Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

292. Memorandum From the Under Secretary of State (Ball) to the President’s Special Assistant for National Security Affairs (Bundy)¹

Washington, November 3, 1965.

Pursuant to our telephone conversation I am enclosing a draft letter which was prepared by Tony Solomon for my signature.² I did not receive this until I was in the midst of the Balance of Payments meeting and consequently, have not had time to give it personal attention. I am sending it along to you since it does express the general position which I outlined to you over the telephone.

Our own analysis suggests that requiring defense industries to produce defense items from ingots drawn out of the stockpile would not appreciably affect the level of imports. Ingot users would continue to procure their requirements at the cheapest price and, to the extent that there was a competitive advantage in imported ingots, the users would continue to bring them in from abroad.

Under these circumstances, I would strongly urge that in announcing the program we avoid reference to the balance of payments or to any curtailments. If we were to do so, we would incur all the disadvantages of taking protectionist action without in fact improving our international current account appreciably.

As you are well aware, this problem is particularly sensitive at the moment because of the election campaign in Canada.

The draft letter suggests that we advise the Canadian and Norwegian Governments as to what we are proposing to do and why we are proposing to do it.

I shall be in the Department until 7:15 or so, if you need me in the meeting.

George W. Ball

1. Source: Johnson Library, National Security File, Subject File, Aluminum Problem, Box 1. Confidential.
2. Not printed. This letter, also dated November 3 and addressed to Secretary of Defense McNamara, recommended that the disposal of 200,000 tons of surplus aluminum be justified by military requirements of the Vietnam war rather than by improving the U.S. balance of payments.__During a telephone conversation with Secretary of Defense McNamara on November 2 at 3 p.m., McNamara told President Johnson there was no question in his mind that they ought to take 200,000 tons of aluminum out of the stockpile. McNamara said defense production needs were 150,000–200,000 tons above pre-Vietnam levels and this release would permit the increased defense production without further increases in already rising imports which the balance of payments program could ill afford. McNamara said industry was concerned, and they would have to work out how to do this with the least disruption of the American market, but he had told an industry representative he had been working on increased defense production and the stockpile since July 20 and the current decision was not related to the Olin-Mathieson price increase announced the previous Friday. McNamara also reported telling the industry representative he thought the President was even considering a larger release, up to 400,000 tons a year, to expedite disposing of the 1.3 million ton surplus. (Johnson Library, Recordings and Transcripts, Recording of a Telephone Conversation, Tape FMISC.01, Side B, PNO 1)