345. Memorandum of Conversation, June 14, among Stikker, Ball, and Fessenden1

[Facsimile Page 1]

SUBJECT

  • Balance of Payments Problems

PARTICIPANTS

    • Mr. Dirk Stikker, Secretary-General, NATO
    • Mr. A. Saint-Mleux, NATO International Staff
    • Mr. George W. Ball, Under Secretary for Economic Affairs
    • Mr. Russell Fessenden, Director, Office of European Regional Affairs

Mr. Stikker said that he wanted to discuss the U.S.-German bilateral discussions which are designed to help alleviate the U.S. balance of payments situation and to raise the question of whether these discussions might be in the NATO framework, given the fact that other countries, such as the U.K., also have similar difficulties. Mr. Stikker said that NATO might be able to be of assistance in this matter, and recalled that Spaak had in fact played a role five years ago when the British were having serious balance of payments difficulties affecting their forces in Germany. Mr. Stikker went on to point out that the Europeans are in fact doing more in the way of defense expenditures today than they had in the past. Figures show some increase—their infrastructure contribution also, in relation to the American share, has considerably increased. As far as aid to less-developed countries, recent OEEC figures show considerable increase, although there may be some question about the OEEC figures.

Mr. Ball said that this general problem is one that might be more fully discussed with Secretary Dillon. Briefly, however, the balance of payments situation seems to be as follows: The short-term capital aspects are well in hand and the situation seems satisfactory. The longer-term balance of payments problem is not so satisfactory. We are making some progress but the basic problem by no means appears to be solved. For the present, the balance of payments situation is temporarily benefiting from the fact of a high rate of economic activity in Europe and a relatively low rate in the United States. Mr. Ball confirmed that we are having bilateral discussions [Facsimile Page 2] with the Germans, [Typeset Page 1514] covering two fields: 1) Procurement of military hardware from the U.S. is being discussed. The French and the British are also having similar discussions with the Germans. We do not feel that our discussions to date have been entirely successful. 2) We are also discussing with the Germans possible sharing of U.S. military facilities in Germany. This is a difficult and complicated problem in which progress is bound to be slow. As for the OEEC figures on aid to less-developed countries, there is some question as to their real significance with respect to the impact on the balance of payments. The OEEC figures are largely in the category of gross capital movements.

Mr. Stikker also asked what we had in mind in our reference in the February 17th Aide-Memoire to the Germans regarding urgent consideration of burden sharing in the defense field in NATO.

Mr. Fessenden replied that we do not have in mind an exercise designed to arrive at some sort of formula for relative defense contributions by NATO countries. Mr. Fessenden also pointed out that our current discussions of NATO planning and strategy do involve increased contributions towards the common defense. We in particular are stressing the need for increased effort in providing better conventional forces for NATO defense. We do not have in mind setting up special new NATO burden sharing machinery. We already have in the Annual Review process established procedures for examining relative defense efforts of member countries.

  1. Balance of payments issues. Confidential. 2 pp. Department of State, Central Files, 811.10/6–1461.