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Foreign Relations, 1969-1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969-1972

Released by the Office of the Historian
Docs 421-446

421. Memorandum From the Director of the Office of Emergency Preparedness (Lincoln) to President Nixon/1/

Washington, December 29, 1969.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile. Confidential; Sensitive. Attached to a December 29 transmittal memorandum from OEP Deputy Director Russell to Flanigan, which indicated that the memorandum had been dictated by Lincoln over the phone from Colorado. Russell called Flanigan's attention to two points discussed with Lincoln, but which were not included in the memorandum to the President: "(a) Does the Administration wish to subject itself to allegations that it has placed this country in a position to be 'blackmailed' by those foreign countries which are the sources of the critical materials which our country or this continent do not produce in sufficient quantity? (b) Is the Administration prepared to risk identifying itself as allegedly in favor of jeopardizing national security, disrupting the market, and injuring domestic industry and foreign countries when there is a substantial likelihood that Congress and industry will prevent the accelerating of stockpile disposals?" These memoranda were transmitted to Kissinger in a December 30 memorandum from Haig, who noted the possible disadvantages and agreed with Lincoln that it was unlikely $1 billion of sales from the stockpile could be realized.

SUBJECT
Receipts in Fiscal Year 1971 from Stockpile Sales

The Bureau of the Budget has informed me of your decision that OEP should seek a minimum of $1 billion in receipts in FY 1971 from stockpile sales./2/

/2/Not further identified. An earlier December 27 draft of Lincoln's memorandum, however, cites Lincoln's November 26 memorandum to Kissinger (Document 416) as a reference. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, OEP, Volume II 11/69-12/71)

The purpose of this memorandum is to outline measures devised to maximize receipts in FY 1971 (a much more difficult task than maximizing sales). This memorandum also discusses the problems likely to be encountered by the Administration as a result of the proposed actions. Such discussion should assist in an appraisal of how firmly the Administration should commit itself at this time toward seeking $1 billion in stockpile receipts in FY 1971.

In brief, about a half billion dollars of receipts in FY 1971 (including those in the current GSA estimate)/3/ could be produced by measures which are not inconsistent with maintaining a stockpile concept or with existing stockpile legislation. Approximately an additional half billion of receipts in FY 1971 might conceivably be achieved if the Administration is willing to take more drastic action which would, in effect, do away with the stockpile concept. Any substantial acceleration of stockpile disposals would result in severe Congressional and industrial resistance. Also, any substantial acceleration of certain stockpile disposals would produce strenuous objections from friendly foreign countries.

/3/In the December 27 draft (see footnote 2 above), Lincoln reported that GSA had estimated $221.6 million in its submission to the Bureau of the Budget.

A proposal for stockpile sales and other actions to accomplish $1 billion of receipts in FY 1971 is attached. I must state very frankly, however, that I believe the prospects of achieving this $1 billion of receipts in FY 1971 are remote.

One can well ask why $1 billion of receipts cannot be readily achieved from a $6.7 billion stockpile book value. A significant reason is that the previous Administration stripped the stockpile of most of its readily disposable assets other than the remaining nickel and copper. The previous Administration also tied up some of the assets (still carried in the $6.7 billion book value) in long-term arrangements--e.g., an agreement with the aluminum industry which provides for purchases of aluminum extending over a 14-year period.

Undoubtedly, the stockpile actions of the previous Administration have intensified the concern of the Congress. In 1967, Senators Russell and Symington, incident to an OEP confirmation hearing,/4/ said that they viewed with apprehension the frequent lowering of the estimates of what is needed in the stockpile for national emergencies, believing the reductions to be inspired by a desire to accommodate economic considerations. During my confirmation hearing, the Senate Armed Services Committee asked to be consulted on and to be kept fully informed concerning stockpile matters. Chairman Philbin, of the House Subcommittee, has repeatedly asked to be kept continually informed concerning proposed stockpile disposals. Immediately following the recent release of stockpile nickel, he specifically asked us to keep him fully advised of our actions on nickel./5/ There is continuing Congressional concern that the Executive Branch will thwart the intent of Congress in the Stock Piling Act by such actions as making unwarranted releases for "the common defense."

/4/Not further identified.

/5/Presumably a reference to the President's December 15 approval; see Document 419.

Congressional concern is not limited to the Armed Services Committees. The Interior and Insular Affairs Committees also are concerned and they give particular attention to the views of domestic industry.

At all times, we are hobbled by Congressional reluctance to pass the legislation necessary to disposal of excesses, by industry's frequent reluctance to support disposal bills or to buy, and by foreign policy considerations. We also are bound by the Stock Piling Act which provides that disposals must be made in such a way as to protect the United States against avoidable loss and to protect producers, processors, and consumers against avoidable disruption of their usual markets. There is obviously a need for obtaining and keeping the confidence and cooperation of both Congress and industry if we are to mount a large scale disposal program to maximize receipts.

Pertinent to the reaction of Congress, industry, and the public are two immediate policy questions arising from possible stockpile actions by the Executive Branch:

(1) Does the Administration wish now to take actions in a way that might be widely interpreted by Congress and industry as abandoning the stockpile concept?

(2) Closely related to (1), does the Administration want to begin dealing with the stockpile in a way significantly and obviously inconsistent with the national security justification for continuation of oil import controls which is contained in the report of the Cabinet Task Force on Oil Import Control which you are about to receive and which will be widely discussed?/6/

/6/Documentation on this Cabinet Task Force is in the National Archives, Nixon Presidential Materials, White House Central Files, Subject Files, Federal Government.

I have not raised here the 1968 Presidential guidance,/7/ based on NSC study, on which stockpile objectives are now calculated, nor the levels of the objectives themselves, nor any details of national security implications. A new study might result in some significantly reduced stockpile objectives, but it probably would not help our receipts from stockpile sales in FY 1971.

/7/See footnote 4, Document 415.

I stress that the contents of this memorandum and its enclosure are estimates and judgments. They are the best I can now make, consulting with my staff and other agencies on very short notice--and they are far from certainties. Such developments as strikes, foreign disturbances, changes in the level of economic activity, and shifts in industry and Congressional attitudes may significantly change our projections.

OEP will press forward, assisting GSA which is the action agency for legislation and sales, to begin execution of the FY 1971 sales plan outlined in the enclosure. Preparatory actions on the first half billion can go forward now. Final decision, needed from you, on the more drastic actions such as releases for the common defense, can be delayed for a while.

G.A. Lincoln/8/

/8/Printed from a copy that indicates Lindjord signed for Lincoln.

 

Attachment

PROPOSED STOCKPILE SALES AND OTHER ACTIONS TO ACCOMPLISH RECEIPTS OF $1 BILLION IN FISCAL YEAR 1971

All figures are approximate estimates subject to significant variations.

Approximately the first half billion dollars	Million Dollars
1. Estimate of receipts provided by GSA to BOB for FY 1971 budget.	221.6
2. Proceeds from quickly saleable material if tungsten, cobalt and cadmium disposal bills pass Congress.	125
3. Cancel all stockpile acquisitions and upgrading, and defer, where feasible, receipts from sales until FY 1971.	50
4. Place Treasury receipts from sales of silver in general fund, rather than coinage fund. (Treasury likely to object.)	60
5. Sell tin for which we have Congressional authorization. (State has objected thus far, because of likely repercussions in Bolivia.)	30
6. Sell rubber for which we already have Congressional authorization. (An OEP reduction in stockpile objective would be required. State may be expected to oppose.)	40
Subtotal (approximately)	525
Approximately the second half billion dollars	Million dollars
7. Divert to commercial sale the copper scheduled for delivery to the DPA inventory in FY 1971 in payment against a DPA advance. (This action will continue the large deficiency in the copper stockpile, which now has less than two months normal consumption. Congress, which was critical of the previous Administration's sales of copper, and which was informed in 1967 of this scheduled supply, may raise new objections.)	25
8. Attempt to sell in FY 1971 the rights to the remaining copper due to be delivered to the U.S. Government under the above contract in FY 1972-1975. (See comment on No. 7, above.)	75
9. Presidential conversion to cash sale of the recent loan of stockpile nickel. (This action will continue the deficiency in the stockpile, which now is a three months supply at normal consumption rates.)	25
10. Presidential release of the remaining nickel and copper "for the common defense." (This action would require legal justification which, in turn, probably depends in part on the existence of a market shortage of these materials.)	335
11. Presidential release of antimony, chrome ore, fluorspar, platinum group metals, and other small miscellaneous saleable materials, "for the common defense." (See comment on No. 10, above.)	125
Subtotal for items more sensitive from a national security and Congressional standpoint.	585
Grand Total (Approximately)	$1,100

 

422. Memorandum From the Director of the Bureau of the Budget (Mayo) to President Nixon/1/

Washington, undated.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile. No classification marking. Mayo met with the President from 11:15 a.m. to 12:20 p.m. on December 30. (Ibid., White House Central Files, President's Daily Diary) Presumably this memorandum was discussed at that meeting. Three handwritten, undated notes and a January 15, 1970, typewritten note from Haig to Lynn are attached to this memorandum. One of the notes, from Flanigan to Kenneth Cole, reads: "I believe (read 'am sure') that Kissinger has a study underway to determine the long range future of the stockpile. I think this broad language is unnecessary. Let's concentrate now on changing objectives as necessary to sell $750 million. After the NSC study, let's change objectives as is necessary to make the desired further sales. I suggest you have Kissinger see this." A December 31 memorandum from Lincoln to Flanigan provided a table that set out an approach to achieve in FY 1971 $750 million in receipts from stockpile sales and related actions; the suggested actions were arranged in order of increasing difficulty. Lincoln noted that the $750 million figure had come from the Bureau of the Budget. (Ibid., NSC Files, Subject Files, Box 396, Stockpile)

SUBJECT
Stockpile receipts

One major question has arisen in proceeding to implement your decision to achieve at least $750 million in FY 1971 receipts from sales from the materials stockpile. It reflects differing interpretations of your underlying and longer-range intent. It is our understanding that you wish the existing stockpile objectives to be amended or discarded to facilitate sales in FY 1971 and later years--rather than simply to obtain $750 million in FY 1971 alone without adjusting the objectives. If you wish to avoid sales being compromised to preserve objectives, we need your confirmation of the following--for transmittal to the responsible agencies.

The $750 million or more receipts in 1971 are not a one-time financial decision, but the initial step in a policy decision to dispose of at least $4 billion of the roughly $7 billion total assets./2/ As such, the "objectives" which currently justify much of the stockpile quantities will not be used to restrict or prevent sales of any commodity./3/

/2/President Nixon changed "6" billion to "4" billion by hand.

/3/The President initialed the Approve option.

Robert P. Mayo

 

423. Information Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, January 21, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 351, Meat Import Policy. Limited Official Use. Forwarded to Kissinger under cover of a January 15 memorandum from Bergsten with a recommendation that he sign it.

SUBJECT
Continuation of Voluntary Meat Import Restraint Program

Secretary Hardin has now announced that a voluntary restraint program will continue to limit U.S. meat imports in 1970. The announcement was delayed nearly two weeks because of problems with some of the supplying countries, particularly Mexico and Australia./2/

/2/In his January 15 transmittal memorandum, Bergsten reported that Hardin announced the new program on January 12 instead of the December 31 target date.

The voluntary restraint agreements will allow the meat exporters an increase of about 1.5 percent over their 1969 allotments. (Our negotiators sold the package as a 4.4 percent increase, but the real increase is only 1.5 percent.) This was enough to gain agreement, because all of the suppliers preferred continued voluntary restraints to mandatory quotas, but none of the suppliers was pleased. All wanted higher restraint levels: the Australians because of their higher historic share of the U.S. market, the Mexicans because of their drought, and the Central Americans on the basis of their "special relations" with the U.S. and your October 31 speech./3/

/3/See Document 122.

Giving in to any of these special pleas would have jeopardized agreement by other suppliers, however, unless we were willing to raise significantly the total amount of our meat imports. Secretary Hardin was unwilling to raise the total because of domestic political pressures. The agreed level is about 40 million pounds below the level which would require you to invoke mandatory import quotas which you could then waive only on the basis of "overriding economic or national security interests". The mandatory quota level would be about 6 percent below the voluntary restraint total, although you could raise it if you concluded that domestic price conditions so warranted.

A new feature of the 1970 program is that all suppliers agree that we can apply our own controls against their meat shipments to us if they prove unable to themselves restrain their exporters within the agreed levels. (This will apply particularly to some of the Latin Americans, whose administrative machinery is not very good, and was done with Honduras in late 1969.) The program thus comes quite close to a quota system without our bearing the normal onus of implementing one.

Australia, New Zealand and Ireland were unable to guarantee that their export restraints would effectively control shipments into the United States passing through other countries (particularly Canada), but they have no objection to our doing so. Agriculture will therefore ask you at some point to issue an executive order banning such imports.

