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

U/MSA files, lot 56 D 551, “Secty’s Memos of Conv.”

Memorandum by the Director of Foreign Operations (Stassen) to the Secretary of State¹

secret

[Paris,] October 21, 1954.

Foreign Operations

I. Broad Objective:

Maximum cohesion of those countries of the world not controlled by the Communists; improvement of military strength, internal stability, individual freedom, and living standards of these nations both absolute and relative to the Communist area; reduce world Communist power; facilitate a world climate for U.S. economic growth, military security, and internal freedom; all to be attained without war.

II. Problems:

A. The burden of maintaining a substantial modern military force is greater than the less developed countries can bear without an extreme lowering of living standards which could only be accomplished through ruthless totalitarian rule.

B. The centralized politically controlled Soviet economic power can attractively reward or seriously punish any nation except for the few most powerful in an economic sense.

C. Neutralist sentiment and fear of war has a divisive influence upon many nations of the free world.

D. Credit availability in the free world is inadequate to the economic development requirements.

E. In the less developed countries administrative leadership and skill in financial and economic affairs are also lacking.

F. The worldwide Communist apparatus has units within nearly every country engaged in disruptive and subversive tactics which multiply the security, economic, and political difficulties.

G. Indications are that the threat to the U.S. and the free world from the Soviet Communist area will be of many years’ duration.

H. Public and Congressional sentiment in the U.S. make it difficult to obtain the trade legislation and the assistance funds required by the world situation.

III. Course of Action:

A. Advise, and carry on a comprehensive effort to convince, the U.S. public and the Congress that an extraordinary program of assistance will continue to be necessary to implement U.S. foreign policy and to safeguard U.S. vital interests and it should not be viewed on a short-term basis.

B. Establish and maintain Regional Economic Cooperation groupings and Regional Credit institutions so as to maximize the use of indigenous economic strength, minimize the requirement for U.S. dollars, facilitate the education of local administrative leadership, assist in maintaining cohesion among free nations, and counter Soviet economic warfare.

C. Carefully assess the financial load and economic consequences of military force goals in cooperating countries and avoid levels of forces which cannot be sustained with acceptable internal and U.S. burdens, relying principally on the military strength of the U.S., U.K., and other advanced industrialized countries to deter external aggression and to fight the first stages of a war if forced upon us.

D. Assist countries, where needed, in developing elite internal police forces, specifically designed and highly trained, to cope with internal disorder, guerilla action, and insurrection, and to break up and render ineffective the internal Communist apparatus.

E. Accelerate the training of administrative and financial leadership in less developed countries, utilizing U.S. universities in joint programs with indigenous educational institutions.

F. Study the possibility of creating an additional device for maintaining cohesion among the free nations through a special U.S. tariff which can be added by the President to the products of any country which does not cooperate in multilaterally agreed trade rules versus the Communist area designed to restrict the Soviet war potential. The special anti-dumping tariffs are a precedent for such action. Access to the U.S. market is the most potent economic lever.

IV. Organization to Carry out the Courses of Action:

A. There are a number of alternative forms of organization which can be effectively used to carry out these courses of action. Each has certain plus and minus factors.

1. The present form of organization placed on a more durable basis by Congressional action.

2. An organization within the Department of Defense, such as a Department of Mutual Security, reporting to the Secretary of Defense.

3. An organization within the State Department, such as a Foreign Operations Administration, reporting to the Secretary of State.

4. An organization within the Treasury, such as a Foreign Finance Corporation, reporting to the Secretary of the Treasury.

B. It is very important that the activities be not split up into many pieces and scattered through a number of Departments. An entity somewhere in the government charged with the operational responsibility of fitting together comprehensive U.S. programs with reference to countries and regions is essential to success in implementing U.S. foreign policy. The same entity must have in its direct administration the personnel required to bring about prompt execution of approved country programs.

The recent complete renegotiation of East-West trade controls,² the comprehensive emergency program in Iran, the Viet Nam refugee and relief action, the combined steps leading to the spectacular improvement in European currencies and approach to sterling convertibility, the Pakistan wheat and flood programs, the Bolivian emergency supply action, the East German food packages—as examples—would have been extremely difficult to successfully conduct if a combined operating entity had not existed somewhere in the government or if that entity did not have direct jurisdiction over personnel with the skills and experience required.

