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

700.5 MSP/12–653

No. 287
The Special Assistant to the Secretary of State for Mutual Security Affairs (Nolting) to the Director of the Bureau of the Budget (Dodge)¹

secret

Washington, December 6, 1953.

Dear Mr. Dodge: The Acting Secretary of State has approved the transmittal to you of the following views of the Department of State on the original FY 1955 estimates of requirements for the Mutual Security Program submitted by the Foreign Operations Administration to the Bureau of the Budget. It is our understanding that Mr. Stassen is submitting to you today revised estimates of requirements² which differ in some respects from the original FOA submissions. Since we have not had the opportunity, because of the accelerated schedule, to study these revisions, our comments are directed to the original submissions.

I should like to take this opportunity to compliment Mr. Macy and his staff on the manner in which they conducted their budget examination. Their searching analysis and cooperative attitude has contributed greatly towards the development of a sound, economical and effective Mutual Security Program for FY 1955.

In presenting the following views, the Department of State has evaluated the general magnitudes of grant assistance in terms of requirements which must be met for various activities and countries if we are to achieve our foreign policy objectives. However, in reviewing the submissions of the operating agencies we have not been in position accurately to evaluate the operational feasibility to utilize effectively the funds requested for particular activities. In addition, we have not taken into account at this time the modalities of our assistance and their effect upon the magnitudes of aid. As you are aware, the Department is studying the possible uses of surplus agricultural commodities in our Mutual Security programs and the possibilities for providing assistance through loans under a more liberal lending policy in lieu of grant economic assistance. Final positions of the Secretary of State on the foregoing questions are expected to be made within the next several weeks, and their effect upon the magnitude of Mutual Security funds evaluated. These results will be promptly forwarded to you.

Military Assistance

The Department of State supports the estimate of $2.4 billion for military assistance—i.e., for MDAP, including offshore procurement. I should like to stress, however, that it continues to be the position of the Department of State that “defense-support” requirements should be sought in the category of “military assistance”, and such requirements would thus be additive to the $2.4 billion figure. The Department supports the $2.4 billion estimate of requirements by the Department of Defense on grounds that it will be a step toward placing the financing of the MDAP program on a more current basis, and that the large undelivered parts of the program taken in combination with the plan to finance lead time with Department of Defense funds does not justify additional financing in FY 55 beyond that recommended by the Department of Defense.

The Department of State considers that the $2.4 billion figure is a minimal figure for the following reasons:

(a) There should, in the opinion of this Department, be a provision similar to Section 5136 of the present Mutual Security Act giving discretionary authority to the President to transfer funds from military assistance appropriations for unforeseen emergencies; the reduction of the $2.4 billion figure, as we see it, would leave little possibility of effecting such transfers without seriously delaying the accomplishment of military objectives.

(b) The Department believes that a program of the magnitude of $2.4 billion, which represents a substantial reduction below FY 1954, will provide continued support for commitments in NATO and other security arrangements, and that this can be adequately explained to our allies without adverse political effects. A further reduction of the figure, however, might well result in the elimination of any further contribution to the war reserve equipment for NATO forces, and thus provide evidence which might be interpreted as a change of our policy in Western Europe.

(c) The FY 1955 military aid program for NATO countries as submitted by the Department of Defense assumes a force basis which excludes from MDAP support all new military units unless individual countries are considered capable of fully supporting and maintaining existing units out of their own resources. It should be pointed out that this programming assumption is in accordance with a JCS criterion which has not been accepted as governmental policy. It is our understanding that time has not permitted the Department of Defense to compare the resulting force basis accepted for MDAP programming with the 1956 NATO force goals which the U.S. intends to approve in the 1953 NATO annual review. It appears almost certain, however, that a fairly large number of support units for ground forces will be included in the NATO force goals for 1956 for which no provision will have been made in the FY 1955 MDA program, although such units will be largely dependent on MDAP assistance for their equipment requirements. A reduction of MDAP funds below the $2.4 billion submitted by the Department of Defense would increase the difficulties of reprogramming to meet the higher priority requirements of such units as are not now covered in the FY 1955 program but which we are prepared to accept within the NATO force goals.

(d) While the program presented by the Department of Defense does not make special provision for certain contingent requirements for military assistance in FY 1955, the Department of State believes it may be necessary to reprogram, as a matter of priority, some part of the $2.4 billion for such requirements. Among the countries where we believe this may be the case is Germany, Japan, Iran, and Pakistan and possibly several other nations in the Middle East and the American Republics. Reduction below the $2.4 billion submission would impair the possibility of reprogramming without serious prejudice to the accomplishment of other objectives of this program.

