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

ISAC files, lot 53 D 443, D–25

Position Paper Prepared by the Director of the Office of European Regional Affairs (Martin)¹

secret

[Washington,] October 8, 1951.

General Tactics in Negotiating Aid to NATO Countries for Fiscal Year 1952

1. The negotiations which are expected to commence the latter part of this month, when Congress has passed the aid bill and appropriations therefor, will take place under the following conditions:

(a) A substantial proportion of the fiscal year will have elapsed.

(b) For the first time, aid will be negotiated in the context of a multilaterally agreed military program which has been reviewed and revised and, in at least preliminary fashion, costed.

(c) While the chief variable will be economic aid, the fact that both economic and military aid will, in fact, be portions of a U.S. contribution to the achievement of a multilaterally agreed target, the Medium Term Defense Plan, makes it desirable that both economic and military aid be negotiated as a package which will enable each country to make its largest and most effective defense effort.

(d) Aid negotiations for 1952 are necessarily conducted in the shadow of the Ottawa discussions of the feasibility of the Medium Term Defense Plan and of the TCC project resulting from these discussions designed to draw up for the Council a feasible and adequate defense program.

2. In the light of this situation, it is proposed that negotiations with each country be handled in the following fashion:

(a) Size of Country Effort.

While it is essential to refer to the need for each country making the greatest effort possible, it is not feasible to condition the availability of aid upon any given level of effort, since the whole question of the size of the country’s efforts and the resulting size of required efforts is under review by the TCC. Moreover, the size of the U.S. contribution to the program has been cut back by our Congress and there is good reason to respect the political decisions of other governments as to the size of their effort, just as they must respect our political decisions.

(b) Composition of Military Effort.

While there is no objection to maintaining in the course of negotiations our views about the desirability of various proposed objects of expenditure, and while we will not give economic or military assistance directly for purposes we consider undesirable, agreement to make, or not to make, certain types of expenditure should not be a condition of aid. Guidance to countries in this field must come from continuous discussion at a technical military level both multilaterally and bilaterally, and particularly in the early planning phases in the development of their defense programs.

(c) Internal Economic Measures.

In the course of negotiations, we must discuss internal economic measures necessary to minimize the dollar cost of the maximum defence effort, but aid should not be explicitly conditioned upon the undertaking of such measures. There should be an understanding that, as in the past, so in the future, full opportunity will be given for the U.S. and the country in question to work together in discussing internal economic problems and means of dealing with them so that we can pass on the benefit and knowledge of such experience as we may have. Recognition should also be given to the role of NATO bodies in this field. We should not set ourselves up as omniscient with respect to the problems of other countries or their solution.

(d) Amount of Economic Aid.

The amount of residual economic aid should be negotiated to reach agreement on the minimum level of economic aid required by the effort the country proposes to undertake, recognizing the importance of maintaining political and economic stability, the fact that some differences in our generosity as between countries may be justified by the amount of military effort any given amount of dollar aid will produce in the various countries, and the urgent needs of other countries for such aid. The amount of economic aid, of course, must take account of total dollars available from other U.S. government sources, estimates of which should be given as programming assumptions prior to negotiations of direct dollar aid.

(e) Amount of Military Aid.

The amount of military aid should be dictated by the ability of European forces to use the equipment involved, an ability much influenced by the size of their defense expenditures for non-matériel costs. Within the overall amount of military aid available, we should, of course, go as far as possible to put forces on a fighting basis, as required by NATO commands.

(f) Counterpart.

Because of our legislative requirements, it will be necessary at the time of aid negotiations to reach substantially firm agreements as to the disposition of counterpart, including the portion which should go to meet the legislative requirement for military expenditures and that required for certain other key programs in which we are interested. In line with the principle in a above, we cannot expect countries normally to expend counterpart for military production in excess of the military production programs currently contained in country budgets which have included counterpart earnings as an income item.

(g) Loans.

It is not considered likely that any substantial proportion of the 10% loan provision can be met in Title I. To the extent loans are found to be sound, they should be worked out in the course of the aid negotiations.

(h) Duration of Commitment.

Since we are requiring our partners to plan their military programs as far ahead as possible and it is, in fact, necessary to do so from a budgetary, a military production and a military training point of view, it is essential that the countries know as far in advance as we can tell them how much military and economic aid they can count on. Therefore, our aid commitments should be firm until the end of the fiscal year. The commitment is, however, to provide the economic and military aid required by the programs they have undertaken to carry out.

(i) Amendments of Aid Figures.

It follows from this general approach—which may be described as reliance upon conditions subsequent rather than conditions precedent—that our initial aid commitment is subject to reexamination. As in the case of the original figure. modifications should reflect the developed needs of the defense program and within the limits of our financial capacity be modified upward or downward accordingly. Modifications should not be considered as rewards or punishments but simply a recognition that programs have changed, with a resulting; change in the need for dollar aid.

1. A covering letter, circulated with the source text as ISAC D–25/1 of October 8, 1951, indicated that this position paper was written as a partial response to the President’s letter of September 24 inquiring into the use of foreign aid for the purpose of building the military strength of Western Europe. For documentation concerning the letter and the study which resulted from it, see pp. 284 ff. The verbatim text of this position paper was transmitted to Paris for Harriman and to London for Spofford in telegram Secrep 87 to Paris and telegram 1944 to London, October 10, respectively. (740.5/10–1051)