No. 236

840A.00R/11–2251: Airgram

The Acting Secretary of State to the Embassy in Ireland 1

confidential

A–53. With the enactment of the Mutual Security Act of 1951,2 certain amendments must be made in existing bilateral ECA and MDAP Agreements. It is considered important to have a single exchange of notes cover all such amendments with a given country and to have uniform notes for all countries requiring similar amendments. Below is a draft agreement applicable to countries having ECA Agreements, but no MDAP Agreements. The agreement must be registered with the Secretariat of the United Nations in conformity with Article 102 of the U.N. Charter.

You are requested to discuss this draft with the Government of Ireland with a view to completing the agreement through an exchange of notes as soon as possible. Prompt action is necessary because Section 531 of the Mutual Security Act provides that no aid can be given a country which has not given the Section 511 assurances within 90 days after the enactment of the Act. This means that the exchange of notes must be completed by January 8, 1952, at the latest.

Your comments on the attached note are invited. It is hoped, however, that because of the need for prompt action and the great importance of maintaining uniformity as among countries, you will be able to begin negotiations immediately on the basis of the attached draft.

[Page 535]

To guide and assist you in discussing the draft note, a commentary has been inserted after each section explaining the reasons for each provision in the note.

“I have the honor to refer to the conversations which have recently taken place between representatives of our two Governments relating to the Economic Cooperation Agreement between the United States of America and Ireland, signed at ----- on -----, as heretofore amended, and to the enactment by the Congress of the United States of the Mutual Security Act of 1951, Public Law 165, 82nd Congress. I also have the honor to confirm the understandings reached as a result of these conversations as follows:

“The Government of ----- has expressed its adherence to the purposes and policies of the Economic Cooperation Act of 1948 as heretofore amended, including the statement of purpose contained in section 2 of the Mutual Security Act of 1951 and re-affirms that, along with the Government of the United States of America, it is firmly committed to join in promoting international understanding and good will and in maintaining world peace and to take such action as may be mutually agreed upon to eliminate causes of international tension. Whenever reference is made in any of the articles of such Economic Cooperation Agreement to the Economic Cooperation Act of 1948, such reference shall be construed as meaning the Economic Cooperation Act of 1948, as heretofore amended.”

(Comment: The opening clause is the standard language used in prior years to amend the Economic Cooperation Agreements in recognition of amendments in the underlying Act. The additional language, referring to the Mutual Security Act, is included to reflect the new purpose set out in section 2 of that Act which states that the purposes of the Mutual Security Act shall “hereafter be deemed” to be included in the purposes of the constituent Acts.

The purpose of the proposed language beginning “re-affirm that” is to commit the recipient government to the undertakings required by section 511(b) of the Mutual Security Act. It is considered important to have the language accepted without change so that we will not have to negotiate different language with each separate country.)

“1. Sums allocated to the use of the Government of the United States of America pursuant to paragraph 4 of Article IV of the Economic Cooperation Agreement may be used by the Government of the United States of America for its expenditures in any area.”

(Comment: This proposed language changes the area in which the United States may use the 5% counterpart so that it may be used anywhere and not solely “within the country” which made the currency available. We recognize the problem that this provision may [Page 536] raise and are prepared to comment more fully on receipt of initial reactions.)

“2. Paragraph 6 of Article IV of the Economic Cooperation Agreement shall include expenditures for the encouragement of emigration from participating countries having permanent surplus manpower to areas, particularly the undeveloped and dependent areas, where such manpower can be effectively utilized.”

(Comment: Section 523(a) authorizes the United States to agree to the release of counterpart for the purpose of encouraging emigration. The proposed language of the amendment adds this purpose to the list contained in the Economic Cooperation Agreements of purposes for which counterpart will be released.)

“3. In lieu of the date referred to in paragraph 7 of Article IV of the Economic Cooperation Agreement, the amount of unencumbered balances referred to in that paragraph shall be determined as of the date of the termination of the assistance program under this Agreement.”

(Comment: Section 523(d) of the Mutual Security Act authorizes the final determination of the use of counterpart to be made when the assistance is terminated, and not necessarily on June 30, 1952. The proposed amendment to the Agreements incorporates this change.)

“4. The two Governments will establish procedures whereby the Government of ----- will so deposit, segregate, or assure title to all funds allocated to or derived from any program of assistance undertaken by the Government of the United States so that such funds shall not be subject to garnishment, attachment, seizure or other legal process by any person, firm, agency, corporation, organization or government, when in the opinion of the Director any such legal process would interfere with the attainment of the objectives of the program of assistance.”

(Comment: Section 515 of the MSA requires all countries receiving assistance “to deposit, segregate or assure title to all funds allocated to or derived from any program” so that they shall not be subject to legal attachment when the Director of Mutual Security is of the opinion that such legal process would interfere with the objectives of the Act. This section was enacted out of concern by Congress over the type of situation which arose when funds intended for assistance to Greece were attached in Belgium in the course of the past year.3 It is recognized that in certain situations attachments are possible on US foreign aid funds, or funds derived there-from, such as five percent counterpart or local currency credits resulting [Page 537] from conditional aid, wherever there is an assistance program of any kind in the area. Attachments could also occur in connection with funds being used for procurement by the United States Government in one of the recipient countries. Thus, it is deemed necessary to ask all the countries to agree to the anti-attachment provision which is considered the minimum step which must be taken now in order to comply with the statute.

Although it is impossible now to outline all cases where attachment would interfere with the program, the problem becomes generally significant only in those cases where advances of funds are made prior to actual delivery of goods and services. The provision would have no effect where the country obtains the commodity or service involved with its own resources and the US has reimbursed such country on receipt of documentation showing that the commodity or service has actually been purchased and delivered or where the US makes available commodities or services and payments are made directly by the US to the suppliers.

In those cases where the attachment provision will require action to be taken, the governments can be assured that the US will cooperate in helping to work out arrangements for compliance that will not be unduly burdensome. What procedures will be required will, of course, depend upon the extent of the problem in a particular country and in many cases no present action may be necessary other than adding this general amendment to the bilateral agreements.)

“Upon receipt of a note from your Government indicating that the foregoing provisions are acceptable to the ----- Government, the Government of the United States of America will consider that this Note and your reply thereto constitute an agreement between the two governments on this subject which shall enter into force on the date of your note in reply.”4

Webb
  1. Drafted by Fesenden of RA; cleared in substance by L/E and BNA, ECA, the Department of Defense, and the Office of the Director for Mutual Security.

    The Secretary was in Europe to attend the Sixth Session of the U.N. General Assembly and the Eighth Session of the North Atlantic Council.

  2. This act, signed by President Truman on October 10, combined under one program and one agency the purposes and activities initiated by the Foreign Assistance Act of April 3, 1948; the Mutual Defense Assistance Act of October 6, 1949; and the Act for International Development of June 5, 1950. For text, see Stat. 373.
  3. Reference here is to the so-called “Socobel” or “Socobelge” case. See footnote 5, Document 129 and telegram Ecato 344, Document 135.
  4. The text of this draft note, with insignificant changes, was handed to Foreign Minister Aiken on December 7 by Ambassador Francis P. Matthews who had presented his credentials on October 22. In his report on this action, telegram 89, December 7, Matthews commented on two points in the note that he believed would cause serious reservations on the part of the Irish Government. (740A.5–MSP/12–751)