740.5/4–2451: Telegram

The Secretary of State to the United States Deputy Representative on the North Atlantic Council (Spofford), at London1


Todep 389. Personal from Cabot. ISAC discussed policies for increasing Eur defense efforts Apr 13 and directed fin and econ group, among other things, to prepare policy paper on interim fin devices to stimulate Eur production (re Depto 824, Apr 242 and Depto 779, Apr 143). Working Group submitted paper (ISAC D–14), summarized below, for ISAC consideration Apr 24.

FEG agreed on necessity for scheme for US financing and procurement of matériel within Eur as means of encouraging fullest possible [Page 149] utilization Eur production capacity for mil purposes. Agreed scheme shld be confined to selected projects of very high priority.
Considerable sentiment that scheme this sort ran inherent danger its purposes and functions might be misunderstood by Eur NATO countries and might create disincentive to maximum financing of production by Eur NAT Govts themselves. Therefore, agreed any such scheme shld be surrounded by thorough-going safeguards to reduce as much as possible any disincentives to maximum Eur financed defense production.
Sub-comite set up to draft terms and conditions under such a scheme shld operate with view to incorporating necessary safeguards.
With exception State Dept reps, FEG agreed any such scheme shld be financed within total volume of aid requested for Eur NAT countries. Group did not, of course, address itself to broader question of adequacy of presently planned levels of aid to accomplish our total proposed in NATO rearmament effort.
Agreed that, within total aid, funds these purposes shld come largely from programmed econ aid but door shld be left open for use of end-item aid funds. Defense emphasized door cld be left open only re post-1952 end-item program.
Opinion of State Dept that scheme shld be financed by an addition to aid funds currently being programmed. State Dept felt scheme shld represent a rephasing of entire US aid program in support of MTDP, with larger sums being applied for FY 1952.

ISAC directed FEG to prepare paper on scheme (para 3 above) prior to taking decision as to whether or not additional funds for its financing wld be required and cld be obtained from the Cong in FY 1952. Prelim report on proposed scheme being prepared.

Freund conversant with Dept thinking re need for additional funds this year.

All members ISAC deeply interested in this problem and careful consideration being given your proposals. Decision on funds question shld be forthcoming early next week. [Cabot.]

  1. This telegram, repeated to Paris for OSR, was drafted by Bray (S/ISA) who also cleared it in substance with Cabot (S/ISA), Cleveland (ECA), and Knight (EUR).
  2. This telegram, not printed, requested information on how the proposal contained in telegram Depto 779, p. 137, had been received, what alternative proposals for activating unutilized European military production facilities were being considered, and how it was planned to treat the subject in congressional presentation (740.5/4–2451).
  3. Ante, p. 137.