Foreign Relations of the United States, 1951, European Security and the German Question, Volume III, Part 1

ISAC files, lot 53 D 443, d–26

Memorandum by Lincoln Gordon, Economic Adviser to the Special Assistant to the President, to W. Averell Harriman, Special Assistant to the President¹

confidential

[Washington,] October 6, 1951.

Subject: Proposed Outline of Operations for NATO Temporary Council Committee

This memorandum reflects extensive discussions with officials concerned representing the Departments of State, Defense, and Treasury, the ECA, and the Bureau of the Budget. It is in no sense an officially agreed document, but represents my personal views after taking into account those discussions. This second draft reflects the discussion at a final roundup of interested officials on Friday morning, October 5.

A. Organization and Procedures.

The TCC and the Executive Bureau will have headquarters in Paris, with meeting rooms furnished by the FEB Secretariat. Ambassador Spofford will suggest the name of a Secretary for the Committee from the existing NATO Central Secretariat. The probable designee is Sigurd Nielsen of Norway, who is universally highly regarded by persons here who know him.

As provided in the Council resolutions, the services of the Council Deputies and the NATO ad hoc Joint Working Group (which includes officers and international personnel from the Deputies, the Standing Group, the DPB and the FEB) are to be available as desired by the TCC. It is assumed that the TCC Executive Bureau will work out with the appropriate members of the Joint Working Group any specific desired tasks to be performed by existing NATO agencies.

Apart from the work already underway in the Standing Group, the DPB, and the FEB, which may be somewhat modified to meet the requirements of the TCC, I believe that it will not be practicable to make substantial new formal assignments to those agencies. The possible role of the FEB is a particularly difficult aspect of this problem, and is discussed in Section H below.

ECA and Defense representatives have suggested that, in addition to the international Secretary, the TCC (or the Executive Bureau) should seek to appoint an international Executive Director or Chief of Staff to provide executive direction for the whole effort. I consider this proposal impracticable for two reasons:

(a) There is no clearly competent eligible individual, who would evoke the necessary confidence, and

(b) The member nations, especially the Big Three, are so intensely interested in the TCC operation that they would be unlikely to entrust such responsibility even to a highly qualified international figure.

(The latter reason applies to us no less than the others.)

As an alternative, I believe we should rely upon an Executive Committee of official-level alternates to the members of the Executive Bureau. These three, together with the Secretary, should be in daily contact to ensure that the various phases of the work are moving in step. In addition, for the work on the economic capabilities side, it may be possible to co-opt Marjolin and other key members of the OEEC Secretariat on an international basis. The ECA is supplying a separate memorandum on this point.

B. Executive Bureau Composition and Relationships to TCC.

The first action of the TCC must be to elect its Chairman and one or two Vice-Chairmen, and to determine the composition and responsibilities of the Executive Bureau. As reported by Mr. Foster, a clear informal understanding was reached at the private Ottawa meeting of the 12 Ministers that the US member would be Chairman, the British and French members would be Vice-Chairmen, and that the Executive Bureau would be composed only of these three. It will be necessary to confirm this understanding privately in advance of the formal meeting on October 9, especially with the Italians, who have hinted at proposing a six member Executive Bureau. The avoidance of ill-will on this highly sensitive issue will depend primarily on the degree of delegated authority sought by the Executive Bureau and the proposed relationships with the full TCC.

On this point, I believe we should suggest a full delegation to the Executive Bureau of the TCC’s authority under paragraphs 3 and 4 of the Council Resolution to call upon member governments for information, advice and assistance and to require assistance from military and civilian NATO agencies. The Executive Bureau should also be charged with proposing to the TCC a general course of action, preferably at a second meeting to be held Wednesday or Thursday. Thereafter, the Executive Bureau should be charged with carrying out this course of action, including organization of the Screening and Costing Committee (McNarney² proposal see Appendix D),³ a preliminary assessment of “realistic politico-economic capabilities” of member countries (and of Germany), an appraisal of the dimensions of the reconciliation problem and a first formulation of possible courses of action for consideration by the full Committee. In reviewing the politico-economic capabilities of each country outside the Executive Bureau, the Bureau should work with the TCC member from that country.

An interim meeting of the full TCC should be planned between November 5 and 10, when the Executive Bureau could report on the work of the Screening Committee and its own progress on the capabilities side. In addition, if the “Little Nine” representatives strongly desire, the official-level Executive Committee might meet once a week with representatives of the Nine (perhaps their FEB members, who will be in Paris in any event) to keep them informed on current progress.

There is attached as Appendix “A” a draft resolution on the Executive Bureau.⁴

C. Conduct of the Opening Meeting.

After the election of officers and establishment of the Executive Bureau, it is suggested that you at once launch the full Committee on consideration of the substance of the problem.

