Foreign Relations of the United States, 1949, Western Europe, Volume IV

NEA Politico-Military Files, Lot 484

Memorandum by Mr. Paul H. Nitze, Deputy to the Assistant Secretary of State for Economic Affairs, to the Foreign Assistance Steering Committee

top secret

[Washington,] January 31, 1949.

Subject: Report on Trip to London and Paris in Connection With Military Assistance Program

1. Purpose of Trip

The Foreign Assistance Steering Committee instructed me to proceed to London and Paris for discussions with our Embassies in these two cities, the Delegation to the Western Union and the Office of the Special Representative. I was asked to obtain information and any studies already made concerning production capabilities of the Western Union countries, the balancing of military requirements against potential productive capabilities, and the determination of implications of present and future military requirements to ERP. I was also asked to discuss with U.S. officials abroad appropriate procedures by which continuing work remaining to be done may be carried on.

2. Status of Studies Already Made

a. The Western Union Military Committee had prepared an interim program estimating the requirements necessary to fully equip existing forces and those mobilizable on three months’ notice in 1949. They had also estimated the magnitude of stocks existing in Europe, estimated production in Europe during 1949, and wastage. From these estimates a list of deficiencies had been prepared.

b. The Supply Board had received reports from the various countries estimating the production facilities which were available in their countries and which could be utilized during 1949 without affecting their economic recovery program, providing necessary raw materials and full financing were made available. The Financial and Economic Committee had worked out arrangements for financing the headquarters expenses of the Western Union organization, and had evolved an interim policy of transfers on memorandum account to cover excesses available in one country and needed by another country. No discussions had as yet taken place with respect to more permanent financial or economic arrangements.

3. Relationship of Military Assistance Program to ERP

a. From an examination of the Western Union Military Committee and Supply Board planning documents and from discussions with the U.S. observers to the various Western Union Committees, it appeared that all of the Western Union countries feel not only that economic recovery must have a clear priority over the military rearmament program, but that no additional military post over their current military programs can be carried by them (the British military program was increased last fall in a manner estimated to require increased military expenditures of some £50,000,000 per annum). None of the programs so far considered by them contemplate any further increase in the current military budgets of any of the countries. If these programs are carried out, there would, therefore, be no further impact upon European recovery, and the additional cost of the rearmament program would fall entirely on the U.S. taxpayer.

b. The issue was immediately raised as to whether or not some greater degree of self-help and mutual and reciprocal assistance on the part of the Western Union countries should be required by the United States, if the military program is to be sound in the long run and of a nature to secure the long-run support of the U.S. people and Congress. The principal considerations appear to be the following: (a) that a strategically adequate long-run program will, of necessity, require increased numbers of effectives, improved training of personnel, and improved maintenance of equipment in Europe which requirements cannot be met merely by supplying equipment from the U.S.; otherwise the equipment provided from the U.S. will not be fully effective; (b) that in the long-run it would be desirable if the Western Union military establishment could be as self-supporting as possible; (c) that unless a beginning is made early in the program toward the principle of increased self-help and mutual and reciprocal assistance it may be difficult to initiate that principle at a later date; (d) that a sense of participation and sacrifice would appear to be essential if a sound psychological foundation for an expanded defense program is to be established; and (e) that Congress will expect some tangible evidence of increased self-help and mutual and reciprocal assistance on the part of the European countries if the U.S. taxpayer is to be asked to absorb additional burdens.

c. If there is to be self-help and mutual and reciprocal assistance going beyond current European military budgets, other than coordinated planning and exchange of items in excess supply in stocks carried over from the war, a real cost to the Western Union countries will be involved. This cost will be in the first instance a financial one, but will also translate itself manpower, facilities, and raw material considerations. In Belgium, excess facilities and manpower exist today. In other countries certain facilities and manpower are being inefficiently or under-employed. In all the Western Union countries the problem of attaining or maintaining internal financial stability is acute. It was the consensus of all the people I talked to in our embassies and in the ECA missions that the most important criterion against which any contribution of increased self-help and mutual and reciprocal assistance on the part of the Western Union countries must be measured is the financial criterion. In the case of France, in particular, balancing of governmental receipts and expenditures this year appears to be possible if full and constant pressure by the United States is maintained on the accomplishment of this objective. Success in achieving internal financial stability this year is a pre-condition to French economic stability and thus to any long-run military security program.

