ECA message files, FRC 53 A 278: ECA circular telegram
The Acting Administrator for Economic Cooperation (Bissell) to all ECA European Missions 1
Ecato circular E–96. Following is proposed new counterpart policy which will serve as guidance at time that economic aid negotiations [Page 283] take place. It modifies Ecato circ E–522 and takes into account Missions’ comments, discussions with OSR and provision in pending legislation that $500 million equivalent of ECA counterpart funds shall be used exclusively for military production.
1. Amounts of economic aid will be agreed between recipient government and U.S. within limit set by total economic aid figure envisaged for this country during fiscal year. Latter figure will set upper limit of the aggregate of the firm commitments that may be reached during the year.
2. Amounts agreed on will be conditioned on a satisfactory commitment by the recipient government in relation to overall U.S. objectives. One element of this commitment, in all cases, will be a definite agreement as to the use of counterpart. Agreed aid amounts will be considered firmly committed, subject to satisfactory performance by the recipient PC in fulfilling its commitments to the U.S., including that with respect to counterpart use. Performance by PC’s will be jointly reviewed by US and PC periodically.
Negotiation on counterpart will thus take place concurrently with decision on making aid amount available rather than being postponed, as has been the case in some countries, until counterpart has accumulated. This is a double-barrelled approach that envisages firm agreement by U.S. on our aid as well as firm agreement by PC on counterpart use.
3. In order to comply with legislative provision re military production uses, first consideration in such negotiations should be given to uses of counterpart for defense production. Following may be useful guide lines in this connection:
- a)
- Efforts are being made to obtain broadest possible definition of “military production” in authorizing legislation. Senate version broadens provision to read “military production, construction, equipment, and materiel”. Expect that this will be version finally agreed upon.
- b)
- Counterpart earmarked for military production purposes should be additive to previously contemplated military procurement in those countries in which US considers additional military effort feasible. Recognize additional military expenditure of this type will not be possible in all cases and that, in order to comply with legislative requirement, counterpart, in some instance, may have to be used at least in part as a substitute for items already budgeted.
- c)
- Decision will have to be reached prior to next general allotments as to amount of counterpart in each country which could be devoted to military purposes in fiscal 1952. This does not apply to emergency allotments made under joint resolution. As part of this process, review should be made currently of amounts of non-committed counterpart funds from previous years’ aid which could be devoted to military purposes. Results of this review would supply minimum immediate targets for future negotiations. Please provide ECA/W with results of your review and target figure for our comments.
4. Counterpart can be used also for other than military purposes. In countries where possibilities of military uses of counterpart are small or where it is considered desirable for other reasons to reserve some portion of counterpart funds for other purposes, negotiations should proceed along lines outlined in Torep 5787,3 i.e., agreement should be reached on counterpart release for a limited number of objectives of special economic and social significance, including control of inflation where appropriate.
5. In most countries it will not be possible to commence useful negotiations concerning counterpart at least until the authorizing legislation has been passed, and in no event can U.S. aid be committed until appropriation is passed. You should, however, inform the Government that this policy with respect to concurrent aid and counterpart negotiation will be put into effect and that we expect negotiations will be commenced soon after appropriation legislation is passed.
6. Before undertaking more than informal preliminary discussions with governments on economic aid, Missions will require further instructions from Washington on the timing of U.S. aid negotiations and duration of aid commitments, on total economic aid potential available to PC; on possible variations as a result of decisions on offshore procurement and infra-structure expenditures; and on the relation of the economic aid-counterpart negotiations to overall U.S. objectives in the PC and to negotiations on other forms of U.S. assistance.