Foreign Relations of the United States, 1947, The British Commonwealth; Europe, Volume III

SWNCC Files: Series 360

Report of the Special “Ad Hoc” Committee of the State–War–Navy Coordinating Committee

top secret

[ Washington ,] April 21, 1947.

References:	a. SWN–5231, March 20, 1947
	b. SWN–5255, March 21, 1947
	c. SWNCC 358/d, March 31, 19471

1. Attached hereto is the report of the Special Ad Hoc Committee of SWNCC in response to the reference memoranda, on policies, procedures and costs of assistance by the U.S. to foreign countries.

2. The Special Ad Hoc Committee states that this interim report, which is highly tentative in nature, has been prepared from information presently at hand and a hasty analysis of such information. It is intended to provide, in a single document, a survey of the present world-wide situation, and to indicate countries to which the U.S., for its own security and national interests may find it desirable to extend aid in the next few months. The preparation of a fuller report, containing more thorough analysis and refinements lacking in this interim report, has been initiated, with completion date estimated as mid-July, 1947.

3. This paper contains, in the first ten pages, (1) the conclusions reached by the committee, (2) a brief of assistance measures which may prove desirable, and (3) a statement of principles and policies pertaining to aid to foreign countries. The State–War–Navy Coordinating Committee is asked to approve in principle the contents of these ten pages as a basis for planning. The remainder of the paper consists of briefs based on the reports which were prepared by working sub-committees for use of the Special Ad Hoc Committee.² The SWNCC is asked to note these briefs which are included in this paper, since it is considered they will be of help in guiding planning agencies in the three departments.

4. The Special Ad Hoc Committee does not believe that it has been able to adequately fulfill the requirements of SWN–5231 of March 20, 1947 as it relates to China. It has been unable to reach an agreement on a program for this country.

The Ad Hoc Committee recommends that SWNCC direct the Far Eastern Subcommittee to submit a more conclusive report on China as a matter of priority when the JCS study now being formulated is made available to the State–War–Navy Coordinating Committee for its consideration.

5. Attention is invited to’ the necessity for extraordinary security measures in view of the nature of the material contained in this report.

Enclosure

Policies, Procedures and Costs of Assistance by the United States to Foreign Countries ³

The Problem

1. To prepare a broad determination of the measures which might be undertaken, in implementation of U.S. foreign policy, for the extension of aid, including money, food, military equipment and other forms of assistance, to foreign nations by the U.S., and to make recommendations as to the allocation and employment of the means likely to be available.

Facts Bearing on the Problem

2. See Appendix “A”.

Discussion

3. See Appendix “B”.

Conclusions

4. It is concluded that:

a. A planned program of assistance to foreign countries should enable the U.S. to take positive, forehanded, and preventative action in the matter of promotion of U.S. national interests by extending assistance under a system of priorities where it will do the most good from the standpoint of promoting U.S. security and other national interests.

b. Needs for such assistance will considerably exceed currently estimated availabilities. In order that aid as extended may be of maximum usefulness, it is necessary that the provision of U.S. aid to foreign countries should be carried out in accordance with a well-considered comprehensive world-wide program, developed in the maximum reasonable amount of detail.

c. The nations of the world which the United States may find it necessary and desirable to aid in the next few months are, in presently estimated order of the urgency of their need in the light of U.S. interest:

(1) Greece

(2) Turkey

(3) Iran–Italy

(4) Korea

(5) France (for political and not economic reasons)

(6) Austria (assuming conclusion of the treaty)

(7) Hungary

d. In these countries, concentrated U.S. programs of aid may be required. As appropriate (see Appendix “A”), these should include financial aid, economic aid, military aid, political support, and vigorous programs of information.

e. In the near future, China will need an undetermined amount of post UNRRA aid, credits for purchase of ships from the Maritime Commission, and a carefully conceived information program. As to additional aid, there is a divergence of view between the State Department on the one hand and the War and Navy Departments on the other, which is indicated in Appendix “A”, Annex “E”, Attachment II. A supplementary report with appropriate corrigendums to this paper will be submitted as a matter of priority when the conclusions of the JCS on the problem are made available to SWNCC for integration with the other factors involved.

f. In the following countries no urgent requirement for extension of U.S. aid or support over and above that now contemplated exists, although substantial requirements may develop at a later date:

