 appropriation on the assumption that construction funds will not be needed\nin 1977 and should not be sought until negotiations with the Soviets are completed. (OMB rec.)\nAnalysis\n1977\n1978\nBudget Authority/Outlays\nBA\n0\nBA\n0\n($ Millions)\nAlt. #1 (Agency req.)\n30\n4\n70\n26\nAlt. #2 (OMB rec.)\n--\n--\n75\n15\nDifference\n-30\n-4\n+5\n-11\nAgency Request: Alternative #1. Deputy Secretary Ingersoll argues \"the deletion of this project would\ndo serious damage to our political relations with the Soviet Union and undermine the spirit of detente\nexisting between the two nations\". He believes a 1977 request is required to show U.S. commitment to\nthe project and to forestall Soviet efforts to begin their construction in Washington, as Ambassador\nDobrynin has been proposing to Secretary Kissinger. State estimates first-year costs at $30M. The\nDepartment would try to protect the U.S. negotiating position by avoiding a definitive overall cost\nestimate and presenting a range of $75-100M to the Congress.\nOMB Recommendation: Alternative #2. OMB recommends against seeking construction funds in the 1977 budget\nbecause --\nthe project is almost certain not to be ready for contract in 1977;\nGERALD\nincluding construction funds would not accelerate the project; there is still much design\n?\nand negotiating to be done;\nFORD\nan overall estimate could not be avoided if the Congress is to appropriate any funds;\nLIBRARY\nmaking public a cost estimate before negotiations are completed would compromise the U.S.\nnegotiating position which might result in charges of \"soft bargaining\";\na 1977 request for such a costly project abroad would undermine the \"no-new-starts\" policy.\nThis recommendation assumes that price negotiations with the Soviets would take place during the final\ndesign stage, rather than afterwards as planned by the Department, so that a firm estimate could be\nincluded in the 1978 budget a year from now.\nEx-Im\nBank\n1977 Presidential Review\nExport-Import Bank of the United States\nTable of Contents\nTAB A\nSummary Table and Background Narrative\nTAB B\nSummary of Recommended Program Reductions\nTAB C\nIssue Papers\nTAB D\nEximbank comments on budget recommendations\nEffect of issue on outlays\nIssue\n(dollars in millions)\n1977\n1978\n1. Lower direct loan\nauthorizations\n-139\n-924\n2. Terminate discount\nloan program\n-43\n-44\n3. Lower guarantees and\ninsurance levels\n0\n0\n4. No manpower increase\n-1\n-1\nGERALD R. FORD\nTAB A\nExport-Import Bank of the United States\n1977 Budget\nSummary Data\n(in millions)\nEmployment, end-of-year\nTotal\nFull-time\nAuthorizations\nOutlays\nPermanent\nTotal\n1975 Actual\n8,315\n1,504\n420\n425\n1976 February Budget\n14,225\n1,757\n440\n445\nInitial Agency Request\n14,189\n1,718\n440\n445\nRevised Agency Request\n13,000\n1,460\n440\n445\nOMB Recommendation\n9,752\n1,418\n440\n445\nOMB Employment Ceiling\nXXX\nXXX\n440\n445\nTQ February Budget\n3,556\n535\n440\n445\nAgency Request\n3,275\n350\nOMB Recommendation\n2,438\n363\n440\n445\n1977 Planning Target\nXXX\n1,700\nXXX\nXXX\nReduction Target\nXXX\n1,300\nXXX\nXXX\nInitial Agency Request\n18,056\n2,036\n475\n480\nRevised Agency Request\n16,015\n1,500\n475\n480\nOMB Recommendation\n8,434\n1,263\n440\n445\n1978 OMB Estimate\n8,500\n1,109\n440\n445\n2\nExport-Import Bank of the United States\nBackground\nThere are major differences of view within the U.S. Government on the need for official stimulus to\nexports through low-cost credits.\nThe Need for Export Stimulus. The draft report of the OMB-led interagency review of export promotion\nprograms identified the various national objectives served by these programs. Although several\nagencies dissented strongly, the majority agreed that export promotion programs are potentially\nimportant for:\n-- Overcoming imperfections in credit markets (such as the unwillingness of private banks to\nextend long-term loans), thereby increasing national income.\n-- Meeting foreign official credit competition, in order to let U.S. exporters compete on an equal\nfooting.\nThese programs are not effective for:\n-- Maintaining full employment. Increasing employment and output is a question of overall monetary\nand fiscal policies, not the level of any particular program.\nFORD\nFacilitating balance-of-payments objectives. Export promotion has no necessary net impact on\nthe trade position because higher exports generally result in higher imports. In addition,\nLIBRARY\nhigher exports financed on credit do not strengthen the dollar until the credits are repaid,\nwhich can be up to 10-12 years on Eximbank direct loans.\nThus, the interagency study concluded that Eximbank financing should be limited 1) to instances of\ncredit market gaps (i.e., where the private market fails to provide credit on reasonable terms), or\n2) to instances of demonstrable foreign government competition.