C. The continuation of the present form of organization is considered most desirable because it is functioning successfully. The Secretary of State’s emphasis upon the State Department as a policy organization is beginning to show significant results from intelligent policy formation, and the operations entity is responsive and effective in carrying out policy without involving State in operational details.

Congressional opposition might be difficult to overcome, but the record of accumulating success of the present method, if presented with a strong recommendation of the President and the Secretary of State, would presumably be accepted by the Congressional leaders of both parties.

D. The second alternative would be the establishment within the Department of Defense of a Department of Mutual Security. This is considered as second in desirability because the Department of Defense is essentially an operational department and additional operational activities would fit readily. Furthermore, the inter-relationships of the military, police, economic, East-West trade, and development factors are extensive and could be better resolved in the Department of Defense than elsewhere. The necessary appropriations could be obtained easier in this form. A charge of “militarism” in the program and a danger of excess orientation toward military objectives as distinguished from national foreign policy objectives would be minus factors. Both could be overcome by the actual conduct of the program.

E. The third alternative would be the establishment of an entity such as a Foreign Operations Administration in the State Department. This would have the advantage of closer control by the Secretary of State and would be conducive to broader understanding of the fact that the program was designed to implement the foreign policy of the United States. Disadvantages would be increased difficulty in obtaining necessary appropriations, involvement of State in operational details, and clouding of the distinct policy formation role of State for the entire government.

F. The fourth alternative would be the establishment of an entity in Treasury. This would have the advantage of bringing the creditor role of the U.S. into better focus and would emphasize the fact that the total program is in the U.S. national interest. It would result in increased understanding in Treasury of the nature of the program and its accomplishments. It would involve a rather complete shift to loans rather than grants, including loans for military equipment. The latter would assist in holding down the arms requests of the less developed countries. This alternative would be closer to the U.K. system with the Chancellor of the Exchequer’s broad responsibilities.³

1. A typed notation on the source text reads: “HES gave to the Secretary in Paris.” A covering memorandum from Roderic O’Connor to Nolting, dated Oct. 25, 1954, reads: “Fritz—Stassen gave this to the Secretary in Paris. Will you see that proper people see it, particularly Mr. Hoover.” Secretary Dulles and Stassen were at Paris to attend a one-day session of the North Atlantic Council, Oct. 23, 1954.

   Secretary Dulles and Stassen held a number of conversations both at Washington and in Europe during this time. On Oct. 18, at Stassen’s initiative, the two men had discussed the ultimate disposition of the Foreign Operations Administration. A memorandum of their conversation reads in part as follows: “The Secretary stated that this was an exceedingly complex matter. The only firm feeling which he had was that he would prefer not to have FOA become a part of the State Department. Nevertheless, if it was decided that such should be the policy, he would naturally follow out whatever agreement might be made. Although it was agreed that this matter should receive early consideration as soon as he and Governor Stassen returned from Europe, no commitments as to procedure or plans were made by the Secretary.” (Memorandum of conversation, by Under Secretary Hoover, Oct. 18, 1954, 103 FOA/10–1854) Stassen and Dulles conducted a wide-ranging discussion at the American Embassy in Paris on Oct. 22 during the course of which, presumably, Stassen handed Dulles this memorandum. However, the objectives and fate of the Foreign Operations Administration were not discussed at this meeting. (Memorandum of conversation, by Dulles, Oct. 23, 1954, U/MSA files, lot 56 D 551, “Secty’s Memos of Conv.”)

2. For documentation on the renegotiation of East-West trade controls, see pp. 817 ff.
3. The only immediate reaction to the Stassen memorandum from within the Department of State found in Department files was a memorandum from Assistant Secretary of State for Personnel and Administration Isaac W. Carpenter to Charles E. Saltzman, Under Secretary of State for Administration, dated Oct. 28, 1954, in which Carpenter asserted that the “most logical resting place for FOA’s integration or liquidation would be through the Department of State” and inquired “whether or not any planning assignment has been given to any department.” (A/MS files, lot 54 D 291, “Foreign Operations Administration”)