(1) Great Britain

(2) Belgium and Luxembourg

(3) Netherlands–NEI

(4) The Philippines

(5) Portugal

(6) Czechoslovakia

(7) Poland

g. The situation of other countries is not so urgent as to warrant examination in this report.

h. In addition to the provision of military equipment and supplies to countries where urgent need exists, a well considered program of military collaboration, including one or more of (a) the provision of U.S. military equipment supplies, (b) the maintenance of military missions, and (c) the training of key foreign military personnel, should be continued or initiated for selected countries indicated at the end of this paragraph. Authorizing legislation now lacking should be submitted and supported. Convincing deliveries under all approved programs should be made thereafter without delay. Plans for the effective sustaining of the program from new manufacture should be developed. General priorities on a long-term basis are:

(1) Western Hemisphere ((a) Canada, (b) Latin America and the Philippines)

(2) Near and Middle East–Europe

(3) Far East (less Philippines)

Priorities for piece-meal acts of assistance, perhaps with a psychological objective, will vary from the foregoing. Programs now exist in one form or another not necessarily in order of priority for

(1) Canada

(2) The Philippines

(3) Latin American Republics

(4) Iran

(5) Italy

(6) China

(7) Greece and Turkey

i. In 1947 the U.S. will probably export to the rest of the world $7.5 billion more goods and services than it imports. The outflow of dollars to finance this deficit will probably include $4.8 billion financed by the U.S. Government in loans, grants, and expenditures in the occupied areas. The current volume of U.S. financing, and particularly its distribution between countries, is not adequate to the full accomplishment of world economic stability, the type of world trading system the U.S. seeks, or U.S. political objectives in several countries.

j. World-wide shortages and maldistribution will exist in the year ending 30 June 1948 in basic commodities, including grains, coal, nitrogenous fertilizer, steel, capital equipment. Legislation relating to materials priorities, domestic transportation, export controls, and shipping will be required in order to achieve a successful program for those exports which are available. Concurrently, economic policy must aim at the reintegration of the economies of critical countries into regional and world trading and production systems.

Recommendations

5. It is recommended that:

a. The above conclusions and interim program, relating to U.S. assistance to foreign nations, contained in Sections I and II of Appendix “A” be approved in principle for planning purposes as tentative, interim guidance for actions by the State, War and Navy Departments, subject to comment on this report from the military point of view-by the Joint Chiefs of Staff and with the understanding that determination to implement each of the programs proposed for planning purposes is a matter for separate decision.

b. Annexes “A” to “E”, inclusive, of Appendix “A” and Appendix “B” be noted as being the detailed exposition supporting the conclusions and Sections I and II of the Appendix.

c. This report be forwarded to the JCS with a request for comment from the military point of view, as a matter of urgency.

Appendix “A”

[Here follows Section I of Appendix A, a tabular summary of assistance measures to be undertaken in an interim program.]

Section II

Policies and Principles for Extension of U.S. Aid to Foreign Nations

preamble

It is taken to be the policy of the United States:

a. To support economic stability and orderly political processes throughout the world and oppose the spread of chaos and extremism.

b. To reduce or to prevent the growth or advancement of national or international power which constitutes a substantial threat to U.S. security and well-being and to oppose programs of coercion and infiltration, especially when effected by the use of armed minorities.

c. To orient foreign nations toward the U.S., toward support of the U.N. and toward procedures in international relations which are consistent with the purpose of the U.N.

A. Objectives of the Aid Program

1. To take positive, forehanded and preventative action in the matter of promotion of U.S. interests through assistance to foreign nations. By timely provision of moderate amounts of assistance to avoid the development of crises which will demand urgent, much larger expenditures.

2. To apply assistance, under a system of priorities, where it will do the most good from the standpoint of promoting U.S. security and national interest. Specifically, to give highest priority to the nations or areas which are vital to our national security and national interest.

B. Consideration of the National Security and Interests of the U.S.

1. It is essential in the national interest that the U.S. use its best efforts to insure that other nations, as well as ourselves, be able to work out a national life free from all forms of coercion.

2. The security of the U.S., and the foundations of international peace, are undermined whenever a totalitarian regime is imposed upon a free people by direct or indirect aggression.

