Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 1

740.5/8–453

No. 279
Memorandum by Laurence C. Vass of the Office of European Regional Affairs to the Director of the Office (Moore)

secret

Washington , August 4, 1953.

Subject:

• Programming the FY 55 MSP

A couple of weeks ago Livie¹ suggested that RA start thinking about the future of MSP, in the light of the prophetic debate in the Senate, where its staunchest friends called for its end this year. The object of our exercise is to obtain enough additional aid to complete the restoration of a viable economic base and some further defensive build-up in NATO. The difficulty is to accomplish this without perpetuating the symbol of a “give-away” program—MSA—and without requiring appropriations of a magnitude bearing an uncomfortable resemblance to the deficit.

The Senate debate makes one thing clear: a separate MSP bill providing for a separate aid administration is the target of the attack. The voiced opposition was to the continuation of an aid administration, not the fact of aid. Furthermore, the attack was on ECA type aid, not honest-to-god hardware, wherever procured. Senators Mansfield, Monroney and George indicated during the debate that they were prepared to support further military aid, if wrapped up in the right color of package.

Many strange bedfellows are currently found under the MSP blanket. We have funds both for bases in Spain and the Children’s Fund. Few Congressmen would label Spanish bases in return for economic aid a “give-away”. At the other extreme few in the Administration would make much of an argument to show a direct tie between funds for children and our own security. One solution to our problem is to create two distinct packages with contrasting ribbon colors and mailed from different post offices.

On the one hand we have a clear cut, homogeneous program which can be sold as being a dollars and cents investment in our own security—end-items to the deserving, who are allied, who may be expected to fight, and whose geography is important to our security. On the other we have the humanitarian, benevolent, and uniquely American offer of improvement of the lot of the depressed, the backward and the oppressed who chose the side of freedom. This is the alternative to armament offered by the President in his April speech; this is the long range solution to the weakness of the still free world. A program to meet this challenge is necessarily long range, unselfish, and above all, an instrument of psychological warfare. Each has its merits; each can be defended; put them together and they spell “give-away”.

As Livie was the first to say, military aid ideologically should be treated as part of our national defense budget. Otherwise we are being inconsistent. Why should Defense be paying for Korean and UN troops while MSP pays the bill for Indochina? Why is one a “give-away” and the other a direct drain, without accountability, on our defense budget? In war, there is no question that we would be desperately anxious to equip our fighting allies, without worrying about the “aid” label. Therefore, military aid should be defended as part of national defense, and perhaps be appropriated as part of our own defense budget. If a program cannot be tied directly to our own security and the free world’s defensive strength, it should be put in the other package—a proudly labelled “give-away” program, justified as such, by a different sponsor, and for a different purpose.

While military aid should be defended as part of national defense, there are a number of man-sized bugs in the tempting proposal to make it a direct part of the Defense Department appropriation. These are:

1. Congressional leaders like a “package” bill for practical reasons. It consolidates commitments; it means only one leadership fight; it diffuses and neutralizes opposition.

2. It would require authorizing legislation for the Defense Department. This would be in the province of the Armed Services Committees, but clearly would also require sponsorship by Foreign Relations and Foreign Affairs. The certain wrangle and ensuing delays in Committee would not be helpful.

3. It would require legislation to limit Defense’s authority to program and allocate these funds. There are risks in relying upon what Congress will do for us in this field, and this somewhat undermines our ideological approach, unless perhaps the powers (which could be delegated) are lodged in the Commander-in-Chief.

4. It makes the “give-away” program a sitting duck, with Congress loaded with high velocity, budget balancing shells.

So much for ideology. How much do we have to have next year for military aid, bearing in mind that the scenario calls for a decline each year, and neglecting any built in “padding” against cuts? On the other hand, we must accept the hard fact that the value of military aid may be accepted by the Congress, but its cost in an election year could easily postpone its purchase. There must be ways of reducing both the real and apparent costs. This is certainly true if we follow the logic of our presentation.

