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

U/MSA files, lot 56 D 551, “MSP FY 1956”

Memorandum by the Director of Foreign Operations (Stassen) to the Special Assistant to the Secretary of State for Mutual Security Affairs (Nolting)¹

secret

Washington, October 1, 1954.

• Subject:
• Development of the FY 1956 Mutual Security Program

I. Introduction

A. Purpose of this memorandum

This memorandum is designed to provide the assumptions, guidelines and other instructions required for the preparation, and submission to the Bureau of the Budget, of the initial FY 1956 Mutual Security Program. It is intended to give the minimum guidance necessary for the orderly development by all agencies concerned of an integrated and coherent presentation which is responsive to the totality of U.S. foreign aid requirements and which, in all of its component parts, reflects consistent assumptions and a full regard for the inter-acting effects of the various political, economic and military factors which are involved. The memorandum does hot, however, deal with the details to be covered in, and format of, each type of program submission. The latter problem has already, to the extent that it necessitates central instructions, been disposed of informally by agreement among all those concerned. Any further questions on this subject should be addressed to Mr. Robert Black of FOA, Room 318, Executive Office Building, Ext. 3841.

B. Weight to be accorded to the assumptions and planning figures set forth in this memorandum

1. Assumptions—Except where specifically otherwise stated, all assumptions which are set forth in this memorandum are to be considered by all programming offices affected as established premises upon which their programs are to be developed. However, in recognition of (1) the fluidity of the present world situation and (2) the desirability of securing original, constructive and imaginative approaches to the fundamental problems with which the foreign aid program is intended to deal, each programming office is invited to submit any alternative programs which are based on alternative assumptions whenever it feels (i) that such an alternative approach might provide a better solution to problems falling within its cognizance than solutions which are predicated on the assumptions contained in this memorandum, or (ii) that the assumptions themselves are untenable or unwise.

2. “Planning figures” —The “planning figures” which are provided in the case of certain programs have a status and force entirely different from that of the other assumptions set out in this memorandum. The “planning figure” for any specific program does not represent a ceiling within which such program must be prepared, but rather a general reference point for programmers with respect to the general order of magnitude which, in the absence of a convincing contrary demonstration, might be indicated by fiscal considerations. Programmers will be at liberty, if they feel that the requirements so dictate, to depart from any such figure, either upwards or downwards, by any margin which they consider desirable, but they should understand that the further a given program submission deviates from its planning figure the greater the justification which will be required therefor. In the case of many programs, no “planning figure” is given because, due to major uncertainties with respect to the nature of the programs required, there appears to be no logical method of deriving such a figure at this time except through the programming process itself.

C. Primary responsibility for the development of specific programs

There are set forth below the assignments of primary responsibility for the development and submission of each of the various separate components of the Mutual Security Program. It should be noted that an assignment of primary responsibility does not eliminate the necessity of coordination and clearance of program by the assignee with other agencies involved in its final approval.

1. Military assistance—The Department of Defense will be primarily responsible for the development of all military assistance programs, including but not limited to those relating to end-items, training, overseas facility development, mutual special weapons, infrastructure, contributions to the military cost of international organizations (NATO, SEATO), etc.

2. Non-military programs

a. Programs of direct forces support, defense support, development assistance, and technical cooperation for any geographic region and its political sub-divisions will be the primary responsibility of the FOA regional offices having cognizance in such region, working closely with their counterparts in the Department of State. In the case of technical cooperation programs, this responsibility will include the preparation of that portion of the program which relates to the domestic program costs associated with executing the programs in the region concerned, but such domestic program costs will be developed under common instructions which should be provided to the regional offices by the FOA Deputy Director for Technical Services and the FOA Controller, with the initiative to be taken by the latter.

b. The consideration of, and the preparation of any program covering, those technical cooperation requirements which are not regional in character will be a primary responsibility of the Deputy Director for Technical Services, and he should submit such proposals, if any, as he considers desirable, with respect thereto. The same assignment of responsibilities applies to any non-regional proposals with respect to development assistance as, for example, any proposal for contributions to an international development fund, to an international finance corporation, or to any similar operation.

c. A program covering the U.S. contribution to UNTA should be developed by the Department of State in close conjunction with the Deputy Director for Technical Services of FOA.

d. The Assistant Director of FOA for Refugees, Migration and Voluntary Assistance will have primary responsibility for developing any program covering ICEM (in close coordination with the Department of State) and the voluntary agencies.

e. The Assistant Director of FOA for Refugees, Migration and Voluntary Assistance will be responsible for developing, in coordination with the Deputy Director for Technical Services, estimates covering any programs for the disposal of surplus agricultural commodities through the voluntary agencies. In addition, the FOA Deputy Director for Technical Services will submit detailed information covering the extent to which, if any, on the assumption that Mutual Security funds would be used for this purpose, funds will be required in FY 1956 to finance the transportation costs for any programs for the disposal of surplus agricultural commodities which are additional to those referred to in the preceding sentence and for which the source of transportation costs is not already specifically provided.

f. The FOA Deputy Director for Mutual Defense Assistance Control will have primary responsibility for developing a program covering the expenses of carrying out the Mutual Defense Assistance Control Act (the “Battle Act”).

g. The Department of State will have primary responsibility for developing submissions covering U.S. contributions to NATO civilian headquarters, any U.S. contributions for funds administered by the UN High Commissioner for Refugees (in coordination with the FOA Assistant Director for Refugees, Migration and Voluntary Assistance) and any other contributions to international organizations that (i) are not regional in character and (ii) are not covered by other assignments of responsibility herein. U.S. contributions to UNKRA and UNRWA are considered regional programs for purposes of this subparagraph, and the FOA Regional Directors for FE and NEA will respectively have primary responsibility for the development of these programs, in each instance in close coordination with the Department of State, and, in the case of UNRWA, in conjunction with the Assistant Director of FOA for Refugees, Migration and Voluntary Assistance.

h. The FOA Assistant Director for Refugees, Migration and Voluntary Assistance should, in close coordination with the Department of State (and to the extent appropriate, with the Department of Defense), prepare a program relating to escapees.

i. The FOA Deputy Director for Management will be responsible for preparing a program covering the administrative expenses of the non-military portions of the Mutual Security Program.

j. A program covering the U.S. contribution to OAS should be developed by the Department of State in close conjunction with the FOA Regional Director for Latin America.

k. A program covering the U.S. contribution to UNICEF should be developed by the Department of State in coordination with the Assistant Director of FOA for Refugees, Migration and Voluntary Assistance.

