Foreign Relations of the United States, 1955–1957, Western Europe and Canada, Volume XXVII

55. National Security Council Report¹

NSC 5721/1

Washington, October 19, 1957.

STATEMENT OF U.S. POLICY ON FRANCE

General Considerations

The Status of France as a Power

1. Despite the diminution of its international power and prestige, France plays a key role in continental Western Europe. Significant developments in France have reverberations in the other Western European states. French support of measures affecting Europe is a requisite for their success; French hostility or indifference to such measures is likely to ensure their failure.

2. France is now passing through a difficult period. However, despite the frequent turnover in cabinets, French politics has demonstrated a basic continuity, indeed a static quality. Despite the current financial crisis, the French economy rests on ample and balanced resources. While recovering from the catastrophic defeat and occupation of World War II, France has been engaged in exhausting military efforts, first in Indochina and then in North Africa. France’s basic postwar problem has been to work out a new relationship with its overseas territories and adjust to the status of a continential nation, without provoking internal convulsions. Certain weaknesses and shortcomings within the French social, economic and political system must be overcome before France can assume fully the important and constructive role which it is capable of fulfilling in Europe.

The Political Structure

3. The French internal political scene is largely the expression of historical factors, which explain the opposition to a strong executive, the plethora of parties, etc. In spite of coalition cabinets with short life expectancy, the continuity of governmental administration is maintained by a highly competent civil service. Despite frequent cabinet changes, French foreign policies since the war have remained fairly constant on most basic issues, such as East-West relations, NATO, European integration, etc., and have generally supported U.S. policies.

4. The system obviously has disadvantages: it discourages difficult decisions and inhibits long-range planning; it is vulnerable to special interest pressures; and it enjoys little popular esteem. It is even possible that the present constitutional system might go under in the face of grave foreign or domestic crises. There is no basis, however, for expecting that in the foreseeable future measures will be taken through normal constitutional processes to remedy present governmental instability by a significant strengthening of the executive or by substantially diminishing the multiplicity of parties. Should extra-constitutional changes be precipitated by a deterioration in the French situation and thereby bring nationalistic and authoritarian elements into power, the resulting regime would probably be more difficult for the United States to deal with and could well pose serious problems for the NATO alliance.

5. The existence of a strong Communist Party is a continuing danger. Its large membership (roughly 300,000, with a hard core of approximately 50,000) and larger following of voters (about five million, or 25% of the votes cast) are difficult to explain in the framework of French intellectual qualities and relatively high living standards. Some of the reasons include association of the Communist Party in the popular mind with the historic aims and aspirations of the French Revolution and the interests of labor; the emergence from the resistance period of a powerful and at least outwardly respectable Communist organization; the continuity of Party activity since 1921; and the strong position of the Party in labor unions, which provides it a legal base for mass political activity. Since about one-fourth of the members of the National Assembly are Communists, any government hoping to obtain a working majority without Communist support must obtain two-thirds of the non-Communist vote. This results in the endless reshuffling of coalition arrangements. Communist strength and potential effectiveness have greatly declined from their immediate post-war peak and the Party has been further isolated and shaken by the Hungarian uprising and repression. Nonetheless, there is no reason to expect that it will significantly decline as a force in French politics in the foreseeable future. However, it may become a “static” party subject to very gradual erosion, and its long-term influence in the trade union field may decline. In the event of general hostilities, the hardcore Communists are capable of extensive sabotage, espionage and para-military action.

6. The Algerian rebellion is France’s most acute problem today. It imperils the political and financial stability of France and French domestic and foreign policies. The presence of over a million persons of European descent permanently residing in Algeria, and the resulting political and emotional factors, greatly complicate the solution of the problem. Despite the probability that the French Government should preserve the present system almost indefinitely by military force, the eventual emergence of an Algerian state which has been granted self-government or independence appears inevitable. The crucial question for France now is whether and how it can accommodate to, and assist in, this development. The longer France opposes it, the worse the final outcome will be for French interests throughout North Africa and the greater the threat to French internal stability. The discovery of large petroleum deposits in the Sahara has complicated the Algerian problem, and, in an effort to maintain their control over the Sahara, the French have recently even further separated its administration from that of Algeria.

7. A small but growing minority in French parliamentary and public opinion is gradually moving toward acceptance of a separate Algerian state as a step toward complete Algerian independence. The further growth of such sentiments will depend upon military developments in Algeria and their effects in France. A continued stalemate in Algeria would probably contribute to the growth of such sentiments, while a drastic change in the military situation in favor of one side or the other (which does not appear likely at present) would have the opposite effect. Increasing popular frustrations may erupt in the form of violent outbreaks both in France and Algeria by or against the Moslem communities. Such violence is unlikely to endanger seriously the present constitutional system unless provoked by a sudden and far-reaching change in French policy. Even then, the Fourth Republic would probably not be overthrown, but the chances of a bid for power by General De Gaulle or a similar figure would be increased substantially.