\nGaps in the Private Market. Eximbank emphasizes gaps in the private export credit market, pointing to\nthe reluctance of commercial banks to make long-term loans and to provide higher risk foreign financing.\nOMB recognizes the benefits from overcoming these credit market gaps, but believes that Eximbank\nunderestimates the willingness of private lenders to provide financing. OMB is concerned that the\n3\nprovision of below-market Eximbank financing has discouraged private lenders and has actually had the\neffect of displacing private sector activities.\nForeign Government Competition. Most governments provide export credits, largely on the grounds that\nthey have to meet the foreign government's competition. The French, Japanese and British provide\nsubstantially more aid to their exporters than the United States and the Germans. The primary\nargument for meeting foreign subsidized credit terms is on equity grounds since economically the U.S.\nwould be better off not subsidizing export credits. The U.S. and other governments have been seeking\na Gentlemen's Agreement to limit export credits. OMB believes that such an agreement is of high\npriority.\nEximbank Program Levels\n($ billions)\n1976\n1977\n1978\nRevised\nCurrent\nOrig.\nRevised\nOMB\nRevised\nOMB\n1971\n1973\n1975\nBudget\nReq.\nEst.\nReq.\nReg.\nRec.\nReq.\nRec.\nDirect Loans\n1.8\n2.3\n2.7\n4.0\n2.7\n3.0\n6.3\n4.9\n2.4\nDiscount Loans\n0.5\n1.6\n1.1\n1.4\n1.4\n1.0\n2.2\n1.5\n0\nGuarantees &\nInsurance\n3.0\n4.5\n4.5\n8.8\n8.8\n5.2\n9.6\n9.6\n6.1\nTotal Program\n5.3\n8.4\n8.3\n14.2\n12.9\n9.2\n18.1\n15.9\n8.5\nOutlays*\n-0.2\n0.5\n1.5\n1.7\n1.5\n1.3\n2.0\n1.5\n1.3\n2.1\n1.1\n*\nBeginning in 1977 Eximbank outlays will again be included in the budget totals; they were excluded by\nstatute in August 1971.\nRevised Agency Request\nIn view of the tight budget situation, Eximbank has substantially revised its 1976 and 1977 request levels.\nThe revised request sharply reduces the 1976 program levels to permit maintenance of higher 1977 levels.\nThe revised request is still $237 million over the OMB mark in outlays in 1977.\n8 TAB\n1977 Budget\nExport-Import Bank of the United States\nSummary of Recommended Program Reductions\n($ in millions)\n1976\nTQ\n1977\n1978\nFTP\nFTP\nFTP\n0\nEmploy.\n0\nBA\n0\nEmploy.\n0\nEmploy.\nCurrent base\n1,499\n440\n425\n3,099\n1,722\n475\n2,090\n475\nRecommended level\n1,418\n440\n364\n2,273\n1,263\n440\n1,109\n440\nReduction\n81\n0\n61\n826\n459\n35\n981\n35\nProgram Reductions:\nDirect Loan Authoriza-\ntions, reduced ceiling\n81\n---\n61\n781\n434\n29\n950\n29\nDiscount Loan Authoriza-\ntions, terminate\n0\n---\n0\n45\n25\n6\n31\n6\nTotal Reductions\n81\n---\n61\n826\n459\n35\n981\n35\nSEPRED\n0 TAB\n5\nIssue Paper\nExport-Import Bank of the United States\n1977 Budget\nIssue #1: Direct Loans\nStatement of Issue\nShould the requested direct loan level be reduced in order to encourage the development of private\nsector alternatives and to encourage an international agreement limiting official export credits?\nBackground\nIn recent years, Eximbank has been attempting to cope with the dilemma of providing interest rates\nsufficiently low to remain competitive with foreign official export credit while sufficiently high to\navoid unnecessary preemption of private credit. The balance has most often been struck in favor of\nconcessional inţerest rates, however, especially during periods of tight money. Eximbank has believed\nit more important to meet the part of its mandate requiring it to increase exports than the part which\nrequires it not to undercut private lenders.\nLow lending rates and rising borrowing costs have caused Exim's net income to fall sharply. As a\nresult the Bank has recently raised its interest rates to a scale from 8 1/4 to 9 1/2 percent, depending\non the maturity of the loan. Lower rates will be permitted on a case-by-case basis as necessary to meet\nforeign official credit competition.\nDespite the reduction in the implicit subsidy, Exim is projecting a large increase in program\ndemand. Such an increase might jeopardize ongoing efforts to negotiate the Gentlemen's Agreement to\nlimit credit competition among the major suppliers. Progress in these negotiations has been limited to\ndate, primarily because of reluctance on the part of the French government, although Eximbank has also\nresisted Treasury proposals for a tighter credit agreement.\nAlternatives\n#1. Provide for an expanded Exim role in export financing sufficient to meet all possible demands\nGENARD\n(Agency revised req.).\n?\nCHOS\n6\n#2. Reduce Exim funding levels over a two year period (1977-1978) in order to encourage an\ninternational credit agreement and limit the Bank to a lender-of-last-resort role.\n#3. Reduce Exim funding more rapidly to achieve the results in option #2 by 1977 (OMB rec.).\nDirect Loan Authorizations (A) and Outlays (0)\n($ in millions)\n1975\n1976\nTQ\n1977\n1978\nA\n0\nA\n0\nA\n0\nA\n0\nA\n0\nAlt. #1 (Agency req.)