The administrative expenses of the military portion of the program will be embodied in the Department of Defense submission referred to in 1 above.

[Here follows brief discussion of the timing of submissions and the procedures to be followed in preparing and submitting programs.]

II. General Assumptions and Instructions

The most fundamental consideration to be kept in mind by all those who participate in the development of the FY 1956 program is the objective of preparing a program which makes the maximum contribution to U.S. foreign policy with the minimum possible use of U.S. resources.

A. The Mutual Security Program for FY 1956 should be planned on the basis of the following general assumptions:

1. The threat of the security of the United States and other parts of the free world from external aggression will continue in somewhat like its present form and at least at its present degree of intensity. There will be no overt military aggression against the free world during FY 1956; the truce in Indochina will be maintained, but the threat of renewed hostilities will prevail throughout the period.

2. The U.S. will continue its current effort to exercise political, military and economic leadership throughout the free world to meet the threat to its security, and the Mutual Security Program will continue to constitute one of the primary instruments of U.S. foreign policy in the exercise of this leadership.

3. The U.S. will, if necessary to meet increased Soviet bloc capabilities, increase its own expenditures for security purposes. In this connection it will be assumed that U.S. production of end-items and/or the allocation of end-items from available production and stocks for foreign aid purposes could be increased if a policy decision to enlarge or accelerate MDAP deliveries were made. It will also be assumed, except as otherwise stated in the case of individual countries, that there will be no developments during or before FY 1956 which will significantly lessen the present political and economic obstacles to increases over present levels in the defense expenditures of other countries in the free world.

4. It will be U.S. policy to extend assistance to meet critical emergency situations (disasters resulting from droughts, floods, earthquakes, hurricanes, etc.) which develop in the free world and, in some cases in the Soviet bloc. Such assistance will normally be in the form of, but will not be limited to, agricultural commodities supplied under Title II of Public Law 480 or from special funds authorized by the FY 1956 Mutual Security Program.

5. Economic activity in the United States and elsewhere in the free world will continue at a high level. There will be increased trade between the free world and the Soviet bloc in non-strategic items.

6. U.S. private investment abroad will increase moderately but, in general, the climate for private foreign investment will not yet have improved significantly in most countries.

7. Except in extraordinary instances, assistance under the Mutual Security Program will not be used for purposes of preclusive buying or as a specific means of deflecting trade from, or decreasing trade with, the Soviet bloc. (To the extent that this specific assumption may need to be modified, it will be assumed that funds other than those called for in the programs to be submitted in this memorandum will be provided. However, regional program offices are urged to bring to the attention of the Deputy Director for Mutual Defense Assistance Control any instances in which the availability of additional funds might make it possible and desirable to take advantage of opportunities of such character.)

8. Without reference to specific commodities, the prices of which may fluctuate significantly, it will be assumed that there will be no general increase in the price of basic commodities on the world market and that if a change in this price level should occur, it is more likely to represent a decrease than an increase. Where particular programs would be significantly affected by price variations in one or two major commodities, program officers should consult commodity experts and, if assumptions as to price changes are made, such assumptions should be specifically stated in the program which is submitted.

9. Pending a governmental decision with respect to future organization for the conduct of foreign aid matters, it will be assumed to the extent that this is necessary for purposes of this particular submission, but only for such purposes, future developments or agency positions in this regard, that present arrangements with respect to the organization and administration of the Mutual Security Program will continue in effect through at least FY 1956.

10. It will be assumed that no arbitrary liquidation periods will be imposed by the Congress with respect to any programs which Congress authorized for financing in FY 1956. It will also be assumed that there will be a Mutual Security Program in FY’s 1957 and 1958, and probably beyond, which has components comparable to, if not identical with, all the major components of the present program.

11. It will be assumed that U.S. trade policies will remain as liberal as at present, that further moderate liberalization of these policies may occur in FY 1956, but that, in the latter event, the economic consequences of such further liberalization will not be felt until after FY 1956.

B. The following general instructions are also provided:

1. All submissions will include an analysis of current and prospective pipelines, deliveries and expenditures out of both (a) FY 1955 and prior year funds and (b) FY 1955 funds. In this connection the following guidance from the Bureau of the Budget is relevant:

“Where formerly programs were developed primarily in terms of program requirements and with much less regard to the expenditure impact, the current budget situation requires that programs be developed in the light of estimated expenditures or shipments of programmed items. With this objective in mind, there should be greater emphasis on the current levels and trend of expenditures and the relationship of the expenditures to the requested new obligation authority.”

2. It will be the responsibility of each FOA regional office to prepare, and to submit simultaneously with its program proposals, a projection which has been coordinated with the Department of State of the probable defense expenditures during FY’s 1956, 1957 and 1958 of each country in which the United States now has, or proposes to have, a military assistance program. This projection should, in each instance, represent the best obtainable estimate of the politico-economic capabilities of the country in question. It should be broken down, where possible, among major categories of expenditure in the same general format as is used in the case of country submissions to the NATO Annual Review. To the extent practical, this material should be developed or reviewed at the country level by the country teams, with the MAAG providing all information which he has available on this subject. A comparison should be made of expenditures for like purposes in FY 1954 and FY 1955. Particular emphasis should be placed on any changes in a country’s ability to finance production of major material. Comments on the ability of the country to sustain higher defense expenditures, on the possible political and economic impact of higher expenditures should also be included.

3. It will be the responsibility of the Department of Defense to provide the regional programming offices of FOA with estimates by regions and, where possible, by countries with respect to (a) the expenditures of U.S. armed forces overseas and (b) expenditures for offshore procurement. In the case of Europe this information should be provided directly to the FOA Regional Director for Europe, in the case of Turkey and Greece, to the FOA Regional Director for the Near East and Africa, and in the case of Japan, Formosa and Korea, to the FOA Regional Director for the Far East. In each instance copies of the material furnished should be provided to Mr. Nolting of the Department of State and to the FOA Deputy Director for Program and Planning. This information is fundamental to FOA planning and therefore should be provided at the earliest possible date, initially, if necessary, in rough and tentative form. Representatives of the responsible FOA offices should discuss this matter directly with representatives of the Department of Defense.

4. It will be the responsibility of the Department of Defense to provide the FOA Deputy Director for Program and Planning at the earliest possible moment, for distribution by him on an individual basis to the FOA regional officials concerned: (a) its estimate of the force levels which will be maintained in countries receiving military aid during the years FY 1956–FY 1958; (b) the force levels against which the military aid program is being developed; and (c) the approximate level of U.S. end-item deliveries in each region and country during each of the years in this 3-year period.

