740.5/7–2051: Telegram
The United States Deputy Representative on the North Atlantic Council (Spofford) to the Secretary of State 1
Depto 88. ToISA. For ISAC from ECC.
1. We believe part II Todep 468 May 29 (rptd Paris 6455 and [Page 224] Heidelberg 252)2 provides workable framework for US action to stimulate level Eur mil prod, and we desire combine this objective with that of promoting sensible long-term Eur mil prod pattern. Specifically, in view increasingly critical time factor in getting available prod capacities under way, we propose substantial proportion of 1952 end-item aid now programmed for ammunition and to extent practicable US spare parts be earmarked for procurement in Eur. Even if and when Eur def budgets for 1952 raised to level US estimated optimum fin capability, there will still be large latent unused physical capacity and large deficiency in ammo and spare parts. To utilize this capacity to meet deficiency will require dol procurement. Furthermore, we believe Eur countries shld be pressed in direction attaining self-sufficiency in these recurrent items at earliest possible date and in any case after 1954. This proposal directed toward achievement all aims set forth in part I Todep 468, and ammo and spare parts represent very critical deficiencies worthy full US support.
2. In order to forestall expectation that US will embark on general program of buying in Eur end-items for Eur forces and consequent disincentives involved, recommend we present this program as one limited strictly to ammo and spare parts for main purpose of stimulating in Eur type of prod which will be necessary to long-term support of rearmament program, and consequent reduction end-item deliveries from US. If ISAC concurs in gen with this proposal, region will submit detailed catalogue of items, quantities, and producing and recipient countries in accordance with para 11 of Todep 468. Quantities, recipients, and delivery schedules will be in consonance with presently proposed FY–1952 end-item prog. Producers will be determined after consultation with coordinator and DP staff.
3. We note that effects these operations upon Eur countries fin and econ position will vary widely, depending upon channels through which procurement dols are remitted and what consequent adjustments are made in US aid progs. Without analyzing these effects in detail, desire urge consideration fol principles to govern admin of prog.
- (a).
- Taking due cognizance prod capabilities, selection of producing and recipient countries should be directed to maximum extent toward those countries whose planned def expenditures for FY–1952 most nearly approximate US capability estimates. As soon as legislation permits, believe we should also stimulate mil prod in countries falling short of capabilities by exercising appropriate influence over expenditures from econ aid counterpart funds.
- (b).
- If country has reached capability level for FY–1952, we should recognize that additional effort stimulated by US procurement (unless offset by cut-backs elsewhere in country’s def prog) will require additional inflow of real resources to meet scarce materials requirements [Page 225] and to avoid gen inflationary threat. This may mean necessity for increased flow non-mil supplies and materials from dol area, although not on full 1 to 1 basis.
- (c).
- Diversion end-item funds to Eur procurement shld permit some net economies in US econ aid progs. Such savings might be transferred to end-item funds to finance additional procurement in Eur or US.
4. In light of foregoing, we no longer press for adoption of particular multilateral interim financing scheme recommended in London Embtel 5242 of Apr 4.3 We note from para 14 of part II Todep 468 that action along lines your proposal, or variants thereof, would be “without prejudice to some more permanent multilateral system”. We plan to continue studying such possibilities, such as Belg proposal recently submitted FEB (see Paris 3393 July 134). [ECC.]