751.5 MSP/10–352: Telegram
No. 541
The Secretary of
State to the Embassy in
France1
secret
Washington, October 3, 1952—7:28
p.m.
1954. Cotel. Reply to Pinay letter and oral supplementary statement being transmitted simultaneously separate tel.2 Fol points shld also be covered in ur discussions with French.
- 1.
- Make clear that $525 million excludes whatever amts programmed to carry out Moody amendment.
- 2.
- You shld secure an understanding and, if possible, an agreed minute to the effect that, while we have no desire to prejudice any possible developments with respect to the foreign exchange value of the frame, we wld want it understood that the value of U.S. aid in support of the French Def budget wld have to be examined again with the French Govt to determine what adjustments might be appropriate [Page 1247] under the new budgetary situation that wld result from any changed relation of the French franc to the dollar.
- 3.
- Since the terms of the understanding we wish to reach with the French, as contained in the ltr and the supplementary oral statement, relate the dollar value of our aid (excluding Moody) to the total French def budget (including counterpart, U.S. procurement, etc.), and do not therefore involve the specific rate or amt of counterpart accrual as such during any particular fiscal or calender year, the 10% counterpart problem, as well as the counterpart pipeline problem, is adequately covered by the terms of our overall negotiation. No specific ref to the 10% problem is therefore necessary at the outset, and we are sympathetic to expressed desire of country team not to entangle these aid negots with estimates of counterpart pipeline at beginning and end of calendar ’53, etc. (If there in any indication Fr think or will wish to argue later that $525 million is after deduction 10% of def support portion, you shld leave no possible room for doubt that score.) We are still left with the question however, of whether to make further releases in CY ’52 of accrued counterpart beyond the 184.3 billion francs, prior to satis understanding with the French on basis Pinay ltr. As understood here between MSA and Labouisse, no further release desirable until we have received satis reaction from Fr Govt to the U.S. negotiating position contained in ltr and oral statement.
- 4.
- As agreed in MAAC with Labouisse, counterpart of FY 53 aid in the form of def support will all be devoted to Fr def production budget. As was discussed in MAAC, and as further discussed by Labouisse and Cleveland, the specific application of counterpart funds to Fr def production and, where necessary, the specific conditions under which counterpart funds will be used, will be agreed from time to time by the Fr and U.S. Govts under a more detailed procedure than has heretofore been in effect. Fr shld be advised in ur discussions U.S. will work out with them a procedure which, without slowing up procurement by Fr Govt of matériel required for its forces, will make sure that counterpart, as well as end-items and OSP, are used in a coordinated fashion with Fr resources to secure a flow of milit equipment to Fr forces that most effectively meets the requirements of Fr NATO forces and the IC campaign. In this connection particular emphasis shld be laid upon the necessity to integrate counterpart expenditure with the total indigenous Fr milit production program. These bilateral discussions wld, of course, take place within the framework of such guidance as can be secured from NATO, on NATO-wide def production programs. We understand Labouisse in agreement with advising Fr of these intentions at time of transmittal ltr to Pinay.
- 5.
- In your discretion you may remind Fr that diversion of end-items funds from original intended purpose means less end-items funded for all NATO countries, France included.
Acheson