6. Note From the Acting Executive Secretary of the National Security Council (Gleason) to Members of the Council1

NSC 5525


[Page 16]


  • A. NSC 5501, NSC 54342
  • B. NSC 5509,3NSC 5430,4NSC 5407,5NSC 161,6NSC 142,7 and NSC 1358
  • C. Memo for NSC from Executive Secretary, subject, “Status and Timing of Current U.S. Programs for National Security,” dated August 9, 19519

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.

Each part is classified separately and may be handled separately in accordance with its highest security classification. Each copy of NSC 5525 as a whole, however, should be handled with special security precautions and limited in circulation on a need-to-know basis.

S. Everett Gleason10


[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 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:

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.
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.

Maintaining Military Strength, Mutuality of Interest, and Common Purpose. The reporting period witnessed a continuation of trends already established in the past:
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.
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.
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.
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.
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.
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.
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.
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.
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

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:
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.
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.
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.
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]
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.
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.
Accept the fact that forces above this level can only be supported, if they are to be supported at all, by US assistance.
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:


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.


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.”]

  1. Source: Department of State, S/SNSC Files: Lot 63 D 351, NSC 5525 Series. Top Secret. NSC 5525 is a collection of reports prepared by various executive agencies. Part 2, printed here, was prepared by the Department of Defense and the International Cooperation Administration. Part 6, prepared by USIA, is printed in vol. IX, p. 529. Further documentation is in Department of State, S/SNSC Files: Lot 63 D 351, 5525 Series.
  2. NSC 5434/1, “Procedures for Periodic Review of Military Assistance Programs,” October 18, 1954, approved by the President, October 16, 1954, is printed in Foreign Relations, 1952–1954, vol. I, Part 1, p. 786.
  3. NSC 5509, “Status of U.S. Programs for National Security as of December 31, 1954,” is in Department of State, S/SNSC Files: Lot 63 D 351.
  4. NSC 5430, “Status of U.S. Programs for National Security as of June 30, 1954,” is ibid. Extracts are printed in Foreign Relations, 1952–1954, vol. II, Part 2, p. 1777.
  5. NSC 5407, “Status of U.S. Programs for National Security as of December 31, 1953,” is summarized in an editorial note, Ibid., Part 1, p. 633.
  6. NSC 161, “Status of U.S. Programs for National Security as of June 30, 1953,” is in Department of State, S/SNSC Files: Lot 63 D 351.
  7. NSC 142, “Status of U.S. Programs for National Security as of December 31, 1952,” is ibid.
  8. NSC 135, “Status of U.S. Programs for National Security as of June 30, 1952,” is summarized in an editorial note, Foreign Relations, 1952–1954, vol. II, Part 1, p. 56.
  9. Not printed. (Department of State, S/SNSC Files: Lot 61 D 167)
  10. Printed from a copy that bears this typed signature.
  11. Actual obligations. [Footnote in the source text.]
  12. Excludes $172.0 million DFS programmed from non-Mutual Security appropriations of Department of Defense. [Footnote in the source text.]
  13. Excludes $189.6 million DFS programmed from non-Mutual Security appropriations of Department of Defense. [Footnote in the source text.]
  14. Excludes $100 million President’s Fund for Asian Economic Development not distributed between the Far East and South Asia. [Footnote in the source text.]
  15. The European Payments Union was established by the nations of Western Europe September 19, 1950, to facilitate currency convertibility and reduce trade barriers between its members.
  16. Not found in Department of State files.
  17. Actual obligations. [Footnote in the source text.]
  18. Includes $16.7 million Palestine Refugee Program. [Footnote in the source text.]
  19. Includes $62 million Palestine Refugee Program. [Footnote in the source text.]
  20. Excludes $100 million President’s Fund for Asian Economic Development, not distributed between the Far East and South Asia. [Footnote in the source text.]
  21. Covered by deobligations from Burma program. [Footnote in the source text.]