This over-all report on the status of national security programs on June 30,
1955, is transmitted for the information of the National Security Council.
Pursuant to Presidential direction, the several parts and annexes have been
prepared by the responsible departments and agencies with the assistance of
the NSC Special Staff. These status reports
have been prepared semi-annually; previous ones were issued as NSC 5509, NSC
5430, NSC 5407, NSC 161, NSC 142, and NSC 135. Beginning with this report, they will
be prepared annually.
Enclosed herewith are a Table of Contents, a complete set of tabs, Parts 5,
6, and 7. The remaining parts of NSC 5525
will be transmitted upon their receipt.
[Enclosure]
[Here follow a table of contents listing the eight parts comprising
NSC 5525, and a foreword and table
of contents to Part 2.]
[Page 17]
PART 2—STATUS OF THE MUTUAL SECURITY PROGRAM AS OF JUNE 30,
1955
Part 1. Mutual Security Programs in Support of Military
Forces
I. General Summary
A. Definition and Scope of
Defense-supporting Programs
Defense-supporting economic assistance is being furnished or is
contemplated to carefully selected and strategically located free world
countries in a wide arc which virtually surrounds the Soviet Bloc. These
countries are united with the US in a common cause: to resist Communist
penetration or domination of the free world. US assistance is designed
to render their joint defensive strength more effective, and to help
them achieve the economic strength which will, in the long run, enable
them to maintain without further aid the forces which the US believes to
be required.
Each of these countries faces three main demands upon its resources:
defense, current consumption, and investment—the latter to provide a
growing base for increasing productive capacity to meet the future needs
of defense, consumption needs of expanding population, and tangible
increase in living standards. Few free world countries—outside of Europe
and North America—possess indigenous resources in sufficient volume to
maintain a tolerable standard of living for their people and at the same
time commit the human and capital resources necessary for adequate
defense and investment. They are, in many cases, virtually forced to
devote top priority to consumption and investment. US security interests
dictate that they make adequate provision for these needs, not only to
sustain the necessary will, strength, and stability to face the Soviet
threat and to provide constructive and attractive alternatives to
Communism, but also, through economic development generally, to reduce
the need for future US assistance. Meantime, US assistance provides the
marginal resources required to bridge the gap between those military
forces which could be maintained by them without aid and those which the
countries and the US agree to be necessary, without impairing economic
development.
MSP economic assistance to countries in
which the US is helping to develop or maintain specific levels of
military strength (via MDAP) has in the
past taken one or both of the following forms:
- 1.
- Direct Forces Support. Programs within
this classification provide to military, para-military,
security, or police forces, direct support which is additional
to the regular military assistance (MDAP) which those forces are also receiving. These
programs provide the soft
[Page 18]
goods (i.e., items other than military hardware) which are
essential to the maintenance of a military force. Such items are
delivered or rendered directly to friendly forces for their
exclusive use or control and do not ordinarily enter into the
local economy of the recipient country prior to delivery. The
purpose of this program is military; any economic benefits which
may accrue to the country are incidental.
- 2.
- Defense Support. Programs within this
classification are designed to support the military efforts of
certain countries which receive MDAP assistance. Such support involves the
provision of general supplemental resources which a recipient
country requires if its economy is to support a defense program
of the size which US policy regards as essential and if, at the
same time, it is to maintain or attain the minimum level of
economic strength or growth which is consistent with the US
national interest. The primary policy reason for defense support
programs is the attainment of military objectives, rather than
the extension of any economic benefits which may also accrue to
the recipient nation. However, where a defense support program
is required in a country for this policy reason, other
non-military assistance which is essential from the standpoint
of US national interest may also be grouped under the heading of
“defense support”. This practice avoids an unrealistic
fragmentation into several artificial components of a totally
integrated assistance program.
Direct forces support differs from defense support in that the former
consists of articles or services which can be traced in a physical sense
from a point of import into the country directly to the soldier who uses
it; the latter has its military impact as a country’s economy is
rendered capable of sustaining the desired enlargement of its defense
burden.
It should be noted that the definition of direct forces support is
somewhat more restricted than that which held in the past. It excludes
any supplies which are to be sold within a country to finance the local
currency costs of military projects (as, for example, military
construction) for which the direct forces support program is furnishing
imported goods. Program figures for defense support and direct forces
support for FY 1955 and prior years, as
set forth in the several country tables, have been adjusted to show
those portions of the program which would be included under the new
FY 1956 functional definitions.