\n2,701\n1,369\n2,700\n1,336\n700\n339\n4,925\n1,434\n4,925\n2,127\nAlt. #2\n2,701\n1,369\n3,445\n1,405\n865\n391\n3,132\n1,461\n2,419\n1,489\nAlt. #3 (OMB rec.)\n2,701\n1,369\n3,132\n1,374\n783\n368\n2,419\n1,295\n2,419\n1,203\nAgency Request\n(Difference from Alt. #1 (Agency request)\n1977 Outlays\n1978 Outlays\nAlt. #2\n+27\n-638\nAlt. #3\n-139\n-924\nThe Agency request is based on a review of potential demand for Eximbank financing. The Bank has\nassumed that the pickup in foreign economic activity and growing commercial bank reluctance to provide\nexport credits will more than offset the impact of its new higher interest rate structure. The Bank\nis also prepared to relax its interest rate policy if the U.S. appears to be losing business to foreign\ncompetition.\nAlternative #2 is designed to force Eximbank toward a lender-of-last-resort policy over a two-year\nperiod. Funds would be limited to the amount likely to be needed under a strict international export\ncredit agreement (e.g., no credits to countries with per capita incomes over $3,000 and perhaps pro-\nhibitions on lending for certain sectors such as jet aircraft). This restrictive level would put pressure\nGERALD\non Eximbank to seek a limitation of credit subsidies. However, such a limitation would be resisted\nby some (e.g., the French) and would risk losing some exports due to reduced subsidies.\nThe OMB recommendation would accelerate the transition of Eximbank to a more limited role as a\nlender of last resort and in meeting demonstrable foreign competition. OMB believes that it is not\nin the U.S. interest to subsidize exports and therefore would not be unduly concerned if some potential\nexports were lost because of the withdrawal of credit subsidies. Yet, since it is also in the U.S.\ninterest to get other countries to stop their subsidies, you might want to hold open the threat of a\nbudget supplemental to increase Eximbank lending if other countries appear unwilling to follow the U.S.\nlead in cutting back on export credit subsidies.\nGERALD\nCUDA\n8\nIssue Paper\nExport-Import Bank of the United States\n1977 Budget\nIssue #2: Discount Loans\nStatement of Issue\nShould the discount loan program be terminated in 1977?\nBackground\nThe discount loan program creates a secondary market for short and medium term export paper on\npreferential terms. Under this program, the Eximbank will make an advance commitment to lend up to\n100% of the value of eligible paper. The cost to the commercial bank borrower is generally one\npercentage point less than the interest yield on the underlying obligation.\nEximbank recently instituted several major program changes: 1) It now charges a commitment fee\nof 1/4% of the value of the underlying obligation, 2) Floating-rate paper can no longer be discounted,\nand 3) A given loan can now be discounted only once.\nAlternatives\n#1. Allow a moderate increase in discount loan authorizations (Agency req.).\n#2. Terminate the discount loan program in 1977 (OMB rec.).\nAnalysis\nThree purposes have most often been cited for the discount loan program: 1) To offset alleged\ndiscrimination against export credits during periods of tight money; 2) To allow export credits to be\noffered at fixed rather than floating rates; and 3) To simply make export financing more attractive.\nThere is no evidence that exports are discriminated against during periods of tight money, and even\nif they were, the program merely provides banks with liquidity and does not require that the discount\nproceeds be plowed back into additional export financing. Thus the first objective does not appear important\nvusit\n9\nnor would the program be effective in meeting it. Moreover, OMB questions the need for a Government\nprogram to assure fixed rates for export credits. Borrowers in any sector prefer fixed to floating\ninterest rates during periods of money market uncertainty. Export credits should be subject to the\nsame rules as credit for other sectors. Finally, OMB does not believe that a case has been made for\nsimply making export credits more attractive to U.S. banks than alternative loans for other purposes.\nAs a practical matter, Exim's discount program also introduces a large uncontrollable element into\nFederal outlay estimates. Disbursements are relatively unpredictable (generally in the $50-300M range).\nOutstanding authorizations of nearly $2B could be disbursed in a real credit crunch, although the\nrecently instituted commitment fee may mitigate this problem somewhat.\nDiscount Loan Authorizations (A) and Outlays (0)\n(in millions of dollars)\n1975\n1976\nTQ\n1977\n1978\nA\n0\nA\n0\nA\n0\nA\n0\nA\n0\nAlt. #1 (Agency req.)\n1,112\n134\n1,400\n123\n350\n15\n1,500\n90\n1,500\n59\nAlt. #2 (OMB rec.)\n1,112\n134\n1,400\n123\n350\n15\n0\n47\n0\n15\n750\nAgency Request\n(Differences from Alt. #1 (Agency request)\n1977 Outlays\n1978 Outlays\n(\nAlt. #2 (OMB rec.)\n-43\n-44\nThe Eximbank recommendation would permit a high level of program usage by private banks, on the\nassumption that the assurance of liquidity and the ability to provide fixed-rate loans provide an\nincentive for exports.