5. Each FOA regional office will, simultaneously with the submission of its program proposals, transmit information covering emergency or disaster situations which have occurred within its region during each of FY’s 1953, 1954 and 1955, indicating (a) the value and form of any assistance furnished by the United States in connection therewith (not necessarily limited to assistance furnished under the Mutual Security Program) and (b) additional assistance which, had it been available, could have been furnished with great benefit to U.S. foreign policy objectives.

6. For the reasons given in the below-quoted guidance from the Bureau of the Budget, individual items should not at this stage include any allowance for contingencies, but a separate amount for contingencies can, in the discretion of any programming office, be submitted as a special item, together with as complete a rationale and justification therefor as possible. The Bureau’s guidance is as follows:

“The current uncertainties existing in the foreign area seem to call for some allowance in the FY 1956 program for items contingent in nature. However, since it rarely happens that all the contingencies materialize, an allowance for each contingency in each geographic area would pyramid the amounts. In view of the flexibility contained in the President’s transfer authority and the surplus agricultural programs, the individual items should not include allowances for contingencies which should be provided for instead on an overall basis. This approach to contingencies should provide a more meaningful basis on which to determine minimum feasible amounts.”

7. Programs which are dictated by political considerations should be justified as such and not on the basis of military or economic necessities. Guidance from the Bureau of the Budget on this point is as follows:

“Programs have been submitted and justified in the past on the basis that they were required because of economic considerations, but upon examination it became clear the real basis was of a political nature or other special considerations. Where the latter considerations furnish the primary basis for aid, they should be clearly presented in the initial submission.”

8. Submissions which cover a large number of different programs, as, for example, those from the Department of Defense and those from FOA regional offices, should contain an evaluation of priorities among such different programs and program components.

III. Definitions and assumptions with respect to specific forms of assistance

For purposes of simplicity it has been assumed in this memorandum that the presentation of the FY 1956 Mutual Security Program to the Budget Bureau and to the Congress would classify all assistance proposed in substantially the same six categories that were established in the Mutual Security Act of 1954 as finally passed. These categories, all but one of which is discussed and defined below, are the following: (A) military assistance; (B) direct forces support; (C) defense support; (D) development assistance; (E) technical cooperation; and (F) other programs, including those multilateral programs which are not included in other classifications. Program submissions should generally follow and recognize these categories.

The foregoing assumption and instruction require a certain amount of explanation and qualification. The most important thing at this time is not, of course, the classification of assistance in particular categories, but rather the development for each country and area of a program which, when all of its elements are considered together, represents a fully integrated approach to the problem of such country or area and constitutes the best use of total resources available for that purpose. At the same time, it is highly desirable, for purposes of internal analysis, for purposes of comparison with prior years’ programs, and for purposes of the Budget Bureau and Congressional presentations, to separate out, wherever this is practicable, (and the case is rare where this is not true), the major types of aid components of the total program. The major aid components which are referred to above and further defined below are generally distinguishable from one another either by the physical nature of the assistance provided (military end-items, for example) and/or by the purposes which the aid is intended to accomplish. However, since the problems of a country or area cannot be neatly compartmentalized, the definitions of the major types of aid cannot always be precise, these definitions sometimes overlap, and frequently we have a choice as to the way in which particular aid should be classified. These factors sometimes present programmers in the non-military area with irritating dilemmas, and the temptation is great to ignore the issue and to submit country programs that are not separated into components or are separated in a routine and meaningless fashion. Unfortunately, the task of Congressional presentation is such that those who determine its final form must have before them raw material from programming offices which is susceptible, with the help of the latter, of being grouped in categories and of being combined in a variety of alternative forms.

One special footnote about “defense support” and “development assistance” is necessary. In countries where the United States is furnishing military assistance (except Latin America), all non-military assistance except direct forces support and technical cooperation will be classified as “defense support” even though such assistance includes aid for purposes of economic development, relief or budgetary support. In all countries where the U.S. is not furnishing military assistance and in Latin America, all non-military aid except for technical cooperation will be classified as “development assistance”. We will not have both a “defense support” program and a “development assistance” program in the same country, and a decision to have the former in lieu of the latter is merely the automatic consequence of the existence of a military aid program in the country, is not an indication of a distinction in program content, and is not intended to preclude the inclusion of assistance primarily designed to further economic development of a kind identical with that which may be included under “development assistance” in a country where no military aid program is in operation.

A. Military Assistance

Programs within this classification are designed to provide the military equipment and training which are required by certain friendly countries in order to develop or maintain specific military, para-military or police units at a given level of effectiveness. The policy reason for undertaking any such program derives in each instance from the existence of two facts: (1) the importance of the units involved to the defense of the United States or to the defense, or to the protection against internal subversion, of an area which is important to the security interest of the United States and (2) the inability of the recipient country to create or to support such units adequately without the equipment and training provided. Military assistance programs almost invariably have an exclusively military or directly related security purpose, even though it is lack of economic strength on the part of the recipient country which makes the extension of such assistance necessary.

This classification also includes, but is not limited to, the following programs which, although not falling strictly within the definition above, are closely akin to, and have customarily been treated in conjunction with, military end-item and training programs, the provision of machine tools and other production equipment required for the production of increased military equipment abroad (facilities assistance); contributions to certain international military organizations (SHAPE and the Standing Group of NATO) for their operating and administrative expenses and for the construction or equipping of military facilities (infrastructure); assistance in the development or production for foreign forces of weapons of advanced design.

In developing the FY 1956 program proposals, the Department of Defense should consider the advisability of including, as a part thereof, recommendations for new obligational authority with respect to (a) each of the special categories of assistance referred to in the immediately preceding paragraph; (b) a U.S. contribution to a NATO logistic and supply plan (possibly as a further implementation of the Bogart Plan);² and (c) assistance to support certain essential elements of military defense not heretofore generally considered eligible for military assistance (such as air defense).

The following informal planning figures, as heretofore informally agreed to among staff elements of the Department of Defense, the Bureau of the Budget, the Department of State and FOA, are hereby established for the military assistance program (exclusive of infrastructure) (figures in billions of dollars):

FY	Unexpended at end of FY	Appropriated or requested for FY	Available during FY	Expended during FY
1954	7.0
1955		1.1	8.1	3.0
1955	5.1
1956		1.6	6.7	2.5
1956	4.2
1957		2.5	6.7	2.5
1957	4.2
1958		2.6	6.8	2.5
1958	4.3
		7.8

This table assumes the loss, as a result of the retroactive application of Section 1311 of the Supplemental Appropriation Act of 1955, of $500 million of the 1950–1954 funds. To the extent this assumption is pessimistic the following figures in the table would need to be correspondingly adjusted; unexpended balance at end of FY 1954 (increased); available funds in FY 1955 (increased); new obligational authority required in FY 1956 (decreased); total new obligational authority required FY 1955–1958 (decreased); unexpended balance at end of FY 1955 (increased).

