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I thought I heard the Secretary of State pontificate on that yesterday at the briefing for Members of Congress, did he not!

Mr. DE PALMA. Yes, I think he mentioned it there, and he mentioned it last night at his Overseas Press Club appearance.

Mr. Gross. Isn't this going to increase the take from the Indonesians and the Ethiopians? A 6-percent cut for the United States will increase the levy on them, won't it?

Mr. De Palma. It would if it were done now in an arbitrary way. It would not necessarily if it were done in connection with the admission of new members into the Organization.

Mr. Gross. Well, we have not been relieved of very much by the admission of a lot of new members to the United Nations, have we?

Mr. DE PALMA. Very fractional percentage points, but we have been relieved each time as new members were admitted and as the new scales of assessment were computed.

Mr. Gross. I see. That was a whopping cụt from 31.57 to 31.52.
Mr. DE PALMA. That was our proportionate share.
Mr. Gross. That was a hell of a cut, was it not?

Mr. De Palma. That was a very small addition that was contributed by these very small states. It was a very small cut.

Mr. Gross. So the 6 percent that even you advocate and the Secretary of State is going to have a serious effect, isn't it, upon this?

Mr. DE PALMA. It definitely will if it is done without the admission of new members bringing in substantial contributions, yes.

Mr. Gross. How many more new members?

Mr. DE PALMA. I cited, for example, the Federal Republic of Germany

because its assessed contribution would be over 6 percent. Mr. Gross. I don't know whether the Federal Republic of Germany is going to be very much interested after this last go around in New York.

I notice you mention the two-thirds vote in your statement, Mr. De Palma. We really got a treatment on the basis of the two-thirds, didn't we, and the application of the two-thirds vote. Didn't we?

Mr. DE PALMA. We lost that vote; yes, sir.

Mr. Gross. So I don't know of any reason why a two-thirds vote should be conjured up in connection with this situation. Why should we pay any more attention to a two-thirds vote? It seems to me that was a violation of the Charter of the United Nations when they refused to apply the two-thirds vote to the so-called important question. Don't you think it was?

Mr. De Palma. Mr. Congressman, you know the fight we made; we had a strong point of view and we expressed it. But, very obviously, a large majority did not agree with us.

Mr. Gross. I am not impressed at all with this two-thirds vote business. I think that in the future the United States ought to ignore it. Somewhere in your statement you said that if we didn't ante up on the basis of about 25 percent, there would be no United Nations, or we would be abandoning the United Nations. Is that the gist of your testimony?

Mr. DE PALMA. Yes; I made such a statement.
Mr. Gross. Would that be bad?
Mr. De Palma. I think it would, very definitely.

Mr. Gross. I expected you to say that.

Mr. DE PALMA. I think it would be very harmful to the national interests of the United States.

Mr. Gross. Well, I doubt if you and I will get together on this issue.

Mr. DE PALMA. I don't think we would.

Mr. Gross. Or very many other issues with respect to raiding the taxpayers of this country for more and better handouts to foreigners.

Thank you, Mr. Chairman.
Mr. FRASER. Mr. Kazen ?
Mr. Kazen. Thank you, Mr. Chairman.

Mr. Secretary, I want to thank you for the statement which you have made before us this morning. I must confess that this is the first time that I have really seen a breakdown on the history of assessments, and I am glad to have it.

You made one statement, Mr. Secretary, that in 1957 the General Assembly, again at our insistence, reduced the ceiling to 30 percent in principle. What do you mean by that?

Mr. DE PALMA. Well, they took a decision that there ought to be a ceiling of 30 percent on the maximum contribution. They did not at that very moment set our percentage point at 30 percent. Having established the principle, it was the understanding that we would work our way down to it as circumstances permitted, and that has been done.

We have not reached it yet, but reductions have been achieved through readjusting this scale as new members have been admitted. We have gotten down to 31.52 percent as a result of that process, so the ceiling exists in principle as the goal toward which we are expected to move. What I am suggesting is that we ought now to work to set the ceiling at 25 and not just in principle but to get ourselves down to 25 percent as rapidly as we can.

Mr. KAZEN. How would you do that?