It should also be noted that direct forces support for FY 1956 will no longer be administered by
ICA. Since the dividing line between
MDAP and direct forces support is
imprecise, they have been considered as two phases of the military
program, and will be administered by the Department of Defense. For
reporting convenience,
[Page 19]
however,
both direct forces support and defense support programs are covered in
the ICA report through June 30,
1955.
Parenthetically, as a direct result of this transfer, complications have
arisen in the administration of military support programs. These
complications stem from the close relationship between defense support
and direct forces support programs. In many instances, a defense support
program, administered by ICA, actually
provides the local currency component for a direct forces support
project, the dollars for which have been appropriated to the Department
of Defense. The problem is further complicated by the fact that there
are competing needs for this local currency. While ICA and the Department of Defense are
endeavoring to resolve these problems, it would appear to be appropriate
to review the decision to transfer to the Department of Defense the
responsibility for administration of dollars in the direct forces
support program.
Aid of the above types has been provided in FY 1954, FY 1955, and is
tentatively programmed for FY 1956, by
areas as follows:
|
FY 195411 |
FY 1955 |
FY 1956 |
|
(in millions of dollars) |
| Europe |
445.1 |
187.2 |
89.5 |
| Near East and South Asia |
182.7 |
255.2 |
224.2 |
| Far East |
1,129.8 |
980.7 |
998.7 |
|
1,757.612 |
1,423.113 |
1,312.414 |
The trend indicated by the foregoing figures has been evident for a
number of years: a progressive decline in assistance—and in the
proportion of such assistance—to Europe, while the proportion of funds
for the Near and Far East has risen. This reflects a considerable
measure of success in meeting both military and economic targets in
Europe; of the Western European countries, only Spain and Yugoslavia are
scheduled to receive defense support or direct forces support in 1956.
On the other hand, the US has shown an increasing measure of concern
with the weakness of the free world’s military position in the Near and
Far East.
The distribution and magnitude of defense support and direct forces
support generally follows the strategic and political aspects of
[Page 20]
US foreign policy. The annex to
this report shows the amount of defense-supporting aid, by country, for
FY 1955 and FY 1956.
B. Achievement of Objectives
The nature of the country programs differs widely from region to region,
and even within regions—in accordance with the specific problems which
each program is designed to meet. For this reason, an integrated
appraisal of the status of the ICA
world-wide program is difficult. Nevertheless, a number of clearly
defined regional conclusions may be drawn, and in
some instances world-wide judgments may be justified.
- 1.
- Maintaining Military Strength, Mutuality of
Interest, and Common Purpose. The reporting period
witnessed a continuation of trends already established in the past:
- a.
- Despite some slippage from force goals, NATO continues to attempt to
achieve its multilaterally agreed targets. However, there is
some question as to the effectiveness of these forces,
largely as a result of the failure of the NATO countries to provide
adequate monetary support. The levelling-off in Western
European defense expenditures has almost certainly been
influenced by a similar levelling in US expenditures.
General
Gruenther’s concern over the low level of
military effectiveness of the NATO forces—which can probably only be
corrected by increased country defense expenditures and
analogous increases in US aid—has resulted in the calling of
a special meeting of the NATO defense ministers in October 1955 to
consider this serious problem.
- b.
- Modest progress has been made toward a cohesive Middle
Eastern defense arrangement, with the establishment of a
series of regional defense alliances linking Yugoslavia,
Greece, Turkey, Iraq, and Pakistan. The Northern Tier as a
defensive alliance is moving beyond the paper stage.
However, there are serious limiting factors: economic
weakness in Pakistan and economic over-commitment in Turkey
give cause for concern; Iran’s defense mission has yet to be
established; and Greek-Turkish relations are strained as a
result of the Cyprus issue. The whole concept of a Northern
Tier defense appears to lack clear formulation both as to
the political objectives which might be achieved and the
possibilities of developing a truly effective military force
in the area.
- c.
- Military strength in the Far East continues to rise. The
US has concluded mutual defense treaties with Japan, Korea,
and Formosa; Cambodia signed a military defense agreement
with the US in May; defense capabilities in the Philippines
and Thailand have risen. It is apparent, however, that the
military forces of most countries in the Far East are
disproportionate to their present or potential ability to
maintain such forces, although not necessarily in relation
to the potential threat. It should be noted that Formosa and
Korea have military objectives which go beyond those which
the US supports.
- 2.
- Economic Growth. The existence of
conditions in the free world which the Communists can exploit makes
it difficult for the free
[Page 21]
world to overcome divisions, fears, and weaknesses. With US
assistance, the free world has made progress in meeting the basic
needs and aspirations of its people. Here, again, the situation
differs from region to region.
- a.
