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

103 MSA/3–753

Memorandum by the Special Assistant to the Secretary of State for Mutual Security Affairs (Martin) to the Secretary of State¹

secret

Washington, February 26, 1953.

• Subject:
• Fiscal Year 1954 MSP

Problem: To determine the position of the Department of State on the size of the FY 1954 Mutual Security Program required to achieve U.S. foreign policy objectives.

Discussion: In the absence of policy guidance as to (1) the modifications in U.S. foreign policy objectives which may affect the size of the FY 1954 MSP, and (2) the extent to which the proposed FY 1954 MSP should be cut to contribute to the goal of a balanced budget, DMS has felt compelled to secure agency reactions to arbitrary cuts in the FY 1954 MSP. It has asked MSP agencies to comment on the effect of such cuts on programs and the effect on present U.S. objectives of the reduced programs.

For example the Department of State has been asked to report on the effect of hypothetical cuts of over 30% and of over 60% in the programs totalling 540 million dollars which we have proposed for economic and technical assistance to Near Eastern and South Asian countries.

In preparing this material the responsible officers in the Department have been asked to re-examine programs with care to include only those funds which on the basis of the latest data must be available in FY 1954 to accomplish U.S. objectives, but to assume no change in basic U.S. policy objectives.

There is attached as Annex A a summary of the position which it is proposed that the Department take with DMS on those programs for which State has operational responsibility. Our presentation of the harmful effects of these cuts, when they go below the levels we are now prepared to accept, is designed to influence the recommendations of the Director for Mutual Security to the Director of the Bureau of the Budget and of the latter to the President. The basic issue at this point will be how large the foreign aid program should be in the light of the need to balance and reduce taxes.

Later on we shall have for review from the standpoint of U.S. foreign policy papers prepared by the Department of Defense and the Mutual Security Agency on the programs for which they have operational responsibility. The State programs represent only a little over $600 million out of the total MSP proposed for FY 1954 of $7.6 billion.

Conclusion: It is essential to insure that the size of FY 1954 MSP to be submitted to the Congress does not go below a level which can effectively implement current foreign policy objectives. Therefore the broad lines of the program should be reviewed at the top policy level in the Department of State before action is taken by the DMS or the Bureau of the Budget.

Recommendation: That you approve the positions contained in the attached Annex A, covering those programs for which the Department of State has operational responsibility.²

[Annex A]

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

secret

[Washington, undated.]

Title II—Near East and Africa:

Cut of $175 million in $240 million program rejected but cut of $90 million in considerable part accepted. Authorization only and no new appropriation for Palestine Refugee program saves $65 million. This due to slowness in getting done what we want to do. Point IV can not be cut from proposed $35 million. Regional economic fund of $140 million with flexibility retained is needed to cover economic aid to Israel, the Arab States and Iran, and to meet emergencies in this politically unstable area.

Title III—South Asia and Far East:

Cuts of $75 million and $150 million in $270 million proposal both rejected. $200 million for India and $49 million for Pakistan, consisting of Point IV plus much larger economic development aid, primarily to expand food production, considered feasible programs and not too much to put into this politically important area. Size of Pakistan program influenced by political necessity of maintaining proper proportion to India program.

Title IV—Latin America:

Cuts of $3 million and $10 million in $25 million program rejected. Small program for 19 countries not getting much other assistance from U.S. Obligation and expenditure record relatively good.

Miscellaneous:

UNKRA organization and financing is currently being re-examined by a Cabinet sub-committee of NSC. Pending outcome their work believed necessary to continue to program on basis of $71 million of new money plus continued availability of military pipeline of $40 million to be available at end of hostilities.

ICEM (Inter-Governmental Committee for European Migration) should be continued at present level of $10 million, leaving open for further study prospect of U.S. contribution to capital needs of emigrants.

Escapee program can use $12 million instead of presently proposed $10 million, provided authority is secured to operate on global basis, including Yugoslav escapees.

UN Technical Assistance contribution can take a 15% cut below $16 million proposed but not the 20% or 50% suggested.

No appreciable change is proposed for other small programs―ocean freight charges, guarantees to informational media abroad, contribution to technical assistance program of Organization of American States, or Chinese-Korean Student Exchange. It has not been proposed to continue the UN Childrens Fund, but further work is being done on this question.

It is anticipated that there may be a need for famine relief for Pakistan but the amount is not currently known. By the time the bill goes to Congress we must know whether we want more money or can take care of the problem if given adequate flexibility in shifting funds between objects and areas.

1. Sent through McWilliams of S/S. Cleared in substance by Jernegan, Cale, Allison, Andrews, Linder, Brown of H, and Under Secretary of State Smith.
2. A handwritten notation by Roderic L. O’Connor on the source text reads: “Sec noted & approved subject to several minor p[oin]ts discussed by me with Mr. Newman.” The reference is presumably to George S. Newman of S/MSA.