FRC Acc. No. 62A613: ISA/MDAP Files

Memorandum of Discussion Prepared by the Management Staff

Subject: Budget Bureau discussion with the President on foreign aid organization and State–ECA relations.1

Set forth below is a summary of the points discussed with the President by the Bureau of the Budget on Wednesday, February 28. The President approved these principles but was not requested to initial the Bureau paper.2

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The Bureau of the Budget is drafting identical letters from the President to State and to ECA3 which will embody the principles outlined below and instruct the agencies to work out suitable arrangements along these lines.

The outline of the paper discussed with the President is as follows:

I. General:

New foreign aid program reflects a marked shift of emphasis from general economic aims to support of military build up.
Broad outlines of policy on substance of this program have already been laid down by the President—the major current issue is the organization of the Executive Branch to carry it out.

II. At present, there are two major agencies concerned with foreign aid:

ECA for ERP and aid to South East Asia and South Pacific.
State Department for Point IV, the allied military production portion of MDAP, and United States participation in the UN programs for aid to Korea, Palestine refugees and technical assistance.

III. There are three broad alternatives:

Continue with the present arrangements unchanged.
Abolish ECA and lodge ECA functions in the State Department.
Convert ECA into an agency with general responsibility for foreign aid operations, with necessary interagency arrangements with State and Defense to insure that foreign aid programs support foreign policy and military production.

The third alternative (c) was recommended by the Bureau of the Budget.

IV. Functions:

ECA would be the operating agency for all economic grant and technical assistance programs proposed in the foreign aid package bill.
Point IV and IIAA4 would be transferred to ECA, provided satisfactory arrangements for administering them could be worked out. The President indicated that his approval of the transfer was contingent on development of a specific plan satisfactory to him and which he would approve.

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V. ECA would not be a permanent agency, but would continue in operation while the size and diversity of foreign aid operations warranted. The June 30, 1952, termination date would be eliminated.

VI. State–ECA Relations:

Leadership of the State Department on behalf of the President in foreign affairs across the board, including foreign economic aid, must be recognized.
ECA operations must be more closely coordinated by State. However, there should be no amendments of Sections 105, 108, and 109 of the ECA Act,5 but both agencies should interpret the Act in favor of closer coordination instead of the present interpretation of virtual independence of ECA.
The recent interagency memorandum on international security affairs6 and the Spofford7 terms of reference have settled several important aspects of State–ECA relations. Additional clarification is proposed through:
Provision that when the ECA Administrator and the Secretary of State disagree, no action should be taken pending resolution by the President.
With respect to control of funds, ECA would submit its budget estimate to the Bureau of the Budget, but would be required to coordinate with State in the preparation of its budget. Appropriations would be made to the President and funds would be allocated by the Bureau of the Budget on the advice of State.
Defense and Treasury would participate in foreign aid decisions through ISAC and NAC, respectively.

VII. In regional matters, the proposition should be established that OSR is part of the United States organization for NATO purposes. OSR should be the economic staff to Spofford. Relationships at the regional levels should generally follow those proposed for the country level.

VIII. Country Organization:

We should move toward integration of economic work in the country under a single head appointed jointly by State and ECA. The details [Page 286] and extent of actual integration are very complex and will take a long time to work out.
State, Defense, and ECA should retain existing vertical command channels for day to day operations, but there should be coordinated instructions for matters of common concern.
Where differences occur at the country level, no action should be taken pending referral of the issue to higher levels on the basis of a single statement.
The Ambassador is recognized as responsible for leadership and coordination of the whole United States Mission in the country.8

  1. President Truman and Frederick J. Lawton, Director of the Bureau of the Budget, were present at this meeting. Other participants have not been determined.
  2. The undated paper was titled “Organizational Arrangements for Future Foreign Economic Assistance Programs.” A copy is in Department of State Administrative Files, Lot 54 D 291.
  3. For text of the President’s letter, April 5, see circular airgram, April 12, p. 290.
  4. The Institute of Inter-American Affairs, established in 1942 and a United States Government corporation since 1947, was the agent for the administration of technical assistance by the United States to the other American Republics. For documentation on U.S. economic and technical assistance policy regarding the American Republics as a group, see vol. ii, pp. 1038 ff.
  5. Reference is to the Economic Cooperation Act of 1948, Title I of Public Law 472, 80th Cong. (62 Stat. 137). The sections under reference dealt with, respectively, the general functions of the Administrator of the Economic Cooperation Administration, ECA Special Representatives abroad, and Special ECA Missions abroad.
  6. The memorandum, approved by President Truman on December 19, 1950, is printed in Foreign Relations, 1950, vol. i, p. 484.
  7. Charles M. Spofford, Deputy United States Representative, North Atlantic Council; Chairman of the European Coordinating Committee.
  8. An extract from the memorandum of understanding between the Department of State and the Economic Cooperation Administration on “Relationships and Organization of United States Representatives and Certain North Atlantic Treaty Bodies in European Production and Economic Aid Programs,” as revised and circulated on March 6, 1951, is included in The Ambassador and the Problem of Coordination, Committee Print prepared for the Committee on Government Operations, United States Senate (Washington, Government Printing Office, 1963), pp. 5961. For additional documentation on this general subject, see vol. iii, pp. 1 ff.