Some of the meat supplying countries, especially Mexico, Australia, and the Central Americans are not pleased with the new agreements. The Latin American countries have already begun to complain and we can expect to have special requests from all of them soon. If you wish to meet the desires of the foreign suppliers, and give special treatment to the Latin Americans consistent with your October 31 policy statement, you will have to face the question of triggering the mandatory quotas and raising the overall level of meat imports. It will not be possible to make a special allocation for Latin America alone within the voluntary levels, as we did in late 1969, because the large suppliers have insisted that they share equally in any further allotments in return for their agreeing to continued voluntary restraints.

The pressures for higher meat import quotas from foreign suppliers may coincide with pressures which Secretary Hardin expects from domestic consumer interests seeking relief from high meat prices. If so, you will have to weigh all of these factors against the serious political opposition which can be expected from domestic meat producers. We will continue to maintain the voluntary restraint program for the pres-ent, but the issue may have to be reopened before long.

 

424. Editorial Note

On February 2, 1970, Henry Kissinger, responding to a Presidential query, sent the President an action memorandum with options on how meat prices might be reduced through increased imports. Option 1 was to increase imports under the voluntary restraint program closer to the 1,100 million pound trigger point for mandatory quotas. Option 2, which Kissinger recommended, was to apply mandatory quotas at a much higher level, perhaps 1,200 to 1,300 million pounds. Option 3 was to waive quotas on meat imports altogether, which the Agriculture Department predicted would increase imports to about 1,400 million pounds in the total absence of any controls, and almost certainly assured a major battle with the domestic producers and their Congressional supporters and a drive for tight quota legislation. (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 351, Meat Import Policy)

On January 27 the President had met with Senator Fannin and members of the National Cattlemen's Association in the Cabinet Room from 4:10 to 4:42 p.m. (Ibid., White House Central Files, President's Daily Diary) Senator Fannin left the meeting at 4:20 p.m.

On February 2 the President met with Secretary Hardin, Don Paarlberg, Bryce Harlow, John Whitaker, and John Ehrlichman from 3:10 to 4:10 p.m. (Ibid.) Kissinger and Fred Bergsten joined the meeting at 3:44 p.m. and Ehrlichman and Kissinger stayed on to 4:14 p.m. Fred Bergsten's memorandum of that conversation reveals the President's interest in increased meat imports to lower meat prices and Hardin's opposition. Hardin said wholesale prices were down, but retail prices had not followed due to the policies of the retail organizations. The President indicated his willingness to "jawbone" the retailers and thought McCracken should participate. Hardin said he was working for the farmers on that issue, a point the President took but said it had to be seen in a larger context that kept consumers in mind. "The President concluded that we should note publicly that he had met with the cattlemen and had learned that retail prices had Ônot been reflected in what the consumer pays'." (Ibid., NSC Files, Agency Files, Box 196, Agriculture, Volume I 1969-1970) The discussion then turned to East-West trade; see Document 313.

On Kissinger's February 2 action memorandum to the President, the "No Action" option is checked, followed by a handwritten date of February 3. A handwritten note by David Young accompanying Kissinger's memorandum indicates that "Actions taken are marked in pencil on information from Bergsten who has done a follow up memo as result of meeting," presumably a reference to Bergsten's memorandum of the February 2 conversation.

 

425. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, February 20, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 351, Meat Import Policy. No classification marking.

SUBJECT
Executive Order to Stop Indirect U.S. Imports of Meat from Australia, New Zealand and Ireland

Secretary Hardin at Tab B/2/ has proposed an Executive Order prohibiting U.S. imports of Irish, Australian and New Zealand beef and mutton which have been shipped via third countries. Budget has approved the Order and State, Treasury, Commerce, the Council of Economic Advisers, and the Special Trade Representative concur (Tab C). The Department of Justice has certified that the Order is correct as to form and legality (Tab D). Peter Flanigan, John Whitaker, and Bill Timmons also concur.

/2/None of the tabs has been found.

Background

The State Department, in cooperation with Agriculture, has nearly completed negotiations with the principal exporting countries for a voluntary restraint program on meat exports to the United States for 1970. Under most of these agreements, the exporting country will restrain its total shipments of meat to the United States whether they are sent directly or whether they are transshipped through third countries.

Three nations, however, (Australia, New Zealand and Ireland) informed us that they would be able to control only the direct shipments to the United States. They would not be able to control meat which they had originally sent to Canada and which might then be transshipped to the United States. These Canadian transshipments began to assume importance at the end of 1969 as the supplying nations reached their voluntary restraint limits and private traders took advantage of the Canadian loophole to get the highest possible (U.S.) prices for their beef. (Canada does not participate in the restraint program.)

For the 1970 program, the three countries have agreed to control by the United States Government, since they cannot control the indirect shipments themselves./3/ This Order will accomplish such control.

/3/See also Document 423.

Based on the voluntary restraint program, the Secretary of Agriculture has estimated that 1970 meat imports will total 1,063 million pounds. Transshipments would be additional, and there is less than a four percent margin for error between the Secretary's estimates and the point at which the Meat Import Act would trigger import quotas. Continued transshipments could thus be sufficient to trigger the quotas or, if their magnitude is revealed only by subsequent figures, give the impression that the Secretary had knowingly made a false estimate. The Agriculture Department estimates that 6 million pounds of transshipped meat have already entered the United States this year. Consequently, it is necessary to stop this traffic as soon as possible in order to be sure that we can preserve the voluntary meat restraint program. The Executive Order has been coordinated with Jim Keogh.

Recommendation:

That you sign the Executive Order at Tab A prohibiting indirect U.S. imports of meat from Australia, New Zealand, and Ireland./4/

/4/The President did not initial either the Approve or Disapprove option but wrote below: "no--Not until meat prices come down."

 

426. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, March 9, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 401, Trade General, Volume I. Confidential. A note at the top of the first page in red pencil reads: "Henry recommends Option #3 under which No Signature required."

SUBJECT
Meat Import Policy

You decided on February 21 that, until domestic meat prices came down, you would not sign an Executive Order to prohibit U.S. imports of meat shipped from supplying countries via third countries, mainly Canada (Tab A)./2/

/2/Document 425.

Meat prices have not declined since that time. In fact, they have again risen slightly. CEA estimates that strong consumer demand and stagnant domestic supply will keep meat prices strong through at least the first half of this year (Tab B)./3/ Paul McCracken's jawboning efforts, which you directed at the February 2 meeting on the over-all farm program, have had no success./4/

/3/Not found.

/4/See Document 424.

This raises a fundamental issue in terms of our present voluntary restraint program on meat imports. Transshipments via third countries, which would have been prohibited by the Executive Order, are additional to the voluntary restraint level of 1,062 million pounds. They therefore move us toward the 1,098 million pound level at which the Meat Import Act would require you to trigger mandatory quotas. (The Act calls for a quota level of 998 million pounds--a 10% reduction from trigger level and hence extremely inflationary--but gives you authority to set a higher level wherever you might choose. Agriculture estimates, incidentally, that imports would total about 1,400 million pounds if we imposed no controls on them.)

Such transshipments have totaled about 7 million pounds so far this year, raising the estimated level of total imports for the year to 1,069 million pounds--less than 30 million pounds below the trigger point for quotas. They are now coming in at about one-half million pounds per week, but Agriculture fears that they will rise sharply when the trade becomes aware that we are not stopping them. (I have thus informed no one of your decision on February 21./5/ However, all of the suppliers were told that such controls would be part of the 1970 arrangement and may become curious fairly shortly.)

/5/See Document 427.

In the present situation, you have three options:

Option 1: Do nothing for the present.

PRO: Avoids inflationary implications of new restraints on meat imports.

CON: Risks a rush of imports when lack of transshipment control becomes known, forcing you to choose, under crisis conditions when tremendous political pressure would be brought to bear, between (a) the even more onerous price and foreign policy implications of mandatory quotas at the statutory level of 998 million pounds, and (b) the domestic political price of raising quotas or waiving import controls altogether.

Option 2: Sign the Executive Order (Tab C)/6/ now, prohibiting transshipment of meat to the U.S. via third countries.

/6/Not found.

PRO: Would assure viability of voluntary restraint program, thus avoiding choice cited above.

CONS:

--Appears inconsistent with overall anti-inflationary program.

--Could raise furor among consumers.

Option 3: Use your discretion under the Meat Import Act to trigger mandatory quotas, raising them to a higher level than would be permitted under voluntary restraint program (probably 1,200-1,300 million pounds).

PROS:

--Significant anti-inflationary step, both in reducing the price of beef and in psychological terms.

--Major foreign policy gains, especially with Latin America, Australia and New Zealand.

CONS:

--Risks domestic political problems with cattle industry and its Congressional supporters. (They might seek new legislation requiring a lower level of imports, so a corollary of this decision should be commitment to oppose such legislation.)

--Institution of quotas runs counter to our general trade policy and exposes us to retaliation. (Both would be mitigated, however, by the higher level of imports which would result.)

Recommendation:

That you choose Option 3: triggering of import quotas, with the quota level set significantly higher than under the present voluntary restraint program, say at 1,200-1,300 million pounds. (If you choose this option, I will ask Secretary Hardin to prepare the documents to implement the decision immediately.)

Approve/7/

/7/The President initialed this option. At the end of the memorandum he wrote a note for Haldeman: "Have Colson--quietly to talk to cattlemen--only when it appears they will be informed of our decision--& tell them we will move in other directions when prices begin to come down--Tell them if we don't do this--the consumer lobby will overrun them in Congress. Tell them it is a very modest step." To the left of the President's instruction is the stamped date of March 10. On that day the President met with Senators Fannin and Bellmon and Congressmen Brown, Steiger, and Quie from 8:39 to 9:49 a.m., and with Secretary Hardin from 2:58 to 4:05 p.m. (National Archives, Nixon Presidential Materials, White House Central Files, President's Daily Diary) No record of these meetings has been found.

Disapprove, prefer Option 1: no action at this time

Disapprove, prefer Option 2: sign Executive Order barring transshipments via third countries (Tab C)

 

427. Memorandum From the Assistant Secretary of Agriculture for International Affairs and Commodity Programs (Palmby) to the President's Special Counsel (Colson)/1/

/Washington, March 10, 1970.

1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 351, Meat Import Policy. For Official Use Only. The memorandum is Tab A to Document 428.

SUBJECT
Beef imports

I cannot believe that we are serious about a triggering of quotas under the Meat Import Law, a set-aside of the quotas by the President and then a decision to increase the allowable level of imports by a couple of hundred million pounds./2/ I say this (a) because we have not yet completed the process of implementing our mid-January decision to proceed with voluntary restraints in 1970 at a level of 1,062 million pounds; (b) because we had a high-level White House decision in December and early January which led to the restraint program in which we fully discussed the suggestions described above;/3/ (c) because the economic facts have not changed materially since that time; and (d) because of the political headaches involved.

/2/See footnote 7, Document 426.

/3/See Document 423 and footnote 2 thereto.

Let me take the last point first. We had great difficulty in convincing our friends on the Hill and the cattlemen that the allowable level should be increased for this year. They are concerned because for the first time in nearly a decade cattle producers in this country are getting a decent return. And now that they are getting a decent return, people are saying bring in more imports to dampen the situation. Further, the restraint program is a substitute for quotas. We are already being charged with not using the quota law when we should be doing so. Think of the storm that will arise when we are not only accused of not using the quota law but of misusing it to hit our cattlemen. I honestly believe that if we were to add a couple of hundred million pounds to the present import level, we would guarantee that the cattlemen would become an overwhelming force in support of textile quotas, of shoe quotas, of steel quotas, and any other protective legislation you and I can think of.

Think of the disbelief we would create in people's minds if before we have even signed all the agreements to implement the decision of last January, we announced a new and completely different action. We are supposed to have signed restraint agreements with 12 countries. To date, only 6 have been signed. If anyone were to ask us the question, we would have to admit that this was a fact. Yet, my boss, Secretary Hardin, after those meetings late last year and early this year made a public announcement that we had the necessary agreements to hold imports to a level of 1,062 million pounds. We have said we would close loopholes for imports coming in, especially through Canada. We have not done so. This action is sitting, we understand, on the President's desk. My boss has his neck stuck way out on the question of doing what we said we would do last January. It would be a severe blow to him and to this Department to consider a reversal at this time.

Late last year and early this year the bone of contention among the participants which led to voluntary restraints was exactly the same kind of action that is now being discussed. At that time all the arguments were being made about an increase in the import level. At that time beef prices were higher than they had been in earlier years. Yet the decision was made. Here, we want to emphasize that although the prices were up, they were not nearly so high as they had been during the summer months of 1969.

