Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 1

700.5 MSP/7–152

Memorandum by Edwin M. Martin, Special Assistant to the Secretary of State for Mutual Security Affairs¹

secret

[Washington,] July 1, 1952.

• Subject:
• Fiscal Year 1954 Mutual Security Program.

At a meeting on June 25 with representatives of your respective offices, current plans for the preparation of the FY 1954 Mutual Security Program were discussed.

DMS and the Bureau of the Budget have prepared a statement, a copy of which has been furnished your representatives, showing basic assumptions, military and economic aid programs by title, illustrative country aid figures, and a ceiling of $7 billion for the 1954 program, plus a possible sum of a half billion dollars for assistance to Japan.

Discussion of these assumptions in MAAC is scheduled for early July. Comments from interested parts of the Department have been requested by June 28.

The deadline for submitting the 1954 program estimates to DMS has been set for August 10. It is requested that the program estimates from operating units in the Department, cleared insofar as possible with other interested departmental offices, be available in S/MSA not later than August 3rd to insure that a completely cleared State Department position may be transmitted to DMS by August 10. DMS has been given until September 15 to submit its analysis, after which it will be furnished to the Bureau of the Budget on that date.

At the June 25th meeting it was agreed that the Department should take “a fresh look” at the foreign aid program for 1954. There should be a comprehensive and realistic appraisal of United States objectives in all areas of the world, and an evaluation should be made of these objectives to determine what has been accomplished and what remains to be done in order to determine how best to proceed in 1954, i.e. are the instrumentalities and techniques now being employed the most effective and efficient which could be utilized for the purposes envisioned? A series of project assignments designed to accomplish this is attached.

Several of these projects attack from different angles the single central problem of how we should give aid to under-developed areas. Basically there are four types of economic aid which may go to under-developed areas:

1. Defense support which is a true contribution to an expanding defense buildup.

2. Technical assistance, strictly defined to cover personal services and supplies and equipment essential for demonstration purposes.

3. Economic development programs, involving large-scale investment.

4. Commodity aid, designed either to provide local currency to support any one of the three preceding programs or for relief purposes, or for general economic betterment.

The examination of the Locke project² is primarily an examination of how we wish to conduct our program in an area in which elements of type 2 and 3 aid, and type 4 aid for relief, are all involved.

The examination of the India program³ is primarily an investigation as to how to conduct a combined type 2 and 3 program, with elements of type 4 to assist in financing the latter.

The re-examination of our programs in the Far East, other than those which are pretty clearly justified as type 1 defense programs—Formosa and Indochina—is designed to give guidance as to what in fact we are trying to do in Burma, Thailand, the Philippines and Indonesia. Then we can decide, in the light of this study and of the other projects, what are the best means for accomplishing these purposes.

The African project on Dependent Overseas Territory programs is an example of an essentially type 2 program, with some elements of a type 3 program, which is being accomplished, however, within a type 1 defense support framework, insofar as legislative authority is concerned.

The emergency project is an attempt to face up to the fact that the provision of type 4 aid for emergency purposes, such as famine relief, is not possible within the spirit, arid only to a very limited extent within the letter, of the Mutual Security Program as it now stands.

While the emphasis on these projects is primarily in terms of objectives, of legislative authority, and to some extent of agency responsibility, the examination of our basic objectives will involve decisions as to which ones we do want to continue to seek with U.S. funds and will thus have an influence on the amounts to be requested for these countries for FY 1954.

While some of these re-examinations can be completed within a relatively short period of time, some of them may take somewhat longer and it may be necessary to make our FY 1954 justification submittals to DMS prior to their completion. We believe that this can be done and arrangements worked out with DMS for necessary amendments up to the date when DMS must submit to the Bureau of the Budget. Nevertheless, projects should be pursued with a considerable amount of urgency. S/MSA will hold approximately weekly meetings with those responsible to discuss progress.

Since all the projects involve aspects of our economic foreign policy, it is assumed that representatives of E will be consulted and work with the unit having primary responsibility in each case. S/P is also being invited to indicate those projects in which they would like to participate. In addition, attention is called to certain other units which should be consulted in the development of a proposal for consideration as a Department position. It is urged that any major differences of view be brought promptly to the attention of S/MSA so that we can be of assistance in resolving them.

[Annex]

Paper Prepared by the Special Assistant to the Secretary of State for Mutual Security Affairs (Martin)

secret

[Washington, July 2, 1952.]

Special Studies for 1954 Mutual Security Program

1. India Program. To what extent do we wish to supplement a strictly defined AID program with either substantial imports of long-range development matériel or with major imports of consumer type goods to provide counterpart for development? Insofar as we wish to do either of these latter two, under what legislative authority should they go forward? What are the desirable administrative arrangements?

Primary responsibility in TCA with NEA collaborating.

2. Near East Development Program. Do we wish to finance an NEA development program of the sort proposed by Ambassador Locke in addition to the regular TCA operations and the resettlement programs? If we do, what are the most desirable legislative and administrative arrangements?

Primary responsiblity to NEA in consultation with TCA.

3. Exactly what are our objectives in Indonesia, Burma, Thailand and the Philippines insofar as economic aid is concerned? What are the most appropriate legislative and administrative arrangements to accomplish them?

Primary responsibility in FE in consultation with TCA.

4. How can we improve our program of technical assistance and perhaps developmental assistance to the colonial areas, particularly in Africa, which are now treated as Dependent Overseas Territories?

Primary responsibility in S/MSA in collaboration with TCA, EUR, NEA and UNA.

5. Emergency Funds. To determine whether it is possible or desirable to secure authority in the MSP to meet emergencies such as famine relief.

Primary responsibility in L/MSA in collaboration with H.

6. Dollar Aid to Europe. To determine what further measures can be taken to reduce dollar aid to Europe and thus decrease the degree of dependence of Europe on the U.S. for this type of assistance and reduce the more and more acute political irritations to which it gives rise.

Primary responsibility in EUR.

7. Escapee Program. To re-examine carefully the Kersten Amendment⁴ in order to determine what we wish to do under it in another year in an attempt to get a clean legislative picture in this field.

Primary responsibility in UNA in collaboration with EUR.

8. Economic Aid to Japan. An estimate of the effects of a Korean armistice in FY 1953 on the Japanese economy to determine whether or not economic aid might, under such circumstances, be required.

Primary responsibility in FE.

Note: It has been decided that present circumstances do not warrant an examination of possible aid programs arising from the Pacific Pact or the Middle East Defense Organization.⁵ This might of course change prior to submittal of appropriation requests for FY 1954.

1. Sent to Thorp, Byroade, Allison, Hickerson, Perkins, Miller, Andrews, and Nitze.
2. See footnote 4, p. 473.
3. Information about the India program and other projects mentioned here is in the Annex, below.
4. The amendment to the Mutual Security Act of 1951 sponsored by Representative Charles Kersten (R.–Wis.) permitted refugees from countries behind the “iron curtain” to be formed into NATO military forces.
5. The term “Pacific Pact” was used frequently in the years 1949–1952 to denote potential regional groupings in the East Asia-Pacific area. For documentation on regional defense problems in the East Asia-Pacific area, see volume xii, Part 1. For documentation on the abortive efforts to create a Middle East Defense Organization, see volume ix.