Mr. DE PALMA. I think that the most obvious way to do it, the easiest way to do it, and perhaps the only politically feasible way to do it, is to take advantage of the admission of additional members. I am not speaking of a purely hypothetical situation because there is a very definite prospect, as you know, in the policy of the Federal Republic of Germany to work out an inner-German agreement. Once the treatv. with the Soviet Union and the related documents are signed, the powers concerned have already indicated that they intend and are willing for both Germanys to enter the United Nations. This is not a purely theoretical prospect; it is a probable one.

Mr. KAZEN. Well, when you talk about the admission of new members, in the German Federation the only one that you are talking about?

Mr. De Palma. No; I cited Germany because it would bring in such. a substantial contribution as to be very meaningful in this context. There are, obviously, a few others. Switzerland is not a member of the United Nations itself, for example.

Mr. KAZEN. Is there any hope that Switzerland will be in, say, within the next 5 years?

Mr. De Palma. I don't know, but the matter is under discussion again in Switzerland.

Mr. KAZEN. What other countries?

Mr. De Palma. Other countries would not be financially significant. Other divided states include the two Koreas, for example, and I am making no prediction about that, and the two Vietnams, which I am leaving out for the moment.

Mr. Kazen. Therefore, there are no new nations coming in?
Mr. De Palma. I have cited the two Germanys.
Mr. Kazen. But they are not new.

Mr. DE PALMA. Neither Germany is now a member of the United Nations. Nor is Switzerland.

Mr. Kazen. We are thinking about the foreseeable, workable future, because the next 2 or 3 years is going to be very vital to the United Nations.

Mr. DE PALMA. Let's leave it at the two Germanys. That would be enough if we should get the benefit of their contributions.

Mr. KAZEN. Well, that would be a drop in the bucket to what people would expect in this country, frankly.

Let me ask you another question about the Lodge Commission report. They say that each reduction in the U.S. share of the regular budget must be clearly marked by at least a corresponding increase in U.S. contributions to one or more of the voluntary budgets for funds in the U.N. system.

Mr. DE PALMA. Correct.

Mr. KAZEN. What would we have gained if we are going to save on the one hand and put it in on the other?

Mr. DE PALMA. Congressman Kazen, I spoke to the 25 percent, I did not address myself to the latter part of the Lodge Commission's recommendation. I said that we think the goal of reducing our assessed contribution toward 25 percent is right, and we should work hard to achieve it. I have not addressed myself to the other problem, but I do think it is important to maintain the level of our voluntary contributions.

I, myself, think those contributions ought to be based in general on relative capacity to pay, with exceptions which we might consider when for some particular reason we believe we should pay more or less. It is hard to make any general rule of thumb as to what we should contribute toward the voluntary programs. I think it is important in general that we, for example, do carry out the President's policy of trying to channel more of our foreign assistance through multilateral organizations, and I would include the U.N. Development Program in that. But I am not at this point linking the two parts of the Lodge Commission's recommendation.

Mr. KAZEN. Well, the only reason I am interested is because it is all in the same breath, in the same sentence.

Mr. DE PALMA. Yes.

Mr. KAZEN. And how in the world can you defend if we are going to fight for this reduction to 25 percent on the one hand and not have these people jump on us and say, “Well, all right, now, if you do, you are following this recommendation. What about the other, putting in a corresponding increase to your voluntary contribution?" It is going to be a pretty difficult situation.

Mr. DE PALMA. I would expect we would be reminded of that. I would not expect when we make this proposal to the U.N. that we would necessarily cite the Lodge Commission report. Others will have read it, and they will no doubt remind us of it.

Mr. Kazen. Thank you, Mr. Chairman.

Mr. Frazer. Mr. Secretary, let me, too, thank you for a very helpful and well-conceived statement.

Would the United Nations in your opinion openly agree to the admission of East Germany in connection with West Germany's admission?

Mr. DE PALMA. Mr. Chairman, I don't really think I ought to get into anything that sounds like a policy statement. Let me say that it is my own personal view that if the two Germanys work out the arrangement that they are negotiating on now, if they are acceptable to the Federal Republic of Germany and then are deemed acceptable by the four powers, including the United States, I cannot personally see any reason why we would not vote to admit both any time they are ready.

Mr. FRASER. Does the United States have any intention or would it support the calling of a special session of the United Nations General Assembly to deal with the very urgent financial, general financial problem which is facing the U.N?