- Europe has progressed to the point where economic aid has
been discontinued for FY 1956
except for Spain, possibly Yugoslavia, and the Joint Control
Areas (Austria, West Germany, West Berlin, and Trieste) and
limited instances where technical exchange can be an
effective instrument of US policy. But Europe is still
falling behind both the US and the Soviet Union in its rate
of growth.
- b.
- The favorable trends which had held in Greece and Turkey
have been reversed. Both are feeling the pressure of
overambitious economic expansion and outsize military
forces. The Iranian economy is on the upturn as oil revenues
are again available. Development progress in Pakistan has
been limited; the future outlook is uncertain.
- c.
- Despite the advances which have been made over the past
several years, the general low level of economic development
in the area constitutes a serious weakness in the free
world’s economic fabric—particularly serious in view of its
proximity to the comparison area of Red China. The Far East
is suffering from inability to export its rice surpluses in
the face of expanding production. Japan’s trade deficit
declined sharply, although the economy continues to depend
upon extraordinary dollar receipts.
- 3.
- Progress Toward Convertibility. Encouraging
steps were taken by European countries toward limited currency
convertibility. The favorable economic climate of the first half of
1955—somewhat checked by unfavorable balance of payments
developments in the UK and the
Scandinavian countries—produced an increased volume of intra-and
extra-European trade, and a continued rise in dollar reserves. The
OEEC Council of Ministers in
January set a new target of 90 percent for intra-European trade
liberalization; in June the ministers renewed the European Payments
Union (EPU)15 and provided for settlement of FY 1956 deficits and surpluses on a 75
percent hard-currency and 25 percent credit basis, instead of the
previous 50–50 ratio. EPU will be
continued until member countries accounting for at least half of
total intra-European trade establish limited convertibility of their
currencies with the dollar. A new European Fund for extending loans,
a new system of multilateral settlements, and modification of the
Liberalization Code will be instituted upon the establishment of
limited convertibility and the termination of EPU. However, it is clear that while
progress toward
[Page 22]
convertibility will continue, actual attainment of a form of
convertibility is still some time off.
- 4.
- New Capital Investment. While figures on
actual private investment in the first six months of 1955 are not
yet available, there was evidence of private as well as government
efforts to stimulate such investments. Three US investment companies
were in the process of formation, with the announced purpose of
mobilizing US capital for investment abroad. The ICA investment guarantee program to
encourage American capital to move into overseas investments was
intensified; in the first half of 1955, total value of guarantees
written increased from $48.6 million to $91.4 million, a rise of 88
percent. New guarantees covered for the first time American private
investments in Formosa and the Philippines; other guarantees issued
in the six months protect investments in France, Italy, the
Netherlands, Turkey, and the UK.
C. Major Issues
- 1.
- The previous MSP status report
(NSC 5509) listed two issues of
major and fundamental importance which affect virtually all
defense-supporting economic aid programs in the free world and
particularly in the underdeveloped countries of Asia, which now
receive the bulk of defense-supporting funds:
- a.
- Whether the primary emphasis from the standpoint of US
interests should be placed (1) on the attainment or
maintenance of internal stability through economic
development, improved living standards, and social progress,
with the necessary corollary of smaller indigenous forces
backed up by US power; or (2) on creating substantially
larger indigenous forces, with proportionately heavier
internal economic burden for defense and a lower rate of
economic and social progress. This issue is particularly
critical for countries such as Pakistan, Korea, Cambodia,
Laos, and Vietnam.
- b.
- Determination of specific military missions for the
defense forces of the country to which military and
supporting economic aid is being supplied. Clarification of
the role of military forces in countries such as Pakistan,
Iran, Spain, Japan, Thailand, Formosa, and several others is
essential to accurate determination of program requirements
and goals for support of such forces.
- 2.
- In essence, resolution of these issues requires that judgment be
made of the value, to the US, of a military force for a given
mission in relation to its cost to the country’s development and to
the US in terms of the US investment in that force.
- 3.
- In the scale of ultimate US objectives, the economic strength of
the free world bulks as large as its military strength. To assure
the steady growth of its economic strength, the following steps are
proposed:
[Page 23]
- a.
- Determine the costs to each aid-receiving country of
raising and maintaining forces of the size and composition
which are considered necessary to carry out military
missions which are important to US security.
- b.
- Through inter-agency and inter-country negotiations,
determine the level and type of forces which such country
can maintain without US assistance and which, over the next
decade or so, the economy of such country can be developed
to support.
- c.
- Accept the fact that forces above this level can only be
supported, if they are to be supported at all, by US
assistance.
- d.
