334. Memorandum of Conversation, July 15, among Rusk, McNamara, and Ball 1
SUBJECT
- DOD Balance of Payments Proposals
PARTICIPANTS
-
- Secretary Rusk
- Mr. Ball
- Mr. U. Alexis Johnson
- Mr. Jeffrey C. Kitchen
- Mr. Robert Schaetzel
- Mr. Seymour Weiss
- Secretary McNamara
- Mr. William Bundy
- Mr. Robert Kovarik
1. In the absence of the Secretary, who was detained, Mr. Johnson opened the meeting by referring to the DOD proposal regarding Spain. Mr. McNamara stated it was intended that the F–102’s should be offered to the Spaniards on a grant, not a sales basis, for a total cost to MAP of $20 million. (In answer to Mr. Weiss’ question, Secretary McNamara indicated that the $20 million was on the assumption that the aircraft would be declared excess.) Mr. Johnson asked whether it would not be feasible to keep one of the three squadrons in Spain, manned by the US if that might be indicated in the base negotiations in order to deal with Spanish desires for an American “presence.” Secretary McNamara replied in the negative stating that he would prefer, if necessary, to move out of Spain entirely, rather than keep one US squadron stationed there. However, he believed that the Spaniards would want the F–102. He also pointed out that the AC & W system would also be turned over to Spain. Mr. Weiss asked whether, in the event our withdrawal resulted in Spanish refusal to renew the other base rights facilities which we were now in process of attempting to renegotiate, (specifically including the Naval facilities) DOD was prepared to pay this price. Secretary McNamara said that if it came to that he would be.
2. (At this point the Secretary arrived.) The Secretary complimented the DOD effort, indicating it reflected a political awareness on the part of Defense staff. [Facsimile Page 2] As a result the proposals advanced were manageable, though there were a few problems. He was particularly concerned, however, that the proposals not be treated as a package, but rather as individual undertakings.
[Typeset Page 1466]3. The Secretary then turned to Japan asking whether in this case, as well as Spain, it made any particular difference to Defense whether or not we explicitly turned over to our Allies the responsibility for air defense, thereby apparently detaching ourselves from our Allies. He pointed out that it would be advantageous from a political point of view not to have to do so. Mr. McNamara stated that he was sorry Defense had raised the issue, particularly in connection with Japan, in this way. He said this was not DOD’s intention and particularly, as the Secretary had pointed out, in light of our continuing presence in Japan with large fighter aircraft units there was no need to do so. He said the Memorandum to the President would be changed to strike this proposal.
4. With regard to Spain, the Secretary asked whether there was any evidence that the Spaniards had asked for the F–102’s. Mr. McNamara replied that we had no definite information. Mr. Bundy stated that he believed the Spanish would like to have the aircraft and that Defense had asked General Donovan to obtain a better appreciation of the problem. Mr. Johnson raised the question of the relationship of the proposal to the current base negotiation. Mr. Bundy agreed with Mr. Johnson that the aircraft proposal should be made a part of the total negotiation. Mr. McNamara stated that we should approach the Spaniards as soon as possible at least on the B–47 portion of the proposal, perhaps indicating as a part thereof that we were planning on redeploying our fighters. The Secretary asked whether a military level approach, first, would be wise. Mr. McNamara said that the discussions should be in Madrid (moving it out of the hands of the Spanish Ambassador in Washington) with the US Ambassador participating to the extent and in the manner he deemed most suitable. The Secretary asked whether in Mr. McNamara’s judgment, from a military point of [Facsimile Page 3] view, the Soviets would be unlikely to attempt to attack Spain with aircraft in the event of war. Mr. Johnson pointed out that Soviet aircraft would have to transit wide areas of friendly territory before getting to Spain. Mr. McNamara stated that if the Soviets attacked with aircraft they would probably only do so after a missile attack. The Secretary summed up by saying that we were prepared to take the proposal up with our Ambassador checking as to whether the Ambassador or our military should try the proposal out on the Spaniards.
