Letter to Committee Chairmen on the Need for Continuing Aid to the United Kingdom, France, and Italy.

Dear Mr. Chairman:

I have been informed that certain goods of primary strategic significance have been shipped from the United Kingdom, France, and Italy to various countries of the Soviet Bloc in fulfillment of long-standing obligations. The total value of the shipments is $2.5 million.

The commitments to deliver these goods were made before the effective date of the embargo provisions of the Mutual Defense Assistance Control Act of 1951 (the Battle Act), Public Law 213, 82nd Congress. But the actual shipments took place after that date. And they consisted of items which have been listed by the Administrator of the Act as items that should be embargoed to the Soviet Bloc in order to effectuate the purposes of the Act.

Thus I have been faced with a grave decision. Under Section 103(b) of the statute I am required either to terminate all military, economic, and financial assistance to the United Kingdom, France, and Italy, or to direct that assistance be continued in spite of the shipments.

The provisions of the Battle Act with respect to termination of aid are as follows:

First, the Act requires--with no possibility of exception--the termination of all military, economic, or financial assistance to any nation which, after the effective date of the embargo provisions of the Act, knowingly permits the shipment of arms, ammunition, implements of war, or atomic energy materials to any nation or combination of nations threatening the security of the United States, including the Union of Soviet Socialist Republics and all countries under its domination.

The shipments made by the United Kingdom, France, and Italy were not arms, ammunition, implements of war, or atomic energy materials, and indeed the Administrator informs me that to his knowledge no country receiving assistance from the United States has made any shipments of that kind whatever.

In addition the Act provides for the termination of aid to any country that knowingly permits the shipment to the same nations of petroleum, transportation materials of strategic value, or items of primary strategic significance used in the production of arms, ammunition, and implements of war. However, in cases involving items of those types (known as "Title I, Category B" items), the President may direct the continuance of aid to the country permitting the shipment "when unusual circumstances indicate that the cessation of aid would clearly be detrimental to the security of the United States." The President may make such a determination after receiving the advice of the Administrator and after taking into account these four considerations: "the contribution of such country to the mutual security of the free world, the importance of such assistance to the security of the United States, the strategic importance of imports received from countries of the Soviet bloc, and the adequacy of such country's controls over the export to the Soviet bloc of items of strategic importance."

The Administrator, Mr. W. Averell Harriman, who is also the Director for Mutual Security, has advised me that aid to the United Kingdom, France, and Italy should be continued. He made this recommendation after consulting with the Departments of State, Treasury, Defense, Interior, Agriculture, and Commerce; the Office of Defense Mobilization, Mutual Security Agency, Atomic Energy Commission, and Central Intelligence Agency.

Upon his advice, and after taking into account the four statutory considerations listed above, I have directed the continuance of assistance to the United Kingdom, France, and Italy. The rest of this letter will explain my reasons for so doing. The "Prior Commitments" Problem

Up until the present case, there have been three decisions to continue aid to countries which had knowingly permitted shipments prescribed under the Battle Act. In those three cases the United States continued its aid to:

The Netherlands, which had permitted certain oil drilling equipment to be shipped to Poland; Italy, which had permitted a grinding machine to be shipped to Rumania; Denmark, which had permitted a tanker to be shipped to the U.S.S.R.

Those cases all involved "prior commitments"--that is, commitments made before the Battle Act embargo lists went into effect on January 24, 1952. The shipments of $2.5 million which now have been made by the British, French, and Italians also were in fulfillment of prior commitments. Still more of these commitments remain on the books of Western European countries. The problem of how to handle these obligations has been one of the most difficult issues that has arisen in the administration of the Battle Act.

The first question to be faced was whether the Act applies to such commitments at all. The Act prohibits further assistance (unless a Presidential exception is made) when a country "knowingly permits" the shipment of items included in the Title I, Category B embargo list. In many cases, the countries in question had entered into trade agreements guaranteeing that they would permit the shipment of these items, and in other cases had issued, or promised to issue, export licenses covering such shipments. Thus there is a real question, especially in those countries where an export license cannot legally be revoked, whether the knowing permission had not been given at the time the foreign government signed the trade agreement or issued the export license. If it had been given at that time, the subsequent shipment would not be relevant, since the knowing permission had taken place before January 24, 1952, the effective date of the embargo list. If the Act were so construed, aid could be continued to such a country without a Presidential determination that continuance of aid was necessary.