3. For reasons of our national security and of vital national interests, our country should support free peoples who are resisting attempted subjugation, whether by armed minorities or by outside pressures.

4. The security of the United States is concerned not only with the dangers which threaten a free country, but also with the effect which those dangers may have on other countries. If the U.S. supports a freedom-loving people whose independence is threatened, other nations may be stiffened in their determination to remain free; conversely, if the U.S. neglects to support such a free people, other nations may be profoundly dismayed and may lose faith in the leadership of the U.S.

5. In helping free and independent nations to retain their freedom the U.S. will be giving support to the principles of the charter of the United Nations.

6. It is important to maintain in friendly hands areas which contain or protect sources of metals, oil and other national resources, which contain strategic objectives, or areas strategically located, which contain a substantial industrial potential, which possess manpower and organized military forces in important quantities, or which for political or psychological reasons enable the U.S. to exert a greater influence for world stability, security and peace.

7. It is desirable that military collaboration between the U.S. and foreign nations important to U.S. security be continued and extended.

[Here follows discussion of conditions to be attached for extension of aid, particularly that there be “a reasonable chance” for success, and that arrangements be made to maintain “adequate measures of supervision and control of the expenditures of U.S. funds, and of the distribution of U.S. goods and equipment, to insure that they are devoted to the purpose for which they have been approved”. There is also a brief consideration of “public information aspects”.]

Annex “A” to Appendix “A”

General Economic Program

Reference: Memorandum of Request to Working Group on Economic Aid (Food and Finance) dated March 21, 1947.

1. The war and the political changes consequent thereto destroyed in substantial part the former capacity of the countries of Europe to meet their manufacturing and agricultural needs through the normal operations of closely integrated economies. As a result the United States became for practical purposes the only country in the world capable of tiding Europe and other deficit areas over the period of reconstruction.

u. s. resources available for foreign financing

2. In 1947, the United States will export to the rest of the world approximately $16.2 billion of goods and services, taking into consideration existing and probable foreign financial commitments. The United States will import in 1947 only about $8.7 billion of goods and services. In 1947 the economy of the United States will thus be supplying to the world $7.5 billion of goods and services more than it receives.

3. Only about $450 million of this $7.5 billion will be financed by private long-term loans and by private and government short-term credits. Most of the balance will be financed by the United States Government ($4.8 billion of which approximately $500 million is the cost of U.S. Army financing of occupied areas) and out of cash and gold holdings of foreign buyers ($1.2 billion). Disbursements by the International Bank during 1947 will provide about $300 million, and private remittances about $750 million.

4. The volume of United States Government foreign financing will, under present programs and policies,⁴ taper off rapidly during the latter part of 1948 and 1949. Similarly, the ability of foreign purchasers to finance U.S. exports out of gold and dollar holdings will diminish as these reserves are drawn down. The volume of private remittances may also be expected to decline.

5. These factors will be offset only in small part by an increase in International Bank financing and possibly by some net increase in private long and short term loans and credits, and by an increase in United States imports.

6. The conclusion is inescapable that, under present programs and policies, the world will not be able to continue to buy United States exports at the 1946–47 rate beyond another 12–18 months.

7. The great weight of evidence indicates that even the current volume of United States foreign financing, and particularly its distribution between countries, is not adequate to the accomplishment either of world economic stability and the type of world trading system which is the object of our trade policy, or of our political objectives in several critical countries. Our political interests abroad, particularly in Italy, Austria and Hungary have suffered and will continue to suffer because existing financial institutions and policies tend to restrict present U.S. financial aid very largely to countries which are regarded as good credit risks.

8. Other than the United States, there are now no major sources of credits or supplies to which the needy countries can turn to meet the bulk of their balance of trade deficits and reconstruction and development needs over the next few years.

9. The President’s Council of Economic Advisers has indicated that a slight business recession may be anticipated sometime within the next twelve months. A substantial decline in the United States export surplus would have a depressing effect on business activity and employment in the United States. The net effect would depend on the direction and strength of other economic forces, but, if the export decline happened to coincide with weakness in the domestic economy, the effect on production, prices and employment might be most serious.