5. The Secretary then moved to the Icelandic issue, querying whether the F–102’s had been requested by Iceland. Mr. Kitchen explained the change in Icelandic attitudes toward NATO and the US and the high importance which was attached by our Ambassador and military commanders in the area to a continuance of US presence in Iceland, if we were to retain effective working relationships between the two countries. The Secretary asked Mr. McNamara how we would handle [Typeset Page 1467] Soviet vessels in the area. Mr. McNamara said probably not with the F–102’s, which he reiterated had very limited military utility. Mr. McNamara went on to point out that if this proposal presented serious political problems he was willing to strike it from the list since it represented an item of low priority. He hoped, however, we would be willing to check this out with our Ambassador. The Secretary and Mr. Johnson reiterated that it was our full intention to do so.
6. The Secretary then turned to the question of the contraction of the European LOC. Mr. McNamara stated that Defense may have been misleading in their presentation. He stated that they had no intention of introducing German personnel into France as a part of this proposal (though German participation was otherwise being sought as a part of other proposals), and, thus, no negotiation with the FRG was involved. With regard to the question of shipping back supplies, he stated that he hoped that there would be material to ship back (quoting a figure of 100,000 tons), though he stated that the information on this was very incomplete and that he was not sure whether there would be anything worth shipping home. In any event, he stated [Facsimile Page 4] that any shipments home would be checked with the State Department in advance. The Secretary stated that his concern went to visualizing a half-dozen ships being loaded with tanks which would imply a major US withdrawal. He said he assumed that attrition would take care of part of the stocks, that we would try to sell part to our Allies and that only then would we ship home. Mr. McNamara confirmed this and reiterated that even under these circumstances any shipments would be checked with State. Mr. Kitchen asked, for information purposes, how and whether we would retain the LOC, under the Defense proposals. Mr. McNamara pointed out that the LOC was built to meet World War requirements. He stated we have no intention of carrying out a long conventional war in Europe. We do not need more than 90 days reserve for approximately 25 divisions. The Secretary asked whether we were, therefore, prepared to close out these facilities. Mr. McNamara said we were. Mr. Weiss asked whether this meant that if the French were desirous of taking over the facilities we would be willing to turn them over. Mr. McNamara said that we should begin to thin down our capability, pointing out that there was something of the order of 6000 out of the 230,000 people involved and he thought we should approach the French and talk about thinning down, but reserve on turning over the facilities if the issue arose.
7. In the foregoing connection, Mr. McNamara asked if he might digress for a moment to outline to the Secretary a proposal that he had in mind. He stated that we would soon be in a position to carry out large scale military redeployment exercises to Europe and the Far East. Sometime between October 15 and January 1, he would like to deploy [Typeset Page 1468] a full division and a full CASAF to Europe. The purpose of this move would be to (a) test our system, (b) demonstrate our capabilities to our Allies and (c) demonstrate our capabilities to the Soviets. He noted that we had 2 divisions of equipment stockpiled in Europe and the deployed division would be matched with this equipment. He said he would subsequently like to have a [Facsimile Page 5] similar movement to the Far East, possibly Korea, and then perhaps next year undertake a two division movement. He said that our capability for undertaking such action was in part due to increased airlift, in part to long range fighter aircraft capabilities, and in part to increased Army stocks of equipment. He said that he hoped, within the next 10 days, to have a paper for review and concurrence by the Secretary which would then permit our Ambassadors to talk to the German, French and British about these deployment exercises. This might be useful, politically, in discussing the redeployments growing out of the balance of payments considerations.
8. The Secretary shifted the conversation by asking if the Soviets were to withdraw all forces from Hungary and one-half of their forces from East Germany whether this would make a significant difference, militarily, to the US. Mr. McNamara stated that he doubted that it would because of the NATO assumption of very rapid redeployment capabilities on the part of the Soviets (an assumption about which he had some personal doubts). He said he would, however, want to check this with the Chiefs.
9. With regard to the LOC proposal, the Secretary stated that we should send some people over to explain to our Ambassadors (in France and Germany) what the proposal involved. He did not feel that a cable would be suitable. Mr. Ball stated that we should avoid tying the adjustments to the gold flow rather attributing it to increased efficiencies or such other factors. Mr. McNamara agreed. The Secretary and Mr. Ball then exchanged views as to what might be said in a general statement on balance of payments, with Mr. Ball suggesting that we should avoid any mention of a dollar figure. Mr. McNamara stated that this was not needed, though he thought we should say that foreign exchange costs attributable to Defense were coming down.