Once it’s all one budget, what’s the logic of storing in this country 12 or 24 months’ war reserves for all our reserve forces and perhaps 6 to 12 months’ reserve in Europe for our 7 divisions there when the absence of reserves for our allies probably would mean that we would abandon our reserves and run for the Pyrenees when the balloon goes up? If war comes, we will be desperately trying to get reserves to our erstwhile allies in the hope we can keep them fighting on our side. Why not get authorization now for planning to make these reserves available in case of war? We have accepted a commitment to deploy 17 divisions in Europe by M + 180. Couldn’t we wipe out the defeatism of Van Vredenburch and many others by assuring the common availability of reserves in case of war, if they will provide the necessary LOC, storage, etc. in peacetime, the U.S. maintaining title meanwhile? By such a deal, we could wipe off the books many billions of the gap caused by reserves which has everyone so scared. If, as I suspect, Defense is actually stockpiling several times as much as our own rates require for 90 days of combat, surely we can then count on Gruenther to bring the higher SHAPE rates down to the point where the reserve requirements of the central front could be wiped off the monetary books, without the appropriation of any more money.

Again, if it’s all for our defense, why should our allies be eligible for bargain basement rates only on “excess” stocks? Why not reserve stocks, since their reserves are our reserves. Up to now, Defense has been rooking little MSP, to use a polite phrase. Matériel which the services have no intention of using, short of a catastrophic emergency, is conveniently rehabilitated for MSP but charged at the full cost of a new item which then goes to the service.

A possible answer to this is to liberalize the “excess” policy. Under the original plan, we had hoped that MDAP equipment could come as a by-product of the mobilization base policy. To the extent that we must produce more than required by our own peacetime attrition, to that extent we can deliver without charge to our allies. While this rosy dream has paled, it is still true that we may exceed our reasonable requirements in many items, because of miscalculation or obsolescence. The M–47 tank may be a case in point. In any event, a decision by the President to lower our own reserve levels here, or to declare MDAP models obsolescent for U.S. use, could make it possible to obtain a couple of billion dollars worth of perfectly usable equipment for our allies at about a $400,000,000 price tag. In an election year, that sounds good.

Suppose we could do this. How little could we ask of Congress in order to obtain the necessary hardware to meet the time phased needs of our allies? First, there is annual attrition. At a guess, this would cost no more than a half a billion, counting on a liberal interpretation of “excess”. More important is OSP, so far as reassurance to our allies is concerned. FY 55 money won’t affect their dollar balance of payments position until ’56 and ’57. Except as an indicator of the Administration’s intention to cope with the longer range problems of the dollar gap, maintenance costs, and the creation of a European maintenance base, the OSP program could well be sacrificed on the altar of the election year budget. But because of these effects, it is essential that the Defense budget contain an OSP section, complete with Buy American exemptions, etc. Given the $2 billion in orders already placed, and the billion we should place out of FY 54 funds, I would venture a guess that only $½ billion need be requested next year for new OSP.

The balance of the aid program for NATO would consist of funds for a few new support units, war reserves, and whatever requirement develops for Germany as a result of ratification prospects. It is improbable that new funds will be needed to match the likely German build-up. On the contrary, it may be possible to offset this year’s cut in part by reprogramming the deliveries already scheduled this year for German forces. At a guess, we might ask for another half billion of new money for build-up. The total request would then be $1½ billion—less than half of the total the Bureau of the Budget planners are currently conceding for ’55 MSP military aid for all titles.

If it is decided to include military aid in the Defense appropriation, the decision as to allocation among countries, and OSP, should be left to the President. Under such a setup, the necessary coordinating machinery to insure that adequate allocations from past as well as new money are obtained can be created by Executive Order. Presumably, Congress will wish to lay down certain criteria for eligibility but I would hope that there would be no breakdown by titles. Preferably, there would be no ceiling on the amount of OSP out of the total. It would be highly desirable to provide for transferability between the Service sections and the International section of the Defense bill. There are few better gestures we could make in the politically sensitive area of “burden sharing” than such an indication of flexibility in the U.S. contribution. Furthermore, providing permanent authority for defense to dispense military aid would be a helpful offset to our inability to appropriate beyond one year.

