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83d Congress, 1st Session

House Document No. 226

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MUTUAL SECURITY PROGRAM

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83d Congress, 1st Session House Document No. 226

Report to Congress

on the

Mutual Security Program

June 30, 1953

PRESIDENT'S LETTER OF TRANSMITTAL

To the Congress of the United States:

I am transmitting herewith the Report on the Mutual Security Program
covering operations during the 6 months ended June 30, 1953, in furtherance
of the purposes of the Mutual Security Act of 1951, as amended.

In the Mutual Security Program we find tangible expression of our belief
that the safety and self-interest of this Nation are inextricably tied in with the
security and well-being of other free nations.

The White House,

August 17, 1953.

in

CONTENTS

Page

President's Letter of Transmittal in

Chapter I. A Program for Long-Term Security 1

II. Europe 13

III. The Near East and Africa 28

IV. South Asia and the Far East , 36

V. American Republics 50

VI. Other Parts of the Program 57

CHAPTER I

A Program for Long-Term

Security

THE first half of 1953 was a period of concrete
achievement for the Mutual Security Pro-
gram. It was a period of intensive policy reexami-
nation and forward planning, of operational over-
haul and streamlining, and of encouraging progress
in free world defense and development.

A New Look at Mutual Security

The present administration assumed the reins
of government on January 20, 1953. On that
date, it assumed also a solemn obligation to the
American people to reexamine most carefully the
entire complex of existing arrangements for their
security. The Mutual Security Program for build-
ing the defenses and resources of the free world
stood particularly high on the list of those ar-
rangements. For this reason, a fresh and searching
look was focused on our mutual security operations
with other nations.

The new Director for Mutual Security, Harold
E. Stassen, promptly initiated an intensive review
of mutual security aims, methods, and working
activities. Concurrently, the basic concepts and
undertakings of the program were carefully an-
alyzed by the National Security Council in rela-
tion to our country's whole security structure and
financial capabilities.

The Director also enlisted the help of a special
group of 55 outstanding leaders of American
industry and finance in surveying all phases of the
program in 14 countries which have accounted
for the largest expenditures in recent years. These
businessmen, who served without compensation,
visited Europe, the Near East, and Far East to
make an on-the-spot study of actual operations
at the local levels.

The evaluation survey resulted in a number of
valuable recommendations designed to streamline
our foreign operational procedures, cut down du-
plication and overlapping, and eliminate blurred
delegations of authority.

The Secretaries of State, Defense, and Treasury
and the Director for Mutual Security held numer-
ous personal discussions, both in this country and
abroad, with high officials of our partner nations
to achieve a first-hand exchange of views on
today's vital military and economic issues. These
leaders of the Administration also took part in
the Paris meeting of the North Atlantic Council
which laid down current military plans for western
defense.

In short, the whole fabric of our worldwide
security objectives and operations was closely
examined.

Where We Stand

As a result of their review of security operations
and overall foreign policy objectives, top adminis-
tration officials reached certain fundamental con-
clusions. It is upon these conclusions that the
present Mutual Security Program is built.

The Threat of Growing Soviet Power

The United States continues to be seriously
threatened by Soviet military and political ex-
pansionism. There is no real evidence that this
threat has diminished or will diminish within the
foreseeable future. The Soviet Union retains the
capacity for aggression, and it has demonstrated

aggressive intentions on numerous occasions in
the recent past. Its future intentions remain an
uncertain quantity.

The Soviet Union and its satellites, including
the mainland of China, occupy about 13 million
square miles' — almost one-fourth of the earth's
surface. This vast spread of Soviet-dominated
territory has enough manpower and natural re-
sources to enable the Soviet bloc to develop an
economic base matching our own.