\nThe OMB recommendation of program termination is based on the questionable program objectives, the\nlack of effectiveness in achieving them, and the uncontrollable outlay pattern of the program.\n10\nIssue Paper\nExport-Import Bank of the United States\n1977 Budget\nIssue #3: Guarantees and Insurance\nStatement of Issue\nShould ceilings for guarantees and insurance be increased even though Exim has regularly fallen\nfar below budgeted levels in the past?\nBackground\nThe purpose of Exim guarantees and insurance is to encourage greater financing by U.S. producers and\ncommercial banks by reducing the risk and uncertainty inherent in export credits. Exim makes a\ndistinction between \"guarantees,\" which usually cover risk taken by commercial banks, and \"insurance,\"\nwhich usually covers the risk of exporting firms. Guarantees are extended by Eximbank itself and\ninsurance is provided by the Foreign Credit Insurance Association (FCIA), a group of 50 private insurance\ncompanies which share the risk of default and have the ultimate backing of Eximbank for large losses.\nAlternatives\n#1. Allow an expanded ceiling for guarantees and insurance coverage (Agency req.).\n#2. Retain the 1976 ceiling.\nARRUBIT\n#3. Allow the program to grow from the 1975 actual level to keep pace with export growth (OMB rec.).\nAnalysis\nOMB has encouraged Exim to shift from reliance on direct credits toward guarantees and insurance.\nExim claims to be making this shift, but performance to date has not been impressive. Treasury has\nquestioned the desirability of such a shift since it would generally result in a higher cost to the\nborrower than an equivalent U.S. Government obligation financing a direct loan. OMB continues to prefer\nguarantees to direct credits since guarantees involve a smaller subsidy element under usual conditions.\nIn addition, guarantees and insurance have a negligible outlay impact.\n11\nEximbank Guarantees and Insurance Authorizations\n($ in millions)\n1975\n1976\nTQ\nBudget\nActual\nBudget\nEst.\nBudget\n1977\nAlt. #1 (Agency req.)\n8,000\n4,502\n8,850\n2,212\n9,590\nAlt. #2\n8,000\n4,502\n5,220\n2,212\n8,850\nAlt. #3 (OMB rec.)\n8,000\n4,502\n5,220\n1,305\n6,015\nAgency Request\n(Differences from Alt. #1 (Agency request)\n1977 Outlays\n1978 Outlays\nAlt. #2\n0\n0\n(\nAlt. #3 (OMB rec.)\n0\n0\nEximbank believes that a high level of guarantees and insurance should be provided in order to avoid\nany risk of having to curtail the program should a sudden demand emerge. Eximbank emphasizes that there\nare no outlays associated with the increase. The OMB recommendation is set at the most likely level of\nprogram usage based on past activity rates.\nFORD\nLIBRAST\n12\nIssue Paper\nExport-Import Bank of the United States\n1977 Budget\nIssue #4: Personnel Levels\nStatement of Issue\nShould the Exim personnel level be increased from 440 to 475?\nBackground\nThe Exim employment level has risen from 400 in 1974 to 440 in 1976. The Bank justifies the\nrequested increase of 35 employees on the basis of its increased number of loans outstanding and the\nadded demands for analysis of loan applications.\nAlternatives\n#1. Provide an additional 35 persons to administer higher program levels under current operating\nprocedures (Agency req.).\n#2. Provide no manpower increase in order to maintain incentives to allocate personnel to the\nhighest priority programs (OMB rec.).\nAnalysis\nEximbank has recently commissioned a private study which recommends an increase in personnel to 480\npeople. However, the approach of the study was simply to extrapolate existing workload factors rather\nthan to examine ways to increase productivity. While the Eximbank's loan processing workload has\nunquestionably increased due to the spurt in activity in the early 1970s, a significant portion of this\nincrease can probably be handled by more sophisticated accounting techniques and other productivity\nincreases. For the first time, however, the Bank (under initial OMB prodding and under Bill Casey) has\nbegun to develop an analytical staff capability and this effort may suffer somewhat under a tight\npersonnel ceiling.\nIMPORT\nBANK\nEXPORT-IMPORT BANK OF THE UNITED STATES\nTHE\nWASHINGTON, D.C. 20571\nUNITED\nPRESIDENT\nAND\nCABLE ADDRESS \"EXIMBANK\"\nCHAIRMAN\nUDGET\nTELEX 89-461\nDear Jim:\nI strongly support the President in his drive to hold down the\ncost and size of government but I believe the OMB budget proposals cut\nEximbank in a disproportionate and counterproductive manner. Reducing\nExim's basic lending authority by 40% and its discount program by 100%\nat a time when authorizations are increased by 100% in France and Japan\nand by 60% in Britain would thoroughly frustrate the Bank's ability to\nprovide financing competitive with that provided by other countries as\ndirected by the Congress. France, Britain and Japan whose aggregate\nGNP is only 70% that of the U. S. are making available about $15 billion\nof official export credits, six times what OMB is proposing for the U. S.