10. The implications of these preliminary conclusions are most serious both for world recovery and stability and possibly for employment and business activity in the United States.

u.s. export programs for critical commodities

11. As important to the democracies of the world as the problem of financing essential exports from the U.S. is the problem of insuring that maximum supplies of critical commodities are made available for export and properly distributed. War-time disruption of the world economy was so vast that severe shortages of a number of vital commodities persist. Recovery of production is frequently slow and tight situations will continue. The burden of meeting these shortages falls primarily on the strongest economy in the world—the U.S.

12. If U.S. financing is to achieve its purpose of strengthening the economies of friendly countries, this Government must maintain such controls as are necessary to insure that a limited number of essential commodities can be procured and shipped abroad to appropriate destinations.

These vital commodities fall into three main groups:

Food

13. In the year ending June 30, 1948, the world will continue to face shortages of bread grains, fats and oils, proteins and sugar.⁵ In the case of bread grains, the most important single item, import requirements are estimated at 37 million metric tons wheat equivalent and exportable supplies at 28 million tons, including 11.2 million tons from the U.S., leaving a deficit of 9,000,000 tons. This means that the importing countries face another year in which their requirements, which are based in most cases on substandard feeding levels, cannot be met by a substantial margin. The U.S. export figure is based on the assumption of normal and non-controlled grain exports.

14. The importance of the U.S. in the world food picture is apparent from the fact that it is expected to supply almost half of the total exportable supplies of bread grains during the next crop year.

15. U.S. food exports, particularly of bread grains, must be increased to the maximum if the program of economic assistance abroad is to be successfully fulfilled. The maximum tonnage of grain which can be moved in 1947–48 over our internal transportation system to ports is approximately 15 million tons. According to present forecasts, the 1947 grain crop should be large enough to permit this volume of exports without any curtailment of domestic consumption.

16. In order to insure that U.S. exports in 1947–48 reach the 15 million ton maximum it will be necessary (a) to commit ourselves firmly to this export goal at an early date; and (b) to direct this amount of grain into export channels by continuing throughout the crop year the domestic controls outlined below. For this purpose continuation of some government procurement and efficient use of transportation will, of course, be essential.

17. Maximum U.S. efforts would reduce the 1947–48 deficit of bread grains from 9 million tons to between 5 and 6 million tons. This additional 4–5 million tons of grain would greatly increase the chances for success of our program for aid to foreign countries. This is particularly true in the critical countries of Western Europe. Unless we can assure maximum U.S. exports, we may face a situation next spring similar to the one which confronts us now, in which the problem is to determine which critical country will have to bear the brunt of inadequate supplies and ration cuts.

18. At the present time we are programming our grain exports in close collaboration with the International Emergency Food Council. This collaboration should continue since the major influences in the IEFC, in addition to our own, are exerted by areas for which we have great concern. The IEFC consequently provides a convenient forum for consulting countries with whom we would collaborate in any case and obtaining multilateral agreement, rather than unilateral decision, on our allocations.

Coal

19. Europe is the critical coal deficiency area of the world. The gap between 1947 requirements and availabilities for Europe will be at least 36 million metric tons. The major European coal importing countries are France, Italy, Belgium, Denmark, the Netherlands, Sweden and Norway—all countries of special interest to the U.S. These countries will obtain in 1947 about 40% of their probable imports from other European countries and the remainder from the United States.

20. It is essential to the progress of European recovery that United States coal exports to Europe should continue at a maximum rate throughout 1947 and for a considerable period thereafter.

21. Under present conditions, exports of U.S. coal entail a heavy drain upon European dollar resources. Ocean freight represents over half the cost of each ton of United States coal delivered at European ports. A coordinated program to increase European coal production should, therefore, receive the highest priority.

22. We should continue to support the principle of international allocation in accordance with need in the distribution of available coal supply. The European Coal Organization has performed a useful function in this respect which should be continued by the Economic Commission for Europe.

Other Critical Commodities

Nitrogenous Fertilizer

23. The world faces an acute shortage of this essential commodity in the coming crop year. U.S. demand has reached unprecedented levels as a result of high farm income and production. Europe and the Far East have heavy requirements due to war-time soil depletion and the shortage of livestock. In order to secure exports from the U.S. controls will be required.

Steel

24. No adequate data are available to give an accurate picture of the world steel position. It seems clear, however, that for several years to come a number of countries, including several in Europe formerly dependent on Germany, will require substantial imports. The European steel shortage which restricts the progress of reconstruction is in part caused by the coal shortage.