Now regarding the economic facts, our prices for beef cattle today are about $2.00 higher than they were at the same time last year. For all of 1970 we are looking for cattle prices to average somewhat above last year, but we are not looking for the run-up which occurred last May and June. Obviously, if that situation would occur again, we would have to take a look at the import level. But that is not our expectation. We should also keep in mind that cattlemen should not be penalized for cost factors beyond their control. It was not their fault that retail price decreases in 1969 lagged behind the drop in cattle prices. You may recall that this was a matter on which we did a little orating at that time with some success.

Clarence D. Palmby

 

428. Memorandum From the President's Special Counsel (Colson) to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, March 10, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 351, Meat Import Policy. No classification marking. Attached to a March 14 memorandum from Colson to Ehrlichman which reads: "Per your request I am enclosing a copy of my memorandum to Henry Kissinger, with which you concurred yesterday along with the earlier memo which the President signed off on which was prepared by Bergsten. Haig has the Bergsten memo--the one that says that the memo of March 9 had been staffed by everyone." The Bergsten memorandum has not been found.

SUBJECT
Meat Import Quotas

With respect to your memorandum to the President of March 9, 1970,/2/ I would like to suggest that further thought be given to Option 1 and that Option 3 not be adopted, at least at this time. I don't think that the President has been made aware of all of the ramifications of Options 1 and 3.

/2/Document 426.

Implementing Option 3 at this time would:

1. Be extremely embarrassing for Secretary Hardin, who, with the President's approval in January, announced that voluntary restrictions had been negotiated at the level of 1,062,000 pounds (see Palmby memo attached as Tab A);/3/

/3/Document 427.

2. Would create severe domestic political problems with the cattle industry and with a number of Senators and Congressmen, principally from Rocky Mountain states (see Timmons memo attached as Tab B);/4/

/4/Timmons' March 10 memorandum to Colson is not printed. Timmons wrote in part: "The President's most loyal friends in the Senate--Hruska, Hansen, Bellmon, Dole, Allott, Miller, Curtis, et al--have been adamant in their opposition to increased imports of foreign meats."

3. Would run totally counter to our policy of avoiding mandatory quotas and intensify demands of shoe and textile interests for mandatory quotas;

4. Would make it more difficult to return to a voluntary system in the future; and

5. Is unnecessary at this time.

I do not think that Option 1 fully states all future alternatives available to the President if he does nothing now. If, as a result of transshipments via third countries, the trigger level is approached, the President (a) can order mandatory quotas at any level he determines justifiable, (b) waive quotas altogether, (c) waive quotas and make new voluntary agreements at a higher level, or (d) sign the Executive Order preventing transshipments, if and when the trigger level is reached.

At the present rate of transshipments, the statute would not be triggered this year. If the transshipments should increase or if countries should violate the voluntary agreements in any way, the statute would not be triggered for several months. Agriculture does have means of enforcing the voluntary agreements. Therefore, why prejudge the situation now? Economic and political considerations might be very different if and when that happens.

Paul McCracken has been conducting a study of meat prices at the President's request, which I understand will be ready later this week./5/ Certainly no decision should be made until we have the benefit of Paul's study.

/5/Not further identified.

John Ehrlichman, Bryce Harlow, Peter Flanigan, John Whitaker, Paul McCracken, Hendrik Houthakker and the Department of Agriculture concur with this memorandum.

I think it is our general consensus that we can very well afford to wait perhaps until June. If, of course, transshipments increase the President could sign the Executive Order and then later on renegotiate the voluntary agreement. Hopefully the transshipments will not increase and we can reach some decision based on the facts available to us in June.

I assume that you will want to prepare another memo to the President reflecting these views so that he can decide, based on the foregoing, whether or not he wishes to rescind the approval he gave to your memo of March 9. If you will let me know how you wish to handle this, I am sure that it can be staffed quickly on this end.

Whatever we do, I would think we should keep the President's options open as long as possible, cause minimum political controversy domestically and, if possible, avoid mandatory quotas which have very adverse trade implications.

Charles W. Colson

 

429. Information Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, undated.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile. Confidential; Sensitive. Attached to a March 17 letter from Kissinger to Laird responding to the latter's February 20 memorandum regarding possible excess holdings in the stockpile that might be reduced without jeopardizing national security. Laird's memorandum, Kissinger's proposed reply, and the memorandum printed here were forwarded to Kissinger under cover of a March 13 memorandum from Lynn. Lynn indicated that the information on the "in-house" review, which Kissinger mentioned to Laird, was "presented as a memorandum for the President, should you choose to send it forward."

SUBJECT
National Stockpile Objectives

When reviewing the National Stockpile of Critical Materials last December, you directed that the stockpile be reduced from its $7 billion present level by at least $4 billion in the next few years,/2/ and that disposals of excesses be accelerated in order to increase revenues in FY 71 and later.

/2/See Documents 420 and 421.

Since then, in conjunction with OEP, I have initiated an "in-house" staff review of the stockpile objectives. Most of the questions can be and are being dealt with at the staff level:

--they are technical in nature;

--they lie within the authority delegated to OEP and other executive agencies; and

--they can be decided in a way consistent with your guidance to maximize stockpile disposals.

For example, on the basis of an evaluation of risks and accessibility of supplies, OEP is changing several assumptions on which stockpile calculations are based:

--Indonesia will be reinstated as a foreign source of supply, as recommended by Defense and State./3/ (This will reduce present stockpile objectives by about $110 million.)

/3/Not further identified.

--Rhodesia will be considered a potential source of supply in a period of true national emergency, despite national policy supporting the present UN sanctions./4/ (This will reduce present objectives by about $25 million.)

/4/Imports of chrome and other items from Rhodesia were embargoed for foreign policy purposes.

--Discounting for concentration of supply within the United States and Canada will generally be discontinued. (This will reduce present objectives by about $500 million.)

These actions reduced stockpile objectives from $4.0 billion to $3.4 billion.

Other agencies are also being requested, in a low key manner, to review and to update technical inputs which are the basis for calculating specific stockpile objectives:

--Defense and the JCS have been asked to update their accessibility listings for foreign sources of supply and their estimates of transportation losses. Their replies are expected on 1 April 1970.

--State has been asked to update its listings of the reliability of foreign sources. This reply is also expected at the beginning of April.

Defense will also be asked to update its estimate of military requirements. OEP wants to delay making this request for several weeks, until the DOD logistics guidance memorandum is finalized, so that the request can be framed in terms consistent with that Defense document. In this updating, account will be taken of the recent NSDM 27 military posture decisions./5/

/5/See footnote 2, Document 415.

At least two issues may eventually require a Presidential decision:

--Should we continue to stockpile for a three-year emergency, or should the period be reduced to one or two years? Both the second and third year each account for about $1.3 billion of the present value of the stockpile ($4 billion).

--Should we consider all foreign sources of supply, other than North America and the Caribbean area, unavailable during the first year of a war? This factor accounts for approximately $1.2 billion of the present value of the stockpile.

As it stands now, we should have an "in-house" study discussing these two issues, as well as any others requiring Presidential determination, in June. It could be used as a basis for decisions or for an NSC discussion. OEP would prefer to have these issues resolved through NSC channels. They were previously dealt with in the NSC: In NSC 5810 in the Eisenhower Administration, and in an NSC meeting which resulted in an October 31, 1968, memorandum from President Johnson./6/ General Lincoln believes that when we defend these decisions before Congress, we would be in a stronger position if the NSC process had been used to reach them, as before.

/6/Documentation on NSC 5810, "Basic National Security Policy," April 15, 1958, and its revision, NSC 5810/1, May 5, 1958, are printed in Foreign Relations, 1958-1960, vol. III, pp. 79 ff. The record of the NSC meeting is printed ibid., 1964-1968, vol. IX, Document 374.

 

430. Editorial Note

Fred Bergsten on March 16, 1970, reminded Henry Kissinger in an information memorandum of the President's approval of his March 9 meat import recommendation (see Document 426), and called his attention to the domestic advisers' objections (see Document 428). Bergsten believed that the outcome might be "non-compliance with a strongly felt Presidential desire--to bring down meat prices." He also noted that maintenance of the voluntary restraints instead of mandatory quotas would be a plus from a foreign policy standpoint.

Bergsten's March 16 memorandum is one of a number of documents attached to a July 2 memorandum from Ernest Johnston to the NSC Files. Johnston wrote: "The matter was eventually handled in a memorandum from Ehrlichman to the President which will not appear in our records. The attached file was sent to us for further action and our aborted memorandum is of no importance. However, some of the enclosures to it are originals with Presidential signatures, etc. which you may wish to keep." (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 401, Trade General, Volume I)

The "aborted memorandum" to which Johnston referred is an undated and unsigned memorandum on White House stationery from Kissinger to the President entitled "Reconsideration of Meat Import Decision." The memorandum indicated that Kissinger's March 9 memorandum (Document 426) had been recast to include the points Charles Colson wanted brought to the President's attention: 1) that increased imports would cost the administration political support among cattlemen, and 2) that resorting to quotas would "blow a hole" in the President's trade policy.

Kissinger presumably never saw the "aborted memorandum." An April 4 memorandum from Colson to Alexander Haig recommended that no memorandum on meat imports should go to the President at that time; the question might be reopened in June depending on how the import situation developed. (Ibid., NSC Files, Subject Files, Box 351, Meat Import Policy)

On April 9 Bergsten sent Kissinger a memorandum reporting on his meeting with Colson that day. Colson reportedly agreed with Kissinger's view that the meat import program would not be tenable for much longer and was leaning toward lifting the level of voluntary import restraints in June, to which Bergsten agreed. Kissinger, on April 13, approved the recommendation in Bergsten's memorandum that he take no action at that time, but follow the issue with Colson in the lead on the grounds it was basically a domestic price issue. Bergsten concluded that he would submit a memorandum for the President when the domestic advisers agreed it was time to go forward. (Ibid.)

 

431. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, undated.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile. Confidential. Attached to an April 22 memorandum from Vaky to Kissinger recommending that he sign the memorandum to the President. A handwritten note by Vaky on his April 22 memorandum, dated April 27, reads: "Agreed with Flanigan to handle matter without memo to President. Flanigan's office will inform Lincoln."

SUBJECT
Tin Disposal

In the memorandum at Tab A, General Lincoln proposes that you authorize him to begin the disposal of 18,000 lbs. of tin from the stockpile to obtain $54 million, as part of the plan to realize $750 million from stockpile receipts in FY 1971./2/ Your decision is required under the terms of the Defense Mobilization Order, because there is a difference of views between OEP and State.

/2/Lincoln's memorandum at Tab A, dated April 8, is not printed. In Lincoln's December 31, 1969, memorandum to Flanigan proposing measures to realize the $750 million target, item 7 was White House approval of tin/rubber disposals amounting to $70 million, which on a scale of 1-5, was given a rank of 3 for difficulty. See footnote 1, Document 422.

General Lincoln favors going forward with tin sales now because market conditions are at an optimum point. Tin prices have been for sometime at the high end of the range permitted by the Tin Council--the organization of producing and consuming nations. On April 16 the Tin Council exhausted its buffer stock in trying to keep the price from rising above the maximum. After an initial spurt, prices have now settled down to just above the maximum. There is no doubt that from an economic point of view now is an ideal time for sales of tin from the stockpile. In addition, General Lincoln points out that Congress' failure so far to enact several disposal bills jeopardizes $300 million in receipts from stockpile sales, and a delay in selling tin could jeopardize some portion of another $54 million out of the total of $750 million we are planning to sell in FY 1971.

The State Department objects to the proposed tin sales at this time because such action would very likely upset the promising negotiations with Bolivia on compensation for Gulf Oil Company,/3/ which are at a very sensitive stage. Prospects for a settlement of the Gulf problem within the next few weeks appear good. However, Assistant Secretary Charles Meyer, who recently visited Bolivia, believes that any tin disposal now would be taken by the Bolivians as a direct attack by the US on the Ovando Government.

/3/See Documents 154 and 433.

Announcement of a tin disposal now--in the midst of the Gulf negotiations--would play into the hands of anti-US radicals in Bolivia, who might use this issue to try to (a) topple the already-shaky Ovando Government and (b) nationalize other US properties in Bolivia. The GOB could be expected to react by breaking off the Bolivia-Gulf talks, which in turn would raise the question of applying the Hickenlooper Amendment, with all of the adverse consequences that would present for our overall Latin American policy. State, therefore, recommends that consultations on tin disposal be delayed until the Bolivia-Gulf negotiations are satisfactorily completed, which should be within a few months.

I believe that the political costs--in Bolivia and Latin America generally--of disrupting the Bolivia-Gulf negotiations are too high to go forward with a tin disposal now. Although a 2-3 month delay until the Gulf problem is settled one way or another could entail some reduction from the anticipated $54 million in stockpile receipts, the longer-term consequences of going ahead now probably would prove far costlier. Peter Flanigan agrees with this recommendation.

