Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

268. Memorandum From Secretary of the Treasury Anderson to President Eisenhower⁰

Undated.

SUBJECT

• Future Military Assistance for the Netherlands, Italy, Belgium and Japan

General Persons has given me for comment Secretary Herter’s memorandum to you dated November 13¹ raising the issue of the future military assistance programs for the Netherlands, Italy, Belgium and Japan.

As you will recall, this subject was discussed extensively at the National Security Council meeting August 1 and again at the Council meeting on October 31.² The NSC Record of Action for the August 1 meeting as approved by you contained the following:

“2275. d. Noted the President’s directive that the Governments of the Netherlands and Italy should be informed at an early date that they cannot in the future look forward to the level of grant military assistance they have received in the past; that the Governments of Belgium and Japan should be informed that they must anticipate an eventual decrease in the level of U.S. grant military assistance; and that decisions as to the future grant military assistance program for each country should be taken following notification to that country.”³

The communications which Secretary Herter now proposes to send these four countries would not carry out my understanding of the language or the spirit of the August 1 decision.

Given the now very substantial financial capabilities of these four countries and the balance of payments and budgetary problems which now face the United States, I cannot concur in the recommendations made to you in the November 13 memorandum.

Secretary Herter’s memorandum and the attached draft cables would call for continued and possibly increased levels of military assistance for the purpose of inducing these countries to increase their defense budgets—something they are fully capable of doing financially without such assistance from us.

The memorandum appears to proceed on two basic assumptions:

1. The United States should continue to press NATO countries to meet MC–70 goals in full using U.S. aid as a necessary inducement.

2. Our NATO partners (even those with very substantial financial capabilities) and Japan would construe any future reduction in the level of United States military assistance as a lack of U.S. interest in NATO and the defense of the Far East and a start down the road towards a “fortress America” concept.

Without attempting to pass judgment on the military and foreign policy validity of the present NATO and Far East strategic force goals, I can say that our NATO and other military alliances are very weak reeds for the defense of the Free World if our financially able allies are not willing to increase their defense expenditures as their financial abilities increase and the financial problems of the United States become critical—in large part owing to the tremendous amount of assistance we have given these countries in reaching their present healthy situation. If our alliances are that weak, the time has now come to reappraise them. In the past few years we have discontinued new commitments for grant military assistance to the United Kingdom, Germany, and France without any damage to the NATO structure. We should be able to expect similar responsible reaction from the Netherlands, Italy, Belgium and Japan.

The level of grant military assistance to these four countries which is now running about $250 million a year is a substantial budgetary item for us. However, even more important at the present time is the balance of payments effect of continuing military aid. If the military equipment which we are now giving these countries is of real importance to their military position, they should be buying it (thereby increasing our exports and assisting our balance of payments position) instead of our providing it to them free. Apparently the only way they can be forced to purchase the military equipment they need is through an orderly reduction and elimination of grant military assistance to them on our part. When we assume a heavy military burden, as we are doing, and let these four financially able countries off with a light burden, we weaken the whole competitive position of the United States in world markets which is so important in our fight to surmount our balance of payments problems.

At the time the August 1 decision was made our balance of payments deficit had been running at an annual rate of $2.7 billion. Today it appears that this deficit is running at a seasonally adjusted annual rate of $4.4 billion. Therefore, there is even greater reason today than there was in August to carry forward immediately your directive above-mentioned in NSC Action 2275 (d).

0. Source: Eisenhower Library, Whitman File, Administration Series, Anderson, Robert B., 1960–1961. Secret.
1. Document 267.
2. See Documents 261 and 266.
3. See footnote 6, Document 261.