There is every evidence that the industrial out-
put of the Soviet bloc is growing rapidly. Results
of a recent study by the United Nations Economic
Commission for Europe show that, at the present
pace of expansion, the Soviet Union by 1960 will
be producing at least as much of the major raw
materials as the seven most industrialized coun-
tries of Western Europe. By 1955, Soviet plans
call for the production of more oil than Western
Europe is currently consuming. Even today, the
U. S. S. R. is estimated to be turning out annually
more than twice the steel it produced per year
to fight the last war.

The Soviet Union continues to maintain the
largest armed force in peacetime history. General
Eidgway has recently publicly reported that the
Soviet Army has approximately 175 active divi-
sions. The Soviet Air Force has some 20,000
front-line aircraft, with a large aircraft reserve.
The Navy includes more than 350 submarines,
many of the latest type. Army strength of the
European satellites has grown, in the postwar
years, from 45 to over 75 divisions. Advanced
types of jet fighters, long-range bombers, and
heavy tanks continue to roll off Soviet production
lines in large numbers. Meanwhile, the possibil-
ities of Russia's ever-growing capabilities for
atomic attack should be kept in the forefront of
our defense planning.

Since the death of Stalin, the Soviet Union has
made certain gestures which have aroused the
hopes of the peoples of the world for a reduction of
tension and a restoration of general peace. But
these gestures have been accompanied by insig-
nificant concrete actions. However fervently the
free peoples may hope for peace, it would be sui-
cidal to base our policies and programs on these
hopes, without solid evidence of Soviet good faith.
Until conditions for genuine peace have been
firmly established, the security of the free world
must depend upon its strength.

The Soviet threat is not military alone, but po-
litical and economic as well. The Communist
imperialists seek constantly to capitalize on the
internal weaknesses of free nations and have dem-
onstrated their ability, through political and
economic subversion, to seize new territories
without engaging the Soviet armies.

Added Threats to World Peace

Coalitions for resistance to aggression and the
strengthening of defenses constitute the first
requirements for survival and progress. But such
measures are inescapably tied in with the eco-
nomic advancement and development of free
nations. Enduring military strength cannot be
built on a shaky economic foundation. Nor can
freedom itself live for long in an atmosphere of
social stagnation and marginal living standards.

Poor productivity, narrow markets, underde-
veloped resources, lack of technical abilities, in-
adequate diet, insufficient output, high incidence
of disease, low literacy rates, weak public ad-
ministration, instable government — wherever these
exist, they offer attractive opportunities to Com-
munist expansion and put a powerful check on the
forward movement of free people everywhere.

A program for the security of the free world
must embrace measures to help remove these
stumbling "blocks and clear the path to a better
future for all.

Healthy, strong and progressive, our partner
nations can constitute a tremendous asset to the
spiritual and material strength of the free world.
Neglected, weakened and subverted, they can be
the means of tearing the free world asunder.

Our Security Depends on Mutual Security

American security is inseparable from the secu-
rity of other free nations. We are linked with
other free peoples not only by common ideals,
but also by mutual needs. Our nation cannot
stand alone. It is strong and powerful, but it is
not omnipotent.

The cold fact is that our rapidly expanding
economy has outgrown our resource base. Our
industrial output is almost altogether dependent
on outside sources for tin, mica, asbestos, natural
rubber, chrome, nickel, manganese, cobalt, and
other vital materials. Without these imports, our
economy would rapidly shrivel up. In addition,

235593—53 2

we are the world's largest importer of copper,
lead, and zinc. Even crude petroleum and iron
ore — once traditional symbols of American self-
sufficiency — are now on our list of net imports.

Further Communist expansion into new areas
of the free world would not only strike at Ameri-
can economic health but would also add enor-
mously to the military and economic potential of
the aggressor. Whenever any country falls victim
to Russian domination, its farms, factories, and
raw materials are automatically subtracted from
the side of the free world and are harnessed to the
Soviet war machine. Thus, the aggressor becomes
stronger and the United States becomes weaker.
If such a process were permitted to continue, it is
inevitable that the Soviet Union would eventually
become more powerful than the United States.
We would then face an uphill fight for survival.

