337. Memorandum from U. Alexis Johnson to Rusk, September 161

[Facsimile Page 1]

SUBJECT

  • DOD Balance of Payments Reductions: Phase Two

1. We have completed the analysis of the draft memorandum to the President which Mr. McNamara left for you on September 10. (Attachment A). In addition, the DOD, as a separate action not included in the Phase II reductions, has proposed the withdrawal of 6000 combat troops originally dispatched to Europe during the Berlin build-up, “Operation Roundout.” (Attachment B). Because the timing of this latter proposal coincides exactly with consideration of the Phase II reductions and since the political effects would similarly be felt during the same period, we are also including our views on this proposal.

2. In summary, our conclusions and recommendations are as follows:

a. A portion of the total savings of approximately $380 million proposed by DOD ($375 million Phase II, plus $4 million Operation Roundout) may well create some foreign policy problems. Nevertheless, since we have proceeded with our analysis on the assumption that it was your desire to exert every possible effort to accept reasonable recommendations for effecting balance of payments savings, to which the President, and all of us, attach such a high priority, we would accept the degree of risk involved in these particular Defense proposals. Included in this category would be such items as: close-out of the B–47 [Facsimile Page 2] deployment by withdrawal of 40 aircraft from Spain and 40 from the UK, at a total savings of $37 million; cancellation of planned activation of one squadron of reconnaissance aircraft for Japan, at a savings of $25 million; reduction by 15% in US personnel in US military headquarters abroad, a savings of $5 million; plus a reduction in foreign procurement resulting in savings amounting to approximately $103 million. In this latter category are such items as reduction in employment of foreign nationals, reduction in military construction and some reduction in purchase of foreign POL. Thus, we propose that of the $380 million savings projected by DOD, we concur in $170 million. (A [Typeset Page 1477] description of each of these proposals and our analysis of its implication is at Attachment C.) This concurrence would, of course, be subject to DOD agreement to provide us with detailed implementation programs and schedules covering each of the various items to permit us to provide guidance on timing and tactics of presentation to foreign governments.

b. With regard to the remainder of the Defense proposed redeployments, we have concluded that our basic national security posture and foreign policy interests would be so seriously jeopardized through their acceptance that we should not concur in them, but should, in fact, present to the President our view of the probable consequences if they are implemented, strongly recommending against their approval. Included in this category of items are the following: (1) redeployment of US tactical fighter aircraft from Europe (a reduction from 796 to 354), (2) a reduction in US ground forces in Europe, largely in the logistical support category, of 30,000 men, (3) withdrawal of the two US divisions in Korea concurrently with a reduction in MAP support for Korean forces (which will require a reduction in those forces) and (4) reduction in foreign procured POL. [Facsimile Page 3] All of the foregoing actions are contained in Secretary McNamara’s Phase II reduction proposals. In addition, we include in this category of items which should be rejected, the separate DOD proposal for a withdrawal of 6000 combat troops which were part of the Berlin build-up (Operation Roundout). The total savings realizable from this category of items is $210 million.

3. Our reasons for recommending against acceptance of the reductions described in paragraph 2, are as follows:

a. The withdrawal of the tactical aircraft from Europe (and the Far East) is, in part, militarily justified by DOD by the introduction into US inventories of the F4C aircraft with its substantially increased range. This would, according to DOD, permit basing of these aircraft in the US, with occasional rotation to the European and Far East theaters, and with a rapid redeployment capability to these areas in the event of hostilities.

Since the additional air force reductions in the Far East are relatively insignificant in magnitude, we would not propose that the Department take exception to this aspect of the DOD suggestion. The situation is, however, quite different with regard to Europe. Leaving aside entirely the military validity of the concept, we would view the political consequences attendant upon such a massive withdrawal of force to be of the utmost gravity. Even if the technical argument based on the F4C availability can be made, it will not be politically persuasive. The primary significance of the US force commitment in the European and Far Eastern theaters is not essentially based upon the intrinsic military utility of these forces, despite the fact that they do in fact have a highly important military significance. Their principal importance has always [Typeset Page 1478] been associated with the dramatic and unequivocal political commitment to the defense of Free World interests in these areas which they symbolize. We have, in effect, through [Facsimile Page 4] this device guaranteed to our Allies in Europe and the Far East an immediate and massive US involvement in any outbreak of hostilities with the Communist bloc. This evidence is required no less today than in the past. Indeed, with various key Allies critically surveying our actions and motivations in connection with recent developments in East-West negotiations, a massive removal of US military air presence located in Europe (even though sizable US ground forces would remain in the theater) might well be interpreted as the beginning of a major US disengagement from the area. It might also be expected to give rise to speculation, abroad and in the US, that it represented a tacit if not explicit agreement between the US and USSR. Particularly if the Soviet Union, independent of our actions, effects certain force withdrawals from the satellites (this is predicted in some quarters), the notion of US-USSR collusion will be even more difficult to confront. With those such as DeGaulle, predicting precisely such a development, our ability to hold our multilateral and bilateral alliance structure together would be seriously impaired.

