751.5–MAP/11–2251: Telegram
The Director of the Planning Staff of the Bureau of European Affairs (Labouisse) to the Administrator for Economic Cooperation (Foster)1
Toeca 1503. Toisa. Negotiations with French. I am today sending to Messrs. Harriman and Nash a memo reading as fols:
“1. The French have told us that, without more definite info from us concerning the nature and timing of dollar availabilities, they have serious problems in developing a realistic import program and a final military program and budget. As examples: (a) if there is no indication as to the breakdown between economic aid and mil expenditures, they cannot estimate the counterpart funds to be available; (b) if there is no way of telling whether mil expenditures will be for US account (i.e., US airfields, LOC, etc.) or for French, the French will find it difficult to know what to include in their own budget.
2. I have told the Fr that I would explore the possibilities what could be given them as tentative figures. I pointed out that such a breakdown could not be considered binding but would be very tentative and for illustrative purposes only.
3. I consider it most important that we meet the French on this point. I consider it also important that, in developing a tentative breakdown, we attempt to forecast as nearly as possible the manner in which we believe that dols will in fact be made available. If we continue to be vague and to resist setting forth tentative estimates of this nature, I believe that there will be misunderstandings between us and that the Fr will be discouraged from indicating their maximum possibilities and may set their import program [Page 448] at such a low level as to endanger our mutual objectives of an increased defense effort.
4. In developing tentative figures, we should bear in mind the real difficulties in the way of actually spending large sums of dols for US mil airfields and infrastructures before June 30, 1952. I am sure that much can be done to expedite this work and the payments therefor, but I believe we will be fooling ourselves to think that $300 mil for these purposes can in fact be spent during this period. I am therefore setting forth in the fol para a suggested tentative breakdown for consideration by you and Washington. (I am also cabling this memo to Washington.) If such a breakdown, or some variation of it, is satisfactory to you and Washington, I would propose that we submit it to the French in an aide-mémoire which would (a) emphasize the fact that the figures are only tentative, and are submitted only to serve as planning assumptions for them in working out their estimates, (b) emphasize that our assurance to make the $600 mil available by one means or another, is contingent upon the Fr undertaking the maximum balanced defense effort possible in light of their financial and other limitations as well as upon their taking the steps necessary to expedite work on the airfields, LOC, etc., and upon our reaching a satisfactory understanding on the other points we have raised with the Fr in our bilateral discussions, and (c) state that the determination as to whether the defense effort is adequate and appropriate is a matter for consideration within the framework.
5. The fol is my suggested tenative breakdown for submission to the French:
Nature and timing of US dollar availabilities through June 30, 1952 (in millions of dollars):
- 1.
- Economic aid, total—170; time phasing—65; already allocated—105 to be allocated as soon as possible with expenditure by Feb 1st if necessary.
- 2.
- US military expenditures.
- (a)
- Supplemental aid for Indochina, being petroleum and other mil end-use items for which Fr must pay dols, total—30; time phasing—as purchased.
- (b)
- Off-shore procurement in France of military items to be produced in France for use in Indochina, total—100, time phasing—as payments to manufacturers are required.
- (c)
- Off-shore procurement in France of mil items to be used by French NATO forces, total—100, time phasing—as payments to manufacturers—181 as required under contracts.
Grand total 600.
There appears to be no problem about items one and two (a) in the above list. Nor do I believe that item 2(d) poses any difficult problem, provided we can cut through red-tape. A serious and difficult problem is raised by items 2(b) and 2(c). As envisaged here, 2(b) would mean dol financing of a portion of the current and contemplated French mil production for Indochina. It would, however, free approximately 35 billion francs now in the Fr budget for Indochina [Page 449] for Fr use in financing their NATO force requirements. Item 2(c) could mean dol financing of a portion of the current or planned Fr mil production for use by their NATO forces. On the other hand, it could mean financing mil production in France, either in lieu of end-items from the US or to cover items needed by France but not included in any current contracts. Under the TCC submission, no funds appear to be provided in the French budget to cover mil production for French NATO forces, although apparently contracts have been made totaling some 280 billion francs. In addition to these contracts, there is apparently an amount of mil production equivalent to 80 billion francs needed by the French but not contracted for. We therefore might apply our financing under item 2(c) to the latter production. The reason for suggesting these two items is that, realistically, it seems the most likely way of getting the dols into the French economy in time to permit an adequate French import program—unless we are prepared now to increase the economic aid figure. With respect toward end of period, say, about May 15, 1952, to envisage the advance purchase of French francs against contracts to cover needs for a brief period ahead recommendation:
That you approve the tentative breakdown set forth in para five and its transmission to the French with an aide-mémoire along the lines suggested in para four.”
As stated in para four, if Messrs. Harriman and Nash and Washington approve the course suggested, we would propose to proceed along the lines set forth. I realize that there are serious difficulties to the procedure outlined, but I feel it important that all those concerned be informed of our considered judgment as to the action required in light of present French situation and of what has been said to them to date (see Embtel 29672 and Toeca 15013).