- Through State, Defense, and ICA negotiation, reach clear agreement with
each country on the level and types of forces which that
country can be developed to maintain and on the
responsibilities which the US and the country will assume in
advancing the country’s economic development to a level
adequate to maintain such forces. Forces and equipment above
this level would be supported entirely by the US, to avert
the adverse effects (which would not be in the US interest)
upon the economy of the country which would result from
maintenance of the larger forces.
[Here follow Section II, “Western Europe;” Section III, “Near East, South
Asia, and Africa;” and Section IV, “Far East.”]
Part 2. Other Mutual Security Programs
(Submitted in accordance with Memorandum for the Secretary of State from
the Executive Secretary of the NSC,
dated July 1, 195516)
I. General Summary
This section contains the status report on those segments of the Mutual
Security Program which are not linked to the provision of military
end-item aid under MDAP and are, for
that reason, not included in the special report on ICA programs supporting defense—Part 1 of
this status report. The purpose of these non-defense-related programs is
to advance the economic development of underdeveloped areas in the
interests of US national security, to promote local incentives and
catalyze self-help. They are also used on occasion to cope with special
problems such as financial and budgetary crises not directly related to
defense, natural catastrophes, special refugee situations and similar
problems.
Such assistance is in many cases provided on the basis of willingness and
ability of countries to strengthen and defend their independence against
Communist expansion rather than on formal alignment with the US, but is
also provided to countries in which the development of economic strength
and political stability generally is in the US interest.
[Page 24]
Assistance programs for these countries generally include one or both of
the following forms:
- a.
-
Technical Cooperation
Technical cooperation programs may be defined as programs for
the sharing of our knowledge, experience, techniques and
skills with the peoples of the less developed areas of the
world for the purpose of helping them to further their
economic development and increase their standard of living.
These programs emphasize, and consist largely of advice,
teaching, training and the exchange of information, and they
do not include the provision of supplies and equipment
beyond that which is required for effective teaching and
demonstration purposes. Moreover, except for these last
mentioned purposes, they do not supply the capital which may
often, if not always, be indispensable to the conversion of
the knowledge, skills, techniques and experience which are
thus provided into economic wealth, improved standards of
living and other tangible benefits among the peoples of the
recipient countries.
- b.
-
Development Assistance
This term describes assistance given primarily to promote
economic development or otherwise to create or maintain
economic or political stability. In most nations for which
it is programmed, development assistance will supplement
programs of technical cooperation by providing supplies,
commodities or funds. Usually this type of assistance is
required to make possible, or to accelerate, projects or
activities which basic US interest requires to be undertaken
and which, in the absence of such additional assistance,
would not be undertaken, or, if undertaken, would not be
carried out at the rate required by US foreign policy.
MSP funds in FY 1956 for development
assistance will be used to help accelerate present rates of
economic growth in the underdeveloped countries where US
national security requirements for such growth cannot be met
by local and foreign private capital or from financing from
the IBRD, Export-Import
Bank or similar sources.
Development assistance differs from defense support in that the former is
immediately directed toward goals which are not primarily military in
character, whereas the latter has as its first aim, and controlling
justification, the attainment of military objectives. With minor
exceptions (e.g., Latin America) development assistance is limited to
countries which do not receive military assistance.
Areas receiving assistance under development assistance and technical
cooperation programs include Israel and the Arab States in the Near
East; Liberia, Libya, Ethiopia in Africa; India, Nepal and Afghanistan
in South Asia; Indonesia in the Far East; the Latin American republics
(except Argentina); and the overseas territories of European powers in
Africa and the Western Hemisphere. While Ethiopia, Iraq and certain
Latin American countries do in fact receive military assistance, the
economic aid programs (principally technical cooperation) are addressed
wholly to economic development and social progress rather than to
support of the defense effort. Technical
[Page 25]
cooperation programs, however, are in effect in a
number of countries receiving defense support.
Aid of the foregoing types has been provided in FY 1954 and FY 1955, and
will be provided in FY 1956, by areas as
follows:
(in millions of dollars)
|
FY 195417 |
FY 1955 |
FY 1956 |
| Near East, Africa and South Asia |
226.1 |
239.618 |
242.019
21 |
| Far East |
10.020 |
28.3 |
38.0 |
| Latin America |
27.1 |
47.9 |
67.0 |
| Total |
263.2 |
315.8 |
347.0 |
The annex to this report shows the amounts of developmental aid of these
types for each country, as finally programmed for FY 1955 and as proposed for FY 1956.
[Here follow Section II, “Near East, South Asia, and Africa;” Section
III, “Far East;” Section IV, “Latin America;” and Annex I, “FY 1955 and FY 1956 non–MDA
Programs.”]