The following further general assumptions will apply in developing the FY 1956 military assistance program, in addition to those which may have heretofore been provided in other documents:

1. It will be U.S. policy to provide on a grant basis (or on liberal credit terms requiring an appropriation to cover them) those end-items which are required in order to maintain forces to which we have heretofore been furnishing, or are now planning to furnish, capital or replacement of equipment at the same level of effectiveness as the level to which such capital or replacement equipment was initially designed to raise such forces.

2. Programming should take into account the desirability of replacing obsolescent equipment at the rate necessary to match increments in the level of effectiveness and capabilities of potential enemy forces as a result of modernization, both by increasing the readiness and capabilities of individual units and by securing greater standardization of equipment among units.

3. The offshore procurement program will be continued and every effort will be made to maximize this program to the extent that it will significantly further the establishment and maintenance of a rationale mobilization base in Europe or the Far East, or will materially contribute (in addition to providing quality end-items at acceptable prices) to the attainment of some extremely important political or economic objective abroad. However, it is recognized, and should be assumed, that this program will be at a level significantly lower than in FY 1954. While recognizing the difficulties of meeting this goal, $300 million will be taken as the target for OSP contracts to be placed out of new FY 1956 obligational authority on a worldwide basis.

B. Direct Forces Support

Programs within this classification are designed to give the military establishments of certain countries direct support which is additional to the military assistance which these countries are also receiving. These programs provide, or finance the provision of, specific supplies, equipment and services which go directly into the hands of, or otherwise immediately benefit, military forces, but which either (1) are of a kind not ordinarily provided as, or (2) are financed or administered in a manner different from, military assistance.

The reason behind this program is the fact that the recipient country, even with the military equipment and training which it is receiving as military assistance, is unable to develop and maintain the size and kind of forces which are important from the standpoint of U.S. security without further help.

The purpose of this program is a military purpose—the support of military forces—and any economic benefits which may accrue to the recipient country as a result of the program are, however extensive or useful they may be, incidental to, rather than a primary reason for, the program.

C. Defense Support

Programs within this classification are designed to support the military efforts of certain countries which are receiving military assistance. Such support involves the provision of supplemental resources which a recipient country requires if it is to carry on a defense program of the size which United States policy regards as necessary. The primary policy reason for defense support programs is the attainment of military objectives rather than the extension of any economic benefits which may also accrue to the recipient nation. However, where a defense support program is justified in a country under this policy definition, the program will also include, where this can be supported, such other assistance for that country as U.S. interests dictate should be furnished to promote economic development or to maintain economic or political stability.

Defense support differs from direct forces support in the following respect: although both forms of assistance are designed to make possible the creation or maintenance of a certain level of military forces, direct forces support does so by providing, or paying for, goods or services that physically (although sometimes in a different form) reach or benefit the forces involved, whereas defense support contributes to this objective more indirectly through providing resources which either (a) enable the recipient country to maintain a level of defense expenditures or undertake defense activities that would otherwise not be possible or (b) increase the recipient’s capacity to do so in the future. The one form of assistance can be traced directly to a soldier who actually uses it or is served by it; the other form has its specific military impact as a country’s economy is rendered capable of sustaining the desired enlargement of its defense burden.

Consideration will be given in the case of every defense support program to the extent to which the assistance involved could be supplied on a loan basis without serious detriment to the attainment of U.S. program objectives. Each programming office should be prepared to demonstrate why any segment of its proposed program cannot be provided on terms of repayment (See IV–B below).

For the treatment of defense support programs in relation to regional economic organizations and activities, see the discussion of this subject as it applies to development assistance in D–4 below.

D. Development Assistance

This term describes assistance given primarily to promote economic development or otherwise to create or maintain economic or political stability. In most nations for which it is proposed, development assistance will supplement programs of technical cooperation by providing supplies, commodities or funds. Usually this type of assistance is required to make possible, or to accelerate, projects or activities which basic United States interest requires to be undertaken and which, in the absence of such additional assistance, would not be undertaken or, if undertaken, would not be carried out at the rate required by United States foreign policy. Mutual Security Program funds in FY 1956 for development assistance should be used to help accelerate present rates of economic growth in the underdeveloped countries (and in certain instances certain European or other developed countries) where United States national security requirements for such growth cannot be met by local and foreign private capital or from financing from the IBRD, Ex-Im Bank or similar sources. Development assistance differs from defense support in that the former is immediately directed toward goals which are not primarily military in character, whereas the latter has as its first aim, and controlling justification, the attainment of military objectives.

The program for development assistance should take into account the following considerations:

1. Development assistance, as a category of funds, will not be applicable in countries where military and defense support programs are proposed. (Exception: Latin America.)

2. Surplus Agricultural Commodities will be supplied in lieu of other dollar commodities where requirements for local currency can be met by local currency which is generated from the sale of such agricultural commodities or, where foreign exchange requirements are being covered, are substituted for by such agricultural import, providing in both instances that normal marketings are protected. (See Sec. IV–A below.)

3. Every consideration should be given to the possibility of programming development assistance on a loan basis except in cases where it can be affirmatively and convincingly demonstrated that for political, economic or other reasons the objectives of such assistance cannot be achieved through extending it on some other basis than a grant.

4. Where this would further the objectives of U.S. aid programs and otherwise be feasible, this form of assistance will be channeled in such a fashion as to encourage regional economic undertakings in conjunction with other U.S. programs. However, in submitting program proposals, any program whose practicability at all, or whose size or general content (as contrasted to its technique, form or method of administration and extension, or its ultimate effectiveness), will be largely unaffected by whether it is provided on a bilateral basis or through a regional economic institution or project, should be submitted as part of a balanced country program. Only those programs or projects which are dependent for their practicality at all upon the establishment of a regional organizaton, or whose size and content would be radically affected if a regional organization were established, should be submitted separately not as a part of regular bilateral country programs. Any submission of the latter type should clearly set out the assumptions upon which it is based.