25. The American mills simply cannot supply both the huge domestic demand and any substantial share of the export demands. They prefer Latin American and other markets where the long-range prospects are better than in European markets. An effort to meet all foreign requirements would entail restrictions on the domestic use of steel. Unless such restrictions can be imposed, the rate of European reconstruction will be substantially retarded.

Capital Equipment

26. A number of items of capital equipment, such as tractors, construction equipment, freight wagons, and mining machinery are tight. The import requirements of the critical countries are large and the U.S. is the only current source of exports. If domestic demand continues strong, some form of priorities to meet the critical export programs will be essential.

legislative action required

27. Successful export programs for food, coal, steel and capital equipment cannot be achieved without the following legislative action:

a. The first step is to insure equitable distribution of supplies as between the domestic economy and foreign economies. This requires extension of allocation powers with respect to a limited list of commodities certified by the Secretaries of State and Commerce as critical to the foreign economic policy of the U.S. Powers to assign priorities directly to producing firms will be necessary for a still more restricted group of items. Both of these powers now expire on June 30, 1947. Recommended legislative action along these lines is now being prepared in the White House.

b). Continuation of export controls is required in order to channel exportable supplies to proper countries and to cut down undesired foreign demand in the domestic market. These controls now expire on June 30, 1947. The President has recommended this legislation to the Congress in his message of March 18, 1947.

c. Finally extension of powers to assign priorities on transportation, which also expire on June 30, 1947, are needed. These powers are essential to insure efficient use of transportation facilities, particularly freight cars. Without them it would be difficult to move bulky export commodities such as coal and grain in the required quantities. The necessary legislation is being prepared in the White House.

d. Legislative action on shipping is also required, as indicated in the following section.

Ocean Shipping

28. To assure the success of our export programs which include tremendous quantities of bulky items such as coal and grain, the following legislative action is required to enable the Maritime Commission to insure maximum availability and efficient use of shipping:

a. Extension of authority of Maritime Commission to operate government-owned vessels. This authority now expires on June 30, 1947.

b. Extension of Maritime Commission authority to apply revenues from operation of ships for government account to meet expenses of operation, including expenses of withdrawing ships from the reserve fleet. This authority also expires June 30, 1947.

c. Extension of Maritime Commission authority to sell or charter war-built vessels under the Merchant Ship Sales Act of 1946. This authority expires December 31, 1947.

29. Recommended legislation along the above lines is now being prepared by the Maritime Commission. Failure to obtain this legislative action would result in a disastrous curtailment of available supplies of U.S. shipping and inability to fulfill essential export goals. For example, it would be necessary to decrease the size of the U.S. tanker fleet by about 230 tankers which would dry up a major portion of the world’s present flow of oil.

economic interdependence of critical countries

30. The cost and duration of United States economic assistance are directly dependent upon the successful integration and coordination of the economic programs in the critical countries both with each other and with similar programs in countries not receiving special United States aid.

31. Furthermore, the reintegration of these countries into healthy regional and world trading and production systems will accelerate their recovery and attainment of the ability to eventually enable them to finance their import needs, thus permitting the strain on the United States to be lifted.

32. Special attention must be given to the coordination of economic policy in occupied areas, particularly Germany and Japan, with general economic objectives in Europe and the Far East.

33. The interdependence of the various national economies is so great, particularly in Europe, that economic recovery of western-oriented areas will require a substantial increase in trade with Soviet-dominated areas, provided such trade can be arranged on terms compatible with the economic and political independence of western-oriented areas.

needs of the occupied areas

34. The occupied areas of bi-zonal Germany, Japan and Korea deserve special consideration for the fiscal year 1948. They will require an estimated $1.4 billion of imports for that period, including foodstuffs, petroleum products and raw materials, principally for textile manufacturing. Not all of this sum will be a drain on American financial resources; however, the requirements for materials will be competitive with those of the countries to be given economic aid. The requirements of the occupied areas, to the extent that they are necessary to prevent disease and unrest, represent an urgent demand on world supplies.

