Foreign Relations of the United States, 1951, National Security Affairs; Foreign Economic Policy, Volume I

700.5 MAP/7–2151

Paper Prepared in the Department of State

confidential

[Washington,] July 21, 1951.

Administration of the Mutual Security Program

a. summary of testimony to date¹

1. Secretary Acheson stated that the present setup is working well and should continue. However, if the Committee desires to change present arrangements that should be done only after it has become thoroughly familiar with the whole program. The Secretary stated that, if essential, the name and functions of ECA could be changed but the Committee should weigh the danger of disrupting a going concern.

2. Cabot urged the present setup be continued on the ground that end-items and economic aid are parts of foreign policy and State is the only logical place for them and foreign policy to be coordinated.

3. Foster said the present setup will work adequately with the improvements now planned for it. However, in response to queries he stated that there are four possibilities:

1. Present setup.

2. New agency for all economic programs.

3. New agency for economic and military programs.

4. State Department to be replaced by a Department of Foreign Affairs with four branches: (1) Military Aid; (2) Economic Aid; (3) Information; (4) Foreign Policy.

He seemed to indicate a preference for a setup headed by an administrator rather than a committee, and said that a new agency could handle military end-items as well as economic aid if the technicalities of procurement did not prevent it.

4. Hoffman² was strong for a new independent agency to handle economic and military aid. The agency would administer economic aid directly; control the funds for military aid; and would allocate them to Defense for procurement. Its relationship to the Defense Department would be like the present relationship between State and Defense with respect to MDAP. It would also decide whether military items would be made in the U.S. or abroad. The agency would have a veto on Exim Bank loans and would be a member of the Executive Committee of the International Bank. The administrator must have cabinet rank in order to effect coordination.

5. Rockefeller strongly favored a single agency for all economic aid, particularly with respect to Point IV and other underdeveloped areas programs, development of essential materials, and encouragement of private capital. He stated that military end-items should be handled as now, except that the new agency should help the military in offshore procurement. He suggested that the Bureau of the Budget should study how much of export controls and procurement should be placed in the new agency.

6. Tracy Voorhees³ presented the recommendations of the Committee on the Present Danger, whose views are similar to those expressed by Mr. Hoffman, summarized in 4, above.

7. Perkins said that many agencies of the government were involved in the programs and that positive machinery is required for coordination so that only the most critical issues reach the top. He said the present way is not bad. It should be improved if possible, but we must be careful of drastic changes, since a three or four month let-down would be very serious. In discussing the relationship of policy to operations, he said the present State-ECA relations were satisfactory. However, the provision for State Department policy guidance should perhaps be strengthened.

b. trends in committee hearings

On the basis of Committee reaction to the above testimony and informal conversations with members of both Houses on this subject, the following appear to be the main trends:

1. Termination of ECA. The Committee wishes to terminate ERP and there is strong sentiment for ending ECA earlier than June 30, 1952. However, there is a desire to create a successor agency to operate the economic part of MSP. This is in contrast to the Administration proposal that ECA be continued for that purpose.

2. A new agency for economic programs. There is considerable feeling that the successor agency to ECA should have broader functions in the economic field than those contemplated for the ECA under the Administration plan. These functions apparently would include all aid to underdeveloped areas, including Point IV; economic aid to Europe; and probably an expanded role in development and procurement of strategic materials, in foreign lending, and in foreign claimancy. Hoffman, Rockefeller, and Voorhees have been strong for this concept and it is incorporated in a bill drafted by Senator Lodge.⁴ These trends are in contrast to the Administration proposal which would keep Point IV in State; would retain ECA; would not make ECA a global agency; and which has not to date contemplated centralizing foreign claimancy and materials procurement and development in a single foreign operating agency.

3. A new agency for economic and military programs. There also appears to be very considerable support for the Hoffman-Committee on the Present Danger proposal which provides that “foreign policy would be made by State” but that there be a single overall agency controlling both the military and economic aid. The agency would operate economic aid and allocate funds to Defense for procurement of military end-items. The economic and military aspects of MSP would be unified under the Administrator of the proposed agency, who would have Cabinet status. Some Committee members have expressed concern about the effect of this proposal on the State Department and have stated a desire to preserve the Department’s policy function in relation to such an agency.

4. Field organization. There has been little attention to the field organization. Prevailing Committee sentiment appears to subscribe to the concept that the Ambassador is the senior U.S. representative in a country. However, the advocates of a new economic agency or a new overall foreign aid agency have in mind special missions abroad of the ECA type which would reflect the expanded responsibilities of the new agency. In addition, the Lodge bill provides for area “Special Representatives”, responsible to the Administrator, who would “coordinate diplomatic and special missions” in their areas with respect to foreign aid matters and who would represent the U.S. at international organizations.

5. Control and allocation of program funds. The Lodge bill provides for appropriations to the President. Other proposals are not clear on this point. Under the Hoffman-Committee on the Present Danger proposals, funds would be allocated by the Administrator of the new agency. This is a departure from the present practice with respect to MDAP and the line taken by the Administration.

6. Coordination of economic and military programs. The Hoffman-Committee on the Present Danger proposal unifies the economic and military aspects of the MSP under the Administrator of the proposed agency. The Lodge bill provides for an advisory committee to the Administrator (ISAC), which would be under the chairmanship of the Administrator. This is contrary to the line taken by the Administration.

7. Relation to the Battle Bill.⁵ The Battle Bill proposes that the President appoint a Mutual Defense Assistance Officer to direct the use of foreign aid in order to lessen East-West trade. Pending the appointment of this officer, the Bill provides that the Director of the Mutual Defense Assistance Program shall exercise this function. Under the Committee on the Present Danger recommendations, the Administrator of the proposed overall agency would become the Mutual Defense Assistance Officer to be established by the Battle Bill.

c. action called for

The situation appears to have reached a point where the Administration must decide what action to take to influence Congressional thinking concerning the Mutual Security Program. Hearings in the House Committee are scheduled to be finished this week. Committee sentiment both on the mark up of the bill and on the form of organization is solidifying. Several drafts of legislation are already in existence and being discussed. It appears desirable that steps be taken, including the following:

1. Check various sources to determine Congressional sentiment as accurately as possible.

2. Mobilize the full political force of the Administration to support whatever line of action is determined upon after making the check called for in the paragraph above. This would include making use of the political strength of the White House, interested Cabinet members, and others.

3. Give assistance to key House Committee members, particularly Richards and Vorys.⁶

4. Indicate to the Committee that, although we still believe the Administration proposal is the soundest course to follow, we will be glad to cooperate with the Committee in working out the details of a bill for the purpose of preserving the program and the Department’s foreign policy function.

1. Regarding the hearings on the Mutual Security Program which began before the House Committee on Foreign Affairs on June 26, see footnote 1, p. 334.
2. Paul G. Hoffman, Director of the Ford Foundation; Administrator of the Economic Cooperation Administration, 1948-1950.
3. Vice Chairman, Committee on the Present Danger; Under Secretary of the Army, 1948–1950.
4. Senator Henry Cabot Lodge, Jr., of Massachusetts; Member of the Senate Foreign Relations Committee.
5. Reference is to H.R. 4550, sponsored by Representative Laurie C. Battle of Alabama, which was approved as the Mutual Defense Assistance Control Act of 1951, October 26, 1951 (Public Law 213, 82d Cong., 65 Stat. 644). For text, see Mutual Security Act of 1951 and Other Basic Legislation, pp. 115–120. For documentation on United States policy regarding East-West trade, see pp. 993 ff.
6. Representative John M. Vorys of Ohio; Member of the House Foreign Affairs Committee.