E. Technical Cooperation

Technical cooperation programs may be defined as programs for the sharing of our knowledge, experience, techniques and skills with the peoples of the less developed areas of the world for the purpose of helping them to further their economic development and increase their standard of living. These programs emphasize, and consist largely of, advice, teaching, training and the exchange of information, and they do not usually include the provision of supplies and equipment beyond that which is required for effective teaching and demonstration purposes. Moreover, except for these last mentioned purposes, they do not supply the capital which may often, if not always, be indispensable to the conversion of the knowledge, skills, techniques and experience which are thus provided to economic wealth, improved standards of living and other tangible benefits among the peoples of the recipient countries. The definition of the limits of the program for FY 1956 should be considered to be the same as the definition in Title III of the Mutual Security Act of 1954, and interpretations which have been, or may hereafter be, issued with respect to the meaning and content of the term “technical cooperation” under the Mutual Security Act of 1954 should be used as a guide in determining the general scope of activities and the forms of aid which are intended for coverage by this category in the FY 1956 submission. However, in cases where the provisions of the Mutual Security Act of 1954, as so interpreted, technically exclude or prohibit activities which (i) a programming office believes should be undertaken and (ii) are closely akin to, or of the same broad general nature as, activities which are permitted as technical cooperation under the present law, it may submit, as part of its technical cooperation submission (rather than under some other head), but specifically identified and justified, proposals which include such now excluded or prohibited activities.

The following factors should be considered in developing a program for FY 1956:

1. Contracts with universities and other private and semiprivate institutions will continue to be an important method of implementing programs.

2. In the development of country programs, there should, in general, be greater selectivity than in the past in choosing projects and activities for inclusion in such programs, less dispersion of emphasis among a large number of different fields of activity and many scattered projects within fields of activity, and more concentration on the solution of a few carefully chosen, high priority problems important to a country’s development.

3. Programs should indicate a phase-out of U.S. support of projects when host countries are capable of assuming responsibility for continuing them, and generally follow guidance on cost-sharing laid out in CA–102 of June 20, 1954.³ In general, also, the probable capacity of a country to assume continuing responsibility for a project a number of years hence should be a factor in determining whether the institution of such a project at this time is wise and timely.

4. In countries, such as Korea and Indochina, where the development and submission of all elements of a country program as a single entity (rather than in the form of separate components) appears advisable, technician costs, training costs and similar technical cooperation expenses should nevertheless be broken out for separate analysis so that subsequently, if Congressional presentation factors so dictate, these phases of the activities proposed for a country can be embodied in the technical cooperation program. Except in the case of Korea and Indochina, this procedure will not be followed without specific advance approval and a full justification.

5. Consideration should be given to the possibility in those countries (including European countries in which technical exchange activities have been conducted) where (a) foreign exchange resources permit and/or (b) inclusion in the normal type of U.S. technical cooperation program is not desirable or possible, of furnishing some or all of any technical assistance for such country on a reimbursable basis under which the U.S. government, as in the case of reimbursable military aid, would provide, or arrange for, the assistance, but would be reimbursed for its out-of-pocket costs in doing so.

Technical exchange programs for Europe will be developed within the general context of the above definition, limits and criteria, as well as within the special framework set forth in V-A-1-f below.

IV. Forms of Aid

A. Use of Agricultural Surpluses

The following assumptions and instructions with respect to agricultural surpluses will be taken into account in developing the FY 1956 Mutual Security Program:

1. As in the FY 1955 Program, the agricultural commodity component of these imports financed with MSP funds will be maximized as long as this does not interfere with the attainment of MSP objectives. It will be assumed that such agricultural imports will not, under the applicable legislation, be required to be in excess of the usual marketings of the United States and friendly countries.

2. It will be assumed that in FY 1956 Title II of the Agricultural Trade, Development and Assistance Act of 1954 (P.L. 480), or any modification thereof, will, to the same extent as in FY 1955, provide resources to meet those requirements for U.S. assistance to other countries in the form of agricultural commodities which result from famines, floods or other natural disasters.

3. Where any choice exists between financing programs under either the Mutual Security Program or financing them under the Agricultural Trade Development and Assistance Act, the latter will be used.

4. It should not be assumed that the Agricultural Trade Development and Assistance Act represents any solution for countries having balance of payments difficulties. P.L. 480 is aimed at increasing consumption of United States surplus agricultural commodities above the level that would otherwise occur, without, of course, disrupting world prices.

5. In programming the FY 1956 Mutual Security Program, account will be taken of those local currencies, if any, which, at the time programs are finally developed, are likely to become available in FY 1956, without dollar reimbursement, for use in the Mutual Security Programs as a result of subsections 104(c), (d), (e) and (g) of the Agricultural Trade Development and Assistance Act.

B. Loans

Any portions of the requirements for FY 1956 assistance which can be met on a loan basis without sacrifice of program objectives will be furnished on a loan, rather than a grant basis. In considering whether and when loans or grants should be used and, if the former, on what terms, the following general criteria should govern:

1. No assistance will be extended out of Mutual Security Program funds to cover projects or activities which the public lending institutions could finance and would be prepared to finance, or which can, and there is real prospect will, be met from private capital sources.

2. Assistance on terms of repayment will always be on the most favorable business terms consistent with the full accomplishment, without compromise, of the political, economic aid, where appropriate military objectives for which the assistance is intended.

3. No assistance should be extended on terms of repayment when this would have the effect of seriously or directly impairing a country’s capacity to borrow from, or to repay previous loans to, the IBRD, the Ex-Im Bank, or private lending institutions.

4. All programs of technical cooperation and all of the other following programs will be handled on a grant basis and will not normally be considered as eligible for assistance on any basis of repayment: ICEM; UNRWA; UNICEF; NATO civilian and military contributions; escapees; MDAC; Ocean Freight; administration; infrastructure; UNTA; OAS; UNKRA; relief operations, such as Operation Exodus.

5. The bilateral Korean aid program will, because of its nature and because of political considerations, be handled on a grant basis, but O/FE, together with appropriate State Department officers, should consider whether, and if so to what extent and on what terms, this program could be placed on a repayment basis.

6. While recognizing (i) that the question of whether particular assistance should be extended in the form of a loan or a grant depends not only on the income-producing capacity of specific projects that may be benefited thereby but also on the status and capacity of the economy of the recipient country projected over the period of the loan, and (ii) that considerations of practical administration may generally, or in individual cases, make it advisable to extend any loan as a general loan to a country, without specifically requiring that it be applied to a particular undertaking or undertakings, nevertheless, for purposes of presentation to the Bureau of the Budget and Congress, programmers should, where possible, and consistent with other assumptions here listed, apply or relate assistance which they propose to extend on a repayment basis to projects which have income earning features rather than to projects that are not in themselves productive in an income producing sense—viz., hospitals, schools, etc.