\nIn discussing on the telephone the impact of the proposed cuts,\nyou asked if export financing created as many jobs as housing. I'm\nattaching a table showing that it beats housing by 50% in jobs per\nbillion dollars of authorization and almost 100% in jobs in relation\nto imputed cost. In addition, a fall off in housing will not cost\nconsumers billions of dollars in higher prices as a fall off in exports\nwill as the latter cuts the value of the dollar.\nIn considering how to achieve the President's objectives of\nreducing the cost and size of government, we can be led astray if we\ndeal in budget figures only without going to the underlying realities.\nThat is more true with respect to Eximbank than for any other agency of\ngovernment because of its tiny size, its ability to operate without any\nappropriation, and the high probability that a diminished export effort\nwill increase not only unemployment benefits but all other costs of the\nFederal government as higher prices inevitably flow from a weaker dollar.\nLet me explain by first turning to the only budget item that has\nany impact on net outlays--our direct lending program. The $2.4 billion\nloan ceiling you would set for FY 1977 against the request we now make for\n$4.8 billion (reduced from our original request of $6.1 billion) would\nresult in a difference in Exim's total net budget outlays for FY 1977 of\nonly $240 million. For this cosmetic reduction--because even the $240\nmillion is not really an expenditure as it would be with almost all other\nFederal agencies, since we are repaid everything we lend--the U. S. pays\na prohibitively high price.\nFORD\n- 2 -\nFor one thing, American companies will not spend the money to even\nbid on the billions of dollars of contracts that are up for grabs in the\nworld if there is no reasonable assurance of the necessary financing to\nfulfill the contracts once they're won. And without Exim to share the\nburden with the commercial banks, that funding just will not be there.\nThe inability to lend $2.4 billion we now ask over and above the OMB\nproposal can mean the loss of $5 to $6 billion in exports costing $500\nmillion in lost taxes and 250,000 or more jobs while chipping a big enough\nslice off the value of the dollar to cost both the public and the govern-\nment additional billions.\nWe need an alternative that will (1) contribute to the President's\nbudget objective, (2) recognize the facts that the Bank's loans are not\nexpenditures and that the cuts first recommended by OMB emasculate U. S.\nofficial export credit financing with no lasting budget savings and\n(3) which will not boomerang by ultimately subverting the President's\nobjective of reducing the cost of government.\nI believe that the activity levels in the following table represent\na balance that reflects all these considerations and still reduces Exim's\nbudget impact $100 million below what it would have been if we had been\nin the budget at the $3.8 billion direct loan figure for the current\nfiscal year.\n($ millions)\nFY\nTransition\nFY\n1976\nQuarter\n1977\nNet Loan Authorizations\nEquipment and Services\n$2,700\n$ 700\n$4,800\nCommodity\n-0-\n-0-\n75\nDiscount\n1,400\n350\n1,500\nSpecial Foreign Trade Loans\n50\n12\n50\nTotal Net Loans\n4,150\n1,062\n6,425\nGuarantee and Insurance Authorizations\n8,850\n2,213\n9,590\nNet Budget Outlay\n1,460\n350\n1,500\nFORD\n- 3 -\n1. Eximbank is in a special situation with respect to this budget\nin these three ways:\n(a) Exim's budget impact figure will represent a full addition\nto the budget as compared to last year when Eximbank was not in the\nbudget;\n(b) Eximbank's ability to carry out its mandate will be\nreduced 1000% of any cut you make to avoid this new impact (to\ngain a $1 reduction in outlays requires a $10 cut in auth-\norizations); and\n(c) your cut will be largely cosmetic because it does not save\nthe taxpayers any money (no appropriations are needed), some of\nthe authorization may not be used at all (we need commitment\nauthority to enable U. S. companies to bid even though they won't\nwin every time--in which case we won't have to actually lend) and,\nif it is, the money will come back with a profit.\nTo take this \"iffy\" budget impact figure and add all of it to the\nbudget distorts what the President has accomplished in holding the cost of\ngovernment to last year's level. To get proper comparability, as we used\nto say at the SEC, the $1.6 billion which Eximbank's activity would have\nimpacted FY 1976's budget should be added to that year's budget, or FY\n1977's impact should be set in some separate category so that the over-all\nreduction you have accomplished is fully appreciated. Is there any way\nto do this?