Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 1

740.5 MSP/3–1753

No. 273
Memorandum by the Director of the Policy Planning Staff (Nitze) to the Secretary of State

top secret

[Washington,] March 17, 1953.

Effect of Reductions in MSAP Expenditures During FY 1954 and FY 1955

1. At the NSC meeting on March 17 [18],¹ the Director for Mutual Security will present a position, based on a detailed analysis by MSA, State and Defense, of the impact on our security objectives of an expenditure ceiling in FY 1954 of $5.5 billion and in FY 1955 of $4.0 billion. This represents a reduction of $1.9 billion in FY 1954 and $4.0 billion in FY 1955 from expenditure estimates in the Truman budget.

2. It is recommended that you supplement Mr. Stassen’s statement by placing the problem in its foreign policy setting. In this connection, you may wish to make the following points:

a. At this time when we are trying hard to increase native forces in the Far East and trying to lay the basis for a satisfactory settlement in Korea and Indochina it is of the utmost importance that the rug not be pulled out from under these efforts by an arbitrary reduction in the deliveries of arms or of the economic assistance necessary to support the forces to be created. In the Far East, the expenditures required in FY 1954 and 1955 will probably exceed, not be less than, those contemplated by the Truman budget.

b. In Europe, the situation is more complicated. We are trying hard to put over EDC and get on with a German contribution to the defense of the area. Germany remains the principal potential source of strength which could contribute in the long run to lightening the U.S. burden. The prospects for EDC remain cloudy, but it would be unfortunate if domestic budget considerations forced us into a course of action which would foreclose in advance the prospect for a German contribution.

The European situation also bears on the Far East. If the U.S. is not in a position to meet certain of the French European requirements it is extremely doubtful that France will do what appears to be necessary in Indochina and may even go so far as to face us with the choice of abandoning Southeast Asia or taking over the Indo-Chinese fighting ourselves.

Critical negotiations concerning these objectives will take place next week with M. Mayer.² The French are asking for very large sums of money—much more than we have ever contemplated giving them—in return for continuing the war in Indochina and proceeding with the build-up of their forces in Europe via the EDC. I do not believe we should give them what they are asking. However, we must have some negotiating room to provide reasonable amounts of aid to the French if we can thereby achieve the tremendously vital security objectives which can be obtained only through French cooperation.

These European policies can be implemented only if the U.S. continues to provide assistance along the lines requested in Mr. Stassen’s program of February 23.³ The most critical elements in this program are the defense support and offshore procurement funds. These provide the essential flexibility without which we cannot hope to achieve our European objectives. If reductions are necessary they should fall first on the end-item element of the program rather than on defense support or OSP.

It may be that by the time the 1954 budget is presented it will be clear that EDC is not in sight. We should still, I believe, provide defense support and OSP funds in the amounts Mr. Stassen requested. We might in this event consider adjusting our end-item program to levels required by existing unexpended funds. Behind these changes would lie a basic policy change in Europe in the direction of strengthening the defense of the periphery at the expense of the center. We should be flexible and gradual in moving toward such a change since its objective would be to persuade the French to change their position and go through with the EDC. I still believe and hope that such a change in policy will be unnecessary.

c. In the Middle East and South Asia, the weakness of the area and the limited nature of the tools we have available to work for an improvement make us extremely leery of arbitrary cuts in the expenditures which we can undertake there.

d. In Latin America the program is small but politically important.

e. If real reductions in program, as distinguished from achieving greater efficiency in executing programs, are necessary for domestic economic reasons, we question whether it is not more important to preserve our political flexibility of action while stretching out some items of our domestic military build-up than visa versa. If we lose important areas in the Far East, Europe, or the Middle East, the consequences can be of immense and almost irreversible significance to our entire security structure. It may be that with Stalin’s death the immediacy of the threat of general war is somewhat postponed.

We therefore support the considerations advanced by Mr. Stassen in support of the earlier DMS budget submissions.

Paul H. Nitze

1. A summary of the Mar. 18 NSC meeting is provided in the editorial note, infra.
2. French Premier René Mayer visited Washington Mar. 26–28.
3. See the letter from Under Secretary Smith to Mutual Security Director Stassen, supra.