Extracts From a Briefing Book Prepared in the Department of State for the Supreme Allied Commander, Europe (Eisenhower)2

top secret   u.s. eyes only

Part B: Status NATO Financial and Production Planning To Implement MTDP,3 Including U.S. Aid

1. general

The NATO has sought

to determine requirements for an adequate defensive strength;
to plan production to meet the equipment requirements, including allocation of tasks to countries; and
to determine how the economic and financial burdens of the defense effort should be shared.

Production planning has not made very much progress, although expert task forces under MPSB auspices have recently concluded surveys of production capacities and potentials in the most important [Page 2] categories of military equipment. These surveys are under study in the MPSB and the results of these studies should be useful to the newly created DPB in moving forward to achieve an adequate production program.

In the interim, each country has been urged to undertake production in those categories of equipment most urgently needed and for which the most serious deficiencies exist. Progress in this direction is uneven although some improvement recently has been noted. The U.S. is seeking both through the NATO and bilaterally to get each country to increase and expedite its production of military equipment as much as its financial and economic situation will permit.

Efforts to work out an equitable distribution of defense burdens are necessarily proceeding slowly. The difficulties include the necessity for first determining the cost of the effort required and at least tentative decisions as to the assignments to countries of tasks both in terms of forces and production. The U.S. seeks to avoid permitting this determination becoming a condition precedent to an all-out effort by all countries.

In planning U.S. assistance to NAT countries, the U.S. has necessarily had to make some broad estimates of the costs of the MTDP, some assumptions as to the extent of the production task which should be undertaken by the U.S. and by the other NAT members, and some assumptions as to the capability of the European nations to increase defense expenditures, with a resultant estimate of economic aid from the U.S. which would be required to assure continued economic stability.

Two billion dollars were appropriated in 1950 and 1951 under the MDAA for aid to our NAT partners. A supplemental appropriation of $3.5 billion was made in 1951 to be devoted primarily to production of long lead items in the U.S. which would ultimately be delivered to European nations. The regular appropriations were designed to provide part of the deficiencies in capital equipment of the forces expected to be in being. The supplemental appropriation is only now being programmed but will also be related to increased forces.

There is attached a table4 which reflects current U.S. estimates of the costs of mounting the Medium Term Defense Plan in Europe showing the amounts of aid required in the form of equipment and economic support and the extent of European effort assumed. These figures are phased over a four year period. It must be borne in mind that if it is decided to accelerate the MTDP, these estimates would have to be sharply adjusted. They are also rough judgments based on [Page 3] incomplete and inadequate data. They assume the U.S. bearing the cost of 60% of capital equipment deficiencies with the European nations bearing the remaining 40% and all of the maintenance and support of forces costs.

Part B

2. defense production

1. NAT Organization for Production. The past organization has consisted of the NAT Military Production and Supply Board (MPSB), composed of representatives of all NAT governments except Iceland. The MPSB is a subordinate body under the NAT Defense Committee, and has met infrequently. Its continuing work has been performed by a Committee called the “Permanent Working Staff (PWS) of the MPSB”, composed of full time representatives in London. Progress by the MPSB in getting increased military production under way has been very slow. Among reasons advanced for this slow progress are: (a) Inability to get from the Standing Group statements of deficiencies in equipment and decisions as to specific types to be produced, (b) lack of adequate funds in defense budgets of countries concerned to permit necessary expansion of production, and (c) the necessity to work in committee or subcommittees of national representatives rather than through an integrated staff capable of continuing forward planning.

2. New Organization. Reorganization of the MPSB into a “Defense Production Board” (DPB) of country representatives permanently available in London, plus an international staff under a Director or Coordinator of Defense Production has just been approved by NAT governments. The DPB will meet in early January to appoint a Coordinator and to initiate the establishment of an international staff. When the DPB is a going concern, it should be more effective than the MPSB, but the necessary urgent action will remain dependent in the final analysis on adequate increased defense budgets.

3. Progress. Since the signing of the North Atlantic Treaty, defense production in the European NAT countries has increased from about $700 million yearly to something under $1,500 million. However, if equipment requirements for NAT defense forces are to be met by 1954, it will be necessary, as a minimum, to more than double this rate of production, even assuming that U.S. production for Europe under the Mutual Defense Assistance Program (MDAP) is continued at present or even higher levels. A most useful step taken by the MPSB has been the organization of “task forces” of competent people [Page 4] in specialized fields of production of high priority equipment, which have visited all important potential producer countries and have made reports which will be used to establish sensible production programs in the various fields covered.

4. Problems. In addition to the necessity of getting clear cut decisions from the Standing Group or other military sources as to requirements and types to be produced, and the necessity for governments to increase defense budgets to finance military production, there are other major problems involved in obtaining adequate and urgent production increases in Europe.

First is the problem of coordinating U.S. “end-item” programs (equipment produced in the U.S. for Europe) with European production programs. Countries hesitate to increase their own production if they think there is any hope that they can get the same items free from the U.S.
Second is the problem of “integrating production”. To get the requisite amount of production performed urgently and at reasonable costs, it is necessary that large scale and economical projects be carried out, utilizing the countries best able to produce certain items, to meet not only national but total NAT requirements. However, production of items in one European country for transfer to other countries would involve payments back and forth, contracts, etc., which have so far prevented initiation of any large-scale production for transfer.
Other complications in the production field arise from selfish commercial motivations, failure of certain countries to provide the MPSB with full production data necessary for planning, difficulties involved in trying to do production planning through the “committee system”, etc.