8. French policy toward its African territories south of the Sahara has recently moved toward providing a large measure of autonomy which may lead to eventual independence. If the French can keep up with African demands and yet control developments in French territories south of the Sahara during the transition stage, there are prospects for a mutually beneficial, long-term, close relationship between France and these areas. The continuation of the Algerian conflict, however, will obviously have an adverse effect on the development of French policy in all overseas territories. Resolution of the conflict by the achievement of Algerian independence would augment pressures in its African territories south of the Sahara for more drastic concessions if not outright independence.

Economic Structure

9. France is basically one of the strongest and most prosperous countries in Europe. France has a balanced economy in the sense that it is a leading manufacturing nation with abundant industrial raw materials as well as agricultural resources. With the injection of a critical margin of external resources,² France has recovered from the effects of the war in record time, and expanded and modernized its economy to a remarkable degree. Today France has the greatest abundance in its history, a high and rising standard of living, and an expanding economy. At the same time France would benefit from basic reforms, including measures to place the fiscal system on a sounder basis, free the economy from foreign trade and exchange controls and government subsidies, and remove tariff, quota and other restrictions protecting French industry and agriculture from competition. The implementation of the European Common Market Treaty may eventually contribute to these reforms. The increasing population and the current development of nuclear energy will contribute to France’s future economic potential.

10. However, the French are now experiencing a financial crisis. Government accounts are characterized by an annual deficit of roughly 20 percent of total expenditures. The campaign in Algeria was responsible to the extent of about a billion dollars for raising the overall budget deficit in 1956 to the equivalent of about $2.8 billion at the pre-August exchange rate of 350 francs per dollar. Since last year, however, the rise in expenditures has been largely attributable to increased government spending for purposes other than operations in Algeria. The boom in France has been engendered not only by high levels of Government expenditure but also by high levels of investment and extensive credit to business—indicating the basic confidence of the French in their own economic future. Inflationary pressures have been dealt with in the past eighteen months largely through massive imports and continuously expanding production (notwithstanding the blockade of Suez), at the expense of the readily available French dollar reserves, which have been seriously reduced.³ France in addition has borrowed and spent half of its International Monetary Fund quota and has withdrawn part of the gold reserves of the Bank of France.

11. Realizing that continuation of the present situation would soon lead to external insolvency, the French have taken some corrective steps. Substantial cuts have been made in projected budgetary expenditures. Nevertheless, the over-all budget deficits for 1957 and 1958, after allowing for economy measures now contemplated, will be nearly as large as the very substantial budget deficit in 1956. The August 1957 changes in the French exchange rate system provided some correction of the very considerable over-valuation of the franc, but appear to have left the franc still over-valued relative to foreign currencies. To bring about a decisive and early improvement in the economic situation, France would need to undertake further budget economies, apply additional credit restraints, impose further stringencies on consumption and investment, and make further adjustments in its foreign exchange rate. It is highly doubtful, however, whether any French Government could take the required actions and remain in power. Even the limited actions taken in recent months have encountered serious opposition in the parliament.

France’s Military Role and Capability

12. From a military point of view, the United States is primarily interested in ensuring continued and effective French participation in Western defense, particularly within the NATO framework. Because of its strategic location, France is vital to the North Atlantic Alliance and to NATO military planning for the defense of Europe. Use of French port facilities, highways, railroads, and airfields is important to U.S. armed forces committed to NATO. In addition, through base rights agreements, the United States is now operating seven main airbases in France. Approximately 44,000 U.S. military personnel are stationed in France at present.

13. Current Department of Defense-approved major combat force objectives for France are:

Army:	14 Divisions
Navy:	198 Vessels (including 3 aircraft carriers and their planes)
	84 Maritime Patrol Aircraft
	25 Helicopters
Air Force:	57 Squadrons

The United States believes that these French forces, in conjunction with other allied forces, would constitute a balanced force capable of contributing to U.S. security and to effective implementation of the strategic concept for the defense of the NATO area.

14. The current strengths and composition of the French Armed Forces, which are based on French over-all national objectives including the NATO commitment, are as follows:

Army:	795,000 (22 divisions of various types which include heavy contingents of conscripts and reserves called up to deal with the Algerian crisis)
Navy:	86,300 (231 vessels in active service and 771 planes)
Air Force:	165,700 (59 Squadrons: total 3,935 aircraft, including 1,689 in tactical units)
National Gendarmérie:	82,000 (17 Regiments and 15 Battalions)

Of its total army divisions, France, with NATO approval, committed 14 and additionally earmarked three for NATO. The recent inactivation of two divisions in continental Europe may result in a reduction in divisions committed or earmarked to NATO from 17 to 15. It is estimated that at the present time only two of the three divisions remaining in Europe would be capable of effectively opposing aggression during the first month of a war. The over-all combat readiness of the French Air Force suffers from the diversion of experienced personnel to units operating in Algeria. Naval air squadrons are proficient in anti-submarine warfare, and the combat capability of the French Navy is relatively good in this respect.

