Memorandum of Understanding Between the Departments of State and Defense and the Economic Cooperation Administration1


Relationships and Organization of United States Representatives and Certain North Atlantic Treaty Bodies in European Production and Economic Aid Programs

i. definition of purpose

An interagency memorandum of understanding,2 approved by the President on December 19, 1950, identified as a most urgent organizational problem the establishment of “the proper framework in which the questions relating to North Atlantic Treaty and economic and military assistance programs can properly be coordinated.” The memorandum of understanding set forth arrangements for the organization of the U.S. Government in Washington, including the establishment of an interdepartmental International Security Affairs Committee (ISAC). It further agreed that corresponding arrangements should likewise be made as quickly as feasible for both the regional and country levels.

This memorandum of understanding is concerned with the organization of United States representatives in European NAT countries [Page 48] and with NATO and OEEC organization as related to the work of such representatives on production and related economic aid programs. The assignments of responsibilities to the various groups of United States representatives in Europe and arrangements for their coordination are without prejudice to such division of functions as may be worked out between international agencies on the one hand and United States national representatives on the other. The references to United States responsibilities therefore apply only to the extent to which such functions are now or may be decided to be handled on a United States national basis.

This agreement shall be used as a basis for developing further refinements of the points covered and additional functions and relations of the U.S. organizations and members of international organizations necessitated by the integration of the MDAP and ECA programs. This refinement shall be initiated by ISAC.

ii. united states organization at country level

A. Functions. The United States representatives (as subsequently defined in B below) at the Country level shall function as a team and be responsible for:

Monitoring (a) the conversion of approved plans into specific production programs, and (b) the execution of such programs for defense production and of programs for economic mobilization. They should assist, where appropriate, in the planning process itself, including the initiation of projects and the recommendation of desirable measures, and persuasion of European governments to accept desired plans and measures;
Conducting necessary bilateral negotiations on programs involving reciprocal commitments between the Country and the U.S.;
Implementing the United States assistance programs, both for military end items and general economic assistance;
Providing coordinated recommendations and a flow of information to U.S. regional representatives and Washington on the military production position and possibilities, general economic conditions, economic mobilization plans and projects, requirements for financial aid and for materials and products in short supply, and availabilities of scarce materials and products, in the Country.
Assuring the coordination of United States military end item assistance with military production in the country concerned. This includes screening country proposals for end item assistance to eliminate items which should be produced by the countries themselves.

(Screening for production possibilities in other European countries shall be done at the regional level.)

B. Organization. To insure the full coordination of the U.S. effort, U.S. representatives at the country level shall constitute a team under the leadership of the Ambassador. They will refer to appropriate [Page 49] regional or Washington agencies, with a joint recommendation or statement of differences, all matters which they are unable to resolve. The United States representatives at the country level are:

The Ambassador, who is responsible for coordination, general direction, and leadership of the entire effort, for insuring that broad United States foreign policy in relation to the country is reflected in all of the operations, and for providing coordinated recommendations to U.S. regional representatives and Washington;
The Chief of the Military Assistance Advisory Group (MAAG), who is responsible for
Administering the United States military end items assistance for the country and assistance in military training; and
Military aspects of production programs in the country.
The Economic Cooperation Administration (ECA) Mission Chief, who is responsible for
Administration of U.S. economic assistance to the country, which should now be channeled toward the rearmament program and toward support of those areas of the general economy which tend to deteriorate because of the rearmament program;
Following, influencing and reporting on the country’s economic mobilization, including defense, defense-supporting and non-military production, economic stabilization, and the maintenance of the basic economy. This function includes primary responsibility in negotiations with the national governments on economic and financial measures relevant to defense efforts.
Influencing, expediting and reporting on non-military production, as well as economic aspects of military production. This includes advice on technical aspects of production and guidance as to most economical use of country resources. With respect to military production, there will be a need for close coordination with the MAAG to insure that military and economic aspects of production programs are properly integrated, and that there is proper interrelation between production and end item programming;
Reviewing, reporting and making recommendations with respect to country availabilities and deficiencies in scarce materials and products.
The detailed respective responsibilities of the U.S. representatives at the country level and the U.S. element of the North Atlantic Treaty Organization Defense Production Board (DPB), as well as the U.S. position on the appropriate responsibilities of the International Staff of the DPB, shall be further clarified by the International Security Affairs Committee.
The Ambassador’s responsibility for coordination, general direction, and leadership shall be given renewed emphasis, and all United States elements shall be reindoctrinated with respect to the Ambassador’s role as senior representative for the United States In the country.

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iii. regional level

A. Functions. The United States regional representatives are responsible for

Guidance from the regional viewpoint of the work of the U.S. representatives at the country level;
Representing the United States in the regional multilateral, organizations of the North Atlantic Treaty Organization (NATO) and the Organization for European Economic Cooperation (OEEC); and
Evaluating country programs and providing coordinated recommendations thereon to Washington.

B. Organization. The principal U.S. regional representatives are as follows:

The United States Deputy in the North Atlantic Treaty Organization (NATO), responsible for general political guidance and for assuring political-economic-military coordination in accordance with his approved terms of reference of December 16, 1950.3
The U.S. military representative in Europe (designated by the Secretary of Defense) and his staff responsible for coordination of the United States end item supply and training programs and providing guidance thereon to the MAAGs.
The ECA United States Special Representative in Europe (OSR), responsible for economic mobilization activities and United States economic assistance programs and for coordinating the work of ECA missions; and
The United States member of the Defense Production Board: (DPB), responsible for representing the United States position in connection with NAT munitions production programs. He will have appropriate access to and will be served by OSR and ECA Missions and may also have appropriate access to MAAGs, as determined by the United States military representative in Europe.