An unavoidable consequence of this approach is the abandonment of transferability between military and economic aid. Nothing has caused more suspicion of our “defense support” rationalization. Anyone can see that we’ve obtained one for one or less for our transfers to economic aid, despite MSA’s glorified presentation charts. Of course, France must remain a case for special OSP. What might be most salable is a straight military aid allocation for the Associated States, accompanied by a presentation indicating our intention of procuring the necessary half of the matériel in France.

Given the driblets of economic aid we have available to hand out this year, our remaining clients will be either weaned or starved by next year. I personally favor starting the weaning process immediately, so that they will savour the green pastures of self-reliance and OSP next year.

On purely economic grounds, I understand that only U.K., Turkey and Yugoslavia really need economic aid this year. U.K. prospects depend upon the success of her own policies, the yet to be formulated U.S. trade policy, and OSP. She might as well be told now (she already knows) that there is no prospect of direct dollar aid for next year. By using the McClellan Amendment² instead of defense financing this year, we can smooth the way for the inevitable.

Given the present change in the East–West climate, I personally consider that it would be politically unfortunate in NATO to continue “defense support” aid for Yugoslavia if we end it for our democratic allies, as I think we should. I find it hard to believe that recent events have not demonstrated that the threat from the satellites is one Yugoslavia can be expected to handle, if we continue military aid. On the other hand, we could hardly pin our case on the threat that the withholding of $30 or $40 million of economic aid would swing Tito into the Russian orbit. In any event, if they really need economic aid next year, we should make every effort to meet their minimum needs through surplus provisions or French type OSP rather than perpetuate the label of “defense support”.

Turkey presents an apparently insolvable problem. As long as we sponsor her overly ambitious military program we are dragged into paying her overdrafts at the EPU bank. If all I hear from Embassy Ankara is true, they will fight even harder without aid, allies, shoes or any other impedimenta of the modern army. I would be inclined to stop at what a liberalized “common use” policy under military aid will provide, and let the JCS come up with a force basis consistent with Turkey’s shorter term capabilities.

If, therefore, we can foresee the end of “defense support” for NATO countries next year we should administer this year’s funds in such a way as to point the program in this direction. Unquestionably there will be heavy pressures next year to use an aid program as a vehicle to dispose of surpluses. Since we wish to discontinue “defense support” I would strongly urge the necessary grants for Europe under the McClellan Amendment rather than defense support. I would accompany this with a “tough” policy in granting any residual defense support aid. It would be very nice to be able to transfer some part of the available $220 million to build up the OSP funds. A “reverse” transfer would be a dramatic indication of the shape of the future.

The “foreign aid” bill which would emerge as a companion piece to the defense appropriation should contain no programs linked to military effort. It would contain our various multilateral programs, such as UNKRA and Palestine Relief, our unilateral programs for CARE, migrants, etc., and our long range permanent TCA. To a considerable extent such programs can be financed through counterpart resulting from the gift of surplus agricultural commodities. The relatively large India–Pakistan economic development program is such an example. The program should be designed in this way and we should exploit to the full the extra appeal of such an approach.

I conclude on a happy note. Such a permanent program should certainly be sponsored by and administered by State. Since we can also play the role as claimant for our allies in the military allocation machinery, the continuation of the unpopular “aid” administration need not be requested.

1. Livingston T. Merchant, Assistant Secretary of State for European Affairs.
2. The amendment to the 1953 Mutual Security legislation introduced by Senator John D. McClellan (D.–Ark.) provided for additional U.S. financing of the program through a revolving currency plan which permitted recipient governments to exchange their currencies for U.S. dollars in order to then purchase U.S. farm surpluses. The United States, in turn, would use the foreign currencies received to finance offshore procurement.