7. It is immaterial, from the standpoint of meeting the minimum targets, whether assistance which is given is given in the form of funds appropriated or in the form of local currency generated from the sale of MSP surplus commodities. It should be noted, however, without going into detail here, that the choice may make a good deal of practical difference in achieving program objectives.

8. Unless and until the NAC approves a different policy, it should be assumed for FY 1956 programming purposes (but for no other purpose) that the terms under which, and the circumstances under which, loans might be extended out of FY 1956 Mutual Security Program funds would be of the following general character:

a. Loans shall be available on the same terms to all borrowers. The loans shall be for 50 years with no repayments of capital, payments of interest, or accrual of interest during the first three years. Starting in the middle of the fourth year there shall be equal semi-annual combined payments of interest repayments of capital, with a clear distinction between interest payments and capital repayments.

b. The interest rate shall be 2½% if repayment is to be in dollars, 3½% if repayment is to be in local currency. At any time during the life of the loan agreement the borrower shall have the right to transfer irrevocably from the 3½% local currency basis of repayment to the 2½% dollar basis of repayment.

c. If repayment is to be in local currency the obligation to repay shall be denominated in dollars with provision for payment in the local currency equivalent of those dollars at the appropriate exchange rate current at the time of repayment. Each borrowing government shall be required to agree that local currency paid to the U.S. under a loan agreement shall be valid at a minimum for any expenditures of the U.S. Government in the monetary area of the borrowing government.

d. The U.S. shall agree to take into consideration the economic position of the borrowing country in any contemplated use of the local currency repaid by a borrowing country.

e. Loan agreements shall allow the borrower the option of prepayment.

f. Loan agreements shall take note of the possibility that the U.S. may wish at a later date to suggest renegotiation of the agreements to provide for direct repayment in strategic materials or other valuable considerations, and each agreement shall generally provide that, if, at any time so long as the U.S. Government is the holder of the obligations under the agreement, the parties to the agreement determine that it would be in their common interests, they may by mutual agreement modify the agreement.

g. Loan agreements shall allow the U.S. the option of converting the dollar obligations it holds under the loan agreements into negotiable bonds in convenient denominations for sales to investors.

9. Programmers should also consider, and include in their submission, an indication of the extent to which assistance proposed by them for extension on a loan basis could, consistent with the achievement of program objectives and the general criteria in 1 to 3 above, still be extended on a loan basis if the terms of such loans were to be far less liberal than those set forth in 8 above.

10. All program submissions, including those for military assistance, will indicate the extent to which it is estimated that the assistance proposed might, consistent with 1 through 8 above, be extended on a repayments basis. In the case of military assistance, this would include the question of what military equipment might, in lieu of being furnished as a gift, be sold to recipient countries on credit terms which are more liberal than those now permitted under Section 106 of the Mutual Security Act of 1954—credit terms which might, as an extreme, be as liberal as those under 8 above.

V. Regional and Country Guidelines

There are set forth below certain regional and country guidelines and assumptions. In reviewing these, it will be noted that there are many countries for which no assumptions or guidelines of any kind are given. Such omissions have no significance whatsoever in terms of whether programs should or should not be prepared for any particular country. On the contrary, any such omission simply means that no special guidance or assumptions, beyond those contained in NSC and other approved policy papers, presently appear to be necessary for the purpose of determining whether, and if so, in what amount and form, assistance should be proposed for a country so omitted. Similarly, the inclusion of assumptions or guidelines for a country is not, except where otherwise specifically so stated, intended to indicate a decision that such country will in fact receive aid. In either event, programmers are urged to refer to the latest NSC guidance on any country or area for which they have programming responsibility.

A. Europe

1. The following specific assumptions apply to the European region as a whole.

a. EDC—The development of a substitute solution to EDC will not change foreign aid requirements for assistance in any countries where such assistance would otherwise be justified. It will be assumed that any substitute solution will be such that the limitations of the “Richards amendment” will be removed.

b. European defense expenditures—In general the percentage of gross national product devoted by NATO countries for defense purposes will slightly decline. On the other hand, there is no reason to believe that the NATO “new approach” studies will lead to adjustments in force levels or force composition which will justify any reduction in defense budgets. The percentage of gross national product allocated for military expenditures will also decrease slightly in Yugoslavia, but it will increase slightly in Spain, and increase substantially in Germany.

c. NATO Logistic Organization—A common NATO Logistic System will be agreed upon and the U.S. will participate in the financing of the facilities required.

d. Receipts from OSP—European OSP receipts will increase from around $500 million in FY 1954 to about $850 million in FY 1955 and then recede slightly in FY 1956 to approximately $825 million. (The foregoing assumption will apply only until such time as the Department of Defense, pursuant to II(B)(3) above, provides more current and accurate estimates.)

e. Convertibility—The movement toward convertibility will not require additional U.S. financial support either to individual countries or to a central fund or reserve. (If, on the contrary, moves toward convertibility do require additional U.S. assistance, then a separate requirement and justification will have to be made at that time.)

f. Technical exchange—The European Technical Exchange Program will be phased out in FY 1956 except in so far as it can be justified in one of the following categories:

(1) As a component of an economic program in a country where an economic program is proposed for FY 1956 (as in the case of Spain in FY 1955);

(2) As a contribution to the European Productivity Agency if it can be affirmatively demonstrated that such a contribution is necessary to, and will materially further the activities of this institution in a manner consistent with U.S. objectives; and

(3) As required to finance institutional contracts.

The FY 1956 program may, however, also include amounts necessary to cover any pipeline costs that cannot be met through anticipated deobligations of prior years’ funds. Moreover, because of differences of view as to the desirability and form of any technical exchange program in Europe, the Regional Office may, in its discretion, include specific proposals representing exceptions to the narrow guidelines set forth above. Consideration should also be given to the possibility of developing arrangements for the extension of technical exchange on a reimbursable basis. (See III-E-5 above.)

g. Tourism—Dollar expenditures for tourism in Europe will increase moderately.

h. War Reserve Levels—NATO plans are likely to place greater emphasis on stockpiles and operational reserves than previously, and present NATO goals with respect to these may be substantially raised.

