Foreign Relations of the United States, 1952–1954, Western Europe and Canada, Volume VI, Part 2

A/MS files, lot 54 D 291, “MAAC”

No. 502
Minutes of the Mutual Assistance Advisory Committee Meeting, Tuesday, February 12, 1952, 11 a.m.¹

secret
MAAC M–10

Washington, February 20, 1952.

Present:

• Office of the Director for Mutual Security

  • Mr. Gordon (Chairman)
  • Mr. Dondero
  • Mr. Murphy
  • Mr. Wolf

• Department of State

  • Mr. Merchant
  • Mr. Cowan
  • Mr. Ferguson
  • Mr. Stinebower
  • Mr. Vass

• Department of Defense

  • General Ruffner
  • Colonel Hains
  • Commander Hoffman

• Mutual Security Agency

  • Mr. Cleveland
  • Mr. Gordon
  • Mr. Lippincott

• Department of the Treasury

  • Mr. Willis
  • Mr. Arnold
  • Mr. Curtis

• Bureau of the Budget

  • Mr. Nelson
  • Mr. Hirschberg

• Office of Defense Mobilization

  • Mr. Rock

• Secretariat

  • Mr. Christensen

Problem of Aid to France

1. The Chairman reported that the agenda had been changed because of the necessity of giving urgent consideration to the French problem. He called attention to cable 4924, February 11 [12] from Paris,² containing recommendations on what should be done to meet the French requirements, and cable 4925, February 11 [12],³ setting forth details of the French budget. He also called attention to the fact that 4925 had been approved by Messrs. Harriman, Draper, Pauley, Labouisse and Richards. He then asked for comments on the two telegrams.

2. Mr. Vass noted that it was not clear whether the proposed French budget covered the second slice of infrastructure; but, if so, then it did not seem that the contribution for the third slice was large enough. Mr. Gordon said that provisions for infrastructure might be included in the Air Force portion of the budget, but said that clarification on this point would be requested. Mr. Vass said that there was also a question as to whether the French would need as many planes for the number of squadrons now being planned.

Mr. Willis asked what the meaning of the decrease in the rate of the Defense buildup would be. The Chairman replied that it was his assumption that it would mean a smaller ratio of active to reserve forces. Colonel Hains said that it would be necessary to let SHAPE and the JCS decide what forces were best for the French.

4. The Chairman pointed out that Embassy telegram 4924 was in effect a proposal for the redistribution of the way in which the $600 million commitment to the French should be made available, noting that the need on which the $600 million commitment is based still exists. He requested that the members comment on this proposal. Mr. Cleveland noted that the French defense program is actually larger than we had expected. In effect it represents a French contribution of approximately 1225 billion francs. Previously it had not been anticipated that the French contribution would exceed a gross of 1100 billion francs. The Chairman pointed out that the TCC had recommended a French contribution of no less than 1100 billion francs but that our staff in Paris has agreed that we should seek a French program of no less than 14 billion francs. He asked that the members consider means available to achieving a program of that magnitude. He referred to the recommendations contained in paragraphs 3 and 5 of the telegram from Paris (4924) and indicated that this was the general approach that he had discussed with Mr. Nash and General Olmsted on February 9, and at that time they had been opposed to such a solution. General Ruffner said that consideration had been given to this proposal in the light of the two cables from Paris and that one of the most important questions was that of the source of the funds for financing the contracts. Moreover, there are still no recommendations from General Eisenhower or the Joint Chiefs of Staff on the effect of having the French come up short on their divisions. In addition, there is no decision as to whether transfers should be made from the Italian and Belgium programs to meet this proposed plan. He reported that it had not been possible to discuss these cables with Messrs. Lovett and Foster prior to the meeting but that it had been Mr. Nash’s view that this problem would probably be decided during the time that the top officials are in Europe. He said that the money to finance this proposal from Paris would have to come from somewhere else and that no one had as yet had an opportunity to pass judgment on the advisability of transferring additional end-item funds. Moreover, Secretary Lovett is insistent that whenever money is transferred that an equivalent contribution to the Defense effort result. The Chairman said that this was not a question of additional transfers from the military end-item funds but rather a suggestion by the Embassy that the money programmed for offshore procurement or for end-items for France be utilized in France to procure similar equipment under procedures less restrictive than those presently in effect for offshore procurement. Colonel Hains said that nonetheless a transfer would probably mean a cutback in forces elsewhere and as yet we have no indication as to whether General Eisenhower or the JCS will agree to this. Mr. Gordon said that he was aware of this but in view of the large sums of money now in the pipeline, it would simply mean making the pipeline shorter and making up this sum in future years. He said that he was not sure that a $200 million reduction would reduce the forces in any country in the near future although eventually it will have some effect.

