Current Economic Developments, Lot 70 D 467, FRC Acc. No. 72A6248
Current Economic Developments
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Mutual Security Act Adopted by Congress1
The Mutual Security Act of 1951 authorizing military, economic and technical assistance to friendly countries was signed by President Truman October 11 [10]. The appropriation bill, which is expected to pass both houses of Congress this week, will if the provisions of the House Bill are adopted, provide $7,482,790 of new money and $816,727,307 of funds previously appropriated but not yet spent. All the President’s requests for specific purposes were granted except $45,000,000 for the US contribution to the United Nations Korean Rehabilitation Agency. However, unobligated balances of last year’s appropriation for assistance to Korea continues to be available.
Fund Provisions. The House, (and it is expected that the Senate will approve) has authorized that funds be distributed as follows:
| Europe | Military | Economic |
| Near East and Africa | $5,072,476,271 | $1,022,000,000 |
| Asia and the Pacific | 396,250,000 | 160,000,000 |
| American Republics | 535,250,000 | 237,155,866 |
| 38,150,000 | 21,245,653 | |
| Total | $6,042,126,271 | $1,440,401,519 |
A certain amount of leeway is given the President in the administration of the above funds as the legislation permits the transfer of not more than 10% of the funds specified in the above figures for each area to be used for the same type of aid in a different area. In the case of Europe, it is provided that up to 10% of the total appropriation may be transferred from military to economic assistance or vice versa.
A restriction on the use of the funds is a provision that not less than 10% of the funds spent under the Economic Corporation Act be for loans rather than grants. This provision will apply to Europe and the Stem Program of Southeast Asia and to any other area where the decision is made to use the ECA Act, such as South Asia and the Middle East. Restrictions on the use of counterpart have been modified to remove the statutory prohibitions against use of the 95% portion in other than the country of origin and to postpone the date of final distribution of balances to the date of termination of assistance. Counterpart provisions also provide that the equivalent of not less than [Page 426] $500,000,000 of all counterpart generated must be used exclusively for military production, construction, equipment and materials. The Act also broadens the guaranty authority of the Economic Corporation Act to cover any area where assistance is authorized under the Mutual Security Act against certain non-business risks such as expropriation and convertibility. Provision is also made for the purchase for dollars of local currency needed for aid programs.
In the case of economic aid funds allotted to Europe, an amount not to exceed $55,000,000 may be used to promote the production of strategic materials. A special provision is included in the section dealing with allocation of funds to Europe providing that a sum not to exceed $100,000,000 of the military allocation may be used for any selected persons who are residing in or escapees from the USSR or the satellites, including eastern Germany and the Soviet occupied section of Austria or any other countries absorbed by the USSR, either to bring such persons into elements of the military forces of NATO or for other purposes determined by the President as useful to the defense of the North Atlantic area and the security of the US.2 A sum of $10,000,000 is usable from the economic allocation for Europe for assistance in the emigration of surplus European manpower. Since economic aid can be granted to any country in Europe which is receiving military aid, the European appropriation provides by inference for the provision of economic assistance to Spain and Yugoslavia.
Greece and Turkey for the purposes of military aid are included under the provisions dealing with the Near East and Africa. Military assistance for Greece, Turkey and Iran is set at $396,250,000, although 10% of this amount can be used for any other country of the Near East area which the President determines is of defense importance. The language of the section pertaining to economic aid is broad enough to include the entire continent of Africa outside of Dependent Overseas Territories, and may be spent either in line with the provisions of the Economic Cooperation Act or the Act for International Development. In addition, up to $50,000,000 is provided for economic aid to Palestine Arab refugees and may be contributed either to the UN or spent directly by any US agency. An additional $50,000,000 is provided for refugee relief and resettlement projects in Israel. It has not yet been determined who shall administer the Israel funds.
In the case of Asia and the Pacific, military aid is granted for the general area of China and this includes the Philippines and the Republic of Korea. Except for the Republic of Korea, economic funds [Page 427] for this area are to be spent pursuant to the Economic Cooperation Act or the Act for International Development.
Economic assistance for the other American Republics is to be spent for technical assistance programs only.
Other Provisions. To be eligible for aid certain commitments must have been agreed to with the US within 90 days. To obtain military aid the country must have agreed to promote international understanding, good-will, maintain world peace, take mutual action to eliminate the causes of international tension, fulfill military obligations under agreements to which the US is a party, make full contributions to its own defensive strength and the defensive strength of the free world, take reasonable measures to develop defense capabilities and insure effective utilization of assistance provided by the US. To obtain economic or technical assistance for purposes other than defense, the recipient country must agree to promote international understanding and good-will, maintain world peace and take mutually agreed action to eliminate causes of world tension. Amendment of both ECA and MDAP bilaterals will probably be necessary, and maybe Point IV agreements.
An anti-cartel provision is included in the new Act, the wording expressly stating that it is the policy of Congress that the Act should be administered so as to eliminate barriers and provide incentives to increased participation of free private enterprise in the development of resources in foreign countries and, to the extent that it is feasible and does not interfere with the achievement of the purposes of the Act, to discourage cartel and monopolistic business practices, and to encourage the development and strengthening of the free labor movement.
Provision is also made to allow suits in US courts for infringement of patents and compensation for know-how used in the assistance programs. The patentee or owner of know-how under this provision, is barred from injunction suits against individuals and may only sue the US Government.
Administration of the Program. The new law establishes a Director for Mutual Security in the White House and a Mutual Security Agency (MSA) as the successor organization to the Economic Cooperation Administration to operate the economic aspects of the program. The Department of Defense is primarily responsible for the military end items. State will remain responsible for Point IV. The Act places in the White House the responsibility for coordination of MSA, Defense and State in this regard. Thus the former coordinating arrangement, ISAC, which was headed by State, is to be abolished. W. Averell Harriman has been nominated as Mutual Security Director.3 In his new position Mr. Harriman will be responsible for super [Page 428] vision and general direction of the Mutual Security Program and administer the Agency. He will also have the coordinating functions in the White House as Director. The new Agency must be placed into operation within the 60 days after the Director takes office, simultaneously with the abolition of the Economic Cooperation Administration.
- For additional information on the action taken by Congress, see editorial note, p. 389.↩
- Information on United States policy regarding defectors from areas under Soviet control is included in documentation on general U.S. policies with respect to the Soviet Union and Eastern Europe in volume iv.↩
- Mr. Harriman was confirmed by the Senate on October 19.↩