There is one further point related to the NATO aircraft. The aircraft in question are committed to NATO. There is at least a question in our minds as to whether their deployment to the US, even if they remained technically committed to SACEUR, would fulfill either the spirit or the terms of that commitment. If judged by our Allies or SACEUR not to be consistent with our NATO commitments this would represent the first time since the institution of the Alliance that the US had withdrawn forces committed to NATO, leaving a major void in our military commitment.

b. With regard to the ground force reduction of 30,000 men in Europe, it is important to understand that, even though largely concentrated in the logistics area, such a reduction is likely to have widely adverse consequences.

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First, its very magnitude will raise a question of US disengagement. Granted that there has been a widespread feeling that US Army support was excessive in relation to combat numbers, it would be difficult to portray a reduction of this magnitude, coming on top of previous streamlining actions, as based solely on the foregoing consideration. Indeed, this is not the sole explanation for the proposed action. Though not pointed up in the DOD Memorandum to the President, we gather that implementation of this proposal involves a de facto and significant alteration in our previous strategic doctrine. Specifically, it involves acceptance of the widely held European view (heretofore vigorously rejected by the DOD) that the forces on the ground in Europe should place reliance on the use of nuclear weapons to meet any attack which [Typeset Page 1479] is not preceded by an extensive period of warning and with consequent opportunity for mobilization. Thus, e.g., the German divisions in the line are not normally at full strength, but instead depend upon availability of warning to fill out the existing deficiencies. Under the revised concept embodied in Secretary McNamara’s proposal, DOD would be depending upon no less than two weeks of strategic warning as compared to the instantaneous responsive capacity of present forces.

In other words, the combat capability of US forces stationed in Europe to meet a conventional attack by the Communists, which was not preceded by significant warning time, would be significantly degraded.

As we understand it, Defense would not overtly admit that the 30,000 man reduction represented a fundamental change in our strategic doctrine (indeed, if even admitted in closed US councils) out of fear that such an acknowledgement would result in still further European short-falls below the resulting downward adjusted NATO goals. Our view is that in addition to the politically [Facsimile Page 6] impressive numbers involved, which in and of themselves can be predicted to create major political problems, we are not at this point persuaded that the political and military implications involved in accepting the revised strategic doctrine implicit in the DOD proposals, permit us to accept it as consistent with US national interests.

c. Finally, in the NATO area, there is the proposed withdrawal of the 6000 combat troops which remain from last years Berlin crisis augmentation (Operation Roundout). (Attachment C). The accelerated withdrawal of these troops (at a savings of $4 million in FY ’64) would be particularly disruptive at this time:

(1) They would be the first sizable combat land forces which the US would have withdrawn. (You recall that you drew a sharp line against large combat force adjustments in your letter to Secretary McNamara of June 7, 1963.) (Attachment D).

(2) Allied and especially German concern over the possible hidden implications of US-USSR negotiations, noted in 3 a. above would be particularly pertinent in this case.

(3) The FRG sensitivity and concern which was evidenced over the removal of 600 troops from Berlin would unquestionably be reactivated and intensified.

However, since these forces are above and beyond our NATO commitment and could logically be justified for return as soon as a less fluid and unstable political situation is achieved, we would recommend our acknowledgement to DOD of a willingness to accept the present schedule for withdrawal (by end FY 1964) and even would be prepared to keep under constant review the possibility of accelerat [Typeset Page 1480] ing that time schedule, should the political climate warrant such action. (Note: This item which, as previously noted, was submitted as a separate proposal by DOD and not as a part [Facsimile Page 7] of the Phase II reductions, would not be raised with the President, as recommended below for other items, unless Mr. McNamara felt it desirable to do so.)

d. You are cognizant of the range of very serious problems associated with the proposed removal of the two divisions from Korea, together with a reduction in Korean force levels. (To refresh your memory, attached is the letter sent to General Taylor last May. Attachment E).

[text not declassified]

Our concerns with the proposal are several:

a. The effect of the foregoing upon our position in Japan (given Japanese aversion to nuclear weapons this policy adjustment could trigger a major reassessment of Japanese policy toward the US), the Far East in general and other areas of the world populated by the colored races, could be far reaching.

b. The removal of two US divisions could [Facsimile Page 8] adversely effect our ability to exercise control over the internal situations in Korea. The present junta government in Korea contains untrustworthy elements some of which may be pro-Communist, and we would find it hard to maintain the UN command, and its authority, if we withdrew our divisions. Military rule has introduced factionalism into the ROK command. The UN command is needed to moderate that factionalism; we dare not increase the risk that important elements of the ROK armed forces may fall into armed conflict against each other. Moreover, we must be able to use fullest possible US influence to prevent ROK forces from being used to perpetuate military rule if it becomes apparent that the populace would revolt rather than accept it.