(e) It should also be pointed out that the Executive Branch is actively considering a decision to provide non-nuclear new weapons for NATO forces.³ If this decision is made there is doubt that the figure of $2.4 billion will be sufficient to implement this plan.

An assumption which should be stressed in connection with the Department of State’s support of the $2.4 billion figure is that we will succeed in making substantial deliveries of equipment to our allies. The contemplated sharp reduction in new obligational authority in FY 1955, particularly in the NATO area, coupled with a failure to deliver past programs, would undoubtedly lead our allies to believe that we were reversing our policies towards Western Europe.

A major objective of the mutual security program is to support the continued development in Europe and the Far East of an adequate military production base. The offshore procurement portion of the Mutual Defense Assistance program has been and will continue to be a key element in achieving this objective. The assumption that a substantial volume of offshore procurement could and would be continued under the FY 1955 MDA program is a major factor in the Department’s support of the reduction in “defense support” programs for that year.

Europe—Economic Assistance

France (Indochina)

The Department strongly supports the estimate of $800 million for support of the military operation in Indochina to be included as a part of the “one line item”. In accordance with our discussion with Mr. Macy of your staff, a costing exercise for this program for calendar year 1954 is being undertaken and will be completed before the time for submission of legislation to Congress. Out of this costing study should come the basis for projecting 1955 costs and a firmer estimate of the amount of this important requirement.

Berlin

For West Berlin, the Department believes that an estimate of $30 million for grant assistance would be adequate to achieve our foreign policy objectives. The Department considers the attainment of our objectives in Berlin to be of a high priority. To this end we believe it essential to attain the goal of a further reduction of unemployment in Berlin by another 50,000 for the coming year. While it is our expectation that we will be successful in our negotiations to have the Federal Republic further increase its support to Berlin in 1956, we believe that U.S. aid of about the same level furnished in FY 1954 ($30 million) will be required. On the assumption of a greater share of the support of Berlin by the Federal Republic, we have in our estimate substantially reduced the pipeline beyond FY 1955.

Greece

The Department concurs in the original FOA estimate of $15 million for Greece.

Spain

The Department concurs in the estimate of $30 million for Spain and supports the views in the FOA memorandum on assistance to Spain being submitted to the Bureau of the Budget.

Turkey

The Department concurs in the estimate of $40 million for aid to Turkey. However, it should be pointed out that the Embassy at Ankara has reported that recent developments indicate that achievement of the force build-up desired in Turkey may not be possible on the basis of the amount of aid now programmed in FY 1954, or the $40 million requested for FY 1955.

United Kingdom

The Department concurs in the estimate of $75 million for the U.K. It is the Department’s view that there is a commitment to the U.K. to request Congress to appropriate this amount to support the U.K. defense effort. Although the military assistance program provides for complete financing of the U.S. contribution to Plan K, it is our understanding that the Secretary of Defense has not approved a policy to support Plan K. Accordingly, we believe that this estimate of $75 million required to enable the U.S. to fulfill its commitment should be included in the “one line item” until there is a U.S. position on financing Plan K for FY 1954 and FY 1955 and until negotiations are undertaken with the British as to the overall estimate of U.S. aid needed to support the desired level of U.K. defense build-up. Should these negotiations be successful, we would hope that a satisfactory U.K. effort in FY 1955 could be attained without requiring the full U.S. contribution to the cost of Plan K and the additional special $75 million program. In this case, the estimate to be justified before Congress should reflect any reduction under this amount that can be achieved.

Yugoslavia

The Department supports the revised estimate of $35 million for Yugoslavia. The provision of this amount of aid to Yugoslavia is a matter of importance to assure the continued development and maintenance of adequate defense forces.

Productivity and Technical Assistance

The Department in its informal comments did not support the FOA submission on this item as originally presented. However, it is now the plan that these programs should be phased out in a manner designed to preserve their past accomplishments. The Department concurs in the revised FOA planning, which takes this factor into account, and believes that these programs should be transferred to the local governments and OEEC during FY 1955.

[Here follow discussions of economic and military assistance to the Near East and Africa, South Asia, the Far East, Latin America, and Multilateral and Other Programs; for text, see volume i, Part 1, page 669.]

Sincerely yours,

Frederick E. Nolting Jr.

1. Copies to the Director of Foreign Operations and the Assistant Secretary of Defense for International Security Affairs.
2. A copy of a 35-page letter from Stassen to Dodge, dated Dec. 9, 1953, transmitting the views of the Director of Foreign Operations regarding the size and composition of the fiscal year 1955 Mutual Security program is not printed.
3. For documentation on the interest of the United States in reassessing NATO military eqiupment requirements, see vol. v, Part 1, pp. 482 ff.