15. The diversion to Algeria of French forces committed to NATO shield forces has weakened NATO defenses to the extent that SACEUR’s emergency defense plans have been seriously disrupted.⁴ Altogether, France has about 400,000 military personnel in Algeria, composed about equally of personnel of the NATO and national command contingents. Until the Algerian conflict is resolved, France will be unable to make the important contribution to NATO, both in forces and logistic reserves, which can be reasonably expected.⁵ The resolution of the Algerian conflict, replacement of attrited and obsolescent matériel and provision of modern and advanced weapons systems, could provide the basis for an effective fighting force available for NATO defense.

16. France looks upon the maintenance of U.S. troops in Europe as vital to the NATO concept and as an assurance against the re-emergence of German domination. Therefore, should the United States decide (because of unforeseen political developments in Europe, the terms of a disarmament agreement, or personnel cuts in total U.S. forces) to reduce the number or personnel strength of its combat units now stationed in Europe, special care would be required with regard to the timing and extent of such withdrawals in an attempt to mitigate the psychological effects thereof in France.

17. From 1950 through June 30, 1957, the United States programmed approximately $3.8 billion in military assistance for France, of which over 98% was delivered by May 31, 1957. (This aid includes some direct and indirect military assistance furnished Metropolitan France in connection with the Indochina conflict, but does not include approximately $1 billion of matériel and services delivered to the Associated States under the Indochina program.) France has also received assistance through the facilities assistance program. In addition, there has been a large offshore procurement program in France, with obligations as of June 30, 1957 totaling over $1.0 billion and expenditures reaching 96% of this amount. France has also benefited from the Mutual Weapons Development Program, NATO infrastructure activities, and dollar reimbursable aid. NATO calculates that France itself spent almost $24 billion for defense during CYs 1949–1956. Its military expenditures in 1956, including expenditures for Algeria, amounted to $4.2 billion, or 8.0% of its GNP, and approximately $4.3 billion (about 7.6% of the GNP) has been budgeted for military expenditures during the fiscal year ending December 1957.

18. a. Despite the magnitude of U.S. aid, the substantial rate of defense spending, and a large production of military matériel, France has not provided necessary replacements for either its own or previously-furnished MAP equipment and ammunition. In order to reconstitute French forces in continental Europe on a basis which would enable them to fulfill their NATO missions, this attrited and obsolescent equipment, particularly general-purpose vehicles, would have to be replaced, and an advanced weapons program undertaken. At this time, it is not possible to estimate with assurance the eventual total costs of French improvement and maintenance requirements in conventional weapons or of French advanced weapons needs (and thus to provide a reliable basis for determining U.S. aid policy related thereto) because:

(1) Current information is unavailable on the extent of equipment diversions to Algeria, the rate of attrition, and the amounts of equipment which may eventually be transferred back to the continent and the timing of such transfer.

(2) Any realistic assessment of France’s future requirements will also depend upon an adequate survey of the obsolescence problem, the full extent of which can be determined only after French forces are restored to Europe and a decision made on the size, pattern, organization and equipment of French forces to be committed to or earmarked for NATO in the future.

b. In the winter of 1957 France requested U.S. assistance in the form of grant aid and offshore procurement for a portion of its requirements by submitting lists of conventional and advanced weapons, which were subsequently costed by the U.S. at about $1.4 billion.⁶ A preliminary review indicated that, exclusive of the advanced weapons portion of this request, a little more than half consisted of matériel requirements related to U.S.-approved French NATO forces. The U.S. reply of March 13, 1957,⁷ stated that current aid to France was not contemplated on the scale proposed but that the French request would be considered in developing future military assistance programs.

c. France is industrially capable of producing a great part of its defense needs. If there were a substantial decrease in Algerian requirements, and if the level of its present defense budget were subsequently maintained, France could finance a substantial part of its total replacement, modernization and advanced weapons requirements. The extent to which France could do so when operations in Algeria cease cannot now be foreseen; being heavily dependent upon the extent of the decrease in total expenditures for Algeria, the success of measures to deal with the current financial problem, whether France decides to produce nuclear weapons and especially upon the extent to which, largely for political reasons, the present level of the French budget is reduced.

19. Although it would impose a very heavy financial burden which France presently could ill afford, France has the capability to produce nuclear weapons in the next few years. There are, moreover, very considerable pressures, both from the military and from certain political elements, to undertake now such a program in order to safeguard France’s military defense and enhance France’s international prestige. The French military are particularly concerned by France’s complete dependence on the United States for nuclear weapons in the event of hostilities. This concern will increase with the growing importance of tactical nuclear arms. In the absence of acceptable alternatives, such as an early disarmament agreement or satisfactory access to nuclear weapons from other sources, France will almost certainly proceed with the manufacture of nuclear weapons, possibly in collaboration with Germany. The French are already pressing the United States to provide the French military with access to atomic warheads for use in its advanced weapons, and have made formal request to the United States for an IRBM program.