35. The following estimated requirements in metric tons and dollar value, and covering the fiscal year 1948 are noteworthy:

	Metric tons	Dollars
Minimum food imports, US and British Zones of Germany	4,030,000	$510,000,000
Minimum food imports, Japan	1,685,000	255,000,000
Minimum total imports, US and British Zones of Germany		666,000,000
Minimum total imports, Japan		576,000,000
US appropriated funds required, Germany		283,000,000
US appropriated funds required, Japan		226,500,000

36. It should be noted in the case of bi-zonal Germany that the data are for the combined US and UK occupation zones; financing of these requirements is a joint and equal US–UK responsibility.

[Here follow Annexes “B” through “E” of Appendix “A”; Annex “B—General Military Aid Program”—is scheduled for inclusion in volume I. Detailed examinations of aid needs on a country and area basis in Europe, the Near East, and the Middle East are included in Annexes “C”, “D”, and “E”, respectively, none printed.]

Appendix “B”

Discussion

1. The determination of tangible means of assistance to be provided by the U.S. in implementation of its foreign policy requires that U.S. interests, in terms of its present and future security and well-being, be carefully established and considered. These interests were recently crystallized in the statement of general U.S. foreign policy enunciated by the President in connection with the situation in Greece and Turkey. The purpose of this study is to report on problems incident to foreign needs or demands for substantial U.S. assistance, and to make certain that commitments undertaken are consistent with U.S. interests and capabilities.

2. In considering this problem it is first in order to define the aid involved. This report is concerned with goods and services, available to the countries in question, and with the actions of the U.S. government relating thereto. The role of the U.S. government regarding these goods and services extends to positive measures of support, or to restrictions, beyond those normal in free international trade and exchange. This aid falls into the following main categories:

a. Material resources—divided broadly into (1) military equipment and (2) non-military items such as food, machinery, clothing, etc.

b. Money, in the form of grants, loans, or expenditures.

c. Services, including advice and technical and administrative assistance.

d. Political support, in the form of backing, encouragement and good offices in international affairs and organizations. (This category of aid is not considered further in this interim report.)

e. Dissemination of information of [by] appropriate means.

3. U.S. security is the fundamental interest to be served by U.S. aid to foreign nations. National security can be maintained most effectively through the rebuilding of a stable peaceful world, in which each nation respects the sovereignty, integrity and way of life of the others in a friendly manner. This situation can best be attained through effective implementation of the charter of the United Nations, coupled with early satisfactory settlement of certain major world problems, which may be settled partially or wholly outside of the structure of the UN, such as peace treaties with Germany and Japan. However, the UN” charter has yet to be implemented with full effectiveness. A realistic appraisal of the world situation shows that there exist many problems which adversely affect the security interests of the U.S. and which may, particularly at their inception, be outside the purview of the UN”.

4. Such problems form the basis from which U.S. aid programs should be determined. In certain countries economic weaknesses exist which may give rise to instability and subsequently to political shifts which adversely affect the security of the U.S. They include subversive and “boring from within” tactics or the threat of overwhelming force, all of which are difficult and sometimes impossible to combat under the United Nations Charter, particularly at its present stage of implementation. The United States has need of friends in the world today and particularly needs to take care that other nations do not pass under the influence of any potentially hostile nation. There are some countries which are at present in very close balance and it is to our advantage to strengthen their resolution to remain independent. As to the countries hostile to the U.S. every opportunity for assisting any of them to regain an independent national life should be reviewed to determine whether the probabilities of success and cost of undertaking the effort warrant any expenditure of resources by the U.S.

5. It should be noted that the results to be achieved by our program of aid may extend well beyond the countries being aided. There is a “bandwagon” quality attaching to the Communist movement, and efforts at infiltration and minority domination, which is vulnerable to positive measures of aid and encouragement undertaken by U.S. If such measures are taken early, they may be carried out with relatively small actual expenditures.

6. The broad purpose of U.S. aid and assistance is to extend in terms of the U.S. national interest the objective recently enunciated by the President for Greece and Turkey, by supporting economic stability and orderly political processes, opposing the spread of chaos and extremism, preventing advancement of Communist influence and use of armed minorities, and orienting other foreign nations toward the U.S. and the TIN. In addition, the U.S. will probably continue to undertake to alleviate starvation and suffering as such where this action is consistent with U.S. interests.