Mr. DE PALMA. Mr. Chairman, this question may be upon us shortly. It is a difficult question to answer. In general, obviously, we would support any kind of procedure that would enable and compel the members of this Organization to face up to this problem. We have been arguing as strenuously as we can that this situation cannot continue.

We have been hoping that the effort that the outgoing president of the last General Assembly, Mr. Hambro, had made would have produced results. To date, it has not, and I am not very hopeful that this particular effort is going to get us to a solution of this problem. So we are looking for other ways. In particular, we are looking very actively for ways to get those who created this problem to face up to the situation.

Now, whether a special session is the answer or not, I think, depends very much on whether we will have gotten to a point in preÎiminary consultations where there is some prospect of achieving anything. If not, we are going to get a repetition of what happened at the time the major deficit started when the Assembly decided that it would not apply article 19 of the charter. I don't think we want to walk into that kind of a deadlock. If we are going to go into a special session, we ought to have some reason to think we will achieve something. It is not necessary to have a special session; there is still some time before the end of this session; but, quite frankly, I am not all that hopeful.

Mr. FRASER. President Hambro's proposals represent the nucleus of the effort to try to establish some kind of new financing arrangement.

Mr. DE PALMA. Yes.

Mr. FRASER. Could you tell us a little about what he has in mind and comment on it?

Mr. DE PALMA. Well, I would do it very generally, if I may. We would be glad to submit something much more specific for the record, if you would like.

Mr. FRASER. If you would do that, it would be very useful.
Mr. DE PALMA. I would be very glad to.
(The information referred to follows:)


In a memorandum of May 26, 1971, to all governments, Ambassador Edvard Hambro set the United Nations deficit (i.e., money owed by the U.N. to others) at $69.6 million. This deficit is comprised of 3 major components :

Million (1) Debts owed by the U.N. mostly to member governments which

rendered direct support to the Congo and Middle East peace-
keeping missions.-

$36. 7 (2) Shortfall in regular annual budget contributions caused by the

withholdings of France, the U.S.S.R., and others since 1963---- 29. 0 (3) Amounts due to certain member governments from "surplus ac

counts" (these are book accounts representing the excess of
appropriations over actual costs for the Congo and Middle East
peacekeeping missions. Had all assessments for peacekeeping
been paid in full, the “surplus accounts” would have been re-


83. 0

Less amount remaining in so-called rescue fund, a fund supported by

voluntary contributions from 22 members to alleviate the U.N. finan-
cial situation.--


Net total.-

69. 6 Under Hambro's scheme, the larger part of the deficit could be eliminated through waivers of claims by member governments, viz., $34 million out of the $36.7 million due for direct support to peacekeeping missions and the entire $17.3 million in the surplus accounts, leaving a net cash requirement of $18.3 million to be obtained from voluntary contributions of members in order to eliminate the deficit.

While this would liquidate the current deficit, it would not eliminate the causes of the deficit: the annual withholding of part of their contributions by France, the U.S.S.R., and the East Europeans. To overcome this barrier, Hambro suggests eliminating the controversial items from the annual budget, and reconstituting the budget format to make it acceptable to all members.

This would involve the prompt settlement of the $119.4 million still due on the U.N. bond issue, now being paid off in regular installments out of the U.X.'s annual budget. In addition, agreement would have to be reached on the other controversial sections of the budget, such as technical assistance, the U.N. Commission for the Unification and Rehabilitation of Korea, and the U.N. cemetery in Korea.

Hambro suggests that part of the bond issue be liquidated through a combination offset and cash surrender arrangement. Each bond-holding member government (60 in all) would deduct from the face value of its bond holdings the amount it would otherwise pay in assessed contributions over the next eighteen years to redeem the full bond issue. Then, the remainder could be reduced by a further 40% to a suggested “fair market value” for the bonds, which pay a minimal 2% interest. Bond holders could accept what remains in full payment for their holdings. The offset arrangement would reduce the cost of amortization by $79 million, while the 40% cash surrender arrangement could result in a further cut of $16.2 million, leaving a net cash requirement of $24.2 million to retire the existing bond issue.

1 $2.7 million of this is owed to agencies other than member governments.

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