Despite the legal ambiguity surrounding this question, however, the Administrator has construed the Act as being applicable to all shipments of embargoed items after the effective date, even though the permission was given beforehand. I concur in this interpretation. It is the interpretation that seems to be most closely in accord with the objectives of the Act, which are to increase the strength of the United States and the cooperating nations and to impede the military ability of the Soviet Bloc. The contrary interpretation also raises certain questions as to inequality of treatment, based perhaps on nothing more substantial than the fortuitous timing of the issuance of an export license.

For the Western European countries, however, the prospect of breaking firm contracts, made in good faith, raised serious problems. The governments of these countries pointed out that East-West trade is basically the exchanging of Eastern raw materials for Western finished metal products, and that this involves a considerable time differential in deliveries. The Soviet Bloc had placed contracts months, and even years, before many of the items now requiring embargo under the Battle Act were agreed to be strategic by most countries, and also before the invasion of Korea in 1950. In many cases the Soviet Bloc had carried out its portion of the exchange by making deliveries of timber, grains, coal, and other essential commodities, and was awaiting shipment of goods which, in effect, had already been paid for. The manufactured products, because of the time differential, were scheduled for delivery to the East in 1952, 1953 and 1954.

The Western European countries attach importance to the fulfillment of their formal trade obligations to the Soviet Bloc. They point out that the Communists constantly seek to picture the Western World as morally bankrupt and bent on the destruction of peaceful relations with the Soviet Bloc. They feel therefore that the moral position of the Western World in this battle of ideas would be weakened by outright violation of clear commitments.

Despite the force of these contentions, the United States requested the Western European countries concerned to freeze their shipments of prior commitment items, so that a joint review of the problem could be undertaken. This request led to an intensive review. As a result, the Western European countries decided that some of the projected shipments could be eliminated without prejudice to the foregoing considerations. The eliminated shipments involved about one-quarter of the outstanding prior commitments.

The three Battle Act exceptions already granted for the Netherlands, Italy, and Denmark total $3.3 million.

Additional items valued at about $2.5 million now have been shipped. These are the British, French, and Italian shipments with respect to which I now have made a determination that aid should be continued. The shipments originated as follows: United Kingdom, $583,818; France, $959,245; and Italy, $940,000.

The items shipped from the United Kingdom were forging machines, special metalworking machines, pumps, valves, rolling mill equipment, balances, locomotives and parts, specialized testing devices, ball and roller bearings, industrial greases and oils, a small quantity of nickel, and one blower. The items shipped from France were boring machines, valves, chemical equipment, compressors, electronic equipment, aluminum, and ball bearings. The items shipped from Italy were rolling mill equipment and ball and roller bearings. (See Appendix for a list of the items, their values, and their destinations.)

There remain a number of other prior commitments on the books not only of the United Kingdom, France, and Italy but also of Denmark and the Federal Republic of Germany. If further shipments of this kind take place, the United States Government will examine such cases on their merits and determine the appropriate action in the light of all the circumstances.

Why the Cessation of Aid Would be Detrimental to the Security of the United States

Following are the considerations, specified in the Battle Act, which have led to the conclusion that unusual circumstances indicate that the cessation of aid to the United Kingdom, France, and Italy would clearly be detrimental to the security of the United States.

A. Contribution of those countries to the mutual security of the Free World

All the countries associated in the North Atlantic Treaty Organization are important to the success of the common undertaking. But the United Kingdom, France, and Italy are the three largest European members of NATO and the vital importance of their participation can scarcely be exaggerated. In their foreign policies they support, as a basic principle, action directed toward the military and economic integration of Western Europe. By reason of their geographical locations, their industrial capacity, their armed forces and their other resources, they are in a position to make, and they are making, contributions of the greatest value to the security of the Free World.

