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

E files, lot 70 D 467

No. 294
Current Economic Developments

[Extract]

¹

secret
[No. 440]

Washington, April 27, 1954.

. . . . . . .

Mutual Security Program for 1955

Congressional hearings have begun on the Administration’s Mutual Security Program for fiscal year 1955.² The program totals approximately $3.4 billion in new funds, in comparison with $4.5 billion appropriated for fiscal year 1954 and $6.1 billion for fiscal year 1953. The program is divided by functions into the following seven categories:

Mutual Defense Assistance	$1,580,000,000
Direct Forces Support	945,000,000
Mutual Defense Support	223,400,000
Technical Cooperation	131,600,000
Development Assistance	256,400,000
Relief and Rehabilitation (Korea only)	241,300,000
Other Programs	70,000,000

Mutual defense assistance covers programs of military equipment and training administered by the Department of Defense as well as certain programs closely akin to military end-item and training programs such as facilities assistance, contributions to NATO, infrastructure and special weapons planning. Direct forces support includes a program for the manufacture of aircraft to be delivered to the RAF; financial assistance for the support of military operations in Indochina; and common use programs for Yugoslavia, Turkey and Formosa. Mutual defense support includes assistance programs which are needed in some countries to create the necessary economic strength to support the maintenance of military forces at a certain level. Technical cooperation includes the sharing of our knowledge and techniques with the peoples of the less developed areas to help them to further their economic development and raise their standards of living. Development assistance describes aid given primarily to promote economic development or otherwise to create or maintain economic or political stability.

Aid by Regions On a geographic basis, the division of the proposed program is as follows, in round numbers:

Far East and Pacific	$1,768.9	million
Europe	897.7	”
Near East, Africa and S. Asia	569.1	”
Latin America	47.0	”
Non-regional	165.0	”

Far East The $1,768.9 million proposed for the Far East is just over half of the total proposed for the world and reflects the growing emphasis on that area. The bulk of this amount, $1,333 million or approximately one-third of the world wide total, is programmed for Indochina. This includes $800 million for direct forces support, $308 million for mutual defense assistance, and the remainder for economic matters related to defense support and for technical cooperation. For relief and rehabilitation in the Republic of Korea $241.3 million is requested. For Formosa, funds are proposed for mutual defense assistance, direct forces support, for economic or mutual defense support and a small amount to continue the technical cooperation program there—a total of $172.9 million. Japan is budgeted for $102.1 million in mutual defense assistance. For the Philippines a total of $24.4 million is proposed for development assistance, technical cooperation and mutual defense assistance. Technical cooperation programs are proposed for Indonesia and Thailand, and in addition, Thailand is to receive mutual defense assistance.

Europe The primary means through which the US is attempting to achieve its policy objectives in Western Europe is the assistance it provides its NATO allies and other friendly European nations. This assistance takes the form of: 1) provision of large quantities of military equipment, services and training for these nations’ forces; 2) purchase in Europe of a portion of the equipment intended for forces in Europe, i.e. offshore procurement; 3) provision of defense support assistance with which recipient countries can obtain dollar commodities needed to bolster internal defense efforts; 4) direct support of military forces through financing the cost of particular local military projects.

Most of the $897.7 million requested for this area is for mutual defense assistance, with some direct forces support and mutual defense support requested in situations like Spain, Yugoslavia and Berlin. Spain, for example, is allotted $30 million to be used primarily for imports of raw materials and consumables. About half of this is to be in the form of surplus agricultural commodities. The local currency counterpart is to be applied to US base construction costs. West Berlin is to receive $25 million in agricultural surpluses and the counterpart is to be used as supplementary funds for capital investment and risk financing essential to relieve unemployment. To support Yugoslavia’s own efforts to maintain a large defense establishment $15 million is proposed, plus $20 million in direct forces support. Economic aid as pure budgetary support has been eliminated for Europe.