2. Country Guidelines

a. Spain—The $465 million level of aid referred to in U.S. agreements with Spain will not be considered as necessarily a binding and permanent ceiling on the total aid which will be furnished to Spain provided that the attainment of approved U.S. policy objectives in Spain appears to justify amounts in excess thereof. Similarly, the $115 million heretofore commonly considered to be the economic aid component of the above total will not be considered as a necessarily binding limitation on the cumulative total of economic aid to Spain. On the contrary, specific consideration should be given to the question of whether, in order to accomplish its strategic objectives, the United States will find it necessary to participate financially in a limited number of transportation and communication projects.

b. Berlin—A limited economic aid program should be continued for West Berlin, such a program to be designed to bolster the morale and the economy of the city and to reduce unemployment. The Department of State should immediately provide FOA with more specific guidance on the size and nature of the program which, from a political standpoint, are required for such purpose.

c. Yugoslavia—It will be U.S. policy to provide such further economic assistance to Yugoslavia as may be necessary to maintain the current defense effort without weakening political stability in the country, including, if necessary to this end, assistance designed to permit a moderate increase in consumption levels.

d. Italy—A limited economic assistance program for FY 1956 for Italy should be submitted if such a program can make a major contribution to any or all of the following:

(1) Induce the Italian Government to adopt measures striking at the organizational basis of Communist power undermining Communist financial and political strength.

(2) Induce Italian groups, particularly Italian employees and free labor movements, to combat Communism vigorously.

(3) Induce the Italian Government and private Italian groups to aid the growth of the democratic labor federations in order to weaken the Communist dominated federation.

(4) Improve the level of economic activity in southern Italy and reduce unemployment generally.

e. Western Germany—It will be assumed that any further military assistance which may be required by Germany over and above that programmed in Fiscal Years 1950–1955 will be on a reimbursable basis, and that no grant assistance will be included for Germany in the FY 1956 program. However, against the possibility that subsequent developments or decisions will modify this assumption, the Department of Defense, as a separate submission, should indicate the value of military equipment (i) whose procurement will require the use of foreign exchange (i.e., cannot be manufactured within Germany in time) and (ii) which should be financed in FY 1956 if the time-phased requirements for such equipment are to be met for a German build-up which commences on January 1, 1955, proceeds thereafter at the rate heretofore assumed for such build-up, and has as its force targets those heretofore planned in connection with EDC.

3. Planning Figure for European Region

The new obligational authority planning figure for all forms of non-military aid for Europe for fiscal year 1956 is $125 million.

B. The Near East, Africa and South Asia

1. The following specific assumptions apply to this area as a whole:

a. Regional defense—There will be a continued development of regional defense arrangements in this area based generally upon the Turkish-Pakistan alliance and a gradually increasing interest on the part of the Arab States in measures for regional defense. It is also a U.S. objective to associate Iran with such regional defense arrangements when this proves practicable and to provide military support to Iran consistent with the attainment of this purpose.

b. Arab-Israeli relations—Arab-Israeli relations will continue to be tense, rendering difficult the development of unified economic plans for this area.

c. Assistance for economic development—It will be the policy of the United States to provide assistance in the amount and form required whenever such assistance in this area will materially accelerate rates of economic growth significantly strengthening the security of the area, or contribute in an important way to the political settlement of major outstanding issues, such as those affecting the Palestine refugees or those involving Arab-Israeli differences.

d. Technical assistance—The Technical Cooperation Program should be continued at approximately the general level requested of Congress for FY 1955, with added provision for the commencement of technical cooperation activities in any new country where such activities seem probable in FY 1956. However, moderate increases in the regular program are not to be excluded if a convincing demonstration of (i) additional potentialities for constructive work and (ii) a capacity (in terms of technicians, etc.) to meet such added needs can be provided. The Department of State should immediately provide FOA with guidance as to which new countries, if any, in this region are likely to request, and become eligible for, technical cooperation in FY 1956.

2. Country Guidelines

a. Iran—Any further program of economic assistance should be related to any expanded military force goals that the U.S. Government may determine to support and/or, on a project basis, to those continuing requirements, if any, for external assistance for economic development which cannot, on the assumption that oil production has been resumed by December 31, 1954, be financed through oil revenues, private investment or loans from the public lending institutions. Similarly, the technical cooperation program should, unless strong justification to the contrary can be shown, be further reduced to a level comparable with other countries, now that the necessity for a rapid impact program has passed. Moreover, Iran should be expected to meet normal requirements for cost-sharing.

b. Palestine Refugees—A program for relief of Palestine refugees should be submitted on the assumption that it will continue to be administered through UNRWA. Funds for refugee resettlement should also be considered and, if considered necessary, included as a separate component of the submission. This program should be closely related to the development assistance justified for the Arab States and Israel in connection with Jordan Valley development, but be otherwise separable so as to permit independent justification.

c. Libya—Development assistance should only be provided if substantial progress is made on using existing assistance (development assistance; Air Force funds; etc.).

d. Africa—Unless strong justification to the contrary can be given, aid for economic development in the Dependent Overseas Territories (other than technical cooperation) should be considered only in connection with P.L. 480.

e. India—A program for United States aid on approximately the level requested of Congress for FY 1955 should be submitted for FY 1956 if progress in expenditure for the 5-Year Plan meets high projections, resulting in foreign exchange and local currency shortages. The technical assistance component should be maximized, and development assistance should, to the extent feasible, be extended in the form of agricultural commodities and on a loan basis.

f. Pakistan—Any economic assistance program submitted should fall in the defense support category and bear a direct relationship to Pakistan defense capacity, to its general economic development, and to current special economic and political problems in Pakistan as they are developed in connection with a consideration of the Heinz Report, present and prospective discussions with top Pakistani officials, and any subsequent NSC determinations.

g. Turkey—Any economic aid program for Turkey for FY 1956 should permit continued support for the maintenance of the present level of armed forces, allowing for increased levels of equipment. The aid program should also allow for the continuation of the heavy investment program. The Turkish program should be especially carefully examined to ascertain whether a large portion thereof could be placed on a loan basis. It will be assumed in connection with the MDAP program for Turkey that the United States will continue to fulfill the commitments made to Turkey on military assistance during the recent visit of the Turkish Prime Minister.

h. Greece—It will be assumed that even if there is no economic justification for a further program in FY 1956, political factors in connection with maintenance of forces may make limited assistance advisable. The Department of State should promptly furnish FOA its initial views on such political factors. In the event that any assistance is to be proposed, it should, if this proves practical, be programmed as direct forces support.

3. Planning Figure for NEA Region

The new obligational authority planning figure for all forms of non-military aid for the NEA region for Fiscal Year 1956 is $375 million, exclusive of any requirements for Palestine Refugees.