Recommendation

That you not approve the proposed tin disposal now, but agree to reconsider the proposal after July 1, if State and OEP have not reached agreement by then./4/

/4/Neither the Approve nor Disapprove option is checked or initialed. Vaky wrote on his April 22 memorandum to Kissinger (see footnote 1 above): "Agreed with Flanigan to handle matter without memo to President. Flanigan's office will inform Lincoln."

 

432. Draft Memorandum From the President's Assistant for Domestic Affairs (Ehrlichman) to President Nixon/1/

Washington, June 20, 1970.

/1/Source: National Archives, Nixon Presidential Materials, White House Central Files, Houthakker, Box 17, Meat: CEA Memos. Administratively Confidential. The final text of the memorandum sent to the President was not found, but it is presumably the memorandum from Ehrlichman to the President to which Johnston referred in his July 2 memorandum to the NSC Files; see Document 430.

SUBJECT
Meat Import Quota Increase

Background

Meat import quotas for 1969 were set at the level of 1,035 million pounds. Because of normal slippage in the program actual imports were 1,070 million pounds.

State and Agriculture negotiated voluntary quotas this year at a level of 1,062 million pounds, which is intermediate between the statutory level (998 million pounds) and the 1,099 million pounds at which the Secretary of Agriculture must impose mandatory quotas (the "trigger quantity").

Imports during the first five months of this year have been at a significantly increased rate--both over last year and over what was anticipated for this year. Agriculture estimates that imports for the first six months will be 620 million pounds. This is approximately 90 million pounds above the 531 million that would be half of 1970's negotiated quota. There is no way to know, however, whether the increased amount has been consumed in the domestic market, or whether importers have deliberately accelerated shipments and put the excess in storage. It is known that total meats in storage are at a higher level than a year ago. However, cold storage holdings are currently at the same level as at the beginning of 1970.

It is clear that if imports continue at present rates, imports will reach the quota level of 1,062 million pounds sometime early in the fourth quarter.

Under the statute (as pointed out above) if imports exceed 1,099 million pounds, there is an automatic "trigger" of mandatory quotas reverting to the original statutory level of 998 million pounds. This would create an untenable situation. You have authority under the statute (on grounds of overriding economic or national security interests or inadequate supply at reasonable prices), either before or after the "trigger" point is reached, to trigger and then do one of three things: (1) suspend quotas altogether, (2) set mandatory quotas at a higher level or (3) suspend the quota level and order the State Department to increase the level of voluntary quotas.

Anticipating that some upward adjustment will be necessary to maintain a stable price and supply situation, Secretary Hardin and Chuck Colson have been conducting quiet but extensive negotiations with the cattlemen and with the cattle state Senators./2/ They have the agreement of the cattle interests to the recommendation contained below and have the assurance that your decision, if you approve this recommendation, will be supported in the cattle states notwithstanding the fact that it would normally be considered politically very damaging.

/2/See footnote 7, Document 426.

Choice cattle prices have declined in recent months somewhere between 7% and 10% and are well below last year's peak levels. By comparison with the average of choice cattle prices over the last five years, however, 1970 prices are up 12%. Imported meat corresponds more closely to utility cow beef. Prices of utility cows reached new highs in 1970 and are almost 30% above average prices received in the last five years. Retail choice grade beef prices are about 7% higher than last year. Hamburger prices have already reached new all time highs. The spread between retail and wholesale has widened in the past year. The Department of Agriculture projects that choice cattle prices will strengthen through the summer and then decline slightly in the fourth quarter but remain above last year. Agriculture also projects that hog prices will decline significantly in the fourth quarter, which may have some effect on the price of beef and cattle.

Options

Option 1. Do nothing for the present. (This requires a third quarterly estimate by Agriculture that total imports for the year will not exceed the trigger level.)

Pros:

a. This would be good politics in the cattle producing states, particularly those in which a number of key Senate elections will be held this fall.

b. It would leave your options open, probably at least until September.

Cons:

a. The Secretary of Agriculture's third quarterly estimates would then have to project an overrun of imports for the year or face a credibility gap.

b. Failing to act now would, therefore, probably make it necessary for you to act in September when it will be more difficult to minimize the adverse political impact.

c. Failure to act now could bring a serious price rise in retail beef during the second half of 1970 if imports had to be halted abruptly to avoid overruns.

Option 2. Trigger and immediately suspend the quotas and then increase voluntary quota agreements to 1,140 million pounds, an increase of 80 million pounds over the present voluntary agreement.

Pros:

a. In view of the Hardin-Colson agreement with cattlemen and cattle state Senators, this has a minimum political risk.

b. It would help to alleviate the short supply for the next few months.

c. It would diminish upward price pressures which would undoubtedly follow from taking no action now.

d. It would have some limited consumer appeal.

e. It would avoid trade problems associated with mandatory imports restrictions.

Cons:

a. Notwithstanding the agreement, there is risk of an adverse reaction politically in the cattle states.

b. This would require a lower rate of imports in the second half of 1970 than during the first half of the year. To be specific it would permit 520 million pounds of imports for the second half, compared with 620 million in the first half (1,140 million for the full year). (After November further upward adjustments could be made if the demand situation required.)

Option 3. Allow the statute to trigger and set mandatory quotas at 1,140 million pounds.

Pros:

a. It avoids certain problems of enforcement associated with voluntary quotas.

Cons:

a. Mandatory quotas are undesirable from the standpoint of trade policy and could cause retaliation even though set at higher levels than the present voluntary program.

Option 4. Use your direction to increase imports of voluntary agreements or with mandatory quotas at a level higher than 1,140 million pounds.

Pros:

a. It would have a more favorable effect on retail prices of lower quality meats. Imports could continue at first-half levels, or even be raised further.

b. It would thus be "pro-consumer."

c. It would be a visible step toward helping nations of the Western Hemisphere, as recommended by Governor Rockefeller./3/

/3/Presumably a reference to Rockefeller's recommendations in late 1969 following his mission to Latin America; see Document 122.

Cons:

a. It would cause an exceedingly adverse reaction among cattlemen and would be damaging politically in the Rocky Mountain states and in the South.

b. It would be embarrassing to Secretary Hardin inasmuch as the January agreement was negotiated for the entire year.

c. It might cause Congress to impose mandatory quotas on a permanent basis at a much lower level than we desire.

d. It could make it difficult to reduce imports when prices come down.

e. If the quotas were set at much higher levels or entirely suspended, the action could cause deterioration of choice cattle prices.

Recommendations

1. It is recommended that you choose Option 2, an increase in the voluntary restraint level 1,140 million pounds. (Tab A contains a draft proclamation increasing voluntary quotas.)/4/

/4/For text of the June 30 Department of Agriculture Press Release and Presidential Proclamation 3993 that provided for 1,140 million pounds of meat imports during 1970 under the voluntary restraint program, see Department of State Bulletin, August 3, 1970, pp. 157-158.

Approve (Recommended by Ehrlichman, Harlow, Flanigan, Hardin, Whitaker, Kissinger, Timmons; the CEA approves of the action to increase voluntary quota levels but feels a higher level, say 1,200 billion pounds, is warranted.)

Disapprove

See me

2. In order to avoid Presidential involvement in decisions necessary to enforce voluntary quotas, it is also recommended that you delegate to Secretary Hardin your authority under Section 204 of the Agricultural Act of 1946. (A proposed Executive Order is attached as Tab B.)/5/ This delegation will permit Secretary Hardin to stop transshipments through Canada. Stopping transshipments will have virtually no effect on the level of imports or prices particularly in view of the increase in quota levels recommended above. Transshipments are, however, a circumvention of the law. They penalize those countries which respect the voluntary agreements and benefit those which do not. When voluntary quotas were negotiated in January, a number of participating countries asked us for assurance that we would not permit transshipments. On February 21 and March 10 you decided not to sign an Executive Order precluding transshipments on the grounds that meat prices had not declined./6/ Cattle prices since declined somewhat but are now strengthening. However, transshipments at these levels do not appreciably affect prices but are highly discriminatory and are being strongly objected to by a number of exporting countries. This delegation will also permit the Secretary of Agriculture to take necessary enforcement measures with respect to the higher levels of imports if circumstances later require him to do so. This proposed delegation was a part of the package Colson and Hardin negotiated with the cattle interests--consideration, in effect, for the increased level of imports.

/5/For text of Executive Order 11539, June 30, delegating authority to the Secretary of Agriculture, see ibid., pp. 158-159.

/6/See Documents 425 and 426.

Approve (Recommended by Ehrlichman, Harlow, Flanigan, Hardin, Whitaker, Kissinger, Timmons, and State Department.)

Disapprove

See me

 

433. Intelligence Note Prepared in the Bureau of Intelligence and Research/1/

RARN-30

Washington, July 15, 1970.

/1/Source: National Archives, RG 59, S/S Files: Lot 73 D 153, Daily Staff Summaries. Confidential; Limdis; No Foreign Dissem. Drafted by T.W. Sonandres (INR) and cleared by G. H. Summ.

BOLIVIA: PROSPECTIVE TIN SALES THREATEN US INTERESTS

Planned sales of US tin, temporarily in abeyance,/2/ could jeopardize our longer term interests in Bolivia. The Ovando regime may be expected to protest dramatically if this long-considered action is taken, despite its relatively minor economic impact, and extensive prior consultations. More importantly, such tin sales might endanger the Bolivian President's precarious political position and seriously complicate financial negotiations with the Gulf Oil Company./3/

/2/In a July 14 memorandum for record, OEP Director Lincoln noted that the Department of State, at Samuels' request, had requested a 1-week delay in referring the tin matter to the White House so that the Ambassador to Bolivia could inform the Bolivian President that the United States was about to resume tin sales. Lincoln agreed to the delay on the understanding that sales would commence in a week. (Ibid., Nixon Presidential Materials, NSC Files, Agency Files, Box 267, Office of Emergency Preparedness, Volume II 11/69-12/71)

/3/See Documents 152 and 154.

US plans and Bolivian reaction. The United States has long considered making an orderly sale of excess stockpile tin in order to reduce surpluses, as well as to stabilize world price fluctuations. Under contemplated arrangements, the 6,000 ton disposal/4/ would be spaced out over a 12-month period and stopped whenever the London market price dropped below $1.50 per pound. The plan has the approval of the International Tin Council and would be implemented in consultation with producer nations.

/4/Annual world demands for tin is some 200,000 tons; the sales impact on the world price is considered minimal. [Footnote in the source text.]

Bolivians assert that these sales are insignificant to the US economy but vital to Bolivia. They also point out that tin prices have declined in recent months and that each one-cent drop reduces export earnings by some $750,000 (on an annual basis). At a late June press conference, the Mines Minister stated his country's "intransigent opposition to [US] sales under any circumstances."/5/

/5/Brackets in the source text.

Potential for violence. We believe that the Bolivian Government will resort to a "counter offensive" if the US proceeds with the tin sales. A source indicated that the Government intends to support, if not incite, anti-US demonstrations, if sales begin. Such a popular emotional issue would be of obvious value to Ovando who has repeatedly resorted to "anti-US" tactics in maintaining his precarious control over a political cauldron of extremists of the left and right, and diverse military elements. On July 10, the Finance Minister said in so many words that he is desperately searching for some outside factor on which to blame an inevitable devaluation and that he would instantly award that honor to the tin sales if they eventuate in the coming weeks or months.

Threat to US interests. The tin issue, however, has adverse implications for US interests in Bolivia going beyond the immediate local reaction. The disposal would present new opportunities for the USSR, whose recent purchases of Bolivian tin already have enhanced its standing in La Paz. Furthermore, US sales risk the reversal of Ovando's recent clamping down on nationalistic extremists.

We see Ovando as a man probing for the political "center of gravity". His first phase was "to the left," exemplified by the Gulf Oil nationalization. His second and current phase is more to the middle (by Bolivian standards), with a strong push from certain military elements. The "gut issue" of tin sales, however, is so susceptible to exploitation by the nationalist extremists that Ovando would have to adopt the same stance, if not exceed it, to maintain his national-leader position.

Any resurgence of a common identity of interests between Ovando and nationalistic extremists carries two risks: the possibility of a revival of the voice of these forces in government circles; and, subsequently, the heightening of tensions between Ovando and the "moderate military" who would see their recent gains (e.g., dismissal of the leftist command-er-in-chief of the Armed Forces) jeopardized.

Finally, tin sales would seriously endanger the Gulf Oil compensation negotiations. It is doubtful that any Bolivian Government could negotiate a satisfactory settlement in an atmosphere of high tension created--in Bolivian eyes--by unjustified US tin disposals. And, the longer the Gulf issue goes unresolved, the greater is the danger that the issue will become a local political football as occurred in the IPC dispute in Peru./6/

/6/See Document 148.

