ECA Telegram Files, FRC Acc. No. 53A278, Paris Torep: Telegram
The Administrator of the Economic Cooperation Administration (Hoffman) to the United States Special Representative in Europe (Harriman), at Paris
Torep 2750. Following are preliminary views with regard to the maintenance of proper relation between military and economic recovery programs in areas or countries where both are envisaged:
I. Basic problem for ECA in maintaining proper relation between military and economic recovery programs in areas or countries where both are envisaged is to maintain a clear distinction between aid necessary to achieve economic recovery and supplementary economic aid made necessary by increased use of a participating country’s own limited resources for military purposes.
- a)
- Increase in military budget of a participating country can only have effect of retarding recovery. For example, in case of Great Britain, for every one hundred thousand men retained in armed forces or added to production of military materiel, the income available for civilian consumption requirements, for other forms of governmental activity or for capital investment goes down about two hundred million dollars. This is approximate equivalent of hoped-for reduction in ECA aid for UK in 49/50 as compared to 48/49.
- b)
- Europe, with exception of few areas such as Italy, is suffering from acute manpower shortage. Military usually draws on highly skilled and more able portion of manpower pool. Actual impingement on recovery is more drastic than statistical computation above might indicate.
II. Supplementary economic aid to offset drag of rearmament program on European recovery should be separate appropriation earmarked for that purpose.
[Page 368]- a)
- ECA, however, should administer these funds since kind of economic assistance required will be indistinguishable from that presently administered by ECA. For the moment this division may be of little practical importance. It might even be possible to meet load by maintaining ECA funds at unchanged level for another yr. But by third year of program supplementary aid figure may become very large relative to aid needed to carry out original ERP program. To begin with, by that time ERP aid should be markedly less than it was first yr. In second place, there is no way of telling how much rearmament program may have to grow. ECA’s operations will become hopelessly blurred unless impact of rearmament program is clearly separated out from beginning. European countries will tend to blame any shortcoming on rearmament described in general terms. ECA itself will become confused between its mission of promoting recovery and of supporting US foreign policy in matter of rearmament.
III. ECA should not administer any part of program for exports of military equipment and munitions.
- a)
- Politically and otherwise this would have unfortunate repercussions both abroad and at home.
- b)
- Certain items which are readily identifiable as military items such as high octane gas for military planes and tanks, packaged army rations, uniforms, boots and such finished goods clearly of military end use nature should be included on military equipment and munitions list.
- c)
- However, other items and raw materials which might be destined for military end use but are interchangeable and almost indistinguishable from items administered by ECA, should be treated as supplemental economic aid under II. Such items would include fuel oil, ordinary gasoline, fibers, leather, steel mill products, etc.
IV. Third agency should have responsibility of ruling on priorities assigned to exports for European recovery as such and for rearmament.
- a)
- In particular, ECA may require protection for ERP exports under a system of voluntary allocations. If voluntary allocations continue, draft law provision with reference to priorities for US military purposes should not be extended to cover Foreign Military Aid Program.
V. Program Coord. Div. of ECA must work in close cooperation with and have access to all information bearing on concepts and plans of those responsible for creating military assistance programs.
- a)
- As necessary corollary, ECA must assure that those responsible for military assistance programs are provided with all data needed to evaluate European economic recovery as a defense measure in and of itself.