International Relations

20. France’s future would appear to lie primarily in its European role, which will continue to be extremely important. France can either advance or block European integration, and in the past has done both. France is currently subject to strong nationalist and isolationist tendencies, which were heightened by the Suez affair and are fed by the frustrations of the Algerian conflict, particularly the feeling that its allies have not given sufficient support in the Algerian troubles. However, barring serious internal convulsions as results of this issue, France should move cautiously toward European integration, which in turn should contribute importantly to NATO strength and to an increased tie-in of Western Germany with Western Europe. Continuation of the present improvement in France’s relations with Spain would further strengthen Western Europe.

21. Owing to the current financial situation and chronic protectionism of the French economy, it is questionable whether France is well prepared now for the adjustments required under the terms of the Common Market. Nevertheless, France has ratified and will undoubtedly implement the treaty. The treaty contains escape-clause provisions which France can and probably would invoke whether her economic situation requires such action.

22. France is faced with the problem of protecting its interest and maintaining its influence in Tunisia and Morocco. As long as the Algerian conflict continues, France’s relations with the countries of North Africa can have no stable basis. The duration and outcome of the conflict will determine whether French influence can be maintained in this area, and will also be a significant factor in the long-term possibilities for fruitful collaboration between Europe and Africa. Increased American influence and prestige in these areas is a source of irritation to the French, who tend to believe that we are attempting to supplant French influence. While the United States often cannot avoid exercising greater influence in the affairs of the newly independent states, it is generally in the Free World interest that strong and healthy links be maintained between France and its former territories, and that French aid and technical assistance contribute to their development.

23. Among the former Associated States of Indochina, France still maintains some political influence in Laos, less in Cambodia, while in Viet-Nam influence is limited largely to cultural and commercial interests. While it is in the U.S. interest that France cooperate with us in this area, the French role in SEATO will be of marginal importance. The French may continue the Sainteny mission in North Viet-Nam, although it is of little or no importance at present and the French Government appears to doubt its eventual utility.⁸

24. France, together with a number of other Western European countries, is gradually becoming convinced that the UN as presently constituted is largely inimical to its national interests. The French feel that the positive contributions of the UN to France are slight, that French security and French political and economic interests depend primarily upon other relationships, and that the UN only weakens these other relationships. Because of the recent enlargement of the UN’s membership, there is an increasing tendency in France and neighboring states to regard the UN as little more than an extension of the Bandung Conference.⁹ Despite this, the French still recognize certain advantages in UN membership, particularly their position on the Security Council. Thus, moves by the UN to interfere in Algeria might cause a French walk-out from the General Assembly, but France is unlikely to withdraw completely.

25. As long as the Algerian conflict continues, France will be a liability in U.S. relations with the Afro-Asian bloc, as well as in the Middle East. If and when this conflict is settled, French capabilities for exercising a constructive role in Africa will depend on the nature of the settlement. French influence in the Middle East, other than in Israel, will probably be limited for some time to commercial and cultural interests.

26. Satisfactory French-German relations remain indispensable to European integration. These relations have developed surprisingly well since World War II, but continue to constitute a sensitive area.

27. While there is a deepseated French fear of eventual German domination of Western Europe, a fear which will be enhanced as German military power grows, it is unlikely that France would revert to the historic French policy of alliance with Russia against Germany. In the absence of a revival of aggressive German militarism, French policy toward the Soviet Union is likely to remain generally in consonance with our own. Partly because of French cultural prestige and partly because of former French influence in Eastern Europe, France might eventually be in a position to promote pro-Western influence in the satellites. French parliamentary and public opinion is in favor of recognizing Communist China. That the French Government has not yet done so is principally due to deference to U.S. policy, and it is probably only a question of time before France recognizes Communist China.

28. French policy until now has strongly supported NATO. The French Foreign Office and most of the French leaders have appeared deeply convinced of the importance of NATO to French security, and particularly of the need for U.S. troops to be stationed in Western Europe. French support for NATO will probably be strained by the frustrations engendered by the Algerian conflict. An emergence of French-German tensions would also be a serious factor. However, as far as can be judged at present, France will continue to support NATO.

29. Relations between France and the United States are not easy and will probably become more difficult, given France’s reluctance to admit its declining world position and given the emergence of U.S. influence in former and present areas of French influence. U.S. ability to bring effective pressure on French attitudes and policies is limited. Algeria is the crucial point at present, and the course of relations between the United States and France will be critically affected by the positions the two countries take on this issue. Similarly, U.S. policies in Tunisia and Morocco will be closely scrutinized by the French.

Objectives

30. Maintenance of good U.S.-French relations, and French policies generally in consonance with our own.

31. Continued French adherence to NATO and fulfillment of its commitments to NATO as well as continued availability to the United States of military facilities and lines of communication.

32. French political and economic contribution to and increased participation in European integration, based on increasingly close French-German relations.

[Numbered paragraph 33 (1½ lines of source text) not declassified]

34. Equitable settlement of the Algerian conflict leading to general stability in North Africa and the Sahara.

35. French economic and financial well-being.

36. Constructive French political and economic policies for French territories in Africa south of the Sahara.

Major Policy Guidance

37. Seek maximum French support for U.S. positions and objectives. To this end, consult with the French Government to the extent feasible on current issues of international importance. Where necessary to oppose French policies, conduct such opposition privately so far as possible and, where feasible, by offering constructive alternatives.