c. [text not declassified] All this would feed directly into the hands of Peiping’s anti-US racist propaganda, would weaken our friendships and alliances throughout the area, and would induce accommodation to the Communists. [text not declassified]

d. Our two divisions and the United Nations command give us opportunities for exercise of control at the 38th parallel we cannot afford to surrender. Otherwise the present or prospective ROK leadership might, advertently or inadvertently, get into a border clash with the Communists. Alternately, a tempting opportunity might be presented to North Korea if ROK forces fell to fighting each other or the civil populace. [text not declassified]

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e. The balance of payments savings cited by DOD are not net savings to the US Government. A very large proportion of these savings would have to be offset by US input through aid, given the direct dependency [Typeset Page 1481] of the South Korean economy on US resources. With the prospect of sharply declining appropriations for foreign aid, it is not clear how the additional burden could be met.

We have considered the feasibility of a one division withdrawal. While the availability of additional strength stationed in Asia but ready for flexible employment rather than being tied down in Korea, is appealing, it appears any withdrawal from Korea would remove the US forces from the Far East area entirely. (There is no readily available place for a division with the possible exception of the Philippines which would aggravate the balance of payments problem). The political visibility associated with a flexibly deployable force stationed in the Far East would thus not be gained.

Nevertheless, for tactical reasons you may wish to agree to further exploration of a one division adjustment.

f. Finally, the proposal for reducing still further POL imports from overseas will hit particularly in the Caribbean area. You are fully familiar with the Venezuelan political problem which we believe should not be further endangered by a prospective loss of US oil revenues. Of the $35 million POL balance of payments reduction we are assuming that $20 million will be attributable to the Caribbean area, principally Venezuela. This reduction should not be approved.

[Facsimile Page 10]

4. The DOD proposals, which we strongly recommend not be approved, in perspective, appear to suggest:

a. Withdrawal of over 50% of US air forces from Europe.

b. Reduction of about 15% of existing ground force strength.

c. Withdrawal of over 100,000 US military and dependent personnel, primarily from Europe.

d. A partial alteration in our existing NATO policy in support of high conventional force capability as contrasted to European desire of continued reliance on nuclear weapons.

e. A major alteration in our Far East military posture, with implicit, if not explicit, increased reliance on nuclear weapons.

f. Possible serious injury to our relations with certain Latin American States,

—with all of the foregoing resulting in the—

g. realization of net balance of payments savings probably totalling less than $150 million.

The price seems inordinately high in relation to the benefits.

5. Before jeopardizing the basic US security posture for such relatively modest balance of payments savings, we must first be satisfied that such savings will in fact accrue, and second we would think that other fiscal and monetary measures, however distasteful, should first [Typeset Page 1482] be implemented. Although Defense has not afforded a precise breakdown of figures, it is clear that the greatest portion [Facsimile Page 11] of the recommended savings in Europe would fall in Germany where we have an offset agreement which the Germans would certainly adjust downward as the US reduced its military expenditures. The Defense staff argues that it cannot foresee future large purchases of US equipment by the Germans, but the history of modern military budgeting demonstrates few lulls in spending for military equipment. Indeed, the modernization of military forces seems to require continuous increased spending for ever more costly weapons systems. In connection with other fiscal and monetary measures, we think it important that you offer to the President an alternative package, embodying detailed programs for implementing such measures, for Presidential approval in order to provide the President with alternatives to the Proposed military cutbacks.

6. Consistent with the foregoing conclusions, we would propose the following:

a. That you indicate, first orally to Mr. McNamara, but then directly in writing to the President, your views as to the seriously adverse consequences of the more far reaching DOD proposals, recommending against implementation of these proposals (while at the same time concurring in proposals totalling almost 50% of the value of the package).

b. Indicating further to the President the relative advantage of attempting to solve or alleviate the balance of payments problem through adoption of other techniques as a first preference before turning to the drastic adjustments contemplated in our security position. In this latter connection, we would recommend that you offer to provide for Presidential consideration within the next thirty days specific and detailed proposals with a time schedule for their implementation.

Recommendation:

a. That you meet with Mr. McNamara to [discuss] [Facsimile Page 12] your views, and

b. That you sign the attached Memorandum to the President which expresses views consistent with those set forth in the preceding paragraphs and which recommends a meeting with the President and other appropriate officials to discuss the foregoing proposals.

Attachment

Mr. McGeorge Bundy

The White House

The Secretary asked me to send you the attached unsigned memorandum from him to the President on the military aspects of the balance [Typeset Page 1483] of payments drain. This is the question which the Secretary plans to discuss with the President and Secretary McNamara tomorrow afternoon from 4:00 to 5:00.

Benjamin H. Read
Executive Secretary
  1. Analysis of DOD balance of payments reductions. Top Secret. 12 pp. Department of State, Central Files, FN 12.