7. Memorandum From the Director of the Office of International Financial and Development Affairs (Corbett) to the Deputy Under Secretary of State for Economic Affairs (Prochnow)1


  • Inter-Agency Committee for the Coordination of Military and Economic Aid Programs
[Page 26]

The Operations Coordinating Board has established an interagency committee, with you as Chairman, to examine our military and economic aid programs and to make appropriate recommendations. This committee was established at the instigation of Mr. Hoover. The other members are Mr. Gordon Gray, Assistant Secretary of Defense for International Security Affairs; Mr. Ohly, Deputy Director for Programs of the International Cooperation Administration; and Mr. Overby, Assistant Secretary of the Treasury. It is expected that the Budget Bureau will be represented in an observer capacity, and the Central Intelligence Agency in an advisory capacity.

The exact terms of reference for this committee have not yet been finally approved by the Operations Coordinating Board. Final approval has been delayed until your return. The latest draft of the terms of reference is attached.2

The problem of properly coordinating our military and economic aid program has been recognized for some time. Various attempts have been made to deal with the problem but with limited success. We find that frequently commitments on military programs are made with inadequate study of the impact on the economy of the country concerned and in turn on its implications for United States economic assistance. In recent months, problems have arisen in connection with the Turkish and Pakistan programs, requiring substantial additional amounts of U.S. economic assistance in order to attain our military and economic objectives in those countries. It is likely that similar problems for a number of other countries are just over the horizon, if not closer. We believe that the emergence of these serious situations and the possibility of more to come is the basic reason for taking a new look with an OCB committee.

As you can well imagine, the job is not a small one. In fact, it is a very large and difficult one. The factors to be considered include as precise a statement as possible of our military and economic objectives in a given country, the ability and willingness of the country to support programs consistent with these objectives, the translation of the above factors into the amount of military and economic aid required, the length of time this must be continued, and finally, the problem of whether the United States is prepared to finance the amounts required or whether some change in objectives is preferable.

[Page 27]

The problem can be narrowed to some degree, because it is most acute in the economically underdeveloped countries where we are encouraging rather substantial defense efforts. At least initially, it is felt that the Latin American countries can be set aside, inasmuch as we do not have very large military or economic programs in that area. Likewise, in the NATO countries of Western Europe, there is no longer any economic aid, the countries have become increasingly strong economically, and the military program is pretty well stabilized. It is in the following countries that the problem is most acute:

Pakistan Greece Korea Viet-Nam Philippines
Turkey Spain Formosa Laos
Iran Japan Thailand Cambodia

Perhaps the best way for the committee to proceed would be to establish inter-agency working groups for each country which the committee feels should be examined. It is suggested that each working group should have as its chairman a representative of the appropriate regional bureau of the State Department and as members a representative from the E area, a representative from Defense, ICA and Treasury. Other agencies might attend when they could be helpful. These working groups would then develop facts, make analyses and reach conclusions. Your committee, in turn, would consider the situation in each case and make appropriate recommendations to the Operations Coordinating Board.

An inter-agency working group already exists for Pakistan and has recently made a report, which has been referred to your committee. It would seem that after the general procedural questions are out of the way, this Pakistan report would become the first item of substantive business for your committee. We are now examining this report with the purpose of determining whether the pertinent facts and issues are presented in such a way that your committee could take effective action. Our preliminary view is that it needs to be more explicit concerning our military objectives and commitments. Inasmuch as this is perhaps the principal basic jumping off place for further consideration and analysis, this would seem to be a fatal weakness. However, we would like to make a more considered and detailed report on this in the near future. An inter-agency working group is also in existence for Turkey. It had a somewhat different objective, and although it also made a report several months ago, it was made on the premise that the military program was a fixed quantity and not to be questioned. Therefore, it is likely that this report will need to be reconsidered before being submitted to your committee.

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As soon as the Operations Coordinating Board makes the final determination on the terms of reference for your committee, you will probably want to call a meeting to discuss methods of proceeding and perhaps also to consider the report of the working group on Pakistan. Mr. Waugh earlier called a meeting of the committee, but at that time the representatives of the other agencies were not familiar with the action of the Operations Coordinating Board in setting up the committee, so that no formal inter-agency work under the auspices of the committee has been started.

  1. Source: Department of State, OFD Files: Lot 59 D 62, Interdepartmental Committee—Aid programs, 1956. Secret. Drafted by E. A. Ross and sent through and initialed by Kalijarvi.
  2. Not printed. The final terms of reference is printed as Document 12.