700.5 MAP/4–2351

Memorandum by Colonel Charles H. Bonesteel, III, Special Assistant to the Secretary of State, to the Under Secretary of State (Webb)

confidential

Subject: Organization for the Mutual Security Program

Attached is a rather drastic memorandum which the “Executive Group” is submitting to you. I should tell you that it represents a good deal of soul searching and is in no way motivated by “Departmental” attitudes on the part of any of the three of us.

We sincerely believe that when the Mutual Security Program1 is presented to Congress as a global, new, and positive approach to the heightened tensions in the world, it must be accompanied by something more than a patchwork organizational structure. The organizational issues to be met are very plain. We believe that the time has come to “grasp the nettles” and that not to do so will greatly increase the difficulties in securing passage of the Program.

We had in mind that, if you agree to this memorandum as a basis for discussion, it should be given Messrs. Foster, Lovett, Harriman, and Lawton, and that they should then meet with you, within the next few days, to agree on concerted recommendations to the President.2

This matter is urgent. The stir being created in the press and on the Hill by the President’s letter of April 53 is exacerbating the situation.

Could we see you on this matter at your earliest convenience—preferably before 4 p. m. today, when we must meet with the White House offices4 to review draft of the President’s Message, which includes statements on organization.

[Annex]

Memorandum by the Executive Group on Foreign Aid Presentation to the Under Secretary of State (Webb)

confidential

Subject: Organization for Administering the Mutual Security Program

The Problem

1. It is the considered opinion of our group that a clear exposition of a sensible organizational arrangement for implementing MSP is [Page 301]essential to an adequate and successful presentation of the program to Congress. This has been confirmed from many sources, including informal contacts on the Hill.

2. A revision of the proposed chapter on organization for the presentation document has been prepared by a group working under the chairmanship of Mr. Burton of the Bureau of the Budget. This document is confused, unclear, and would only emphasize to Congress that within the Executive Branch there is not a comprehensive and effective organizational concept for implementing MSP.

3. The President’s letter of April 5 on organization has not clarified the basic issues involved in establishing an effective organizational arrangement.

4. The President’s letter has reached the press and has evoked critical comment, not only from the press, but also from public and private organizations and individuals.

5. The time remaining before presentation of the President’s message to Congress on MSP is so short that it will take extraordinary action to improve the present situation.

Facts and Discussion

6. There is no basic issue taken by any of those concerned with the organizational problem to the fundamental premise that the State Department should exercise leadership, guidance, and in the final instance, control—subject only to Presidential determination if other interested Cabinet officers object—over all elements of the foreign policy of the United States and over the policies and principles to govern the operations of other agencies involved in overseas activities insofar as they affect Foreign Policy considerations.

7. Confusion and conflicting ideas exist, however, as to arrangements for policy coordination and the assignment of operational responsibilities under established policies and principles.

8. There are two principles which, we believe, should govern organizational arrangements for carrying out the MSP. They are:

a)
The arrangements should be so designed as to assure that all U.S. operative agencies abroad carry on their activities in accordance with U.S. foreign policies and objectives common to all. This means effective coordination and genuine agreement by all concerned on these policies, and a system for general review of operations to see that they are, in fact, conforming to such policies.
b)
The organizational arrangements should be as simple as possible and lead to the best and most rapid furtherance of U.S. objectives, with least expenditure of American resources in either money, manpower, or physical materials.

9. These principles should be applied to the present confused organizational picture. There are seven principal problem areas which need clarification. These are listed hereafter; first, the questions arising [Page 302]from the President’s letter of April 5, and, second, the remaining issues.

The President’s Letter

10. The question of one “Overseas Economic Aid Agency”. Both the Gordon Gray Report5 and the Rockefeller Report have specific recommendations to the effect that a single Overseas Economic Administration should be established. We are not yet aware of the recommendations of the Brookings Institution.6 However, in our view, the whole concept of a global foreign aid program makes it imperative that the question be faced now. We believe there is need for a comprehensive Overseas Economic Aid Agency to carry out the operations of administering such aid abroad. It seems to us, further, that there are not sufficient reasons to justify continuing duplicative separate organizations involved in foreign aid and assistance such as TCA and the ECA’s organization for technical assistance, particularly in light of the need for better U.S. organization to develop the increased production by foreign countries of strategic materials. We recommend that ECA be made the sole agency administering foreign economic aid and that urgent consideration be given to the transfer of TCA and IIAA to the ECA, taking care to preserve appropriate authority and prestige for Dr. Bennett7 and his staff within the ECA. We believe this can be done.

11. The question of the Allocation of Aid Funds. The President’s letter states: “. . . the Secretary of State, after recommendation from ISAC where appropriate, should make the broad decisions concerning the use of funds as between (a) military end-item assistance and economic support and (b) major political areas”. It is understood that this decision, although its scope and intent has been much misunderstood, was reached without consultation with the Department of Defense and has raised objections there. We do not believe this question is substantively of major importance, but as it seems to be interpreted by the public and by Congress it may be difficult to handle. If it would be interpreted, as we believe it must, to mean allocations only within the legislatively permitted flexibility between programs and between Titles of the Act, it becomes less important. If further it is recognized that it does not prohibit either the Secretary of Defense or the Administrator [Page 303]of the ECA from protesting to the President a decision made by the Secretary of State to which they do not agree, it is even less important. It does not, therefore, seem to us to warrant the political fight it will evoke on the Hill. We recommend, therefore, that in the President’s message, it be explicitly stated that there is no intent to alter the status and authority of the Secretary of Defense and the ECA Administrator, a fact evidenced by their continued responsibility to appeal to the President in any case in which they find themselves unable to accept the allocations of funds made by the Secretary of State.