5. The Committee then discussed the problem of estimating the size of US military expenditures in France and the question of how much of these expenditures actually accrue to the French Government. Mr. Cleveland pointed out that it was the assumption of the French at the time the $600 million commitment was made that a sum in excess of this amount would actually have to be made in order for an amount of that magnitude to accrue to the Government. The Chairman pointed out that if it turns out that the French actually get $600 million without any extraordinary action on our part, there will be no need for worry; but that unless the French are guilty of gross negligence in seeing that US defense expenditures accrue for the most part to the Government, we will be bound to see that they actually obtain the $600 million.

6. The Chairman then raised the question of whether it would not be possible to meet a part of our commitment by purchasing in France some portion of their military program under standards less restictive than those established for present offshore procurement. Col. Hains said that it might be possible to use the funds transferred from military end-items in that way but that present funds would have to be used under existing procedures in the standard way. Mr. Gordon said that under the plan we would select those contracts that we wanted to take over from the French Government. Mr. Ferguson asked if this was a blanket turning over of funds to the French Government. The Chairman replied that if it was, then he was opposed to it. Mr. Vass said that the plan involved new procurement and not the picking up of existing French contracts.

7. Mr. Merchant asked whether it might be possible to meet some of the requirement by the pre-purchasing of local currency in France. Mr. Willis said that in the discussions that had been held on pre-purchasing it had been decided that there would be many disadvantages in such a system. At best pre-purchasing merely postpones the problem since it really constitutes an interest-free advance which had to be met at a later time. It is also considered as an undesirable practice because of the possibility of exchange rate changes and the Congressional justification problem. He concluded that the idea of pre-purchasing had been dropped as one to be considered only in connection with a much more serious problem.

8. The Chairman said that perhaps the essential factor in the discussion was that offshore procurement had to date been too slow. This has arisen primarily because the directives thus far have covered only those things included in US end-item programs and which accord to US specifications. However, if the restrictions on OSP procedures were loosened, it would still be possible to procure equipment which would meet NATO standards. He concluded that if the French are unable to finance some of the desirable items in their planned production program, it would be far better for the US to finance them now at the sacrifice of items which would not be produced in the US until 1953 or 1954 since we will gain more by maintaining good short run production.

9. The Chairman then made the following recommendations and action assignments:

(1) MSA is to develop a specific proposal on the amount of funds presently programmed for other Title I countries which could be diverted to meet the French requirement. It was suggested that perhaps as much as $60 million could be obtained in this manner.

(2) Since the considerations which prompted the $600 million commitment to France are still valid, the authority to transfer military end-item funds to economic aid should be utilized to provide an additional amount of money. The legal advisers and legislative technicians will have to be consulted for their judgment as to the amount of funds now remaining that are available for transfer and the advisability of carrying out such a transfer.

(3) An examination will be made to see what steps can be taken to expand the procurement program for Indochina in substitution for French expenditures on French production for such purposes.

(4) An examination will be made as to whether OSP arrangements can be developed which would make some of the contemplated French production of hardware eligible for procurement. This procurement would be handled through the French Goverment with the standards established as close as possible to those presently in effect for OSP.

1. The Mutual Assistance Advisory Committee (MAAC) was an interagency group created in November 1951 as a successor to the International Security Affairs Committee (ISAC). Records of this Committee, including documents, reports, and action summaries are in ECA–MSA–FOA files, lot W–13, “MAAC files”.
2. Document 499.
3. Document 500.