Current Economic Developments, lot 70 D 467

Current Economic Developments 1

[Extract]

secret
Issue No. 361

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US Mutual Security Legislation for 1952

The Mutual Security Act of 19522 now on the President’s desk for signature authorizes a total of $6,447,730,750 in foreign aid for appropriation under the Mutual Security Program to free nations resisting Communist aggression beginning July 1. Of the total authorization, $4,598,424,500 is to be used for military assistance and $1,805,288,500 for economic and technical assistance. Authorization is also included totaling $44,017,750 for UN technical assistance, emigration of surplus manpower from Europe, ocean freight on relief packages, and the UN International Children’s Emergency Fund. The total authorization falls short $1,468,750,250 of the $7.9 billion requested by President Truman and it is possible that there will be a further cut in the appropriation legislation.

The new legislation contains some provisions that will present increased difficulties in administration, and the sharp reductions in funds authorized will materially handicap certain of the programs. One of the most serious developments in Congressional consideration was the Senate version which included a new Kem amendment to supersede the present Battle Act.3 The Executive Branch opposed the new amendment which was far worse than the original Kem amendment. It provided, with no possibility for exceptions, that all economic, financial, or military assistance should be terminated to any country exporting or knowingly permitting the export [Page 506] of arms, military matériel, or goods likely to be used in the manufacture of arms or armaments going to the Soviet Union or its satellites or the shipment of which is embargoed or would be refused export licenses by the US. The amendment was struck out in conference. A strong attempt was made on the floor of the Senate to reject this portion of the conference report. Owing to an unusual parliamentary situation, the vote in the Senate could not be taken on a proposal to recommit the bill to conference but had to be taken on the conference report as a whole. The fact that the Senate approved the conference report by a good margin does not give us grounds for complacence, however. Political observers believe that had the vote been taken on the Kem amendment alone, it probably would have passed. There is a possibility that this issue may come up again in the appropriation debate.

Another amendment that would have presented serious difficulties had it been adopted would have limited dollar expenditures under the Act for International Development for supplies and equipment in any country for any fiscal year to not more than three times the dollar costs for personnel. The conferees felt that the reduction in TCA funds was a sufficiently restraining factor for this year, and that the proper limit for such expenditures could not be effectively expressed by a mathematical ratio. The conference report points out, however, that supplies and equipment beyond those necessary for demonstration purposes will convert this into a type of world-wide economic aid program our country cannot afford and specified that this should provide adequate notice as to the legislative intent of this program.

Funds Authorized. Under the new Act, a total of $4,698,047,750 is authorized for Europe for military and defense support purposes. Military and technical assistance in the amount of $741,430,500 is authorized for the Near East and Africa, including funds for Arab and Israeli refugees. Asia and the Pacific have been authorized $886,220,000 for military, economic and technical assistance, and $78,014,750 is provided for Latin American military and technical assistance. As in previous legislation, there is an administrative provision permitting a transfer of funds up to 10% for the purpose for which they were originally intended, at the discretion of the President, between geographic areas.

All funds were cut below the amounts requested by the President. The 29.5% reduction in the sum for the defense support of our North Atlantic Treaty allies and other European countries together with the decreased authorization for the furnishing of military end items to European countries (from $4,145,000,000 to $3,415,614,750 or 17.6%) will result in a substantial decrease in their ability to carry through the planned defense build-up. A large [Page 507] reduction (20.9%)4 was also made in the authorization for technical assistance for South Asia, including Burma and Indonesia, which will materially handicap the projected programs in those areas. The Executive Branch favored inclusion of an amendment in the legislation that would provide for continued MSA administration in Burma and Indonesia despite US non-participation in any mutual defense programs in those countries. MSA has been administering in those areas the economic programs originated under the previous Economic Cooperation Administration. Under the new legislation it will be necessary to shift the economic and technical assistance programs in those areas to the administration of the Technical Cooperation Administration.

The bill includes an authorization of $9,240,500 for contribution to the Provisional Intergovernmental Committee for the Movement of Migrants from Europe with the stipulation that none of the funds made available for the movement of migrants shall be allocated to any international organization having in its membership any Communist or Communist-dominate or controlled country.

A total of $16,481,000 was authorized for the UN International Children’s Emergency Fund. It was specified that in no case should US contributions exceed one-third of the contributions from all governments including government contributions for the benefit of persons located within territories under their control. In addition, none of the funds may be used in duplication of the activities of other UN agencies.