38. Coordinate with the French our policies with regard to the Soviet Union and German reunification. Avoid giving the impression that the United States and the USSR may bilaterally reach agreement on matters of direct concern to France.

39. Endeavor to minimize French trade with Communist China, and to prevent, or at least discourage for as long as possible, French recognition of Communist China.

40. Continue to urge the earliest practicable return to Europe of NATO-committed French forces which were diverted to North Africa.

41. In the light of the availability of U.S. resources and over-all demands upon them, continue to furnish France military assistance for the purpose of assisting France to fulfill the missions of its Unapproved military forces for NATO, and endeavor to assure that MAP matériel will be used only in support of French military operations consonant with U.S. policy.

42. Seek to continue the use on a harmonious basis of U.S. installations in France and the satisfactory carrying out of the NATO Status of Forces Treaty.

43. a. Explore means, within the provisions of the Atomic Energy Act of 1954, for the positioning of nuclear weapons, and, when released by Presidential directive, their rapid turn-over to NATO forces, including French components, for use in carrying out the military tasks assigned these forces within NATO policy and plans for defense of NATO areas, including France.

b. Endeavor to secure atomic storage rights in France for the United States as soon as possible.

c. On the basis that it is in the best interests of all countries concerned to discourage production of nuclear weapons by a fourth country, seek to persuade France not to undertake independent production of such weapons. Assure France that the United States will find ways to make nuclear weapons available to NATO allies in the event of aggression against NATO.

44. Continue, as in the case of the Common Market and EURATOM, to give discreet encouragement to further French participation in Western European integration. In this connection, assist, where feasible and necessary, the continued maintenance of satisfactory French-German relations and the improvement of French-Spanish relations.

45. Take appropriate steps to attempt to reduce Communist strength and effectiveness in France.

46. Bearing in mind the eventual and inevitable emergence of a self-governing or independent Algeria and the long and continuing financial dependence of Algeria on France, take whatever opportunities seem appropriate to contribute toward a realistic Algerian settlement which is in keeping with U.S. interests and the future stability and economic viability of North Africa. To this end:

a. Avoid public pressure, overt U.S. interposition in the Algerian problem, or assumption by the United States of responsibility for a situation which may serve only to strengthen resistance to the efforts of moderate elements on both sides to produce reasonable concessions.

b. Endeavor to ensure better understanding of U.S. motivations in seeking an early, peaceful and equitable solution which would assure the stability of the North African area and its relations with France and the West.

c. Direct U.S. efforts toward encouraging moderation and willingness to negotiate, but attempt to have third powers contribute to settling the dispute.

d. Encourage the maintenance of a close and friendly French relationship with North Africa and the continuation of French financial and military assistance to North Africa.

e. Urge France and Morocco and Tunisia to improve their mutual relations and their cooperation in the UN.

47. Encourage the French to adopt and subsequently to maintain policies designed to achieve internal financial stability and balanced external accounts at high levels of activity. With reference to the immediate financial difficulties of France, discreetly encourage the French, wherever possible, to undertake further budget economies, curtailment of credit, restraints on consumption and investment, and adjustment of their foreign exchange rate.

48. Encourage the implementation of the present progressive French policies in French territories in Africa south of the Sahara and the continuance of French economic assistance to those territories. Make clear our policy favoring the continuance of close ties between France and those territories. Coordinate any U.S. technical and financial assistance to those territories with French and European plans in order to prevent duplication or the impresssion that the United States intends to supplant French influence.

Attachment

[1½ pages of source text not declassified]

[Attachment 1]

¹⁰

DEFENSE COMMENTS ON MILITARY ASSISTANCE

1. MAP Objectives: The objectives of the military assistance program are: (a) within the provisions of the North Atlantic Treaty (NAT), to assist in meeting requirements which are essential to organizing, equipping, training, and maintaining the forces specified as necessary for the defense of the NAT area in NATO-approved defense plans, within levels which can be maintained over an extended period of time; (b) to provide military assistance in a manner which will assure that such assistance contributes toward the development of forces capable of effective integrated action generally in consonance with the strategic concept for the defense of the NATO area.