10. The Secretary mentioned that in contacts with Ambassadors, discussion should be limited solely to the [Facsimile Page 6] proposals which related to the Ambassador’s country in order to avoid discussing the entire package. Mr. Johnson stated that this was our intention.
11. The Secretary then returned to the problem of Japan, stating that Mr. McNamara’s earlier remarks had clarified the DOD proposal regarding a shift in air defense responsibility. With regard to the problem as to which base would be placed on a stand-by basis, Mr. McNamara indicated that to accept Itazuke would require a serious reduction in operational capability, but that if this provided important political [Typeset Page 1469] benefits he would be willing to live with it. In connection with the proposal to redeploy fighter squadrons from Japan, Mr. Weiss alluded to the fact that Mr. Gilpatric and Ambassador Reischauer had given recent reassurances to the Japanese that US forces would not be redeployed from Japan, and in this connection, asked how quickly Mr. McNamara felt it necessary to move with his proposal. Mr. McNamara said that he hoped to make the move over the next 12 months, but indicated that he appreciated that there was a need for careful handling of the proposal.
12. The Secretary touched briefly on the contractual services problem. Mr. Kitchen pointed out that our concern was that various reductions in contracts, hiring of personnel, housing, etc., not be concentrated in one area at one time. Mr. McNamara stated he thought this was no problem.
13. The Secretary then turned to MAP/OSP calling attention to the precautionary note in the State memorandum. He stated, however, that having been subjected to Congressional inquiries on this and related matters, over the past few days he was not too enthusiastic about protesting OSP. Mr. McNamara stated he was flatly opposed to additional OSP, though he agreed that he could not object to reviewing each case on its merits. [Facsimile Page 7] The Secretary referred to the Church Amendment. Mr. Ball stated that the President was concerned and felt that the entire problem could become politically acute. Secretary McNamara stated that our position should be that OSP is being phased out except for prior commitments. Mr. Bundy said he thought we had a strong case. The Secretary said it was strong to us, but not the man in the street or Congress.
14. With regard to oil procurement, the Secretary asked where the most came from. Mr. McNamara said Venezuela, but that Defense would not cut down in any sensitive areas without State concurrence. The Secretary asked whether this might not be handled as an operational matter rather than a matter of policy. Mr. McNamara said by all means, but even so he wished to check it with State. He pointed out, for example, that over the last year purchases from the UK were up 4 to 5 million. The Secretary said it would not bother us to see such purchases cut back, though he preferred that this be done on an operational basis.
15. The Secretary then turned to the Caribou, asking Mr. McNamara, as the expert in the matter, if he were the Canadian Defense Minister what he would say the US commitment was. Mr. McNamara stated that he thought it was Mr. Drury, Canadian Minister of Defense Production, who was most directly involved in this matter and that he was satisfied with the US overall position. However, he offered to talk further with Mr. Drury if this seemed desirable. Mr. Ball noted that Ambassador Butterworth was in Washington and this might be discussed with him. [Typeset Page 1470] Mr. McNamara stated that the Army still liked the Caribou, but the Air Force is persuaded that it is not a good aircraft for US needs, and that he agrees with the Air Force. He said it would be at least 12 months before final tests were completed, and that the Army might, during this period, persuade him as to the merits of the Caribou, though he doubted it. The Secretary pointed out that we do not have a balance of payments argument to make with the Canadians since we were in a favorable position with them.
[Facsimile Page 8]16. The Secretary and Mr. McNamara agreed that the proposal for handling the public relations problem was well taken. Mr. McNamara asked who the point of contact with State would be. After it was clarified that Mr. McNamara had in mind a single point of contact for the entire balance of payments proposal, including the public relations aspects, Mr. Kitchen was designated by State, and Mr. Bundy was designated by Defense.
17. Mr. McNamara stated he would like to send the memorandum forward to the President with State concurrence, but subject, of course, to review of detailed implementation plans, and subject to an appropriate public relations program. The Secretary stated that in addition he would want the condition imposed that the proposals not be treated as an entire package and that publicly they not be related to balance of payments considerations.
18. The Secretary and Mr. McNamara exchanged views on the problem of Defense representation overseas.
19. The meeting adjourned.
[Facsimile Page 9] [Facsimile Page 10] [Facsimile Page 11]- “DOD Balance of Payments Proposals.” Top Secret. 11 pp. Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330.↩