7. The provision by the U.S. of carefully regulated quantities and types of military aid and assistance in the form of military equipment, advice, and training, is a powerful influence in orienting the recipient nations toward U.S. policy. Foreign armed forces which are supplied with U.S. equipment will look to the U.S. for replacement and maintenance. In addition to contributing to the internal order and integrity of the countries concerned, moderate security forces maintained by those nations offer several benefits to the U.S. against the contingency of war. Foreign powers with aggressive designs would be faced with the necessity of committing openly overt acts. The reduction by an enemy of even the small countries may consume significant, though small, amounts of time and resources, thus affording a cushion of time and distance to the U.S.

8. It is believed that the following considerations are basis to decisions as to aid to be provided:

a. Taking the action will probably have consequences favorable for us, possibly carrying far beyond the limits of the nation concerned. Alternatively, if we do not take action the resulting situation might operate very decidedly to our disadvantage.

b. The problem at hand in the nation concerned is one within our economic, technical, and financial capabilities.

9. In order to be certain that aid is applied to the specific purpose for which provided in implementation of the policy enunciated by the President, controls and safeguards must be maintained which will ensure:

a. That misuse, diversion and waste are minimized.

b. That the U.S. have full knowledge of the manner in which the means provided are distributed and used.

c. That the government of the country being aided proceed with the development and support of free and democratic institutions as opposed to minority domination.

10. The necessity for an organized and comprehensive program of aid is apparent from the magnitude of the existing problem. The present and prospective needs and demands of foreign nations for U.S. aid will, in all probability, exceed availabilities. Hence a system of priorities must be installed if the provision of aid is to be closely related to the contribution thereby made to U.S. national interests and to attainment of the objectives of U.S. foreign policy. Further, it is probable that positive, forehanded and preventative actions will result in commitments considerably below those which would be required if situations were allowed to develop to the point of crisis. The interim comprehensive program set forth in Appendix “A” and the Annexes thereto has been prepared to provide such a system of priorities and such a basis for positive, forehanded, preventative action.

11. In order to establish the requirements which it may be desirable to fulfill within the next few months, it is considered necessary to develop an interim report, tentative in nature, which indicates:

a. Present urgent requirements for assistance which it is within the U.S. interest to provide.

b. Additional measures of assistance, derived from consideration of long-term U.S. programs and international assistance objectives, which it is in the U.S. interest to initiate without further delay.

The interim report is of necessity based upon fragmentary data and will be revised as better data is assembled. It must be followed by a more comprehensive and thorough report which will set forth a program and policy for U.S. aid over the next few years.⁶

1. Enclosures “A” and “B” to SWN 5231 are printed on pages 197 and 198; the other reference memoranda are not printed.
2. The minutes of the Committee on the Extension of U.S. Aid to Foreign Governments describe the liaison effected by the Department of State and by working groups of other Departments and of SWNCC in the preparation of the report. Department of State action was completed on April 15, when the committee reached final agreement as to a priority listing of countries to be considered for U.S. assistance. This list was substantially the same as that incorporated into the “Main Report”, infra, except that in the latter Korea was included among the highest priority group.
3. This enclosure has been described as the “Main Report”.
4. For documentation regarding U.S. foreign loan policy in the immediate postwar period, see Foreign Relations, 1946, volume i .
5. For documentation on U.S. policy regarding the world food crisis in 1946, see Foreign Relations, 1946, vol. i, pp. 1439 ff.
6. The final report was completed and circulated to the State–War–Navy Coordinating Committee as SWNCC document 360/3, dated October 3, 1947. In an accompanying memorandum the Ad Hoc Committee stated “that the recent rapid progress of events has made obsolete much of the data on which the report is based. It cannot therefore be considered current.… Attention is invited to the fact that the Marshall Plan was inaugurated after this report was in process of formulation under the Committee’s originial terms of reference . . . consequently this report relates only indirectly to the Plan.” Elsewhere in the memorandum, the Ad Hoc Committee stated that the report “is intended to provide in a single document a survey of the present world situation and to indicate countries to which the United States for its own security and national interests may find it desirable to extend aid during the next three to five years.… The attached report recommends that U.S. capabilities be reviewed once the Marshall Plan becomes firm insofar as the application of U.S. support to other areas of the world is concerned.”