2. DOD-Approved Force Objectives:

Army:	9 Infantry Divisions, Motorized
	3 Armored Divisions, New Type
	2 Mechanized Divisions, Rapid
Navy:	3 Aircraft Carriers (CVL)
	3 Cruisers (CA/CL/CLAA)
	70 Destroyer/Escort types (DD/DDE/DE/PF)
	6 Patrol Vessels (PC/PCE/SC)
	15 Minesweepers, Ocean (MSO)
	78 Minesweepers, Coastal (MSC)
	15 Minesweepers, Inshore (MSI)
	8 Submarines (SS)
	84 Patrol/Antisubmarine Aircraft
	25 Helicopters
Air Force:	9 Interceptor Day Fighter Sqdns (UE 16 a/c)
	16 Interceptor Day Fighter Sqdns (UE 25 a/c)
	9 All-Weather Fighter Sqdns (UE 12 a/c)
	11 Fighter Bomber Sqdns (UE 25 a/c)
	5 Light Bomber Sqdns (UE 12 a/c)
	4 Tactical Reconnaissance Sqdns (UE 18 a/c)
	3 Transport Sqdns (UE 16 a/c)

3. U.S. Military Assistance—FYs 1950–1957: U.S. military aid programmed for France for the period FY 1950 through FY 1957 totaled $3,796.3 million with estimated deliveries of $3,764.3 million as of 30 June 1957.¹¹ This amount included the value of equipment and supplies, packing, crating, handling, and transportation costs; expenditures for training; construction; and the cost of rehabilitating excess stocks. Excess stocks, not chargeable to MAP, in the amount of $272.1 million were also programmed and delivered. Final approvals for France under the FY 1956–57 Advanced Weapons NATO Regional Program have not been made, and the above figures do not include such costs. France also received assistance through the Facilities Assistance Program (obligations—$24.7 million; expenditures—$4.2 million). During this period, programs other than grant aid which resulted in U.S. dollars entering the international balance of payments for France were: the Mutual Weapons Development Program (obligations—$43.7 million, expenditures—$16.6 million); the Offshore Procurement Program (obligations—$1,050.7 million, expenditures— $1,016.3 million); and NATO infrastructure expenditures of $212.5 million. Deliveries of equipment and supplies sold to France for dollars under the Reimbursable Aid Program amounted to $16.6 million as of June 30, 1957.

4. Estimated U.S. Military Assistance—FY 1958: On the basis of the illustrative program outlined in Paragraph 7 below, U.S. military aid programmed for France for FY 1958 is expected to total $160 million, including $90 million of advanced weapons tentatively allocated to France from the NATO Regional Program. The $70 million for Conventional Item MAP is made up of equipment, supplies and training from the country program and of expected deliveries from the NATO Regional Spare Parts Program. Expenditures for FY 1958 under the illustrative program are estimated at $72 million. The Facilities Assistance Program for France in FY 1958 is estimated to be $7 million, with expenditures of $13.1 million.

5. Effectiveness of French Forces: The French Army is capable of maintaining internal security in European France and of retaining control in Algeria at the expense of obligations elsewhere. However, with all but 3 of the 17 divisions earmarked for or committed to NATO now in North Africa, it is incapable of meeting its NATO commitments. Only two of the NATO-earmarked French divisions in Europe could be brought to combat effectiveness by M + 30 days, and probably not more than two of those in North Africa could be returned to Europe and readied for combat during such a period. The French Navy, although though somewhat limited by obsolescent ships and aircraft, can effectively handle its antisubmarine warfare role and, except under conditions of sustained operations, has an effective coastal mine sweeping capability. Its carrier air groups are effective for antisubmarine warfare and carrier operations. French Air Force over-all capabilities remain below NATO standards. Only 17 of 25 NATO-committed squadrons are considered combat ready, largely because of diversion of personnel to North Africa, obsolescence of some aircraft and deficiencies in training, spare parts, and war reserves.

6. Outlook for the Future

• a. French Aid Request

  (1) Notwithstanding prior military assistance of about $4 billion, on 13 December 1956 France requested additional military aid (including a large OSP program) over a period of years in an amount of about $1.4 billion. The U.S., on 13 March 1957, informed France that: (a) grant aid was not contemplated on the scale proposed; (b) U.S. could not undertake to finance, directly or indirectly, French operations in Algeria; (c) U.S. aid for conventional matériel must take into account France’s capabilities to meet its own requirements; and (d) the French request would be reviewed in detail during development of U.S. military assistance programs.

  (2) A preliminary review indicates that, exclusive of advanced weapons, a little more than half of the original French request includes matériel requirements related to U.S. military objectives, forces, and plans for France. These objectives, forces, and plans assume the French NATO forces would be occupying continental defense positions at the time deliveries are made. The review also shows that the deficiencies consist largely of attrition replacements, modernization requirements, and ammunition reserves. Many of the 20,000 general purpose vehicles and the substantial ammunition reserves requested are probably the result of Algerian attrition. Remaining deficiencies are largely for modernization of interceptor day fighters, combat vehicles, maritime aircraft, and other matériel.

• b. French Self-Support Capabilities

  (1) The strength and balance of the French economy are described in the General Considerations. In comparison with the U.K. and Germany, which are financing all their own defense requirements, the French are in a favorable position by reason of substantial U.S. military assistance. Moreover, France is industrially capable of producing most of its defense needs. The French proposal for a substantial amount of OSP shows the availability of France’s military production capacity and appears to indicate industry pressure to utilize such capacity and French interest in augmenting dollar earnings. French producers have also directly presented numerous requests for U.S. orders.