5. Adequacy of Effort. Although no authoritative figures for the total cost of needed new equipment for European NAT countries have been produced, various rough estimates indicate such cost will run from $20.0 billion to $25.0 billion or even more. Assuming the U.S. might provide 50% or somewhat more of the equipment free from the U.S., there remains the necessity for Europe to produce over $10.0 billion worth of new equipment in the next three years. Unless greatly increased emphasis and accent is put on military production in Europe, there is grave danger that the forces desired by 1954 under the Medium Term Defense Plan will not be properly equipped by that time.

6. Comments. The unavoidable time-lag between the beginning of production planning and the delivery of finished items is such that all countries should be urged:

To back up the newly approved Defense Production Board, make available to it the best possible personnel, and accept and implement its recommendations.
To initiate maximum production that is known to be economical and needed without awaiting full commitment of U.S. aid, the completion of agreement on “sharing the defense burden”, etc.
Most importantly, to take the urgent and courageous action necessary to obtain increased defense budgets from their Parliaments.

Part B

3. financial and economic

1. European NAT members have not yet faced up to the full need for increased defense budgets. Some of the basic difficulties have been:

Lack of the same sense of urgency that has impelled post-Korea U.S. increases.
Political shakiness of European governments, which has made them reluctant to take unpopular decisions and disappoint hopes for higher living standards.
Postponement of decisions until U.S. aid has been committed.

2. Financial planning within NATO is still in an elementary stage. Such planning has been based on the general perfectionist assumption that the costs of the MTDP must first be estimated and then the burden of sharing such costs should be shared equitably, having regard to the capabilities of each participant. Attempts to cost the MTDP have not yet resulted in any NAT-wide accepted estimate of what the cost of an adequate defense plan would be. Meanwhile, NATO has agreed on procedures to analyze the economic capabilities of member countries with a view to helping the Council Deputies agree on an equitable sharing of the burden, but conclusions are not now expected for some months.

3. The defense budgets of European NAT countries in 1950 have not increased substantially above the pre-Korea rate. For 1951, their budgets based on announced plans may total $6.6 billion for defense, compared with the pre-Korea rate of $5 billion. Increases in addition to announced plans, however, are now being actively considered. U.S. appraisals show need for increasing European budgets for next year to at least $10 billion, exclusive of about $6 billion of U.S. aid if minimal defense needs are to be met. Some U.S. estimates suggest much larger budgets are necessary.

4. The following pages discuss present prospects and economic potentialities for increasing defense expenditures of the various countries. Their present and pre-Korea rates of defense expenditures are given in the accompanying table, which also compares expenditures with each country’s Gross National Product.

[Page 6]
NAT European Defense Budgets
FY beginning: (in million $) Percent of GNP
1950 1951 1950 1951
Pre Korea rale* Post-Korea rate Pre-Korea rate Post-Korea rate
Belgium 187 187 250 2.9 2.9 3.8
Luxembourg 4 6 N.A. 3.5 4.5 N.A.
Denmark 53 75 75 1.8 2.6 2.5
France 1,640 1,640 2,451 7.3 7.3 9.7
Italy 515 595 915 4.0 4.5 6.4
Netherlands 307 307 263 6.2 6.2 5.0
Norway 48 63 80 2.7 3.6 4.5
Portugal 41 44 N.A. 1.8 1.9 N.A.
U.K. 2,237 2,380 3,108§ 6.0 6.4 8.0
Canada and U.S. Defense Budgets
Canada 493 950 950 3.3 6.3 6.3
U.S. 15,124
{ 47,689(a) }
N.A. 5.5
{ 16.7 }
  1. General Eisenhower was about to begin a tour of the capitals of the NATO countries. (See pp. 460 ff.) The briefing book, prepared for him in the Office of European Regional Affairs, consisted of two major divisions: I. General Comments and II. Country Briefing. The latter is not printed. Part A of the General Comments, military in nature, is printed ibid . A copy of the General Comments was transmitted to Lucius Battle by George Perkins with a memorandum dated January 3 (740.5/1-251) suggesting that Acheson might wish to glance through its contents before his talk with Eisenhower on January 4 described in circular telegram 354, January 5, p. 395.
  2. Medium Term Defense Plan. It was set up on April 1, 1950, at a meeting of the NAT Defense Committee at The Hague. At that meeting, the Defense Committee approved the first draft of a detailed 4-year defense plan prepared by the NATO Standing Group, Military Committee, and Regional Planning Groups. This plan, in revised form, was approved by the Defense Committee and forwarded to the North Atlantic Council Deputies on October 28, 1950. This, document is presumably the one generally referred to as DC 28.
  3. Not printed.
  4. Based on country submissions to the PWS-DFEC. [Footnote in the source text.]
  5. Assumes $400 U.S. special aid. [Footnote in the source text.]
  6. This is projection based on the assumption that very substantial U.S. dollar assistance will be available. [Footnote in the source text.]
  7. Assumes U.S. special aid of approximately 100 million. Program is now being reviewed by Cabinet and further increases likely. [Footnote in the source text.]
  8. Appropriations.
  9. Estimated expenditures.