\nFailing that, in light of the way a reduction in budget impact\ngenerates a 10-fold reduction in the Bank's lending program and ability\nto discharge its responsibilities, it's far too severe to impose a 20%\nreduction in budget impact terms and a 40% reduction in loan authorization\nas you propose for Eximbank while imposing only a 6.6% reduction on a\ngovernment-wide basis. Indeed, your proposal would cut our budget impact\n$400 million or almost 25% below the original $1.7 billion budget target\nwe received from OMB. What we now propose would cut Eximbank's FY 1977\nbudget impact by almost the same 6+ percent average as you're doing for\nall other agencies.\n2. Some of the proposed amputation can be readily avoided without\nany budgetary impact. The least understandable cut of all is in the Bank's\nguarantee and insurance programs from $8.9 billion in FY 1976 to $6.0 billion\nin FY 1977--Eximbank had requested $9.6 billion. These programs involve\nessentially no Federal outlays--net claims paid in FY 1975 totaled only\n$1.8 million; in fact, they have generally made money and provided a positive\ncontribution to the budget.\n- 4 -\nThe Bank's guarantee and insurance programs are a vital part of\nthe U. S. export support effort. Their function is to reduce the political\nand commercial uncertainties inherent in exports; to spread the risk among\nexporters, the private financing institutions, and Exim in accordance with\nclassic insurance principles; and to let the marketplace operate to the\nmaximum possible extent. The recent OMB direct export promotion study\npoints out:\n\"Without Eximbank\n...\nit is very difficult\nto insure foreign loans. Whenever possible, it is\npreferable to have private banks or exporters extend\ncredits with Eximbank guarantees and insurance\n=\nEvery study on Eximbank's policies has similarly endorsed the guarantee\nand insurance programs.\nEximbank's guarantee and insurance activity is already running close\nto $6 billion annually, reflecting our continuing efforts to increase the\nrole of guarantees and insurance in our total programs so as to maximize\nprivate sector financing. The expected growth in U. S. exports, coupled\nwith this major effort by Exim to have the commercial sector shoulder a\ngreater portion of export financing and the decrease in our loan authority,\nwill require a substantial increase, not a decrease, in guarantee and\ninsurance authority.\nIf our loan authority is to be reduced in FY 1977, it is imperative\nthat the Bank secure the full $9.6 billion in authority that has been\nrequested. This is not a frivolous point. The Bank has a statutory\nmandate to facilitate U. S. exports. We cannot continue to cut our\nfacilities without flouting that statutory obligation. If we cannot\nlend, we must find some way to expand our guarantee activity if export\nfinancing is to continue to be available so that American exporters can\nremain competitive in the world marketplace.\n3. I question the propriety of OMB's directive to drop Exim's dis-\ncount loan program as well as OMB's competence to make that judgment.\nEximbank is directed to use its resources to facilitate exports and has the\nexperience as well as the responsibility to determine how best to do that.\nThe Discount Loan Program is one of our major programs designed to encourage\nsmall and medium-size export transactions and to encourage small and medium-\nsize commercial banks to finance American exports at fixed interest rates.\nCutting off the Discount Loan Program would seriously impede the thousands\nof U. S. exporters, many of them small businesses, who get their export\nfinancing from the 209 participating commercial banks, most of them\nsmaller regional institutions. These smaller banks state categorically\nthat they will have to withdraw from export financing if they do not\nhave the liquidity assurance this program provides.\nGERALE FORD CIGNARY\n- 5 -\nEximbank's Discount Loan Program has been finely tuned through\nseveral changes since OMB's last study of the program to provide maximum\nexport support with minimum actual drawdown of funds. Thus, in the last\nfiscal year we assisted over $1 billion in private export financing with\nonly $134 million in disbursements.\nAs of November 1 of this year, the Bank's Board of Directors modi-\nfied the Discount Loan Program even further. While it is too early to\ndetermine the precise impact these most recent changes will have on dis-\ncount loan authorizations, we believe that they will reduce authorization\nlevels substantially. Therefore, we now believe that an authorization\nlevel of $1.5 billion will be sufficient for this program in FY 1977,\nas compared with $2.2 billion requested in our September 1975 budget sub-\nmission. These steps will reduce outlays in FY 1977 by at least $100\nmillion and by even greater amounts in future years. Further cuts will,\nhowever, not yield additional benefits. Even if discount loan authoriza-\ntions were to be cut to zero in FY 1977, it will only yield a minimal\nfurther reduction on 1977 outlays because disbursements, if any, which\ntake place only if money market conditions tighten and banks find it\nnecessary to borrow for liquidity purposes, generally lag after auth-\norizations by several years. This fact vividly makes the point that this\nis a standby program which serves as the lever that brings banks into\nexport financing with minimal Exim disbursements. Our commitment turns\ninto an actual disbursement in only about 20% of the cases. Yet it may\nmultiply private financing by a factor of five.