A draft outline of a possible statement, covering the general background and the main lines of attack on the problem, is attached as Appendix “B”.⁵

D. Military Background.

As indicated in Appendix “B”, arrangements would be made for a presentation to the entire TCC of the basis of the military force requirements. It is understood that Major General Lindsay, the Standing Group representative in Europe, is discussing with General Eisenhower on Saturday, October 6, the best way of handling such a presentation. It is probable that General Lindsay would summarize the main states in development of force requirements, both for Western Europe and for other NATO commitments, and that Generals Eisenhower and Gruenther would make a more intensive presentation regarding the European theater.

E. Revised Military Force Requirements.

The Standing Group is now planning to have a revised statement of force requirements for the defense of Western Europe some time next week. As presently planned, the force requirements will be referred to National Chiefs of Staff by the Military Representatives Committee next week. The SG paper, revised as a result of national comments, will be forwarded for the use of the TCC about October 15. The Standing Group will also develop next week the new time-phased, country-allocated contributions recommended from a military point of view to meet the new requirements. Since these proposed national contributions will require close study by the National Chiefs of Staff, the Standing Group plans to allow the MRC members until 20 October to submit their comments on contributions. Hence the plan for force contributions will not be issued until a few days after 20 October.

It is essential that timely distribution of Standing Group force papers be made to the appropriate agencies of TCC. Accordingly, I strongly recommend that the Standing Group be requested to adopt the following procedure for these documents:

(a) The U.S. element of the Standing Group forward on a U.S. eyes only basis to U.S. Representatives in TCC and SCC planning papers at the time that these papers are forwarded from the planning teams to the U.S. Deputy Representative on the Standing Group.

(b) The Standing Group forward documents to the representatives of the Standing Group nations on the TCC Executive Bureau and the SCC as soon as the documents have been approved by the Standing Group.

(c) MRC documents to be forwarded to the Executive Bureau for distribution to all TCC Members at the time they are issued to the military representatives.

F. Screening and Costing.

Assuming that agreement can have been reached informally with the French and British prior to the first TCC meeting, you should present to the full Committee the McNarney proposal for the creation of the “Screening and Costing Committee” (SCC). The explanatory memorandum and draft terms of reference, as proposed by General McNarney and slightly amended to reflect the changes agreed in his office last Wednesday, are attached as Appendix “D”.⁶

G. Germany.

It is understood that the new Standing Group requirements statement will include a specific force allocation for Germany. This figure, however, is based on the JCS view of a desirable German contribution by 1953, and is therefore considered by the U.S. as subject to upward revision to secure a figure on the total German contribution by the middle of ’54.

The TCC and the SCC should use the present SG figure as an interim assumption, but seek a final figure from the SG urgently. These figures would be subject to modification when and if the Paris Conference on the European Defense Community reaches agreement on this question.⁷

The SG requirement must be supplemented by estimates of supporting forces for divisions and by time-phasing in some detail of the buildup. These estimates are normally furnished by national governments, but Germany is not in a position to do this. TCC should urgently request SG to have SHAPE prepare estimates on these points.

On the basis of the SC figures, the U.S. Costing Group should estimate German defense costs. Tripartite agreement on them should be sought for use in the forthcoming London negotiations with the French and British on occupation costs.⁸ These costs and the requirements they are derived from should be subject to review by the SCC similar to the screening applied to NATO countries.

The London Group will also be seeking for their purposes to develop, in cooperation with HICOM, estimates of German economic capacity. TCC should look to this Group for such estimates on Germany and should be prepared to discuss the estimates with appropriate representatives of the occupying powers on the same basis as with representatives of NATO powers.

While it will probably be impossible for TCC to pass judgment on Germany’s capacity figures prior to the time when negotiations will have to be started on this subject with the Germans, the Executive Bureau should give such informal comments as they can on the figures.

Prior to reaching final agreement with the Germans, particularly if the figure proposed differs appreciably from that previously discussed with the Executive Bureau, the occupying powers should secure comments from the Executive Bureau in the light of the TCC exercise as it stands at that time. Any tripartite agreement with the Germans should be subject to renegotiation depending on the final outcome of the TCC exercise as a whole.

It would be desirable if a figure for Germany’s defense capacity to which the Germans had themselves agreed could be before the TCC prior to its making it final report.

Recommendations of the London Group with respect to the handling of occupation costs should be communicated to the TCC since they will affect the defense burden of the occupying powers, which must be taken into account in measuring their financial capacity against defense requirements.

H. Economic Capabilities Aspect of the TCC Operation.

1. The tactical problem of introducing the economic work under the TCC operation has two principal facets:

(a) The first arises from the absence of internationally agreed costing figures now or for several weeks to come. It is obviously necessary and desirable to get some preliminary economic analysis underway to cover the whole period FY 1952 through FY 1954 (which has not been covered in the FEB operation to date) in advance of final international agreement, if any, on costs of military requirements.

(b) The second is to devise means of instigating such economic analysis without causing national governments or international bodies to take firm and final positions on economic capabilities prior to confrontation with military costs.