In two world wars the United Kingdom has shown its determination to fight for its democratic way of life, and has, in those wars, borne the shock of combat in the early stages. In this sense it has in effect been a first bastion of defense for the Free World. Its example during the dark days of 1940 and 1941 when it stood, with the Commonwealth, practically alone was one that cheered free men everywhere. France, the traditional ally of the United States from the time of the American Revolution, has likewise stood in the forefront of those willing to fight for a way of life that respected the dignity of the free individual. And Italy, despite a dark period in its history, has in recent years aligned itself firmly with the free nations of the world, and in the face of formidable obstacles has made a contribution of great value.

Together, the United Kingdom and France account for about four-fifths of the defense expenditures of the European NATO countries. Their share of the total production of military equipment is even higher. They rank highest among those countries in the percentage of gross national product devoted to defense spending.

The United Kingdom makes almost half of the defense expenditures of the European NATO countries. The United Kingdom and the United States have cooperated with each other in a manner unique in the history of nations. Common defense policies have been developed, and the practice of consultation that was undertaken during the last war has made possible a coordinated defense which is a cornerstone of United States security. The air bases in the British Isles are a key element in the Free World's system of defense. The British fleet, together with that of the United States, stands in defense of our shores as well as theirs. The British merchant marine furnishes the United States, as well as the United Kingdom, with lines of supply. On the continent of Europe the British have the largest armored force of any NATO country, including the United States.

France, a country which has been the battlefield of both world wars, which has seen the best of its youth depleted by those wars, which has undergone the anguish of enemy occupation, and which has been forced to struggle bitterly for its economic health, is second only to the United Kingdom among European NATO countries in defense expenditures and in output of military equipment. The vast communications network upon which the common effort depends is centered in France. While making its defense contribution in Europe, France is carrying the burden of a war against Communists in Indo-China. Into that war it has poured a vast sum of money and the pick of its trained officers.

Italy's contribution to the common security is in a sense one of the most noteworthy on the continent. For out of the wreckage of fascism has arisen a resolute government determined to play a major part in the struggle for freedom. Having experienced the evil of totalitarianism, Italy has resolved to stand on the side of freedom and to defend that freedom. Its natural resources are few. The social pressures which are the outcome of the poverty and distress of the masses have been intensified by years of totalitarian rule. Nevertheless, and despite the presence of a Communist party that feeds on the poverty of the country, the Italian Government has taken firm steps to preserve its internal security. It has modernized its military installations. In its harbors are based the NATO Mediterranean command, and its communications and supply facilities are of incalculable value.

The factories of these three countries produce goods and services needed by the NATO forces, and this production is given priority over civilian needs. By June 30, 1952, the United States had placed contracts with European manufacturers for $684 million of equipment to be used by NATO and the United States military forces. About half this amount is coming from France, with Italy and the United Kingdom having the next largest shares. In the year ending June 30, 1953, additional contracts of $1 billion are expected to be let in Europe.

B. Importance to the security of the United States of assistance to those countries

The security of the United States is squarely based on the unity of the Western nations and the continued strengthening of their free institutions.

In like manner the effectiveness of the contribution that the United Kingdom, France, and Italy can make toward that unity and strength is dependent at the present time on assistance from the United States.

Since the end of World War II the United States has given net grants and credits to Western Europe that amount to $23.1 billion in economic aid and $2.7 billion in military aid--a total of about $25.8 billion. Of the economic aid, $6.4 billion went to the United Kingdom, $4.5 billion to France, and $2.4 billion to Italy. Those three countries also received large shares of United States military assistance.

All this aid represents an investment directly in the interests of United States security. To terminate aid to the United Kingdom, France, and Italy would seriously impair that security because it would jeopardize the effectiveness of the free nations' first line of defense in Europe. Our assistance is indispensable to the three countries; without it they would be unable to carry the military burdens they have assumed in NATO. Moreover, since the plans developed in NATO are integrated plans which depend for their success on the continued performance of these countries, the collapse of their defense efforts would mean the collapse of the whole NATO system. We would be imperilling a $25 billion investment in Western defense for a consideration of $2.5 million worth of shipments which already have gone to the Soviet Bloc. Regrettable as these shipments may be, and important as these commodities may be to the Soviet Bloc, their strategic advantage to the Communists is far outweighed by the damage to our own security that would result from the termination of assistance.

