E files, lot 70 D 467

No. 263
Current Economic Developments1


[No. 361]

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US Mutual Security Legislation for 1952

The Mutual Security Act of 1952 now on the President’s desk for signature authorizes a total of $6,447,730,750 in foreign aid for appropriation under the Mutual Security Program to free nations resisting Communist aggression beginning July 1. Of the total authorization, $4,598,424,500 is to be used for military assistance and $1,805,288,500 for economic and technical assistance. Authorization is also included totaling $44,017,750 for UN technical assistance, emigration of surplus manpower from Europe, ocean freight on relief packages, and the UN International Children’s Emergency Fund. The total authorization falls short $1,468,750,250 of the $7.9 billion requested by President Truman and it is possible that there will be a further cut in the appropriation legislation.

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Funds Authorized. Under the new Act, a total of $4,698,047,750 is authorized for Europe for military and defense support purposes. Military and technical assistance in the amount of $741,430,500 is authorized for the Near East and Africa, including funds for Arab and Israeli refugees. Asia and the Pacific have been authorized $886,220,000 for military, economic and technical assistance, and $78,014,750 is provided for Latin American military and technical assistance. As in previous legislation, there is an administrative provision permitting a transfer of funds up to 10% for the purpose [Page 484] for which they were originally intended, at the discretion of the President, between geographic areas.

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

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

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

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

Counterpart. A provision was modified which would have seriously hampered the flexibility of use of counterpart funds. The proposed provision, which the Executive Branch strongly opposed, [Page 485] would, except as otherwise provided, limit use of counterpart funds only for projects of military assistance or defense support. The conferees recognized the desirability of the use of more counterpart funds in the defense effort, but felt that this provision might prevent the use of counterpart under other acts, and for such purposes as US procurement of strategic materials. Furthermore, the conferees felt there was the possibility that under this provision counterpart could not be used in Germany, Austria and Trieste to carry out programs essential to the security of the US but not strictly within the limitation of this provision. The modification limits the programs for which new funds authorized in the 1952 Act would be available except as other uses of counterpart are specifically authorized by law.

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

On the positive side, the new legislation provides for setting aside counterpart funds for programs furthering free private enterprise objectives (Benton Amendment). Dollar aid in the amount of $100,000,000 is to be furnished under agreements which will assure that the counterpart derived therefrom shall be used for this purpose.4 The counterpart funds are to be used to establish revolving funds which shall be available for making loans and carrying out such programs. In this connection, funds not to exceed $2,500,000 may be transferred to the Organization for European Economic Cooperation for the encouragement of free enterprise objectives. In addition, limited amounts of counterpart funds acquired in connection with the foreign-aid program may be used for the educational exchange funds authorized by the Fulbright Act.

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

Ocean Freight Subsidies. The authority of the US to pay freight charges on shipments of relief supplies overseas is not in the 1952 [Page 486] Act. Similar authority is granted in the case of shipments by voluntary non-profit relief agencies (registered and approved by the Advisory Committee on Foreign Aid) to any country eligible for economic or technical assistance under Mutual Security Act. The Department will assume the responsibility for administering this program for fiscal year 1953.

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

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

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

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

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  1. Current Economic Developments was prepared as a classified twice-monthly publication by the Bureau of Economic Affairs (subsequently the Bureau of Economic and Business Affairs) of the Department of State for internal use as a background and policy guidance report for policy level officers of the United States Government serving at home and abroad. It was instituted in 1945 and terminated in October 1974.
  2. The sections not printed deal with administrative provisions of the Mutual Security legislation for 1952, Brazilian loan projects, Israeli Government announcement of financial matters, a report on the recent International Cotton Advisory Committee meeting at Rome, and extension of U.S.-Mexican Migrant Labor Agreements.
  3. The parenthetical figure of 20.9% is crossed out in the source text at this point, and a handwritten notation in the margin reads: “should be 32.6. TCA says Conf report is wrong.”
  4. This provision was inserted in the Mutual Security legislation by an amendment offered by Representative Blair Moody (D.–Mich.). (Memorandum by Gordon E. Reckford, June 2, 1952; MSA files, lot W–3127, “Congressional Testimony”)