 

434. Memorandum From Secretary of State Rogers to President Nixon/1/

Washington, August 20, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile. Secret. Attached to a September 5 memorandum from Vaky to Kissinger reporting that the President had approved Rogers' recommendation and recommending that Kissinger sign a directive to the State Department and OEP informing the agencies of the President's decision. Kissinger's September 7 memorandum to Rogers and Lincoln, also attached, informed them that tin sales were further suspended for a period not to exceed 90 days and that plans to resume sales should be undertaken before the end of the 90-day period in order to take advantage of the favorable market. They were also to work out arrangements to minimize the risks to American lives and property.

SUBJECT
Resumption of Commercial Sales of Stockpile Tin

Recommendation:

In the light of Ambassador Siracusa's strongly reiterated warning that the initiation of stockpile tin sales now could lead to an irrational reaction in Bolivia which might threaten American lives and property,/2/ I recommend that you authorize a further temporary suspension of sales for a period not to exceed 90 days./3/ We would plan to proceed with disposals before the end of that period, in order to take advantage of the favorable market, and would use the period or such lesser time as may be necessary to work out arrangements to minimize the risks to American lives and property./4/

/2/Telegrams 2896 and 3235 from La Paz, June 17 and July 7, respectively, transmitted the Ambassador's warnings. (Ibid.)

/3/See footnote 2, Document 433.

/4/The President initialed the Approve option.

Background:

By memorandum of April 8, 1970, General G.A. Lincoln, Director of the Office of Emergency Preparedness, requested your decision on a difference of views between the OEP and the Department of State concerning commercial sales of excess stockpile tin./5/

/5/See Document 431 and footnote 2 thereto.

In a memorandum of April 29, 1970, Mr. Peter M. Flanigan informed General Lincoln that you did not at that time approve the sale of 18,000 tons of tin from the stockpile as requested and that the request would be reviewed by July 1 in the event that General Lincoln and the Department of State were unable to agree upon the proposed sale prior to that time./6/

/6/See Document 431.

As a result of continued high prices for tin, an anticipated shortfall in supply and the exhaustion of the International Tin Council buffer stock, pressure from U.S. and foreign consumers for initiation of a stockpile disposal program intensified during late April and May. At the same time, political tension in Bolivia appeared to be easing.

In an effort to be responsive to these pressures and to move toward the initiation of a tin disposal program, the Department instructed Ambassador Siracusa to determine Bolivian President Ovando's attitude toward a modest disposal program in light of the new market conditions. While maintaining Bolivia's basic opposition to disposals, the Bolivian President conceded that under existing market conditions some kind of action was required and he agreed in principle that some degree of stockpile sale was probably necessary.

At the specific request of President Ovando, two officers from the Department were sent to La Paz during the first week of June to consult with Bolivian officials confidentially on a proposed commercial tin sales program. These consultations, in which the Ambassador participated, elicited Bolivian acquiescence in a modest one-year sales program of 6,000 tons. The Bolivians indicated that if the program were held to 6,000 tons they would make only a pro forma protest.

Following the June meeting in La Paz, the Department opened consultations with the other major tin producers (Malaysia, Indonesia, Thailand, Nigeria, Congo (K) and Australia) and with the International Tin Council, looking to a disposal program limited to 6,000 tons annually, beginning on or about July 1, 1970. Some misgivings were expressed about the timing of our disposals but in the main those six producers and the Tin Council were reasonably satisfied and the Department had planned to conclude consultations in time for disposals to begin on July 1.

On June 17, Ambassador Siracusa urgently requested suspension of action leading to tin sales. The basic change in the situation between the Ambassador's discussion with President Ovando on May 23 and the dispatch of his June 17 cable was a deterioration of the political situation marked by a week of rioting and disorder in Bolivia that left four persons dead and scores wounded.

In requesting the further suspension of tin sales the Ambassador warned of a serious danger to American lives and property that is likely to result from an irrational Bolivian reaction to U.S. disposals. Enclosed are a series of cables in which the Ambassador analyzes the situation and describes the threat (Enclosures 1. La Paz 2896; 2. La Paz 3235; 3. La Paz 3343; 4. Lima 3963; 5. La Paz 3590)./7/ It is noteworthy that although President Ovando has as recently as July 22 reiterated his government's assurances of making only a pro forma protest and providing protection should violence be directed against U.S. personnel and installations,/8/ the Ambassador discounts the ability of the Bolivian Government to make good on these pledges.

/7/None printed. The five telegrams were also attached to Document 436.

/8/As reported in telegram 3590 from La Paz, July 23.

Ambassador Siracusa's clear warnings about the dangers to American lives and property must be carefully weighed and appropriate steps taken to eliminate the risks or reduce them to a minimum. However, our legitimate tin disposal policies would be frustrated and a favorable market situation missed because of the possibility of an irrational Bolivian reaction.

I, therefore, propose that, if you concur, we inform the Ambassador that we are going ahead with our sales program not later than 90 days from now. We would instruct the Ambassador to: (a) consult with President Ovando as to the most appropriate timing within this period for such a disposal in order to minimize the political problems such action would pose for him; and (b) request the cooperation of the Bolivian Government to work out arrangements to minimize the risks to U.S. personnel should our disposal program lead to violent anti-American reactions and to prepare an appropriate contingency plan.

William P. Rogers

 

435. Memorandum From the Director of the Office of Emergency Preparedness (Lincoln) to President Nixon/1/

Washington, August 24, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile. Secret. Copies were sent to Kissinger, Flanigan, Trezise, Meyer, and Shultz.

SUBJECT
Resumption of Commercial Sales of Stockpile Tin

REFERENCE
Secretary Rogers' memorandum to you, same subject, dated August 20, 1970

Secretary Rogers has proposed a further delay of up to 90 days in sales of excess stockpile tin, during which time he proposes that we work out arrangements and proceed with the sales./2/

/2/Document 434.

Having been charged by you to proceed with actions to obtain receipts of $750 million from the stockpile in FY 1971,/3/ I offer the following comment on this proposal:

/3/See Document 422 and footnote 1 thereto.

1. With all due respect for the concern of the Department of State and Ambassador Siracusa about the situation in Bolivia, I am not fully persuaded of the need for appreciable further delay. Since the beginning of this Administration, we have deferred tin disposals in April and September 1969 and in April 1970 because of unstable situations in Bolivia. After reducing the proposed commercial sales from $54 million to $23 million, we obtained on June 5, 1970, the agreement of the Bolivian Government not to make more than pro forma objections to our sales. Although the political situation in Bolivia is unstable, I am inclined to question whether it is sufficiently serious to preclude our sales, and whether it is likely to become appreciably more stable in the foreseeable future.

2. I believe 90 days is too long a delay, in view of current tin prices and of the approaching Tin Council meeting in October. The price of tin, probably as a result of speculation based on our evident delay in selling tin, has again risen on the London Metals Exchange, to $1.69 a pound. A Tin Council meeting in October is expected to try to establish the present high price as the normal price, which would be costly to the United States and inflationary. If we do not sell beforehand, under these circumstances, we probably will receive complaints from industry, and perhaps from Congress. It should be noted that a 90 day delay would also extend beyond the Congressional elections.

3. The delay on tin disposals because of Bolivia--now known in the trade as the "Bolivian freeze"--is impairing other stockpile disposals. In the July meeting of the UNCTAD Commodities Committee in Geneva,/4/ Bolivia taunted the rubber-producing countries, especially Malaysia, for weakly accepting US disposals. Malaysia has subsequently raised questions about US rubber disposals, and has cited the Bolivian case. In recent weeks, a number of other countries have also protested US stockpile disposals. Although this is not unusual, it may be due in part to the holdup in tin disposals because of Bolivia.

/4/Not further identified.

Recommendation

For the reasons given above, I recommend that we proceed with the tin disposals as soon as possible, and in any event no later than October 1.

G.A. Lincoln/5/

/5/Printed from a copy that indicates Lincoln signed the original.

 

436. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, September 1, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile. Secret. A notation indicates the memorandum was sent to the President at the Western White House in San Clemente. (Ibid., White House Central Files, President's Daily Diary) It was forwarded to Kissinger under cover of an August 28 memorandum from Vaky which called Kissinger's attention to Lincoln's belief that the United States could not afford economically and budgetarily to wait the 90 days proposed by Rogers. Vaky reported that he had proposed a compromise at 60 days, to which Lincoln and Flanigan would agree, and expressed hope that the State Department would as well. (Ibid., NSC Files, Subject Files, Box 396, Stockpile)

SUBJECT
Resumption of Commercial Sales of Stockpile Tin

Secretary Rogers and OEP Director, General Lincoln, agree that we should resume sales of stockpile tin, but they disagree as to when.

In the memo at Tab A, Secretary Rogers notes the strongly reiter-ated warnings of our Ambassador to Bolivia that an initiation of stockpile tin sales now could lead to an irrational reaction in Bolivia which might threaten American lives and property there./2/ He accordingly recommends a delay for a period not to exceed 90 days. He proposes to use the delay to consult with Bolivia on the best timing of sales and on plans to protect American lives and property, as well as to make our own contingency plans. The Secretary stresses that the 90-day limit is a maximum, and that we would endeavor to initiate sales as soon as possible before that.

/2/See Document 434.

General Lincoln believes that 90 days is too long a delay. He notes that the world tin price has risen probably because of our evident delay in selling from our stockpile./3/ A Tin Council meeting in October is expected to try to establish the present high price as the normal price which would be inflationary. If we continue to wait, therefore, we would surely receive industry and congressional complaints. The 90-day delay would also extend beyond the congressional elections

/3/See Document 435.

He also notes that we have already delayed tin disposals for almost 18 months because of instability in Bolivia. He questions whether Bolivian instability is serious enough to preclude our sales, or whether it will improve in the foreseeable future. Having been charged by you to proceed with actions to obtain receipts of $750 million from the overall stockpile in FY 1970 [FY 1971], General Lincoln believes we must proceed with tin sales (approximately $23 million) as soon as possible to take advantage of current favorable market conditions for such sales.

We must weigh, on the one hand, the economic advantage of early disposal and the risk of industry complaints and unfavorable price movements if we do not; and, on the other, the risk of being inadequately prepared for a plausible threat to American lives and property.

In my view the risk of violent Bolivian reaction is a central consideration. It is sufficiently probable that we must give the Ambassador the benefit of the doubt and assume it as a likely occurrence. We should not risk being in a position in which we could be charged with not taking reasonable precautions to protect our people. Therefore, I believe we must provide for a period within which we could make immediate and appropriate preparations before initiating the sales.

Although General Lincoln recommended that sales resume prior to October 1, he acknowledges that this may leave too little time to take precautions and would agree to a later deadline. On the other hand, reasonable plans to meet the dangers cited surely can be made in a shorter time than the 90 days proposed by Secretary Rogers, if we begin immediately.

A 60-day maximum period, i.e., November 1 deadline, should therefore be an adequate compromise which would accommodate the various considerations posed by OEP and State. Peter Flanigan concurs.

Recommendation:

That you instruct State and OEP to initiate tin disposal sales as soon as possible but not later than November 1, and to take immediately all feasible steps to protect U.S. lives and property in Bolivia against threats that may arise as a consequence./4/

/4/Neither the Approve nor Disapprove option is checked or initialed, but the President approved Secretary Rogers' recommendation; see Document 434 and footnote 3 thereto. A handwritten note by Butterfield on the first page of the memorandum printed here called Kissinger's attention to the Department of State memorandum.

 

437. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, December 14, 1970.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, Office of Emergency Preparedness, Volume II 11/69-12/71. Secret. Forwarded to Kissinger under cover of a December 7 memorandum from Nachmanoff, on which Kissinger wrote: "What is amount of money involved?" Another note, presumably by Haig, reads: "$23 million."

SUBJECT
Commercial sales of Stockpiled Tin and Their Impact on Our Relations with Bolivia

On September 7 you approved State's recommendation to delay by 90 days the resumption of commercial sales of stockpiled tin./2/ The additional period you authorized expired December 7. Acting Secretary John Irwin has requested a further suspension of 90 days to avoid further radicalization of the new Bolivian Government. (Memorandum at Tab A)./3/ General Lincoln strongly opposes any further delay because of the possible adverse effect on your stockpile disposal program. (Memorandum at Tab B)./4/ OEP will not initiate action, however, until a decision has been made on State's request for an additional extension.

/2/See footnote 3, Document 434.

/3/Irwin's December 2 memorandum to President Nixon is not printed.

/4/Lincoln's December 3 memorandum to the President is not printed.