d. It was the feeling of Messrs. Holmes, Caffery, Harriman, Finletter¹ and Bruce² and of the technical people, both in our Embassies in London and Paris and in the ECA, that some increase in the military budgets of the various Western Union countries could be met by increased taxes or other non-inflationary means, depending upon the magnitudes involved and the timing and method of approach to the Western Union governments.

e. The most important question in this regard appeared to be whether or not there existed or could be created the necessary broad public support for a military security program to lay the foundation for increased sacrifices to accomplish that objective. In general the picture appears to be that a sense of insecurity is widespread, but no one can be sure that this will of itself lead to a willingness to make increased sacrifices. The problem is particularly acute in France where many associate the idea of security with a decrease in tension between the U.S. and the U.S.S.R., and not with an increase in the military potential of the Western Union countries. In France it appears that only the motivation of national pride might be strong enough to support an increased military program involving sacrifices on the part of the French people.

f. With the above considerations in mind, it appeared that a portion of the assistance to be made available from the U.S. might well be linked to and made conditional upon increased military budget appropriations by the individual Western Union countries. It was thought that such a “carrot and stick” procedure would help the governments of Western Union countries sell a program involving increased self-help and mutual and reciprocal military assistance to their own people. If they did not come in they would, to some extent, be left out of the procession.

g. Furthermore, if the portion of assistance so linked is made available in dollars rather than in military aid items, it would cover the dollar cost of increased imported raw material requirements resulting from their increased military budgets and any decrease in export potentialities resulting from diversion of manpower.

4. Size, Scope and Composition of a Military Assistance Program

a. From discussions in London with Colonel Westphalinger³ and others, it appeared evident that the putting into effect of a military program of adequate size to give Western Europe true military security against an all-out attack would be beyond the capacity of the Western Union countries, irrespective of the magnitude of U.S. assistance, at least during the period of the European Recovery Program. If a start were made during the next three years on a rearmament program and if the European Recovery Program were a success, the foundations might, however, be laid for an adequate security program to be developed in subsequent years.

b. From this it follows that the limiting factor on the magnitude of a military program during the ERP period will be the economic and financial resources which can be made available rather than the requirements evolved from an adequate strategic plan of defense. This point seems to be realized by the Western Union planners and until some principles are laid down on a high political level, which give some guide lines as to the general magnitude of economic and financial resources which can be made available for carrying out the program, there will be long delays and a dangerous unreality in the work being done by the various Western Union Committees. The work which has been done to date has been largely restricted to an interim program based on bringing up to adequate levels the equipment and balance of existing forces and those mobilizable on three months’ notice during 1949. This work has assumed nine French divisions. It was Colonel Westphalinger’s opinion that, in view of the reduced number of effectives which he understood to be contemplated by the current French military budget, it would be more realistic to cut the French figures in the interim program down to a five-division basis. (Subsequent information casts doubts on this point.) It was both General Kibler’s⁴ and Colonel Westphalinger’s opinion that no longer range program than the interim program could be evolved by the Western Union Committees in less than six months.

c. From conversations with Roger Makins of the British Foreign Office and Sir Henry Brittain who is the British secretary of the Western Union Financial and Economic Committee, it was apparent that little of a concrete nature could be expected from that committee during the next few months.

d. In view of the above, it appeared to Colonel Bonesteel of ECA, Colonel Westphalinger and me that if the necessary work in developing the principles to apply to a military assistance program were to be developed prior to March 1st a considerable degree of initiative would have to be taken by the U.S. In order to stimulate the development of a U.S. position, we drafted a telegram to Mr. Gross containing a suggested approach with illustrative figures. It was our thought that such illustrative figures could then be promptly checked from a number of different angles as to general order of magnitude and feasibility, that a U.S. position could then be developed which could serve as a basis for further discussions with the Western Union Committees, and that the testimony before Congress could be developed in the light of those further discussions. It was our thought that a U.S. position would include a target figure for the aggregate dollar value of military assistance to be made available from the U.S. during fiscal 1950, an estimate as to the increased Western Union military budgets which could be carried by them during 1950 without seriously affecting European economic recovery, and a determination as to the dollar or raw material assistance which the U.S. might be able to make available within the overall U.S. target figure to help them minimize the economic effects of such increased budgets.