C. The Far East

1. Regional Guidelines

The following specific assumptions apply to the area as a whole:

a. As the most likely area for further Communist efforts at expansion, the Far East will continue to be the object of intense United States effort to prevent further losses and to stabilize the political situation through a combination of economic and military programs.

b. Plans for increased military strength growing out of SEATO arrangements will require some expansion (exclusive of Indochina) of end-item and defense support programs.

c. An economic grouping of free Asian states, possibly to include those of South Asia and Japan, may merit the support, including financial support, of the United States. This support may be in terms of loans through a regional bank, as direct development assistance on a loan or grant basis, or on some other basis. In particular, programmers should consider, and discuss with other offices, the wisdom of including or not including, and if so, in what form and amount, a proposal for funds to cover the possibility of a loan to assist in the establishment of an Asian Regional economic structure. (See III–D–4 above.)

d. Technical cooperation programs will continue at approximately the levels requested of Congress in FY 1956, but with moderate increases allowable where strong justification therefor can be given and with added provision to cover, if this otherwise appears desirable, a program in Japan.

2. Country Guidelines

a. Indonesia—The FY 1956 program should be designed to strengthen internal security and political stability. Levels of aid proposed should reflect careful judgment as to the likelihood of political acceptance and the absorptive capacity of the Indonesian economy. Consideration might be given to the possibility of two alternative levels of aid, the higher dependent upon political developments, including participation in regional arrangements noted in 1C above. (See also III–D–4 above.)

b. Thailand—The program submitted should be based upon a stated force goal assumption. A program of economic development, if submitted, should be governed in part by the absorptive capacity of the Thai economy. In general it will be U.S. policy to support an increase in force goals (as supplied by the Department of Defense) and intensify economic development, and to provide such assistance as may be necessary for such purpose.

c. Philippines—In preparation of the FY 1956 defense support program for the Philippines, assumptions should be made as to the expanded force goals (as supplied by the Department of Defense) which will be supported by MDAP, Japanese reparations, trade factors affecting balance of payments and the absorptive capacity of the economy for capital investment from both private and public sources. In general, it will be U.S. policy to support an increase in force goals and intensify economic development in the Philippines and to provide such assistance as may be necessary for such purpose.

d. Korea—Continued assistance on a major scale will be necessary to finance reconstruction, support of ROK forces, contributions to UNKRA and, if necessary, direct relief. It will be assumed that Korea will not be a participant in a regional economic program. All assistance for Korea in Fiscal Year 1955, military assistance included, will be financed under the Mutual Defense Assistance Program.

e. Formosa—Barring (i) large-scale, overt hostilities requiring a much greater Free Chinese defense effort or (ii) changes in the missions, levels or composition of Formosan forces of a character imposing significantly larger burdens on the Formosan economy, all forms of economic aid in FY 1956 will not be in excess of the approximate level of aid requested of Congress for Fiscal Year 1955.

f. Japan—Facing a rapidly worsening economic situation, some part of which may perhaps be dealt with in FY 1955 under P.L. 480, Japan may require substantial external non-military assistance in FY 1956, but such assistance, if required, may take any of a variety of forms, including aid under P.L. 480, triangular arrangements, etc. In developing any program for such assistance it can be assumed that new OSP contracts placed in Japan in FY 1956 will be at least approximately $50 million. It will also be assumed, in developing any MDAP program for Japan, that there may be some small increases in FY 1956 and 1957 in the amount of resources devoted by the Japanese Government to its military forces (above the reduced amount so devoted this year), but that there will not, by Fiscal Year 1957, in the absence of substantial defense support, be any substantial increase in force levels above those currently approved by the Japanese Government.

g. Indochina—It will be assumed that French forces will continue to provide an important element of defense for the three Associated States during Fiscal Year 1956. It will also be assumed that the Associated States, and particularly Vietnam, will be unable to devote more, and probably will be able to devote only substantially less, resources to defense than during Fiscal Year 1954. It will further be assumed that U.S. fiscal considerations will in no wise limit the forms or amounts of assistance which will be extended in or for Indochina in FY 1956 where the extension of such assistance alone, or in conjunction with other measures, offers any reasonable prospect of furthering U.S. objectives of maintaining Laos, Cambodia, and Southern Vietnam as free nations and of winning the 1956 elections. In developing any direct forces component of the program for this area, the FOA Regional Director for the Far East will work with the FOA Regional Director for Europe and the latter will, under the coordination of the former, be responsible for preparing any portion of the direct forces component relating to assistance for the support of French Union Forces. The two regional directors should work out with one another an exact division of work responsibility and work load in this regard.

3. Planning Figures for Far East

In view of current uncertainties, no new obligational authority planning figure for any or all forms of non-military aid for the Far Eastern region is given for Fiscal Year 1956.

D. Latin America

1. Regional Guidelines

a. Economic development—In furtherance of United States objectives to promote orderly economic development in Latin America, and subject to the results of the Rio Conference, the United States should be prepared to assure the financing of all sound economic projects either through private capital, IBRD or Ex-Im loans in that order of preference, or, failing these sources, through development assistance, exclusively, unless an extraordinary contrary justification can be adduced, in the form of loans. (See IV–B above.)

b. Technical cooperation—Aid levels may provide for moderate increases proportional to the expanding economic development programmed by the Latin American countries.

c. Military assistance—The program will have essentially the same objectives as in Fiscal Year 1955.

d. Other aid—Other assistance, on a loan and/or a grant basis, might be authorized to meet any emergency economic situation in Latin America which was as grave as that which confronted Bolivia in Fiscal Year 1954.

2. Planning Figure for Latin America

The new obligational authority planning figure for all forms of non-military aid for the Latin American area for Fiscal Year 1956 is $50 million.

Harold E. Stassen

1. On Oct. 5, 1954, Nolting circulated a memorandum to various bureaus and regional offices in the Department of State in which he noted that this report “was informally coordinated with this Department through S/MSA at the time of first draft” but that the pressure of a “rigid deadline” set by the Bureau of the Budget had precluded careful review and comment by the Department of State. For this reason, he continued, “I have reserved this Department’s position with FOA and any serious objections arising from the more thorough review of the current paper will be taken into account.” He concluded with the assurance that he was “ready to receive and to see that careful consideration is given to any comment suggesting major changes in the current paper.” (Memorandum by Nolting to Assistant Secretary of State for Economic Affairs Waugh; U/MSA files, lot 56 D 551, “MSP FY 1956”)
2. Not further identified in Department of State files.
3. Not printed.