The bill also provides for a US contribution for multilateral technical assistance programs, authorizing $15,708,750 for the UN and its Specialized Agencies and for the Organization of American States.

Counterpart. A provision was modified which would have seriously hampered the flexibility of use of counterpart funds. The proposed provision, which the Executive Branch strongly opposed, would, except as otherwise provided, limit use of counterpart funds only for projects of military assistance or defense support. The conferees recognized the desirability of the use of more counterpart funds in the defense effort, but felt that this provision might prevent the use of counterpart under other acts, and for such purposes as US procurement of strategic materials. Furthermore, the conferees felt there was the possibility that under this provision counterpart could not be used in Germany, Austria and Trieste to carry [Page 508] out programs essential to the security of the US but not strictly within the limitation of this provision The modification limits the programs for which new funds authorized in the 1952 Act would be available except as other uses of counterpart are specifically authorized by law.

The new legislation increases the availability of counterpart for the procurement of strategic materials to 10% from the previous 5%. The Executive Branch opposed it as it will require renegotiation of bilateral agreements with countries receiving economic assistance, will reduce pro tanto funds available for the military budgets of recipient countries, and may reduce the dollar earning potential of those countries in respect to materials sold to the US.

On the positive side, the new legislation provides for setting aside counterpart funds for programs furthering free private enterprise objectives (Benton Amendment). Dollar aid in the amount of $100,000,000 is to be furnished under agreements which will assure that the counterpart derived therefrom shall be used for this purpose. The counterpart funds are to be used to establish revolving funds which shall be available for making loans and carrying out such programs. In this connection, funds not to exceed $2,500,000 may be transferred to the Organization for European Economic Cooperation for the encouragement of free enterprise objectives. In addition, limited amounts of counterpart funds acquired in connection with the foreign-aid programs may be used for the educational exchange funds authorized by the Fulbright Act.

Shipping. The new legislation clarifies the shipping provisions of the Mutual Defense Assistance Act so that the 50% requirement no longer applies to material purchased by foreign countries from the US on a reimbursable basis. The 50% requirement still applies to other cargo shipped from the US under the Mutual Defense Assistance Act.

Ocean Freight Subsidies. The authority of the US to pay ocean freight charges on shipments of relief supplies overseas is continued in the 1952 Act. Similar authority is granted in the case of shipments by voluntary non-profit relief agencies (registered with and approved by the Advisory Committee on Foreign Aid) to any country eligible for economic or technical assistance under the Mutual Security Act. The Department will assume the responsibility for administering this program for fiscal year 1953.

Other Provisions. The provision spelling out the responsibilities of the Director for Mutual Security for small business was transferred from the Economic Cooperation Act5 to the new Mutual Security [Page 509] Act so as to assure the continuation of operations under that section. The new measure also provides that small business will share equitably in TCA programs.

The Act carries a limitation on personnel in Government agencies administering the Mutual Security Program which will require a reduction in the Washington staffs and will present difficulties in carrying out the program.

Another difficulty is presented by the bill’s prohibition of use of any appropriated or counterpart funds for expenses of disseminating within the US “general propaganda” in support of the Mutual Security Program or the payment of travel or other expenses outside the US of any citizen of the US for the purpose of publicizing the Mutual Security Program within the US. However, at the same time the conferees recognized there should not be any interference with the supplying of full information to the Congress and to the public concerning the operations of the Mutual Security Program.

Continuation of the informational media guaranty program is also authorized in the new legislation, and continuation of the investment guaranty program beyond June 30, 1952 is otherwise provided for in the Act.

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  1. Current Economic Developments was prepared as a classified twice-monthly publication by the Bureau of Economic Affairs (subsequently the Bureau of Economic and Business Affairs) of the Department of State for internal use as a background and policy guidance report for policy level officers of the U.S. Government serving at home and abroad. It was instituted in 1945 and terminated in October 1974.
  2. Signed by President Truman on June 20, 1952; for the text, see 66 Stat. 141.
  3. For documentation on the Kem Amendment and the Battle Act, see pp. 817 ff.
  4. At this point in the source text the parenthetical statistic 20.9% is crossed through and a handwritten notation in the margin reads: “should be 32.6 (TCA says Conf rept is wrong)”.
  5. The act is Title I of the Foreign Assistance Act of 1948 (Public Law 472), approved Apr. 3, 1948; for text of Title I, see 62 Stat. 137.