Your decision of September 7 to delay tin sales was based on the need to work out a program acceptable to the Bolivian Government, then headed by General Ovando, in order to minimize the adverse reaction in Bolivia and reduce the threat to American lives and property. In fact State achieved an understanding with Ovando which would have permitted us to proceed with the sale of 6000 tons of tin, but Ovando was overthrown and replaced by General Torres before it could be implemented. Torres was expected to be more radical than Ovando, but he has taken a moderate approach thus far (including a commitment to abide by the Gulf Oil Company settlement).

State argues that a resumption of tin sales so soon after he took office would

--be taken by Torres as an attack on him and his government;

--give radical elements a strong anti-US issue, and would tend to push him in the direction of radicalization thereby jeopardizing the Gulf settlement (which should be pinned down by March) and our longer-term relations with Bolivia;

--additional time might permit the conclusion of an agreement with Torres similar to that achieved with Ovando.

OEP contends that continued failure to resume tin sales jeopardizes the entire stockpile disposal program. The OEP case acknowledges that the amount to be realized from tin sales ($23 million) is not large relative to the total disposal program ($750 million), but notes that Congress will be increasingly reluctant to grant further disposal authorizations (16 disposal bills are pending on the Hill) if the Administration fails to use the authority it already has for tin disposal. (OEP is being prodded by Representative Mendel Rivers)/5/ In addition, OEP argues that:

/5/Attached to Lincoln's memorandum at Tab B is a copy of an October 19 letter from L. Mendel Rivers, Chairman of the House Armed Services Committee, asking about the delay in the release of surplus tin from the stockpile.

--the most recent delay is only the last of a series stretching back to 1968;

--tin sales at the level contemplated should not adversely affect the world market price of tin.

With respect to State's position, OEP points out that Bolivia is inherently unstable politically and that it is unlikely that the situation will improve much in 90 days.

The tin sales issue is a dilemma to which there is no really good solution. The key questions to consider in making a decision which minimizes the adverse consequences to our interests are:

--Would a further 90-day suspension in tin sales really endanger the entire commodities disposal program?

--If not, would an additional 90 days make any difference in reducing the foreign policy costs of ultimately resuming sales?

--If so, how can the additional time best be used to achieve this result?

The immediate impact of a continued suspension in tin sales on the overall stockpile disposal program is not certain. The amount of money to be realized from tin sales is not great. Moreover it is by no means established that tin sales is the ruling factor in the passage by the Congress of the 16 pending disposal bills. It seems unlikely any action will be taken by the Congress during the remainder of this session regardless of actions on tin sales. Tin will be one factor during the coming session but only one of several.

On the other hand, the foreign policy costs of resuming sales in the absence of adequate preparation could be very great. Bolivia is in a particularly unstable phase and the Torres Government is more likely to over-react to tin sales than would a more solidly-based government. This situation is not apt to be much different in three months but a little time devoted to careful diplomatic and propaganda work might help to limit the reaction of the Torres Government when we do begin sales. Bolivia was not very much different three months ago than it is now either, yet we achieved a tacit agreement with Ovando before he has overthrown. A further delay, therefore, might reduce the foreign policy risks.

A major factor not present at the time of your earlier decision to suspend sales is the existence of the Allende Government in Chile. As yet Chile's neighbors, including Bolivia, have taken a correct but cautious approach toward the Allende regime. If we give Bolivia a strong reason for reacting against us now, the likely result will be to align them more closely with Chile than would otherwise be the case. Moreover, the emergence of a more radical government in Bolivia, coming so soon after a Marxist victory in Chile, will be seen as another political loss for the US. This is by far the strongest argument for not resuming tin sales at the present time./6/

/6/In the margin next to the last two sentences in this paragraph, the President wrote: "forget it--It will happen inevitably anyway--if it's going to happen--Tin will not do it." See Document 149.

If you do approve a further delay, State should be directed to use the extra time to make a maximum effort to work with Torres to reach an understanding with him similar to the one achieved with Ovando, and to prepare a counter-propaganda campaign in Bolivia. Moreover, consultations should be held on the Hill to explain the reasons for delaying tin sales and to urge that consideration of the other disposal bills not be tied to the tin problem. Bill Timmons concurs.

Peter Flanigan concurs with understanding that delay would be for not more than 90 days.

Recommendation

That you approve delaying resumption of tin sales by no more than 90 days, with the understanding that State will undertake a program to prepare the Bolivian Government and people for an eventual resumption of tin sales, and that extensive consultations will be undertaken to explain our position to the Congress./7/

/7/Neither the Approve nor Disapprove option is checked or initialed. The President drew a line through the paragraph and wrote below the options: "no--go forward with the sales as I ordered 18 months ago." The President underlined "no" twice. This memorandum, however, is attached to a January 27, 1971, memorandum from Kissinger to Rogers and Lincoln informing them that the President had approved a further delay in the resumption of sales of stockpiled tin; see footnote 3, Document 439.

 

438. Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, undated.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 351, Meat Import Policy. Secret. Sent to the President in the week of December 21; see footnotes 3 and 4 below.

SUBJECT
Meat Import Program for 1971

Two different options have been recommended by the agencies for setting the level of meat imports in 1971 under the voluntary restraint program. Agriculture and STR recommend no increase in 1971 over the 1970 level of 1,160 million pounds (Option III in the paper prepared by the Task Force on Agricultural Trade, Tab A),/2/ for domestic political reasons. State, Treasury, CEA, and the Office of Consumer Affairs recommend increasing the import level from 1,160 million pounds to 1,300 million pounds (Option IV). The economic agencies base their views essentially on the anti-inflationary impact of the higher import level.

/2/Reference is presumably to a paper distributed to members of the Task Force by Houthakker on December 2 for a meeting that afternoon. Options III and IV described here are Options III and IV of the five options in Houthakker's paper. (Ibid., White House Central Files, Houthakker, Box 17)

State's recommendation is based principally on the implications of this program for our relations with Latin America. Eight Latin American countries voluntarily restrain their meat exports to us, and at least one more will probably have to be brought into the program next year. Implementation of these restraints has increasingly caused major frictions between us and these countries over the past two years. Although the difference in the levels involved is small for us, it is economically important and politically sensitive for the Latin countries.

I agree with State, and support Option IV. I recognize that 1,300 million pounds may be too high in domestic political terms; I would urge at least a token increase, however, to whatever level may be feasible in domestic terms. As State indicates, any decrease from the 1970 level would cause major foreign policy problems.

There are two major reasons why a liberalization of this program is now particularly important to our Latin American policy. First, in view of the Chile situation, we want to be particularly careful to maintain our friendships elsewhere in the Hemisphere, and to demonstrate that we will cooperate with the Latins on issues that matter to them if they will cooperate with us. The eight Central American countries, who are all suppliers of meat, will play an important role in our efforts to maintain the OAS sanctions against Cuba in the wake of Chile's decision to recognize Castro and begin trade relations with him. In addition, Mexico is by far the largest supplier of meat in Latin America, and the new Echeverria Administration there will regard this as the first concrete test of our attitude toward it.

Second, there have been numerous sniping efforts in the Congress this year against Latin meat exports to us. The Senate Finance Committee trade bill, in fact, would "close some loopholes" in the existing Meat Import Act. A bill cloaked in environmental protection guise, passed by the House, would bar any imports from countries which did not control the use of pesticides as well as we do. Another bill, also passed by the House, would require all imported meat to be unfrozen for inspection at the border, which obviously would render it completely inedible.

Needless to say, these moves have made the Latins very nervous about the security of the U.S. market for their meat exports. Your decision on the meat import level for 1971 provides the only foreseeable opportunity to take a concrete step which would reassure them.

There is also a foreign policy case for liberalizing the controls in terms of Australia and New Zealand, the two largest suppliers. We are making major efforts to keep both involved in Vietnam, and to join in helping Cambodia./3/ Both regard our annual decision on meat imports as one of the major indicators of our interest in them, and our decision always occasions a great deal of political debate there. The Governments in both countries maintain only narrow margins in their Parliaments, and the alternatives in both would be much less cooperative with us in Southeast Asia.

/3/On December 28 Bergsten and Holdridge sent Kissinger a memorandum reminding him that he had sent the President a memorandum the preceding week recommending the maximum possible increase in meat imports in 1971 under the voluntary restraint program. They recalled that the case had largely been couched in terms of Latin America, but they called Kissinger's attention to Australian and New Zealand developments that strengthened the maximalist case. In particular, the New Zealand Ambassador had informed the State Department on December 22 that economic stringencies, in part due to limited beef exports to the United States, were reinforcing the New Zealand desire to withdraw its troops from Vietnam in 1971. (Ibid., NSC Files, Subject Files, Box 351, Meat Import Policy)

Finally, it is by no means certain that an unchanged overall level of imports would offer sufficient bait to obtain continued "voluntary" restraints. It is virtually certain that any proposal for a rollback from 1970 levels would destroy the "voluntary" cooperation. The alternative would of course be to shift to quotas.

Recommendation:

I therefore recommend that you choose Option IV in the paper prepared by the Task Force on Agricultural Trade--1971 meat imports at 1,300 million pounds--or a level above 1970 which may be feasible in domestic political terms; I will work out the specific number with your domestic advisers if you approve the principle of an increase over the 1970 level, but decide that 1,300 million pounds is too high. I oppose any rollback from the 1970 level./4/

/4/None of the options below is checked. In a January 26, 1971, memorandum regarding the President's decisions, Bergsten informed Kissinger that the President has not accepted his maximalist approach but had instead decided to hold imports constant at 1,160 million pounds. After reviewing the issues Bergsten explained his view of the bureaucratic dynamics that had resulted in Kissinger's recommendation not being accepted. He reported that Hardin and Colson originally had supported 1,160 million pounds but then fell back at the last minute to 1,125 million pounds to enable them to characterize 1,160 million as a reasonable compromise. The final paper to the President, Bergsten wrote, was a composite drafted by Flanigan and did not present Kissinger's "token increase" as an option. He complained that for the second time they had been "end-played" by Hardin and Colson "in the absence of any countervailing force of sufficiently high level to expose its absurdity." (Ibid.)

Approve Option IV: 1,300 million pounds in 1971, an increase of about 11% over 1970

Prefer a smaller increase over 1970, the specific number to be worked out

Prefer Option III: 1,160 million pounds in 1971, the same level as in 1970

 

439. Action Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, January 20, 1971.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, Office of Emergency Preparedness, Volume II 11/69-12/71. Secret. Forwarded to Kissinger under cover of a January 21 memorandum from Nachmanoff. A stamped notation reads: "The President has seen."

SUBJECT
Commercial sales of Stockpiled Tin and Their Impact on Our Relations with Bolivia

On December 14, 1970, I sent you a memorandum (attached at Tab A)/2/ on this subject recommending a further suspension of tin sales of no more than 90 days because

/2/Document 437.

--A resumption of tin sales at this time would tend to push the Torres Government in Bolivia to the left.

--Some additional time might permit the conclusion of an accord with Torres similar to that which had been concluded with his predecessor, President Ovando, before the latter's overthrow.

You disapproved the recommendation, noting that radicalization of the Torres Government will occur in any event if it is to happen, and indicating that tin sales or their absence will not be a major consideration. I agree fully that radicalization of the Torres Government, should it come about, will arise primarily from the internal dynamics of the Bolivian situation rather than anything we may or may not do.

However, two factors lead me to request that you reconsider your decision. They are:

--The Bolivian situation has deteriorated markedly since the date of my last memorandum on this subject. There have been increasing reports from the Embassy and CIA of plots against the Torres Government, a growth in general lawlessness and the increasing inability of the Government to control it, and the rising influence of leftist student, peasant and worker groups. This past weekend moderate elements in the Armed Forces bungled a coup attempt as they did last October. The probable result of this unsuccessful coup will be more influence for student and peasant groups, and an accelerated move to the left by the Torres Government.

--The importance of the timing of renewed tin sales in avoiding blame for the leftist shift in Bolivia. My earlier memo was not sufficiently clear on the point that, while I agree that what we do will not decisively affect the internal situation in Bolivia, I am concerned that the Administration will be blamed--however unjustly--if the Torres Government moves sharply to the left, or is overthrown and replaced by a more radical government, immediately after we have resumed tin sales. Obviously there is no guarantee that the situation will be any better at the end of an additional 90 days, but if the Torres Government is overthrown by leftist forces or turns sharply left on its own, the U.S. at least cannot be accused of having pushed it there because of an untimely resumption of tin sales.

If a move to the left does take place in this period, we could, of course, go ahead with tin sales subsequently without taking the blame. On the other hand, if the Torres Government stabilizes somewhat, the additional 90 days can be used to work out an arrangement with Torres similar to that we had with Ovando to minimize the negative impact of a resumption in tin sales.