Our Allies Provide Needed Strength

Aside from America's interest in preventing the
population and resources of other nations from
being added to the Soviet war potential, we also
recognize that many of these nations can make
a substantial positive contribution to our own
defense. They have the manpower, industrial
production, technical skills, and natural resources
which might prove to be the decisive factor in
deterring or resisting aggression.

It is no longer realistic to consider America's
security position solely in terms of our national
defense facilities. Any determination of the size
of the military forces required to protect this
country in event of war must depend in great
part upon the size and quality of the military
forces under the control of allied nations. The
amount of money which America must spend each
year for defense purposes is directly related to the
extent of the defense efforts made by our partners
abroad. The adequacy of our protection can only
be measured by assessing the total strength of the
free world. Therefore, where America can con-
tribute to building the strength of other free
nations without serious sacrifice of its own
strength, the net result is to enhance the overall
security of the American people.

United States military and economic assistanca
can maximize the contributioa of other nations
to the overall defense of. the free world. Many
free nations possess some of the things needed to

develop and maintain effective defense forces, but
lack other things. For example, a nation may
have brave soldiers but lack equipment. It may
be able to produce small arms and ammunition
but unable to product tanks, planes or electronic
equipment. Or again, a nation may possess
factories capable of producing certain modern
weapons but be unable to activate these factories
because of economic difficulties.

A program of American assistance, carefully
adapted to the needs of the individual country,
can often supply the "missing link" in the defense
structure and permit that country to achieve
modern, balanced forces. Thus, because the
United States pays only a part of the cost, the
total defense power made possible by American
assistance is far greater than could be produced
by the same expenditure of money and resources
for other purposes.

For the foregoing reasons, it is evident that
what we make available to other nations in mili-
tary equipment, economic resources and technical
help is not a "give-away program," but is a sound
and high-yielding investment in national safety.
International security expenditures represent less

International Security Programs Made Up 8 Percent
Of Our Total Budget In The Last Fiscal Year

U. S. Budget
Fiscal Y«

Expenditures 1
jar 1953

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than 10 percent of our national budgetary expendi-
tures. In terms of the total effort of the free
world the cost is small, but in terms of increased
strength the dividends are enormous.

Where We Are Heading

Mutual Security Aims Redefined

The direction of our leadership is determined by
the nature of the problem before us. The problem
of achieving mutual security is many-sided. The
Mutual Security Program must, accordingly, press
forward on all fronts with these key objectives:

First. — To attain and maintain within the
framework of democratic institutions the defensive
strength, political stability, and economic growth
which is necessary for the free world.

Second. — To build for the United States and our
partner nations an effective counterforce against
totalitarian aggression, pacing the necessary
military buildup so that it does not outstrip our
collective economic capabilities. For us, as well
as our allies, a judicious balance must be main-
tained between the mflitary effort and economic
stability.

Third. — To strengthen the efforts of the peoples
of the free world in realizing their full capabilities
for developing their resources within expanding
economies and stable political situations. This
applies particularly to the economically under-
developed areas where a sound economic founda-
tion is essential for the growth of democratic
institutions. Only in this way can we jointly root
out those conditions which invite subversion,
weaken the will for freedom, and imperil the
survival of democracy.

Fourth. — To strengthen the efforts towards
regional political, military, and economic integra-
tion, thereby broadening the base of our collective
strength.

Finally. — To retain at all times the initiative
for peace. The Mutual Security Program is proof
in being that the United .States leads with genuine
deeds — not merely words — in the determined
quest for world peace.

In moving toward these objectives, the needs
and problems of the United States and other
nations of the free world must always be con-
sidered from a global standpoint. Action in one
area of the world must be weighed in relation to
reactions in other areas. It is equally essential

that the United States operations to carry out
these programs be administered in such a manner
that maximum value is attained for the funds and
effort expended.