12. Functions of ISAC . The President’s letter leaves it unclear as to whether ISAC will continue to operate under its existing charter, which limits its activities to “Security Affairs”, or whether it should be the over-all interdepartmental coordinating mechanism on all assistance programs of whatever nature. In the formulation of proposed programs for MSP we have found, for instance, that the military and economic programs for Asia were not adequately related. Specifically, in the Formosa program we found that the end-item program was based on the assumption that certain items essential to make the military program effective would be covered in the economic programs. They were not—to the tune of many millions of dollars. We recommend that ISAC clearly and explicitly be given comprehensive responsibility for the coordination of foreign assistance programs, both military and economic including technical cooperation programs, for all regions of the world.

The Other Urgent Issues

13. The question of “primary operating responsibilities” for operating agencies. In the past there has been considerable duplication of effort and much jurisdictional argument arising from the Department of State and other agencies screening in detail the technical work of agencies charged with primary responsibilities for operating programs. The Interdepartmental agreement establishing ISAC, approved by the President on December 19, 1950, established in its paragraph 7 the primary responsibilities of the operating agencies. When ISAC is considering the allocations of funds for carrying out programs or is approving programs, we recommend that the State and Treasury Departments should accept, with a minimum of double-checking, the technical statistics and recommendations provided by the agencies with operating responsibility and should confine their reviews to broad judgments on major issues. The pre-occupation of the Chairman and State member of ISAC should be to expedite the evolution of clear basic policies and principles, related to our overall Foreign Policy objectives, to govern operations under the MSP, and to achieve proper balance in the allocation of funds. He should not require his State Department staff to duplicate the detailed technical work performed by agencies with operating responsibility, nor to [Page 304]clear, in advance, technical operating instructions to the field within the framework of established policy. He should, however, be given for information copies of all such instructions when dispatched and his staff should review them to see that they do not diverge from established policy. If any instructions should so diverge, he should initiate immediate and appropriate remedial action.

14. The question of the proper relating of technical and grant economic assistance programs with the making of Export-Import Bank, International Bank and other loans. The implementation by the U.S. of a program for technical assistance and economic development grant aid in an underdeveloped country without there being the closest relationship between the implementing agency and the U.S. agency (and international agency) responsible for making governmental loans to the same country makes little or no sense. This is especially true in countries—and there are many—whose credit position is good and which are accruing gold and dollar reserves. We believe that in each underdeveloped country, the effort should be made, principally by the country government but with technical assistance from U.S. personnel (or International Bank personnel) if needed or justified by the U.S. national interest (or United Nations interest), to work out an overall development program for the country. This slowly evolving program would give proper and specific account of the varying sources of funds—the government’s, private capital, Bank loans and U.S. technical assistance and grant aid. In cases where U.S. political interests necessitate grant aid to “spark-plug” needed action, this should be taken into account. We believe Congress will wish to be assured that we are in fact moving to establish such procedures. This has not been true, to any substantial extent, in the formulation of country programs in the proposed MSP. We recommend, therefore, that the current consideration by the N.A.C. of this question be expedited and be aimed at effecting in the near future satisfactory working relationships between and among the Export-Import Bank, the International Bank, the ECA, the Department of State and the Treasury.

15. The question of a consolidated U.S. organizational arrangement for increasing the development and production of strategic raw materials in foreign countries.8 At the present there are a great many U.S. agencies involved in this area of activity, but there is no clear assignment of responsibility for the foreign operations in any one agency. In view of the vital importance of this subject to our national security and the obvious importance of relating our foreign assistance programs, particularly in underdeveloped areas, to the attainment of U.S. objectives in this regard, we believe Congress will wish to be [Page 305]assured that necessary reorganization to this end is under way. Accordingly, we recommend that urgent attention be given this question by the Executive Branch, that appropriate action be taken to expedite the necessary studies and that a recommendation, including the designation of one agency, possibly the ECA, to be responsible in this field, be made to the President on this matter at the earliest feasible date.

16. The question of the organizational arrangements necessary to assure that “claims” by foreign countries for allocations of scarce materials and goods from the U.S. are presented and acted upon by agencies of the U.S. Government in the way best designed to promote the U.S. national interest. This is a most complicated question and will require a considerable time to work out adequately in all of its ramifications. We mention it because we believe the success of the whole concept of the MSP will depend more on the availability for transfer to other countries of actual goods and materials from the U.S. at the times they are needed than upon the mere appropriation of funds for the program. The problem encompasses more than the availability just of the materials to be shipped under grant aid and includes those essential items needed by countries no matter how paid for. The obtaining for the U.S. of requisite amounts of strategic raw materials is implicitly involved. We recommend that continued attention be paid this question by the Executive Branch to the end that arrangements adequate to cope with the problem can be effected as rapidly as feasible.

  1. Regarding President Truman’s message of May 24 proposing foreign aid in the form of a “Mutual Security Program,” see editorial note, p. 317.
  2. No record of the proposed meeting has been found in Department of State files.
  3. For text, see circular airgram, April 12, p. 290.
  4. No records of the meetings under reference have been found in Department of State files.
  5. For documentation on Report to the President on Foreign Economic Policies, by Gordon Gray, November 10, 1950, see Foreign Relations, 1950, vol. i, pp. 831 ff.
  6. The Administration of Foreign Affairs and Overseas Operations, a report prepared for the Bureau of the Budget by the Brookings Institution, was submitted in June 1951.
  7. Henry G. Bennett, Director of the Technical Cooperation Administration. The TCA, under the general direction of the Secretary of State, administered the technical cooperation program (Point Four) authorized by the Act for International Development (Title IV of the Foreign Economic Assistance Act of 1950, Public Law 535, 81st Cong.).
  8. For documentation on U.S. policy regarding the procurement of strategic materials, see pp. 1 ff.