795B.5/3–452

Memorandum by the Assistant Secretary of State for Economic Affairs (Thorp) to the Acting Secretary of State 1

secret

Subject:

  • Reply to Defense Department’s proposals of March 4, 19522 regarding reimbursement of the United States for logistical support furnished foreign troops in Korea

Background:

Since September 1950 the U.S. has dealt with questions regarding reimbursement for logistical support provided foreign troops in Korea according to a directive of the Secretary of Defense, concurred in by State and Treasury and approved by the President. In general the following [Page 191] procedure has been followed: (1) Before the U.S. accepts an offer of troops, the offering government is required to acknowledge an obligation to reimburse the U.S. for any logistical support furnished, the terms to be negotiated at a later time. (2) Some time after the troops are in Korea, the U.S. initiates negotiations with the objective of obtaining an agreement, if possible, for regular dollar payments on a current basis. Alternative terms of settlement can be considered if the preferred terms are not obtainable. Decisions on the application of the directive to individual cases are made by State, Defense, and Treasury through informal consultation.

Defense now proposes that this procedure be changed by making the “cash-on-delivery” provisions of Section 408(e) of the Mutual Defense Assistance Act3 the foundation of U.S. reimbursement policy. The U.S. would seek to obtain agreement on handling reimbursement under Section 408(e) before accepting any new offers of troops and would also seek agreement on such terms wherever reimbursement negotiations with respect to forces now in Korea have not yet been concluded. This proposal, it is believed, would not only have effects inimical to the primary U.S. objective of obtaining additional offers of troops for Korea but would put the U.S. in a difficult position in negotiating for reimbursement. Furthermore, contrary to the Defense view, the Department’s legal analysis indicates that the Congress did not intend Korean reimbursement matters to be dealt with under Section 408(e).

Defense also proposes that the National Security Council be responsible for financial decisions in this field. It is not believed that this would be an appropriate job for the Council, although it is recognized that more formal arrangements than now exist in the Executive Branch might be desirable.

Defense proposes, lastly, that State take over from Defense the primary responsibility for handling negotiations with foreign governments on reimbursement. This proposal would give to State a responsibility that Defense desired in 1950 and that probably should not have been assigned outside of the State Department in the first instance.

Recommendation:

That you sign the attached letter to Secretary Lovett (Tab A).4

  1. This memorandum was drafted by Mortimer Goldstein of the Monetary Affairs Staff of the Office of Financial and Development Policy and cleared by Jack C. Corbett and Alexander M. Rosenson of that same office. It was then cleared by Ruth Bacon of FE, Ward P. Allen of EUR, Charles R. Burrows of ARA, Harry M. Howard of NEA, Joseph J. Sisco of UNA, Walter N. Walmsley of C, and Alfred G. Vigderman of L/E.
  2. Not printed (795B.5/3–452).
  3. Reference is to the Mutual Defense Assistance Act of 1949 (P.L. 81–329), approved Oct. 6, 1949; for its text, see United States Statutes at Large, vol. 63, part 1, pp. 715–721.
  4. The letter to Lovett, not printed, was signed and a copy was attached to the source text. Also attached to the source text were copies of an undated, unsigned memorandum on section 408(e) of the Mutual Defense Assistance Act and a copy of the directive of the Secretary of Defense of Sept. 1, 1950; neither is printed.