C. Coordination. These U.S. regional representatives shall be formally coordinated through the European Coordinating Committee (ECC), composed of the U.S. Deputy (Chairman), the U.S. military representative in Europe, and the EGA Special Representative in Europe, as identified in III–B. Arrangements shall be made for associating the U.S. members of the DPB and of the FEB with this group. Arrangements shall also be made for effective collaboration between this group and the United States element in Supreme Headquarters of Allied Powers in Europe (SHAPE).

D. Geographic Location. Effective coordination requires easy access between the U.S. representatives identified in III-B above and the United States element in SHAPE. This implies consideration of the transfer of the Council of Deputies, the DPB, the permanent working: staff of the Defense Finance Economic Committee, and the Military [Page 51] Standardization Agency of the North Atlantic Treaty Organization (NATO), as well as the United States regional organizations now in London (Joint American Military Advisory Group, and the U.S. Deputy’s Staff). The United States should seek the agreement of other interested governments to a location of the agencies of the North Atlantic Treaty Organization as may be recommended by the U.S. Deputy (Chairman) with the concurrence of SHAPE.

iv. defense production board responsibilities

A. The DPB should concentrate on problems of NAT munitions production, in accordance with the hitherto accepted London discussions of its scope. This includes planning for NAT production in accordance with military requirements based on approved objectives, and expediting the effective accomplishment of such production plans. It should also include the identification of major bottlenecks in the form of material supplies, production equipment, machine tools, manpower and other resources, and seeking action to remove these bottlenecks by the responsible authorities, national or international.

B. The DPB functions should not be broadened to include economic mobilization, NAT organization for which is discussed in V below. Close working relations between these NAT organizations will be essential.

C. The DPB should maintain close liaison with the Standing Group and its agencies including the Military Standardization Agency.

v. NATO organization for economic mobilization

A. There should be created, in a position parallel with the DPB and similarly subject to coordination by the Deputies, a NATO Finance and Economic Board (FEB) composed of senior economic officials from the member countries. The U.S. member would be designated by OSR. The FEB, and on a broader geographical basis the OEEC, should be responsible for necessary cooperative work in the entire field of economic mobilization and maintenance of the basic economies, including parallel action on materials conservation and limitation, conversion of civilian production, economic stabilization, and stimulation of additional production of scarce materials, power and fuels, and other defense supporting requirements. A great deal of this work will necessarily be performed on a national rather than an international basis, and the degree of NATO-wide coordination will be less than in the case of munitions production.

B. The permanent working staff of the Defense Finance Economic Committee would be absorbed into or be replaced by the FEB. The working Group of Twelve on equitable distribution of the economic burdens of the NATO defense program would also be absorbed into the FEB structure, but for the purpose of the burden-sharing exercise, [Page 52] the FEB would report recommendations for action by the Deputies rather than merely operating under their general coordination.

C. U.S. representatives shall press vigorously for the expeditious establishment of FEB. Pending its establishment, the U.S. Deputy and the ECA Special Representative in Europe shall act for the fulfillment of the objectives proposed for FEB, in the Council of Deputies and OEEC and in discussions with regional representatives of other NAT nations.

D. The FEB might well be composed of the NAT country members of the official level of OEEC Council. A corresponding relationship should exist with specialized subcommittees wherever action both on a NATO basis and on an OEEC-wide basis is desirable. (For example, an FEB subcommittee concerned with the problem of financing military end item transfers would be the NATO member element of the OEEC Trade and Payments Committee, which is concerned with the general operations of the European Payment Union.)

E. The FEB would require some international staff. Part of the FEB staff might well be recruited from the existing OEEC Secretariat staff.

vi. adjustment of requirements and availabilities for scarce materials and non-military products

A. The primary channel for determining deficiencies in scarce materials and non-military products should be the national governments, with review and screening by the ECA Missions as part of the United States country teams outlined in II above. Arrangements should also be made for regional screening to ensure the fullest use of intra-European supply possibilities. These country claims will be affected by action in the FEB (and OEEC), particularly in connection with the development of parallel conservation measures and European supplies. Screened claims for non-European resources will be transmitted through the ECA for appropriate consideration in Washington. This will require coordination with global action on supplies and requirements in the proposed international materials group.

B. European materials programs should be reviewed so far as possible through U.S. machinery, national and regional, in Europe and transmitted to Washington for action only after such screening. Washington Supply Missions of foreign countries shall not become agencies for the submission of programs of requirements to U.S. allocating authorities. They will have to engage in day-to-day negotiations with claimant agencies in connection with final decisions on claims, modifications of programs, and the development of detailed schedules within approved programs. However, decisions in Washington should not be taken without reference to review and recommendations from the country and regional representatives.

  1. This is a revision of the original memorandum of understanding agreed upon by the agencies involved on February 1. The Director of Defense Mobilization, Charles E. Wilson, transmitted the source text to Acheson as an enclosure to his letter of February 15, not printed, explaining that it took account of General Eisenhower’s wish that the geographic location of the NATO agencies be left open for him to discuss with Spofford (740.5/2–1651). The original memorandum of understanding was discussed in telegram 871 to London, February 6, not printed (740.5/2–651).
  2. For text, see Foreign Relations, 1950, vol. i, p. 484.
  3. See footnote 5, p. 19.