Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

80. Telegram From the Department of State to the Embassy in Germany⁰

Washington, July 30, 1963, 9:07 p.m.

300. Joint State-Treasury-Defense. Embtel 374.¹ Re Part I Joint Report we agree that there should be no doubt that the U.S. expects a full offset to U.S. defense expenditures in both payments and orders. Therefore it is proposed that Secretary McNamara present the following letter to Minister von Hassel to make it absolutely clear that we expect full offset. This is in keeping with the past practice of exchanges with the FRGMOD on this subject.

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• "1. In consonance with the assurances that you gave President Kennedy and in accordance with the memorandum presented to Minister Erhard,² following his discussion with President Kennedy during his recent visit, it is in our mutual interest to offset in full the dollars received by Germany as a result of U.S. defense expenditures in Germany.
• "2. Therefore, the level of FRG payments—as well as orders—resulting from the cooperative logistics arrangements between our respective governments, which will have benefit both to the military capabilities of the armed forces of the FRG and to the U.S. balance of payments, should result in a full offset of U.S. defense expenditures in the FRG, presently estimated at $1,300 million for CY 63-64.
• "3. It is our understanding that this objective is in consonance with a $1,300 million planned FRG procurement objective for CY 63-64.” End text.

Re second troublesome feature mentioned Embtel we realize FRG could use para 4 to modify payments schedule, but we do not consider it feasible eliminate reference to Feb. 2 exchange of letters or to amend those letters.³

0. Source: Department of State, Central Files,FN 12 US. Confidential; Operational Immediate. Drafted by Henry J. Kuss (Defense) and Robert M. Brandin (EUR/GER) on July 29; cleared by Sullivan (Treasury), Brandin, David Klein (White House), and Grant G. Hilliker (S/S); and approved by Jeffrey C. Kitchen (G/PM).
1. Telegram 374 from Bonn, July 27, claimed that the Joint Report, which was signed on July 24 by representatives of the Department of Defense and the German Defense Ministry and was to be signed by German Defense Minister Kai-Uwe von Hassel and McNamara during the latter’s visit to Bonn July 31-August 2, was not clear whether the payments offset during the next 2 years would be $1,300 million or $1,000 million. The telegram expressed the fear that the German Government would interpret the Joint Report as “U.S. acquiescence to FRG minimum payments schedule totaling $1,000 million.” (Ibid.) The Joint Report has not been found.
2. See footnote 3, Document 74.
3. The source text has no signature.