As my earlier memo noted, an additional 90-day suspension of tin sales would not significantly affect the commodities disposal program legislation. Hearings on tin disposal in the House Subcommittee on Stockpile Disposal subsequent to my memo indicated that there was considerable understanding of our political problem with Bolivia among Committee members who did not push for immediate resumption of sales.

Recommendation

That you approve a delay in the resumption of tin sales by no more than 90 days, with the understanding that State will undertake a program to prepare the Bolivian Government and people for the resumption of tin sales at the end of that period./3/

/3/The President initialed the Approve option. A January 27, 1971, memorandum from Kissinger to Rogers and Lincoln informed them that on January 25 the President had approved a further delay in the resumption of commercial sales of stockpiled tin for a period not to exceed 90 days. Kissinger noted that the President had instructed the State Department to take all feasible steps with the Bolivian Government to reduce the political costs and risks to American citizens and property when sales were resumed, and had asked the State Department and OEP to consult with Congress regarding the administration's position on tin sales. (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, Office of Emergency Preparedness, Volume II 11/69-12/71)

 

440. Memorandum From the Director of the Office of Emergency Preparedness (Lincoln) to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, undated.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, Office of Emergency Preparedness, Volume III 1972-1973. No classification marking. The memorandum is undated but is attached to Kissinger's March 18, 1972, reply (Document 442), which refers to Lincoln's February 23 memorandum. See Document 441.

SUBJECT
Request for Exception to Prohibition on Sales of Excess Tin from the National Stockpile

On April 9, 1971, the President, in response to an appeal from the Government of Bolivia, directed that commercial sales of stockpile tin be postponed indefinitely./2/ There have been no disposals of tin since that time other than non-commercial sales under the AID program (The Indian program which accounted for the bulk of these sales was terminated in December, 1971)./3/

/2/On April 9, 1971, Kissinger sent the following memorandum to Secretary of State Rogers and Lincoln: "The President has decided to rescind his decision to proceed with sales of stockpile tin after April 25, 1971. He has directed that sales of stockpile tin be postponed indefinitely." (National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, Office of Emergency Preparedness, Volume II 11/69-12/71) The April 25 date would mark the end of the 90-day deferral period the President agreed to on January 25. See footnote 3, Document 439. The Bolivian Ambassador presumably brought up tin disposals from the stockpile on April 6 at a State dinner with President and Mrs. Nixon in honor of Chiefs of Missions of the Americas (including Canada) and their wives. There is no record in the President's Diary that the President had another meeting with the Ambassador in April 1971. (National Archives, Nixon Presidential Materials, White House Central Files, President's Daily Diary)

/3/Not further identified.

I now have before me a request from an American metals company for a quantity of tin in exchange for titanium sponge. We are presently acquiring 7,000 tons of titanium for the stockpile under an arrangement whereby payment by us will be in the form of excess materials previously authorized for disposal by Congress. The American firm (a U.S. Steel affiliate) requests that a portion of this payment be in the form of tin (2,000 tons valued at $7 million over a two year period).

I am fully aware of the difficulties previously posed for our foreign relations by the sale of tin. However, I believe that, in this case, the impact on our relations with Bolivia and other tin producing states would be minimal. The sale, which is in effect a barter arrangement, is within the United States. The material would not enter the brokerage trade, but would be transferred by the recipient directly to U.S. Steel for use in stateside plants.

The price of tin in the United States is presently at a relatively high level, and the amount involved represents less than 1.5% of U.S. consumption (in comparison, the earlier disposal program which triggered the President's action called for sales of 6,000 tons in one year). Given the relatively small amount of the proposed transfer and the fact that it is a direct transaction outside of the world or even the domestic market, I believe that it could have no more than a remote effect on the world trade in tin.

I would appreciate advice as to whether an exception can be made from the President's directive which would permit this one-time barter transaction. I recognize that the proposal might first have to be explored with the tin producing states.

G.A. Lincoln

 

441. Memorandum From the Executive Secretary of the Department of State (Eliot) to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, March 3, 1972.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, Office of Emergency Preparedness, Volume III 1972-1973. Confidential. Attached to Document 442.

SUBJECT
OEP Request for Exception to Prohibition on Sales of Excess Tin from the National Stockpile

On February 18, General Lincoln requested that a one-time exception be made from the President's directive of April 9, 1971, which suspended indefinitely commercial sales of stockpile tin./2/ The Department of State opposes the lifting of the ban on tin disposals at this time. The foreign policy reasons which caused the Department to recommend previously that no commercial sales of stockpile tin be made still obtain. Although the leftist regime of Bolivia's former President General Torres has been replaced by a friendly government, serious political instability, critical monetary and fiscal problems, and high unemployment continue to exist in that country. Stockpile tin sales have not diminished as an emotional issue in the Bolivian political arena, and the precarious tenure of the Banzer Government would be threatened. As you informed the Department on February 2, the President wants a forthcoming assistance program for Bolivia./3/ Continued suspension of stockpile sales is an integral part of our cooperative policy toward Bolivia.

/2/See Document 440 and footnote 2 thereto.

/3/Not further identified.

The impact of a tin sale to a U.S. Steel subsidiary would have a particular impact on Malaysia since U.S. Steel generally buys Straits Tin. The Malaysians and other Southeast Asian producers would view the release of two thousand tons as damaging to their developing economies and as a prelude to future releases. The United States is committed to consultations with the producer governments and the International Tin Council before the commercial release of tin from the stockpile, and given the certainty of public knowledge of those consultations, the US would be faced with strong diplomatic protests even before the sales were made.

A further foreign policy consideration is the likelihood of strong criticism of the US disposal programs at the upcoming UNCTAD-III Conference in Santiago. If we begin consulting with the tin producing countries now, we can expect adverse reactions at UNCTAD-III in April./4/

/4/For documentation on UNCTAD III, see Documents 144 ff.

Although a one-time exception to the President's directive might be justified on economic grounds, particularly since it involves a barter transaction, I believe that the ban should not be lifted now for the above foreign policy reasons.

R.T. Curran/5/

/5/Robert T. Curran signed for Eliot above Eliot's typed signature.

 

442. Memorandum From the President's Assistant for National Security Affairs (Kissinger) to the Director of the Office of Emergency Preparedness (Lincoln)/1/

Washington, March 18, 1972.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 267, Office of Emergency Preparedness, Volume III 1972-1973. Confidential. A copy was sent to Under Secretary of State Irwin. Forwarded to Kissinger for his signature under cover of a March 14 memorandum from Hormats and Hewitt. (Ibid.)

SUBJECT
Request for Exemption to Prohibition on Sales of Excess Tin from the National Stockpile

Thank you for your memorandum of February 23, requesting my advice on whether an exemption can be made from the President's prohibition on tin sales from the stockpile./2/ Because of the economic and foreign policy significance of this matter, it is important that the President himself review this issue. I would therefore ask that the Department of State consult after UNCTAD III (April 13-May 19)/3/ first with producer governments and then with the International Tin Council/4/ to determine their reaction. OEP could include these results along with the views of the Department of State, CIEP and other appropriate agencies in a paper which would be submitted to the President on or about June 2./5/

/2/Document 440.

/3/For documentation on UNCTAD III, see Documents 144 ff.

/4/In their March 14 covering memorandum to Kissinger, Hormats and Hewitt pointed out that the United States was committed to consultation with the Tin Council before any release of tin from the stockpile.

/5/Not found.

With regard to the long-range issue of our tin stockpile, the possibility of commercial sales of excess tin from the national stockpile is viewed by the tin producing states as a threat to their economies. Therefore, so long as surplus tin remains, its disposal will continue to be an irritant in our bilateral relations with these countries. With a view to removing this irritant, it would be desirable if the Office of Emergency Preparedness, in consultation with the Department of State, could explore the possibilities of devising a mechanism or mechanisms for the possible gradual release of surplus tin in a manner least likely to disrupt the world market.

Henry A. Kissinger

 

443. Memorandum From the President's Assistant for Domestic Affairs (Ehrlichman) to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, March 22, 1972.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile (1973). No classification marking. Attached to Document 445. Also attached is a March 24 memorandum from Hormats to Kissinger proposing a reply to Ehrlichman, on which Kissinger wrote: "Before you send this--does tin affect Bolivia? If so see me." Hormats' proposed reply to Ehrlichman had no specific reference to Bolivia.

SUBJECT
Disposal of Stockpile Tin

Our $688 million budget projection of stockpile receipts for FY 1973 includes about $35 million for sale of around 10 thousand tons of excess tin on the assumption that the President's current ban on tin sales would be lifted and that we would be in the market for the full year. I understand that for the past several years GSA has been directed by the White House not to sell tin in the domestic market in view of international policy considerations. As you know, this matter is a very sensitive political issue with the Bolivian government even though our tin disposals would constitute less than 5% of world production. Lifting the ban would permit GSA to sell the tin with due regard for impact on the market as required by law. Since it is nearly a year since the President ordered an extension of the tin freeze last April,/2/ it would be most helpful to get a current evaluation to see if there are valid reasons why the President should not now be requested to lift the ban. In the past we have sold considerable amounts of tin with no significant impact on world prices--30 thousand tons in 1965 and 12 thousand tons in 1967. From the domestic side it would make good sense to move at this time--

/2/See footnote 2, Document 440.

--The domestic market is strong at about $1.76 to $1.77 per lb.;

--U.S. industry would favor sale of our tin surpluses (U.S. Steel has already asked GSA to exchange tin for their purchase of titanium); and

--Sales should help our balance of payments since tin is not produced domestically but consumed here in large quantities.

For many of our stockpile commodities we have had difficulty in getting OEP requirements lowered and disposal authority enacted by the Congress. Neither of these obstacles is present in the case of tin disposal which is solely an administrative matter. Even the Armed Services Committees have urged us to get into the market./3/

/3/Not further identified.

I recognize that any disposal of tin would be unwelcome by Bolivia, Malaysia, and other tin producing countries. However, in view of the budgetary significance for 1973 and subsequent years, I think we should have a fairly hard assessment of why the President should not be asked to rescind the ban on tin sales--at least by June 30, 1972.

As you know, the tin producing countries have always opposed selling tin on the grounds that it would upset our foreign relations posture. I hope that the NSC will be able to give us an independent estimate of our present foreign policy interests in this area. I would think there might be some room for a change from our practice of the past five years--particularly since domestic requirements should now increase in view of the economic upturn and recommended increases in defense procurement. Perhaps there may be some room for negotiation to stretch out the sales or to consider other concessions which are of interest to these countries.

John D. Erlichman

 

444. Memorandum From the Executive Secretary of the Department of State (Eliot) to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, October 21, 1972.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Agency Files, Box 286, State, Volume 16. Secret; Exdis.

SUBJECT
Tin Disposal Program

In response to the request telephoned by Mr. Jorden's office to Deputy Assistant Secretary Szabo on October 11 for views on the proposed resumption of the USG tin disposal program, because of the situation discussed below the Department of State recommends against rescission of the current indefinite suspension of tin disposals and against initiating consultations with producing countries regarding the disposal program at this time. Such actions would prejudice U.S. policy objectives in Bolivia and would harm relations with other major producers.

A ministerial delegation from Bolivia informed us on September 25 that President Banzer had decided to devalue the Bolivian peso provided Washington lending agencies gave assurances of adequate support to the measures. The delegation carried out detailed consultations with the IMF, IBRD, IDB and with us, departing early in October expressing satisfaction with the assurances received. We expect the devaluation to take place before the end of this month.

We and the other Washington financial institutions concerned regard satisfactory execution of devaluation and its accompanying measures as critical to solution of the serious budgetary and monetary problems facing the Banzer Government. The central purpose of our emergency assistance policy toward that government since its inception in August 1971 has been to provide the breathing space for it to effect fiscal and allied reforms such as this one which will put the government and the economy on a firmer base. In coming to its decision, the Banzer Government has had to overcome major concerns that currency devaluation is such a drastic cure, and is widely feared because of past Bolivian experience, that its adoption would risk the fall of the government.

The best hopes for a stable and prospering Bolivia are now tied to President Banzer's determination to carry out an effective devaluation/fiscal reform program, a program which cannot succeed without the sympathetic support which has been promised by Washington financial institutions and ourselves. The IMF will provide in the weeks following devaluation standby resources totaling $22 million. IBRD and IDB have promised vigorous implementation of development lending activities. We have promised to release to the Bolivian Government upon devaluation the $4 million remaining from the 1971 U.S. emergency assistance program to Bolivia together with the $20 million in the second program loan to Bolivia signed last month. We are discussing with the GOB an accelerated and expanded PL 480 agreement which would provide timely shipments of wheat and oils to assist the government in heading off panic buying by consumers.

Settlement of the remaining Bolivian expropriation case (Matilde Mine Co.) is in final stages, giving hope for elimination of this category of problem with Bolivia.