Planning for the Long Pull

Mutual security planning must be of a long-
range nature. Just as we have no evidence that
the threat to our security has diminished, neither
can we predict a date on which this threat may
reach maximum proportions.

Any program so far-reaching in purpose and so
vital to national safety and well-being calls for
integrated and carefully thought out planning.
Obviously, we cannot proceed efficiently with a
patchwork of disjointed ideas or a series of
emergency improvisations. Nor is it good policy
to operate with day-to-day, blow-hot-blow-cold
methods in meeting conditions that promise to be
with us for a number of years.

What plans we make should be designed so
that the efforts of the United States and our allies
can be carried forward with maximum efficiency
and minim um strain over a sustained period.
This means building steadily at a pace our
respective economies can bear without breaking.

We simply cannot aim for a fixed target by a
fixed date, as if we were preparing for a D-day of
our own making. We have no aggressive intent.
The potential threat to our security is both
immediate and long term. We must move for-
ward with flexibility of action and continuity of
purpose. Only in this way can deep-rooted and
lasting results be achieved.

A Period of Achievement

The first 6 months of the year witnessed a
number of noteworthy accomplishments in our
Mutual Security Program which measurably
advanced the objectives of free world security.

Tightening the Framework. — It was evident
to the Administration that the organizational and
administrative structure through which the Mu-
tual Security Program had been operated needed
thorough revision. Organizational arrangements
for the conduct of foreign affairs had been built
upon numerous separate statutes. This resulted
in a scattering of programs within the Executive
Branch. The new Administration found consid-

erable duplication and conflict of responsibilities
and powers in existing activities aimed at provid-
ing military, economic, and technical assistance to
foreign countries. Therefore, it was essential to
take steps to tighten lines of responsibility, pre-
vent duplication, and promote operating efficiency.

On June 1, by Executive order, the President
transferred to the jurisdiction of the Director for
Mutual Security the operating responsibilities for
certain United States technical assistance pro-
grams, formerly vested in the Secretary of State.
The Director also assumed operating functions
with respect to United States participation in in-
ternational programs of technical assistance, relief
and rehabilitation, and refugees.

Simultaneously, the President announced a plan
for reorganizing the departments of the United
States Government concerned with the conduct of
its affairs overseas. The plan reaffirmed the his-
toric responsibility of the Department of State as
the agency responsible for the development and
control of foreign policy and relations with foreign
governments. It also reasserted the responsibility
of the Chief of Diplomatic Mission for providing
effective coordination of, and policy direction with
respect to, all United States Government activities
in a foreign country. This reorganization plan
became effective on August 1, 1953.

The new organization regroups foreign assistance
and related economic operations within a single
agency, the Foreign Operations Administration.
The Office of the Director for Mutual Security
and the Mutual Security Agency are abolished,
and the functions transferred to the FOA. The
Office of the United States Representative in
Europe is also abolished. A new United States
mission (United States Mission to NATO and
European Regional Organizations) is established.
The chief of the mission reports to and receives
instructions from the Secretary of State. Repre-
sentatives of the Secretary of Defense, Secretary
of Treasury, and the Director of the FOA are
included in this mission.

This reorganization measure has been designed
to achieve more unified direction and integrated
operation of foreign assistance programs, as well
as substantial economies and greater efficiency
of operation.

Our Global Military Shipments Acceler-
ated.— The value of shipments of mditary
weapons and equipment to our allies continued to

rise at an accelerating rate. Shipments in the first
half of 1953 were almost two-thirds higher than
during the preceding 6 months. Security restric-
tions do not permit publication of details by
specific area, but on a global basis the major
items delivered since the beginning of the program
through May 3 1 , 1953 , included :

81.328 electronics and signal equipment
items.

26,564 tanks and combat vehicles.

140,865 motor transport vehicles.

25,234 artillery pieces.

19,855,000 rounds of artillery ammunition.

510 Navy vessels.

4,126 aircraft.