\n4. Now let me turn to the most difficult and critical area, our\ndirect loans. During the first four months of FY 1976 we have approved\nabout $1 billion in direct loans. Approvals are running lower than\nanticipated because recession and financial stringency in many countries\nhave caused the postponement of many large projects and because we have\nincreased our interest rates and generally tightened our terms to the\npoint where we are in grave danger of becoming uncompetitive. We can see\nthe rest of this year clearly enough to agree to hold to a $2.7 billion\nlimit which would be about what we did in FY 1975 and is $1 billion less\nthan our approved FY 1976 authorization level. We cannot take this step,\nhowever, if we were held to $2.4 billion in FY 1977. If we were to be\nbumped down to $2.4 billion for FY 1977, there would be no way to back\nAmerican bidding for the billion dollars in bid opportunities which we\nhave been told are coming in from Mexico, Venezuela, Brazil and other\nstrong countries after the turn of the year. The downward spiral in\nour export effort would commence.\nIn reviewing our $4.8 billion requirement you must also keep in\nmind the way we fit into international bidding practice.\n- 6 -\nTo provide our companies with the backing to justify their\neffort to land contracts abroad, we must be prepared to make commit-\nments not only on the contracts they get, but also on contracts that\nwill wind up in other countries. We won't win them all, but, since\nwe can't tell in advance which ones we'll win, we need enough margin\nin our authorizations to issue commitments on contracts we will wind\nup losing but must compete for in order to get our proper share of\nthe business.\nSince 1969, the Bank has actually loaned about 70% of the\nauthorizations it's been allowed. This kind of flexibility and\nbreathing space is essential if the Bank is not to be so cramped in\nmaking commitments that U. S. exporters will ease off or be hurt in\ntrying to market without the kind of backing their competitors get.\nAs for the justification for the total direct loan request of\n$4.8 billion, we again reviewed the potential export sales which will\nrequire the Bank's direct loan participation, together with commercial\nbanks, and find about 300 export situations and projects totaling $11.8\nbillion which we believe represent transactions which will definitely\ngo forward. On top of that there will be a lot of business we have\nnot yet heard about. Failure to support these transactions will mean\nlost sales because numerous inter-agency studies, as well as recent\nexperience, clearly show that the private market is unable to provide\nthe hundreds of millions of dollars required for the nuclear and thermal\npower plants, steel mills, and large resource development projects\nwithout Eximbank support. It would be devastating to American exporters\nto attempt to handle all this with a $2.4 billion authorization, about\n50% less in real terms than the loans made in FY 1974, the last pre-\nrecession year.\n5. Finally, on staffing, Cresap, McCormick and Paget recently\nfinished an extensive study of the Bank's personnel requirements which\nwas undertaken because the Directors, from personal experience, felt\nthat the number of yearly transactions and the resulting accumulation\nof assets and commitments to be managed have increased to a degree\nexceeding the level which the staff can safely handle. This third\nparty survey concludes that the Bank still needs 40 additional people\nto properly handle the Bank's business--five more than we are requesting.\nWe were denied any additional people last year until I got through\nto Roy Ash by asking him what he'd do if he had increased revenues per\ntransaction by 25% and lifted gross revenues by $75 million, while in-\ncreasing productivity and diversifying risks, and his budget committee\nrefused to allow him to increase overhead by 2-1/2% to maintain and\n- 7 -\nextend that progress. We got 20 additional people. I know that you,\nJim, would walk all over a budget committee which told you you couldn't\nspend half a million dollars, amounting to one-half of one percent of\nyour profits, out of a $95 million revenue increase, to protect $100\nmillion in profits, $10 billion in assets and $16 billion in commit-\nments.\nRemember that this Bank with 440 people handles far more trans-\nactions and is responsible for more commitments than the World Bank\nwith over 3,000 people. Remember, also, that it will pay for the addi-\ntional people without burdening the taxpayer as almost all other Federal\nagencies do.