  (2) Despite the fact that France is devoting a substantial share of its resources to non-defense purposes, the present level of defense expenditures—were it not for the cost of Algerian operations—would be more than adequate to meet NATO objectives. France is currently spending $4 billion a year on defense, as compared to $3 billion in the [pre-Algerian period. Current expenditures for matériel are $800 million, up $200 million from the previous peacetime rate. Consequently, a substantial decrease in Algerian requirements, even if accompanied by some defense budget cuts, could release sufficient budgetary funds to finance stated French NATO matériel needs over a period of three or four years. Admittedly, it may not be realistic to expect that the French would maintain their present level of defense expenditures if the Algerian operation ended, or that they would necessarily devote all savings that might result to the equipping of NATO forces.

7. Outlook for Future U.S. Military Assistance¹²

a. In view of the circumstances stated above, consideration is being given to the utilization of the authority of Section 103 (c) of the Mutual Security Act, including particularly the provisions regarding the acceptance of local currency. Following this suggested general approach, the U.S. would supply matériel to France on a reimbursable basis, accommodating French foreign exchange difficulties, as necessary, by accepting franc payments. Inasmuch as productive capacity exists in France to fill many of the conventional equipment deficiencies of the French forces, it is assumed that U.S.-produced military end items would be purchased by the French Government to meet only a portion of those needs. As to that portion of the requirements producible in France, it is assumed that the French would make budgetary provision for this procurement, but that some form of U.S. assistance might be necessary to offset the foreign exchange costs of the imported components necessary for this production. The specific procedure for providing such a foreign exchange accommodation may range from offshore procurement contracting methods to any of several forms of reimbursable economic assistance. It should be noted that the U.S. has had no prior experience with a reimbursable military aid program for local currency under Section 103 (c) of the Mutual Security Act as recently amended. Problems varying in proportion to the size of the transactions should be anticipated, particularly in the use in MAP or other U.S. government operations of local currency so generated.

b. U.S. Military Assistance—FY 1958–61: The following table indicates the cost to the U.S. of implementing an illustrative program for France for FYs 1958–61. Under the illustrative program, France would receive on a grant-aid basis all of the advanced weapons tentatively programmed for the period FY 1956–61. In addition, France would receive on a grant-aid basis the conventional MAP items programmed through FY 1958. For the conventional MAP items programmed after FY 1958 it is assumed that France would reimburse the U.S. in dollars or possibly in francs, under the provisions of Section 103 (c) of the Mutual Security Act of 1954, as amended. When local currency payments are received from France, it is assumed for the purposes of this Financial Appendix that these franc reimbursements would be re-used to purchase in France or elsewhere MAP equipment or services for other MAP recipients. It is possible, however, that some part of the expenditure shown as Reimbursable Aid in the table may become grant aid. Similarly, to the extent the francs could not be used, this reimbursable program would, in effect, become grant aid.

c. The illustrative program contemplated (both grant and reimbursable aid) provides for spares and maintenance support for French-held MAP equipment at approximately the present level; provides major end items of conventional equipment not economically producible in France (e.g., medium tanks); and also provides advanced weapons from the NATO Regional Program.

d. The advanced weapons tentatively shown in this illustrative program are:

• 4 Bns Nike
• 6 Bns Honest John
• 1 Bn Corporal
• 1 Sqdn Matador
• 200 F–84 Conversion Kits
• 7 Sqdns F–100D Fighter-Bombers

e. Advanced weapons programming, both as to dates and quantities, is extremely tentative. Allocations from the NATO Regional Program are subject to change from a U.S. programming standpoint, and there may be some reluctance on France’s part to accept certain advanced weapons when the great maintenance effort (in both personnel and money) required to support them is realized.

f. Expenditures by the U.S. during the period FY 1958–61 for grant-aid military assistance would be about $303 million.

g. Gross expenditures by the U.S. for Reimbursable Aid military assistance for the period FY 1958-61 would be about $207 million. Any franc reimbursement received would enable U.S. purchases of MAP equipment or services to be made in France or elsewhere for allocation to other MAP recipients.

h. Supplementary programs, e.g., a dollar OSP program in France for third country needs, may be necessary to assist France in its foreign exchange difficulties. These dollar needs would result from the large indigenous military production effort keyed to the U.S. military assistance program.

[Attachments]

¹³

STATE–ICA COMMENTS ON PARAGRAPH 7 OF THE DEFENSE COMMENTS ON MILITARY ASSISTANCE

While the idea of reimbursement in local currency bears careful exploration with the French, there are probably limitations on the extent to which it may be usefully employed.

With regard to continued U.S. programming of grant aid for maintenance and spare parts for conventional equipment previously delivered to France, the Country Team at Paris has agreed with the concept of phasing out such grant aid progressively during the period ending in FY 1961, after which all such support would terminate, if not before. Such support for the French Navy terminated in CY 1956, and arrangements are being negotiated to cut off grant aid for this purpose for the French Army in CY 1959, and French Air Force by CY 1961. The French have requested that spares for certain items, such as the M–47 tank and certain engineer equipment, be continued longer than CY 1959; and certain Air Force spares be provided on a continuing basis, to assure adequate utilization of previously delivered equipment.

