47. Telegram 222 From the Mission to the North Atlantic Treaty Organization to the Department of State1
Subj: Burdensharing, Offset and Jackson-Nunn. Ref: A) USNATO 0175; B) USNATO 0104; C) London 0487; D) State 5965. Please pass SecDef.
Summary: Our efforts in NATO have elicited responses from Allies (other than FRG) offering prospect of military purchases in the US totalling an estimated $750 million. Economic conditions which offered hope of more success when US launched burdensharing proposal in May 73, have now altered to such extent that it is not likely Allies will take any action multilaterally beyond possible modification of US share in NATO budgets, infrastructure contribution, and pipeline deficit. While we should continue to press the FRG to increase its offset to a level more commensurate with its economic position, maximum effort in NATO should now be on putting together quickly a package of military procurement in the US to demonstrate within time frame of Jackson-Nunn effort Allies are making to offset our military BOP expenditures. NATO International Staff is working with Allied authorities to identify categories and amounts of purchases which we may determine creditable under US law. This work can be helpful to US in developing a package which we can present to Congress to show effort being made by Allies under difficult economic conditions, to avoid renewal of Jackson-Nunn amendment, and to forestall other initiatives requiring US troop withdrawals.
Action requested: 1) That as soon as the DPRC determines criteria of eligibility of procurement as offset, staff members from WashDC consult with USNATO and International Secretariat to expedite identification and accounting of such purchases. 2) That SecDef and SecState make approaches we have suggested, particularly with FRG and UK, to prevent foundering of effort to achieve multilaterally agreed relief for
[Page 197]US on NATO budgets and pipeline deficit. 3) That appropriate US Cabinet Secretary consult with FRG FinMin Schmidt to impress upon him need for greater German contribution. End summary.
1. A stock-taking at this juncture leads US to conclude that we have arrived at a watershed in our burdensharing negotiations with NATO Allies.
2. Over the months since our original initiative based on the President’s May 3 policy report to Congress and on statements by SecDef and SecState at June DPC and NAC Ministerials, the US has worked to develop a multilateral burdensharing program to deal with our military BOP and additional budgetary problems. Throughout the early fall, in parallel with bilateral US–FRG negotiations, the US made gradual but perceptible progress toward recognition and acceptance on the part of our Allies that a positive multilateral response was necessary to assure the maintenance of US troop levels in Europe. By early November, we had achieved forthcoming declarations of intentions to increase military procurement in the US (to a total of approx $750 million), and an expressed willingness to consider modification of US share in NATO budgets, infrastructure contribution, and European pipeline deficit. There remained problems with the UK, the FRG, and, of course, France. With worsening economic conditions, a large military BOP loss of its own, and heavy pressure on its defense budget and establishment resulting from civil unrest in Northern Ireland and bombings on the home front, the UK announced its inability to increase its share of NATO budgets. FRG reiterated that its total contribution would be restricted to renewal of its bilateral arrangement with the US—an arrangement still not concluded. France, throughout, remained in the wings regarding the entire subject with calculated detachment. Our Nov 29 illustrative proposal to the NAC was a ploy to maintain momentum by providing examples to which our Allies might respond after consideration at Ministerial or Cabinet level. Rather than giving a new impetus to our overall effort, the December Ministerials left our Allies with the mistaken impression that the pressure for a multilateral response to our initiative was eased. Reports from NATO capitals indicate that Allied Ministers interpreted the US attitude as relaxed and concluded that burdensharing could be taken care of by improvements of their forces. They were undoubtedly encouraged to draw this conclusion by what they perceive as a dramatic and worrying shift in the relative economic position of the US and our European Allies. The negative tone of the Jan 9 NAC discussion pointedly reflected the chill new atmosphere (USNATO 0104).
3. Conditions when we launched our initiative, which offered some hope for multilateral—and preferably automatic—solutions to a longstanding US problem, have now altered to the point where US [Page 198] should reconsider the basic thrust of our approach for the short run. However desirable it may be to work out, eventually a long-term multilateral arrangement which would put the US troop stationing BOP problem permanently behind us, present economic conditions—including skyrocketing energy costs—make such an optimum response unattainable at this time.