e. It was Colonel Westphalinger’s rough guess that if the interim program were reduced to a five-division basis for the French and all items not absolutely essential screened out, military end items which could be provided from the U.S. might have a replacement value of three to four hundred million dollars, and the cost of rehabilitation and transportation might amount to an additional hundred to two hundred million dollars; and that items not covered by the interim program but necessary for a balanced program such as tactical air training in the U.S., etc. might add an additional 200 million dollars. On the basis of information received subsequent to our return, it appears that these rough guesses are probably much too low.

f. Similarly as a rough guess, Colonel Bonesteel and I estimated that France, Belgium and the U.K. might be able to carry increased military programs of the general order of magnitude of $300 million apiece and Holland $100 million, provided that the principle outlined in paragraph 3f above were accepted and only half these amounts required internal financing of increased military appropriations, the other half to be covered by the U.S. in the form of raw material or dollar financing. We, therefore, suggested as illustrative figures for the Western Union countries as a whole increased military programs aggregating expenditures equivalent to $1 billion, $500 million of which to be carried by the Western Union countries through increased military budgets to be financed by non-inflationary means, $500 million to be supplied by the U.S. in the form of dollars or imported raw materials. Subsequent discussions have indicated that these illustrative figures are probably too high.

g. In discussions with Messrs. Bliss and Bartlett of the Embassy staff in London⁵ and with Mr. Finletter, it appeared that the British economy was extremely tight financially and as to manpower and facilities, but that some increase in military expenditures was not necessarily out of the question. We left a memorandum on the basis of which the Embassy and ECA staffs were preparing to give further study to the problem.

h. In Paris we discussed the French budgetary situation at length with the Embassy and ECA staffs. It was their preliminary opinion that if the French budget could be gotten into balance during the next six months an additional load of $100 million during fiscal 1950 would not necessarily be an impossible burden. They were preparing to give as concrete a reply as possible to the questions asked in Mr. Gross’ telegram of January 14⁶ by January 25.

5. Considerations Bearing on Tactics of Possible Negotiations with Western Union Countries as to Economic and Financial Principles Governing the Military Assistance Program

a. It was the opinion of Ambassador Harriman that little progress could be made by the Western Union Financial and Economic Committee until we had arrived at a measure of agreement on overall policies with Cripps⁷ and with Schuman in view of the fact that the important questions involve basic political considerations. It was his feeling that, after a U.S. position had been evolved in Washington, Ambassador Douglas and he might explore the subject with Cripps and Schuman and attempt to reach an agreement in principle, the detailed arrangements then to be developed by the appropriate Western Union Committees with full U.S. participation.

b. It was his opinion that a program of increased self-help and mutual and reciprocal assistance could be successful only if Cripps and Schuman considered it politically feasible and committed themselves to support the measures necessary to gain a favorable public reaction and to put it through.

1. Thomas K. Finletter, Chief of the ECA Mission in the United Kingdom.
2. David K. E. Bruce, Chief of the ECA Mission in France.
3. Col. Henry R. Westphalinger, Senior Technical Representative, Office of U.S. Military Attaché, London; after February 10, U.S. Army Member, Military Committee of Five (Brussels Pact) Powers Joint American Military Advisory Group, London.
4. Maj. Gen. A. Franklin Kibler, Chief of the U.S. Delegation to the Military Committee of the Five (Brussels Pact) Powers, in London.
5. Don. C. Bliss, Counselor of Embassy for Economic Affairs, and Frederic P. Bartlett, First Secretary of Embassy.
6. Telegram 127 to Paris, January 14, not printed.
7. Sir Stafford Cripps, British Chancellor of the Exchequer.