France made cash military purchases amounting to $85 million in 1956 and $100 million in 1957, from the dollar area, part of which was carried out under the reimbursement provisions of U.S. legislation; and a further $60 million a year was spent on such purchases from other European countries. It is estimated that by CY 1959 France will spend roughly $25 million as a consequence of the reduction in U.S. grant aid for spares, and that by CY 1962 the amount will increase to $50–60 million a year, according to estimates by the Country Team at Paris. It is unlikely that France will increase this rate of dollar expenditure for military supplies over the next several years; the extension of the spare parts cut-off will, it is apparent, take up a large part of the slack in these expenditures which might otherwise result from a decline in external requirements for the forces in Algeria.

At the same time it can be anticipated that the present level of over-all French defense expenditures will decline sharply after Algerian operations are ended, unless France launches an extensive missiles production or nuclear weapons program. It therefore appears likely that the probable extent of future French over-all financing of conventional military equipment, if taken together with the phasing out of U.S. grant aid for this purpose, would lead to a steady decline in the effectiveness of French military forces in the conventional field.

[Attachment 4]

¹⁴

ICA COMMENTS ON ECONOMIC AID

Magnitude, Objectives and Achievement of Program

France has been one of the two largest recipients of U.S. economic aid. From 1945 through the middle of 1957 France had received close to $6.5 billion in economic assistance (both grants and loans) from the U.S. Of this total, $3.9 billion¹⁵ was advanced from Mutual Security programs and $2.6 billion from other U.S. sources (e.g., UNRRA, Lend Lease, Ex-Im Bank, surplus sales, etc.). (Practically the entire amount obligated has been spent by the end of FY 1957.) This aid has enabled France to rebuild its extensive war damage and supplied it with badly needed machinery, food, fuel, raw materials, and numerous other commodities. It also assisted the French in modernizing its industries and has enabled it to maintain full employment.

A number of major industries were placed on a world competitive basis with the aid of U.S. equipment. Outstanding among them is the French steel industry. U.S. assistance has enabled France to build the two most modern and fully integrated continuous strip mills on the European continent, Sollac and Usinor, which are supplying France with sheets for the growing steel processing industries.

The counterpart francs generated with U.S. aid constitute a large proportion of the fund used by the so-called Monnet Plan of modernization of industry and agriculture. This fund played a particularly important role in the expansion of the French basic industries. As a result of the combined efforts of the U.S. and France the French industrial production at the end of 1956 was almost double that of 1938. The great contributions made by the U.S. aid to the French economic recovery and expansion have been fully acknowledged by responsible Frenchmen in all walks of life. The bulk of the aid was given in the years 1949–1953.

Program Trend

U.S. direct economic assistance to France in recent years has been confined to modest labor TE programs ($250,000 in 1956 and $150,000 in 1957) designed to aid French free trade unions to combat the CGT, the communist controlled trade union organization. The TE program has played a significant role in the training of the leaders of the French free trade unions in a number of industries.

1. Source: Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5721 Series. Secret. A cover sheet, table of contents, a note on the Financial Appendix, the Financial Appendix, Attachment 2 to the Financial Appendix, a memorandum of transmittal from the Executive Secretary, and a statement by the North Atlantic Council, March 27, 1956 (the first annex to NSC 5721/1) are not printed. NSC 5721/1 differs from NSC 5721 only in paragraphs 41 and 44 a and c.
2. During 1945–1956 the United States provided $4.0 billion in grants and $2.5 billion in credits, a total of $6.5 billion gross in economic aid to France. This was equivalent in value to 15 per cent of total imports by Metropolitan France during this 12-year period. [Footnote in the source text.]
3. As of August 22, 1957, these dollar reserves had been reduced to approximately $170 million. [Footnote in the source text.]
4. See Annex, pp. 15–17. [Footnote in the source text. The Statement by the North Atlantic Council, March 27, 1956, is not printed.]
5. France has recently indicated that it cannot at this time state when it will return any large part of its forces now in Algeria to continental France. [Footnote in the source text.]
6. See footnote 3, Document 42.
7. Document 42.
8. See Document 18.
9. Reference is to the conference of non-aligned nations of Africa and Asia at Bandung, Indonesia, April 18–24, 1955.
10. Secret. This is Attachment 1 to the Financial Appendix which is not printed.
11. These figures include some direct and indirect military assistance furnished metropolitan France in connection with the Indochina conflict, but do not include approximately $1 billion of matériel and services delivered to the Associated States under the Indochina program. [Footnote in the source text.]
12. See State–ICA comments on the remainder of Defense Comments. [Footnote in the source text. See Attachment 3 below.]
13. Secret. This is Attachment 3 to the Financial Appendix which is not printed.
14. Secret. This is Attachment 4 to the Financial Appendix which is not printed.
15. Of this amount, $716 million was diverted for economic assistance to Indochina. [Footnote in the source text.]