Near East, Africa and South Asia US interest in this area, where more than 700 million people or about 30% of the world population live, requires the acceleration of economic development. For this reason, a large portion of the total $569.1 million requested for the area is to be used for development assistance and technical cooperation, with the largest single portion recommended for India. The mutual defense assistance, direct forces support and mutual defense support funds are allotted primarily to Greece and Turkey, with Iran slated to receive $6.9 million in mutual defense assistance.

A tentative country breakdown of the proposed development assistance and technical cooperation programs follows:

Country		Development Assistance	Technical Cooperation
		Million	Million
Egypt		$20.0	$4.4
Ethiopia			1.5
Iran		40.0	10.0
Iraq			2.2
Israel		40.0	1.4
Jordan		10.0	2.2
Lebanon		5.0	2.5
Liberia			1.3
Libya			1.4
Saudi Arabia			1.7
Syria		10.0
Dependent Overseas Territories		5.0	5.4
Afghanistan			1.6
India		85.0	19.5
Nepal			.8
Pakistan		20.0	6.7
Regional			1.2
Undistributed by Country			2.2
UNRWA		(30.0*)
	Total	$235.0	$66.0

In many of the countries it is planned that part of the aid will be in the form of US agricultural commodities.

Latin America The largest portion of the $47 million in new money requested for Latin America is to be used to continue technical cooperation programs in 19 of the Latin American republics (all except Argentina) and in the Caribbean dependent overseas territories—a total of $23.5 million. The sum of $1.5 million is requested as the US contribution to the technical assistance program of the Organization of American States in the region. In order to continue the emergency program in Bolivia which began this year, $9 million is requested for development assistance. To continue the grant military assistance program under which eight Latin American countries already have entered into bilateral military assistance agreements with the US and under which negotiations are under way with three additional countries, $13 million has been requested.

Non-Regional Programs A total of $165 million is requested for programs which are non-regional in character. Among the purposes for which this sum is requested are: $17.9 million for the US contribution to the UN expanded technical assistance program; $11.7 million for the US contribution to the Intergovernmental Committee for European Migration; $13.5 for the US contribution to the UN Children’s Fund; and $3.2 million for the NATO civilian headquarters. Largest items are allotted for administrative costs and for military facilities assistance and mutual special weapons planning.

Proposed Legislation The draft bill proposed by the Administration provides that all of the funds would be appropriated to the President. Existing administrative organization arrangements within the government for administering the program are to remain, and the Foreign Operations Administration is extended until June 30, 1955. The actual bill has combined pertinent existing legislation into one act and provides for repeal of the separate earlier statutes. The Act for International Development which was not emergency or temporary legislation, is among those repealed. This will necessitate Congressional reconsideration of continuation of the technical assistance program when various other parts of the proposed consolidated bill expire. While the draft bill does permit the use of surplus agricultural commodities in our economic aid programs, the major provision for use of our surplus commodities abroad is to be included in separate legislation. Thus, the surplus commodity program under Section 550 of the Mutual Security Act is not proposed to be continued as such.

The President is authorized to transfer up to 10% of the funds available within the first six categories of assistance to any other of the categories. The transferred funds can then be used according to the provisions of the category to which they are transferred. Similarly the President can transfer up to 10% of the funds available under any of the sections or geographic subdivisions of the categories (except mutual defense assistance) to other sections or geographic subdivisions within any of those categories. The President is also authorized to use up to $100 million of any of the funds available under this Act to further the purposes of the Act, and without regard to specific provisions of the Act, when he considers such use important to the security of the US.

. . . . . . .

1. The sections not printed deal with the conclusion of the Consultative Group Meeting; the U.S. loan to the European Coal and Steel Community; devaluation of currency by the Government of Mexico; and, progress of the FCN Treaty Negotiations with the Federal Republic of Germany.
2. See the editorial note, supra.
3. Authorization only. [Footnote in the source text.]