Almost 1.5 million small arms and machine

guns were shipped, along with about 738

million rounds of small arms and machine gun

ammunition.

Military shipments to Indochina were made on

a high priority basis and included vital artillery

pieces, military vehicles, and certain types of

necessary aircraft.

In Latin America, Brazil, Uruguay, and the
Dominican Republic ratified the necessary agree-
ments to make them, eligible for United States
military assistance.

Increased Defense Efforts in Europe. — Our
European allies have continued to increase then-
defense expenditures for troop pay, materiel,
construction, and other military purposes. Since
the signing of the North Atlantic Treaty in 1949,
our allies have increased the level of their annual
expenditures by 120 percent. Estimated Euro-
pean NATO defense expenditures for the 1952-53
fiscal year, according to the NATO Secretary-
General, are nearly $12 billion, as against a little
more than $5 billion in 1949-50. Moreover,
Western Europe's production of major military
materiel for the year ended June 30, 1953, totaled
more than $3 billion, a fourfold increase over
pre-Korean levels.

Offshore Procurement. — The end-items pro-
duced and shipped from the United States are
being augmented by the offshore procurement
program. During the first half of 1953, this
program gained momentum in Europe, enabling
the European nations to produce an increasing
quantity of military equipment and supplies in
their own factories. Through June 30, 1953, about
$2.2 billion had been awarded to the European

United States weapons and equipment for our Allies ready for shipment under the Mutual Security Program.

countries in offshore procurement contracts by the
United States military services. In addition,
nearly $38 million worth of offshore procurement
contracts for materiel were awarded in Japan and
Formosa.

More Strength for NATO. — Expanding defense
efforts in Europe, while adding appreciably to
NATO's defense capacity, have placed an increas-
ing strain on European national resources. This
was one of the major problems confronting the
NATO cabinet ministers at the eleventh ministerial
meeting of the North Atlantic Council held in
Paris in April. The United States delegation at
this meeting was led by the Secretary of State,
and included the Secretary of Defense, the
Secretary of the Treasury, and the Director for
Mutual Security.

In reaching agreement on a firm military

program for 1953 and a provisional program for
1954, the NATO ministers adopted measures to
get greater strength by less costly and more
practicable means. It was agreed that military
needs must be kept in balance with economic
realities, thus reducing the danger of excessive
strain on the budgets of the NATO countries,
including our own.

The program adopted provides for a continuing,
gradual buildup in the number of NATO forces,
and at the same time calls for greater emphasis on
the quality of existing forces. Appreciable im-
provements in quality will be attained through bet-
ter organization and training, and better equip-
ment. Reserves of supplies and materials will be
increased. It is estimated that quantitative in-
creases plus qualitative improvements, in combi-
nation, will increase the overall combat effective-

<*^WNI

Land, sea and air forces of six NATO nations — Turkey, Greece, Italy, the United States, France and Great
Britain — combine to launch a simulated early morning assault on Lebedos Bay, Turkey.

ness of NATO forces by as much as 30 percent
during the current year.

At the April meeting, the NATO ministers also
reached agreement on short-term and long-term
plans for financing NATO airfields, bases, com-
munications, and other facilities used in common
by forces of different NATO countries, and re-
affirmed the Council's support of the Treaty which
will establish a European Defense Community.

Europe's Dollar Position Improved. — Most
Western European countries have recently suc-
ceeded in improving their dollar payments posi-
tions. This favorable development, however, was
to a large extent counterbalanced by the fact that
the reduction in the dollar gap was achieved
primarily through enforced restrictions on imports
rather than through an expansion of exports.

Action by the Coal and Steel Community. —

The European Coal and Steel Community moved
into gear. On February 10, 1953, tariffs and
quantitative restrictions on coal movements were
removed. On May 1, the first steps were taken to
open officially the common market for steel.