Extreme Bolivian sensitivity at every level to U.S. Government tin disposals is a fact of political life. It cannot be doubted that rescission of the indefinite suspension of tin disposals or initiation of consultations on tin disposals at this time would come as such a heavy blow to the Banzer Government as to undermine the foundation of confidence and sympathy which we have built up in our relations, endanger the devaluation/fiscal reform program, jeopardize the Matilde settlement, and adversely affect the outlook for the success and continuation in power of the Banzer Government.

Once the devaluation/fiscal reform program has taken effect and put Bolivia and the Banzer Government on a sufficiently firm and stable foundation economically and politically, it would be timely to reconsider the question of resuming tin disposals./2/

/2/On the copy of this memorandum attached to Document 445, a note in the margin next to this paragraph reads: "probably in 1993."

Harry G. Barnes/3/

/3/Barnes signed for Eliot above Eliot's typed signature.

 

445. Action Memorandum From Phil Odeen of the National Security Council Staff to the President's Assistant for National Security Affairs (Kissinger)/1/

Washington, November 27, 1972.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile (1973). Confidential. Concurred in by Hormats, Jorden, and Holdridge. Attached to a January 19, 1973, typed note by J. Bushnell, that reads: "Note. State has been requested to provide considered opinion on timing of initiation tin sales and issue of sale to potential Japanese stockpile. State is divided between Economic Bureau which wants to negotiate long-term sale agreements with International Tin Council and ARA which wishes to continue the Presidential ban on any tin sales, even to a Japanese stockpile. The issue awaits new arrivals on 7th floor for resolution. Meanwhile the President has reviewed the entire stockpile issue and actions affecting tin as well as other commodities are proceeding separately in a manner which makes these letters OBE. We have consulted informally at the staff level with the authors of the incoming letters who agree that they not be answered and the tin sale issue be treated as part of the larger picture."

SUBJECT
Disposal of Stockpile Tin

Cap Weinberger (Tab D),/2/ Peter Flanigan (Tab E),/3/ and George Lincoln (Tab F)/4/ have written concerning the President's ban on the disposal of tin from the Stockpile in deference to our concern for the stability of the Bolivian Government. They would like to see the ban lifted and sales of tin resumed in order to provide additional budget revenues (about $20 million per year).

/2/Weinberger's October 10 memorandum to Kissinger is not printed.

/3/Flanigan's October 10 memorandum to Kissinger is not printed. He referred to the President's commitment to a stockpile reduction and noted the possible budget and balance-of-payments benefits of additional sales. He mentioned an ongoing rubber disposal program in which Malaysia had concurred and suggested reevaluation of the political considerations regarding tin sales.

/4/In his November 14 memorandum to Kissinger, not printed, Lincoln noted the legislative authority to sell excess tin and urged reconsideration of the tin disposal program.

Background

In April 1971, in direct response to a plea from the Bolivian Ambassador, the President ordered an extension of a prohibition on disposal of surplus tin./5/ He recognized the potential revenue gains from the disposal, but the President assessed that the foreign policy repercussions of such action (in Bolivia in particular) would be adverse to U.S. interests.

/5/See footnote 2, Document 440.

The State Department (see Tab G)/6/ is opposed to lifting the ban on tin sales on the grounds that it would undermine the Banzer Government's attempt to effect fiscal and monetary reforms, specifically the recent currency devaluation, which is crucial to placing the government and economy on a firmer base. There are already riots in the streets of La Paz and the Banzer Government which is under heavy fire has declared a state of siege. At this juncture in Bolivian economic and political development, it would be unwise to take the considerable political risk of tin disposal for a small revenue gain.

/6/Document 444.

Moreover, the world price of tin is now depressed although tin prices were high during 1970-71. Initiating sales would violate our 1966 understanding with the International Tin Council in which we agreed to cooperate with the Tin Council's efforts to keep the price of tin from falling below a price floor. The current price is only a little above the floor and initiation of U.S. sales might force Malaysia, Indonesia and Thailand as well as Bolivia to adopt export controls and suffer reduced export earnings. Thus the foreign policy considerations at this time extend well beyond Bolivia.

An Alternative Approach

While this is not the time to initiate sales of our surplus tin in a way that would depress the already weak world market, there may be a way to meet the underlying objective of increasing our budget and balance of payments receipts from tin. Japan is a major consumer of tin and has no official stockpile. Japanese purchase of a part of our stockpile to establish its own stockpile would:

--help moderate Japan's highly favorable trade balance with us;

--increase our budgetary receipts;

--give the Japanese some reserve supply of a key commodity (Japan in essence has been relying on our stockpile at no cost to it);

--permit Japan to purchase tin from us at a favorable price because the tin price is low at the moment.

Although Bolivia and other producer countries would prefer to have Japan establish a stockpile through purchases on the open market, a transfer from one stockpile to another which has no effect on the market should be acceptable to the producers especially if they understand this is an alternative to U.S. sales on the market.

At our request the State Department has initiated discussions with the Japanese on such a tin purchase (Tab H)./7/ We have no assurance Japan will agree to establishment of a tin reserve. But initiating these discussions allows you to be somewhat positive in responding to Weinberger, Flanigan and Lincoln without upsetting the Bolivian situation.

/7/Telegram 212280 to Tokyo, November 22, not printed, reported that on October 27 a Japanese Embassy officer had come in on instructions to explore possible purchases of excess commodities from the stockpile to help redress Japan's balance-of-payments problem with the United States. The Japanese were particularly interested in nickel and cobalt, but the Department informed the Embassy in Tokyo that there was a strong interest to begin commercial sales of excess tin and asked the Embassy to approach Japanese officials regarding purchases of tin as well as other commodities. The Embassy was informed that Japan would have to agree to hold any tin purchases in a Japanese stockpile until an emergency arose to avoid depressing the tin market, and requested the greatest discretion on the part of U.S. and Japanese negotiators due to the adverse effects that rumors of possible tin sales would have on relations with the tin producers.

Recommendation

That you sign the memos at Tabs A, B, and C to Cap Weinberger,/8/ Peter Flanigan and George Lincoln which state the foreign policy restraint on open market sales of tin is still necessary but that the underlying budgetary objective could be attained if negotiations which the State Department has opened result in a Japanese purchase of some of our surplus tin for a Japanese emergency stock.

/8/None printed; the memoranda were not signed.

 

446. Memorandum From the President's Assistant for National Security Affairs (Kissinger) to President Nixon/1/

Washington, December 26, 1972.

/1/Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile (1973). Confidential.

SUBJECT
Stockpile of Strategic Material

A review of the Stockpile of Strategic Materials has been completed which shows that our present inventory of materials far exceeds national security requirements. However, before the Administration can press for disposal authority from the Congress, you need to provide new planning guidance for Stockpile policy based on national security judgments. This memorandum provides, for your consideration and decision, policy alternatives that establish such a planning basis and rationale.

Background

The hypothetical national emergency which sets the size and mix of the Stockpile inventory is at present a three year conventional war in Europe and Asia. This scenario was reaffirmed by the previous Administration as the planning basis for the Stockpile and has been used to support in the Congress this Administration's stated Stockpile requirement of 72 materials valued at $4.9 billion. (The total Stockpile inventory is $6.6 billion, including $1.7 billion which has already been determined to be excess.)

Issues For Decision

There are three key issues in establishing a new planning basis for the Stockpile. They are:

1. The War Scenario. The war scenario that is assumed for Stockpile planning is described in terms of a) the theater or theaters in which the war occurs; b) the duration of the war; c) the military manpower level the U.S. will support.

Current Policy: Current Stockpile policy is premised on three year wars in Europe and Asia with U.S. support for a 5 million man military manpower level.

The two theater planning basis does not necessarily imply forces engaged simultaneously in both theaters, rather it entails simultaneous conflicts in which the U.S. is engaged in at least one and material supply is interrupted from both theaters.

Alternatives: Your principal choices are:

A. Maintain the current policy guidance, i.e., 3 years, Europe and Asia; 5 million men. (OEP recommendation)

B. Reduce the war duration in Europe, i.e., 2 years, Europe; 3 years, Asia; 5 million men. (DOD recommendation, I concur) (Weinberger, Ehrlichman & Timmons concur)

C. Reduce further the war duration in Europe, i.e., 1 year, Europe, 3 years, Asia; 5 million men. (Most consistent with military planning for short war duration in Europe)/2/

/2/The President initialed this alternative.

D. Other, as you may specify./3/

/3/The President also checked this alternative and wrote: "Reduce even further--all this is ridiculous."

2. The Degree of Austerity Imposed on the U.S. Economy. The degree of austerity relates to sustaining growth in civilian consumption standards during war. If it is planned that the burden of meeting defense related production requirements during war will be borne largely by consumers in terms of their sacrifice of improvement in living standards, then the requirement for stockpiling materials will be diminished. For example, reduced private automobile production would increase the availability of lead and copper for defense related production, lessening the need for these materials in the Stockpile.

Current Policy: Current Stockpile guidance is ambiguous on this issue.

Alternatives: Your principal choices, are:

A. Some austerity but quantities stockpiled should be sufficient to preclude declines below prewar levels in living standards. (DoD and OEP recommendation, I concur) (Weinberger, Ehrlichman and Timmons concur.)

B. Other, as you may specify./4/

/4/The President wrote and underscored "Cut it" next to this alternative.

3. Cushion to Hedge Against Unanticipated Developments. Whatever the amount of material estimated necessary to meet expected Stockpile requirements, additional amounts may be added to hedge against unanticipated developments such as high losses of materials in shipment due to enemy submarine action or curtailment of exports from usual trading partners due to adverse political developments.

Current Policy: Current guidance provides a hedge by assuming imports in the first war year from normal sources outside of North America, Mexico and the Caribbean area will not be available. This add-on amounts to approximately $1 billion of the present $4 billion Stockpile requirement.

Alternatives: Your principal choices are:

A. Reduce cushion by shortening non-availability period from 1 year to 6 months and by assuming only the principal sources of foreign supply are nonavailable rather than all sources of foreign supply. (DOD recommendation, I concur.) (Weinberger, Ehrlichman and Timmons concur.)

B. Eliminate cushion./5/

/5/The President drew a line through Alternative A and initialed Alternative B.

C. Other, as you may specify.

Stockpile Policy and Revenue Potential

The planning basis recommended by DOD in which I concur requires a Stockpile inventory of $1.3 billion. (Current requirements is $4.9 billion; current inventory is $6.6 billion.) Such a reduced inventory requirement provides an opportunity to obtain substantial revenues from Stockpile disposals, however, experience indicates that the rate at which revenues are likely to accrue to the budget is slow and can extend over a period of several decades (revenue estimates at Tab A) because:

--Disposals must be authorized by Congress. Authorization is often refused or is slow in coming because of views held by key Congressmen that a large Stockpile is vital to the national security and/or disposals from it are detrimental to their constituencies.

--Even after authorization, disposals cannot (by statute) occur at a pace which will seriously disrupt materials markets.

--Stockpile disposals may be an irritant to foreign governments whose exchange earnings come from material exports. We often find it advantageous to slow or forego disposals to eliminate this irritant.

Recommendation

Substantial reductions in the Stockpile inventory will not jeopardize the national security. I recommend, therefore, that you authorize the National Security Decision Memorandum (Tab B)/6/ that directs General Lincoln to adjust downward the Stockpile inventory requirement consistent with the Department of Defense recommendations. If you wish to select other alternatives, the NSDM will be revised accordingly.

/6/Not printed.

The proposed National Security Decision Memorandum/7/ provides guidance to lower the Stockpile requirement, but it does not establish a strategy for how and when to approach the Congress for Stockpile disposal authority or provide a plan for Stockpile sales once they are authorized. As soon as you approve a National Security Decision Memorandum lowering the Stockpile requirement, I will develop with Cap Weinberger and John Ehrlichman our recommendations for Stockpile disposal actions including a new disposal program for submission to the Congress.

/7/The President circled "National Security Decision Memorandum," drew a line to the bottom of the page, and wrote: "Change to reflect my very dim view of this whole program. Unless cuts mortally affect the economy in the U.S.--make them." NSDM 203 was issued on February 6, 1973; the cuts were reduced. (National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 396, Stockpile (1973))

Cap Weinberger and John Erlichman concur. Bill Timmons also concurs./8/

/8/The President drew a line through this last paragraph and the options below and wrote "E" over Ehrlichman's name.

Approve the NSDM

Rewrite the NSDM to reflect my decisions

Other

 

Tab A

Revenue Estimates
($ Millions)

Stockpile Inventory Requirements Consistent With		Revenues From Excess Sales
		1972	1973-75	Total Potential
Current Policy	4900	150	900	1700
DOD Recommendation	1300	--	1000/1200	5300