\nIn conclusion, I believe you should view our revised budget\nproposal in the broader context of what we are trying to achieve--which\nreflects the Administration's philosophy of minimizing government involve-\nment in the economy. We have reached the amazing point where over 50%\nin value of our activity is in guaranteeing and insuring transactions\nwholly financed by private capital. The authorization levels suggested\nby OMB would require the bank to now turn its back on our private sector\npartners whom we have just succeeded in inducing to work with us, but who\nwould be unable to proceed without us. Such stop-and-go policies are\ndetrimental to any program, and more so in the case of export financing\nwhere the bringing together of a transaction usually takes so much longer\nthan an equivalent domestic project and where assurance of financing\navailability over time is even more critical to a successful sale than\nin the domestic arena.\nWe have raised our interest rates substantially over the past two\nyears from a straight 6% to a range of 8-1/4 to 9-1/2%, which is very\nclose to the market rate and considerably above the prevailing prime.\nThe increases in our rates and fees, coupled with the recent fall-off\nin commercial rates, have left us in a position where the availability\nof capital is our only remaining tool to help U. S. exporters maintain\ntheir overseas sales.\nThe present favorable U. S. trade balance reflects, in part, the\ngrowth in Eximbank support for U. S. exports four and five years ago.\nThe drastic authorization cuts now suggested by OMB would seriously\ndepress our exports, the consequences of which will be felt throughout\nthe economy in the late 1970's.\nI believe that our proposal, while it would impact the budget\nby about $200 million more than the OMB proposal, will achieve the\nFORD\nLISTARY\n- 8 -\nPresident's objective by coming in at $100 million less than the\nbudgetary impact of the FY 1976 program approved for Eximbank last\nyear. It will also permit the Bank to carry out its mandate to\nprovide financing competitive with that provided by other countries,\nthereby continuing to provide the President with a valuable instru-\nment for achieving both his economic and foreign policy goals.\nYours,\nWilliam William J J. Casey lary\nThe Honorable\nJames T. Lynn\nDirector\nOffice of Management and Budget\nWashington, D. C. 20503\nLIBRARY\n-\nEXPORT-IMPORT BANK OF THE UNITED STATES\nPOLICY ANALYSIS STAFF\nNOTE\nNovember 14, 1975\nGOVERNMENT SUPPORT AND RESULTING BENEFITS\nHOUSING AND EXIMBANK EXPORTS\nFY 1975\nHousing\nEximbank\nGovernment Support for Credit (billion U.S. $)\n1/\n2/\nPreferential Credit Authorizations\n24.0\n2.7\nOMB Estimate of Inputed Cost of\nPreference\n3.3\n.3\nResulting Benefits\nOutput (billion U.S. $)\n29.2\n5.9\nDirect and Indirect Employment\n(thousands)\n1,472\n260\nOutput Per Dollar of Authorization\n$1.22\n$2.19\nOutput Per Dollar of Inputed Cost\n8.85\n19.67\nEmployment Per Billion Dollar of\nAuthorization\n61,300\n96,300\nEmployment Per Billion Dollar of\nInputed Cost\n446,100\n867,000\n1/ Budgeted\n2/ Authorized\nGERALD FORD\nTHE PRESIDENT RAS SERV\nQ. Why do we still have an exchange of persons program?\nA. - It enables ambassador to provide foreign leaders and potential\nleaders an understanding of American policies and insitutions\nthrough VIP tours to the U.S.\n- In countries where a low U.S. profile must be maintained, it\nprovides contacts between key elements of U.S. and foreign\nsocieties.\n- It institutionalizes the study of American policies and people\nin foreign academic centers.\n1920\nExchange of Persons Program *\n1976 Request to Congress\nAcademic\nNon-Academic\nLecturers, Profs,\nEducational\nGraduate Students\nTeachers\nResearchers\nForeign\nTravel\nArea\nForeign\nU.S.\nForeign\nU.S.\nForeign\nU.S.\nVisitors\nForeign\nU.S.\nForeign\nU.S.\nAfrica\n8\n3\n1\n--\n7\n9\n19\n49\n17\n14\n7\nLatin\nAmerica\n18\n9\n15\n--\n9\n15\n25\n40\n7\n21\n12\nWest\nEurope\n39\n63\n46\n54\n44\n33\n21\n--\n--\n30\n42\nEast\nEurope\n9\n19\n19\n32\n17\n19\n10\n--\n--\n11\n20\nEast Asia\n& Pacific\n16\n3\n11\n14\n13\n13\n15\n--\n--\n14\n10\nNear East/\nSouth Asia\n9\n3\n7\n--\n8\n10\n8\n10\n75\n9\n8\n*NOTE: Excludes other important program elements such as cultural presentations. The level of activity in\na given area should not be equated with a proportional concentration of resources since unit\ngrant costs vary considerably by activity and geographic area.\nHigh European exchange activity is attributable in part, to the sizable contributions of European\ngovernments. Thus cost to the U.S. of conducting exchanges in this area is lower than in other\nareas and the primacy of West Europe disappears for several types of exchanges.\nGERALD LIBRARY a. FORD"
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