Evening star., 1950-11-13

creating defensive strength in
Western Europe, as part Of a joint
effort to provide mutual security,
forces a postponement of the time
when the United States, consist
ent with its own interest. can end
economic assistance. Adequate
rearmament-within the time re-
quired by the current situation
will require not only extensive
supplies of military equipment
from the United States, but also
"a substantial diversion of Western
European output from other uses
and some increases in imports.
In view of the mutual interest
in achieving security. the Western
European countries should be
willing to undertake diversion of
resources from consumption and
investment to the extent possible.
The recent marked improve
ment In the trade and reserve
positions Of Western Europe re-
fleets. to some extent at least, the
favorable effects on their position
of developments In the United
States, while they have not yet
felt the unfavorable impact of
their own accelerated rearma-
ment. It seems clear that a suf-
ficiently large and rapid growth
in military strength is beyond the
capacity Of Western European
countries solely through their own
efforts or with aid only in the
form Of military equipment.
Provided that the Western
European countries undertake a
genuinely adequate defense effort.
we should be prepared to extend
dollar aid to meet the short-run
burden OF their own military pro-
duction, insofar as it exceeds the
sacrifices which it is within their
ability to make. Western Europe
is the most critical area from the
standpoint Of our own security
and the security of the free world.
We should also recognize that,
unless Western European exports
and earnings are maintained to
the maximum extent consistent
with accelerated rearmament,
Western Europe's inability to sup
port itself and consequently it's
need for economic aid will be un-
necessarily prolonged. At the
same time, it is important that
the Western European countries
utilize their total resources more
fully and continue to press toward
closer economic and political re-
lationships.
Recommendations Listed.
With these considerations in
mind. it is recommended that:
l. To facilitate the required ex-
pansion of Western European de-
fenSes in accordance with joint plans,
the United States should be pre-
pared to continue supplying aid,
apart from military equipment, for
another 3 or years beyond the
present time. The needed amount
of aid depends upon the rearma-
ment effort actually undertaken by
individual countries, and its total
impact on their economies, these
factors being worked out primarily
through the economic and produc-
ton planning agencies of the North
Atlantic treaty organization.
2. Aid to Western Europe should
be planned on the basis of an over
all assessment Of requirements
rather than on q specific project
basis. It should be administered
separately from aid in the form of
military equipment shipped from
the United States.
8. Such aid should be admins
tered on basis that will contribute
to the fullest possible use Of Euro
pean resources, encourage intra-
European trade, and help to inte-
CRATE the European economic effort. |
It is recommended that the United |
States continue to support the de-
velopment of an effective intra-
European payments mechanism. At
least for the time being, 1t should |
continue to allot to the European
Payments Union portion Of the
dollar aid 1t extends to Europe.
4. In the joint planning of Sc
curity programs, and specifically in
helping to increase the defensive
strength Of Western Europe, ade-
quate consideration should be given
to the Importance Of high volume
of European exports, which are the
only means for achieving self-sup-
port, although the internal burden
of rearming must obviously have
an impact on the levels of con-
sumption and investment.
5. In view OF the special import
'ance Of the pound sterling in world
trade and Of a strong position of
the United Kingdom, the needed
rate of increase in British military
expenditures should be achieved by
means that avoid seriously worsen-
ing the external position of the
United Kingdom.
Japan's Position Noted.
Because Of its predominant in
dustrial position in the Far East,
the potential contribution of a stable
and democratic Japan is extremely
important for economic growth, the
improvement of living standards,
and the maintenance Of peace in
the region. During the last year,
with the help Of United States Gov
ernment aid, Japan has been able
to add substantially to her dollar
reserves. and at the same time has
experienced a continued improve
ment in her balance of payments
position.
This process should continue dur
ing fiscal year 1851 with the United
States aid already appropriated.
Unused resources are still available
to permit further increases in out
put for both exports and domestic
use. BY fiscal year 1852, with a con-
tinuation Of present favorable
trends To rHo n NAV hn en1f .,,~~~~x