An objective appraisal at this juncture can only lead to the conclusion that prospects are becoming worse rather than better during the constricted time frame now imposed by US legislation. The overall US BOP and monetary positions have improved while those of most of our Allies are deteriorating. Our European Allies, accustomed to growth and buoyancy, are now facing a period of belt-tightening brought on in part by the energy crisis and are looking to the future with trepidation. Perceived conditions have changed to such an extent that other allies, particularly the UK, have indicated they may seek offset relief themselves. Under the circumstances, we understand the British position that it is impossible for the UK to participate in any multilateral burdensharing option (Ref C).
4. Although the pressure is on the defense budgets of all Allies, of the nations reporting their military BOP situation to NATO only the FRG shows a surplus on military account. Only the FRG has an impressive overall BOP surplus (nearly 9,000 million DM for the first ten months of 1974) and a military BOP surplus (4,000 million DM in 1973). Consequently, it is the Germans whom the US should continue to press hard, and, in my view, this can only be done to any real effect with FinMin Schmidt.
5. Under these conditions, I propose that while we continue to press for relief on the NATO budgets in an attempt to achieve a visible, multilateral burdensharing response, we place maximum effort here in NATO on putting together as quickly as possible a package of military procurement in the US to demonstrate to Congress the extent to which our Allies are offsetting our military BOP expenditures. The package would include those items which clearly fall within the definitions provided by the US as qte payment unqte creditable against the deficit for purposes of Jackson-Nunn; other closely related Allied purchases which, although not strictly creditable, are helpful; and any other things our Allies are doing, or refraining from doing, which favorably affect our military BOP position. However, it should be remembered even with such an all out effort to identify all planned procurement creditable under Jackson-Nunn, it may well be that military purchases by our Allies (other than the FRG) will be less than the $750 million we had estimated on the basis of DPQs. With drastically increased fuel costs coming out of fixed military budgets, it seems virtually certain that there will be slippage in planned capital expenditures.
[Page 199]6. The next step I propose would be intensive consultation with Congress to demonstrate the effort our allies are making to meet our military deficit, while maintaining and improving their own defense efforts and while in the midst of severe economic difficulties themselves. Our aim with Congress would be to seek understanding of the effort being made in Europe and the need for a liberal interpretation of US law, to avoid renewal or further amendment of Jackson-Nunn and to forestall other initiatives requiring US troop withdrawals.
7. To assist in identifying and quantifying military procurement in the US by our Allies we can utilize the International Staff Economic Secretariat which has been charged by SYG Luns to develop a plan to tabulate transactions that can count as receipts under Jackson-Nunn. The chairman of the Economic Directorate has already begun to work with Allied authorities in NATO to identify categories and amounts of procurement (firm to firm and govt to firm, as well as govt to govt) which US authorities may determine accountable under Jackson-Nunn. International Secretariat intends to work closely with the Mission and, as soon as possible, with a team from WashDC to clarify whether identified purchases are creditable as military procurement under criteria developed by the US.
8. Mission proposes that we work with NATO’s International Staff to help pull together a package of offset procurement clearly encompassed within Jackson-Nunn and to identify other purchases, activities, and actions on the part of our Allies which are helpful directly or indirectly to stationing of our forces, our military deficit, and our over-all balance of payments.
- Summary: The Mission reviewed
the status of the NATO
multilateral burdensharing issue.
Source: National Archives, Nixon Presidential Materials, NSC Files, Box 266, Agency Files, NATO Jan–May 31, 1974, Vol. XVII (2 of 2). Confidential; Nodis. In telegram 12584 to the Mission to NATO, January 19, the Department approved the proposal to discuss guidelines on definition and criteria for military procurement with the NATO Economic Directorate and agreed with the suggestion of the need for Congressional consultations. (Ibid., RG 59, Central Foreign Policy Files, 1974)
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