C. Strategic importance of imports received by those countries from the Soviet Bloc

Each of the three, the United Kingdom, France, and Italy, has historical trade relationships with one or more of the countries now included in the Soviet Bloc. A certain degree of dependence upon Eastern Europe has been developed, both as a market and a source of supply. The three nations have exchanged their own products for essential coal, grain, foodstuffs, and other commodities. If these countries were forced to shift to other sources of supply, the shift would require the expenditure of more dollars, which these countries do not have.

The United Kingdom can produce only 40 percent of its own food supply. It is thus dependent on imports to feed its population. Since the end of World War II the United Kingdom has obtained very important quantities of coarse grains and timber products from the Soviet Bloc. The coarse grains, through the increase in domestically produced meats and poultry products, have made a vital contribution to the diet of the British people. The timber products have helped to provide adequate housing for a significant number of British families; and such items as pit props have assisted directly in the increase of coal production.

If the British did not obtain these important items from the Soviet Bloc, they would either have to procure them largely in dollar areas or go without. If they decided to procure these items in dollar areas, they would almost inevitably have to reduce their defense expenditures in order to obtain the needed dollars. If they decided to go without, they would have to worsen an already austere standard of living. Either alternative would weaken the British contribution to the common defense.

A somewhat similar pattern exists in both France and Italy--made more difficult in both these countries, however, by the presence of large and vocal Communist groups. The Communist propaganda line has long been that refusal to trade with Eastern Europe has placed severe hardships on Western Europeans by cutting them off from important supplies traditionally purchased in Eastern Europe.

Italy still depends on the Soviet Bloc for supplies of such vital imports as coal, manganese, iron and steel, wheat and foodstuffs. Italy normally imports about nine-tenths of its coal requirements, and in 1951 the Bloc supplied 12 1/2 percent of Italy's coal imports and 11 percent of coke imports. Also in 1951 the Bloc supplied 6.5 percent of Italy's manganese imports, 7 percent of its pig iron imports, over 12 percent of wheat imports, and almost 20 percent of other grains including rye, barley, and oats.

France, too, gets important quantities of certain essential imports from the Soviet Bloc, such as certain types of coal, although France's total trade with the Bloc is not as large as Italy's or Britain's. In 1951 France received from the Bloc almost 10 percent of its coal and coke imports, 8 1/2 percent of its total glycerine imports, and 10 percent of its asbestos imports.

Part of the reason why Western Europe has been able to reduce its dependence on Eastern supplies to these levels, and hence withstand to a marked degree the Soviet Bloc pressures for strategic items, has been the existence of United States aid. If we were suddenly to withdraw this aid, the flow of strategic goods and services to the Iron Curtain areas would be bound to increase. This would defeat the purpose of the Battle Act, not contribute to it.

D. Adequacy of British, French, and Italian controls over the export of strategic items to the Soviet bloc

Failure to abrogate all their prior commitments should not be allowed to obscure the fact that these three countries have long operated effective controls over strategic items and have prevented the shipment of large quantities of these items to the Soviet bloc. The British, in fact, enacted controls before the United States did so. Many improvements can undoubtedly be made in some controls systems, and work along these lines is in progress. These countries have been important participants in international discussions of controls--a cooperative program that is unprecedented.

In deciding whether to terminate aid in these cases, I have been guided by the basic objectives of the Act--to strengthen the security of the United States and of the Free World. This Government has sought constantly to avoid placing weapons in the hands of the Soviet Bloc with which to attack the Free World. But weapons take various forms. They may be commodities of strategic importance; they may be hunger or discontent within the borders of friendly countries; or they may be discord between our allies and ourselves. We must guard against giving the Soviet Bloc any of these weapons. It is my firm conviction that the decision to continue aid in these cases best serves the security interests of the United States.

Sincerely yours,

HARRY S. TRUMAN