2. Accordingly, it is proposed that:

(a) The Executive Bureau of the TCC should request the FEB Secretariat to prepare preliminary analyses of European economic capabilities through FY 1954. Such analyses would be generally prepared in the form of “informal reports” by governments submitted to the FEB Secretariat for technical but not for substantive review, and subsequently submitted by the Secretariat to the TCC Executive Bureau. It should be emphasized that the FEB activity would therefore be a secretariat function rather than a broad function since the work will not involve the conclusion of international agreements on substantive submissions.

(b) The Executive Bureau will indicate to the FEB Secretariat the general form of the informal reports on economic capabilities. These reports would present preliminary governmental views on the economic impact and feasibility of two alternate levels of defense expenditure, assuming economic aid continuing through FY 1953 and 1954 at the level requested of Congress in FY 1952. The two alternate levels of defense effort would be

(i) that level which the national government is internally (i.e., not necessarily with parliamentary approval) planning to undertake on an expenditures basis for FYs 1952, 1953 and 1954, taking into account the known large shortfall in military activities as compared to requirements.

(ii) a level 10 percent higher than the foregoing level in FY 1952 and 20 percent higher than the foregoing levels for FYs 1953 and 1954. (See paragraph 3 below for discussion of possible upper limit of levels of defense expenditure by country.)

(c) In its instruction to the FEB Secretariat the Executive Bureau should clearly state that assumption (ii) carries no implication that an equal percentage increase in defense efforts by all countries will be equitable. The purpose of the instruction is rather to select an arbitrary technique for economic analysis designed to minimize preliminary disagreements over assumptions so that a rough basis of economic data will be prepared in time for the confrontation process in November. The Executive Bureau believes that for some countries such a percentage increase will represent an excessive economic burden, whereas it expects that analysis will show for other countries a percentage increase of this or some other magnitude may well be feasible.

(d) The Executive Bureau should request the FEB Secretariat, in preparing instructions to countries for the preparation of informal reports, to reduce to a minimum the standardization of detailed submissions. The instructions should request countries to emphasize the principal limiting factor and bottlenecks, such as inflationary limits, industrial bottlenecks, balance of payments difficulties. Some uniform data may be requested such as that shown on the attached short form, but it should be held to a minimum.

(e) The FEB Secretariat may at its discretion supplement national informal reports or prepare independent reports on economic capabilities and bottlenecks. In particular it might be useful for the Secretariat to prepare studies on the availability of certain key commodities such as coal and steel for purposes of military production in Western Europe.

(f) The national informal reports, having been subjected to technical review, together with any independent Secretariat reports should be submitted to the Executive Bureau as soon as they are prepared and not later than the date which is agreed upon for the submission by SCC of the estimated costs of military requirements.

3. On the question of assumption (ii) described in 2(b) above, the question has been raised as to whether some objective formula could be easily devised and agreed to which would make it unnecessary for countries whose defense programs are already relatively high to prepare submissions on the basis of the assumed increment. Experience of the past few months suggests that no such objective formula can be devised or agreed. In FEB discussions last spring most countries agreed that any formula for application of specific percentages of estimated GNP to military programs would have to be progressive; thus a proposal to select a figure of 14 percent of GNP as an upper limit to submissions on the basis of assumption (ii) above would be regarded by European countries as a simple technique whereby the U.S. would be able to avoid making a submission on assumption (ii), whereas all other countries would be required to prepare such a submission. As to the development of an objective, progressive formula, several weeks of discussion in FEB failed to elicit agreement on the graduations of progressive percentages of GNP. No other formula has been devised to date. Accordingly, it appears to be necessary to adopt something like assumption (ii) above, supplemented by the statement described in paragraph 2 (c) above.

1. This memorandum was circulated as International Security Affairs Committee document ISAC D–26 of October 8, 1951, and in the cover letter attached to the source text it was noted that Gordon wrote this memorandum in consultation with other ISAC agencies although their participation did not necessarily imply their agencies’ approval of Gordon’s recommendations. The cover letter also pointed out that Section H was prepared by ECA on the basis of discussions with Gordon but that Gordon had not seen this section prior to its inclusion in this memorandum.
2. Gen. Joseph T. McNarney, U.S.A.F.
3. The words “see Appendix D” were added according to the instructions in the corrigendum to ISAC D-26 of October 10, 1951. Appendix D, “Proposal for NATO-TCC Screening and Costing Committee,” was also attached to this memorandum because of the instructions in the corrigendum. Many of the recommendations contained in Appendix D, which is not printed here, were later accepted by the TCC.
4. Not printed. The draft resolution contained in Appendix A on the organization of the Executive Bureau was approved by the U.S. Delegation on the TCC and subsequently presented to the TCC as a U.S. draft proposal; its text, identical to that in Appendix A, was transmitted to the Department of State in telegram Repsec 23 of October 9 (740.5/10–951).
5. Not printed.
6. The text was corrected here according to the instructions of the corrigendum discussed in footnote 3 above.
7. For documentation concerning the attitude of the United States toward the Conference for the Organization of a European Defense Community, see pp. 755 ff.
8. For documentation on the work of the Tripartite Group on Germany (TGG), under reference here, see pp. 1647 ff.