Suspension of Economic Aid to the Nether-
lands, Iceland, and Denmark. — In January, the
Netherlands Government announced that, after
careful consideration of the economic position of
the country, it had decided not to request fur-
ther defense-support aid. This accomplishment is
especially noteworthy in view of the increase in
the Dutch defense effort in NATO since Korea.
The United States will continue its program of
direct military aid in the form of arms and equip-
ment for Dutch military, naval, and air forces.

8

Technical assistance programs will also be con-
tinued.

In May, the Icelandic Government also sug-
gested the suspension of further economic aid.
At the same time, it expressed its deep apprecia-
tion for the effective and most welcome help which
was given to Iceland in its time of need. The
Minister of Commerce described in great detail,
over the radio and in the press, the great debt
owed the United States by Iceland for this very
material economic aid.

In June, the Danish Government, too, proposed
the suspension oi defense-support aid in view
of its improved financial position. Denmark's
achievement in rebuilding its economic strength
after the Nazi occupation of World War II is con-
crete evidence of both the Danish people's own
great efforts and the effectiveness of our assistance
programs.

Three more names were thus added to the list of
those countries * which have been enabled to re-
gain their strength to the point where United
States economic aid could be suspended.

Wheat to Pakistan. — Famine faced Pakistan as
a result of two successive years of heavy drought.
Grave economic difficulties prevented the country
from financing the necessary wheat imports by
loan as it did in 1952.

To aid the Pakistani people in then time of need,
the United States made available up to 1 million
tons of wheat from surplus stocks. About 700,000
tons are being provided immediately on a grant
basis. The necessary legislation was enacted on
June 25, exactly 15 days after the President's
emergency request. The first shipload of wheat-
left on June 26, and additional shipments are
being made as rapidly as possible.

Mutual Development and Technical Assist-
ance.— United States leadership hi seeking world
peace and progress goes beyond the pressing
necessity to manufacture weapons, expand armies,
and construct military barriers to aggression.
Under the program for mutual development and
technical assistance, we are helping other free
nations to increase the output of food, raw ma-
terials and finished goods, to gain better health
and education, to improve methods of transporta-
tion and public administration, and generally to

1 Belgium-Luxembourg, Ireland, Portugal, and Sweden.

raise their living standards.

There are at present over 2,000 American tech-
nicians in various parts of the world. These
experts are working side by side with the people
of our partner countries in all vital fields of de-
velopment and training from labor productivity
in Iran or livestock production in Honduras to
disease control in India and thermal power genera-
tion in Formosa. Closely connected with these
technical assistance measures are the essential
commodities and machinery we are providing to
help the participating countries achieve stronger
economies which ultimately can be put on a self-
supporting basis.

Emphasis for the Next Year. — For the fiscal
year 1954, new funds totaling $4.5 billion were
appropriated for the Mutual Security Program.
In addition to this amount, the Administration was
authorized to carry over $2.1 billion which was
unobligated from appropriations of previous fiscal
years.

The bulk of the new funds — $3.2 billion — was
earmarked for military assistance. A little under
$900 million was appropriated for defense-financing
purposes, such as $85 million each to Britain and
France to back up their NATO military produc-
tion, and a special fund of $400 million for the
Indochina campaign. A special -weapons item
of $50 million was made available to encourage the
designing and initial production of new special
weapons to be used in the mutual defense program.
About $350 million was appropriated for develop-
ment and technical assistance programs, primarily
for free Asia and the Near East.

Appropriations for multilateral organizations
totaled almost $80 million. The largest share of
this amount, $51 million, will be contributed to
the United Nations Korean Keconstruction
Agency. The remainder will be used for such
purposes as children's welfare, movement of mi-
grants, and international technical assistance
programs.

The Mutual Security Program takes into ac-
count the fact that the scope of the present threat
is world-wide, although the emphasis of the threat
may shift from one region to another as free world
defenses are probed for weak spots. Mutual se-
curity operations therefore, are geared to build a
security structure which will guarantee the great-
est possible strength for the free world as a whole.

Most Of Our Foreign Aid Is Now For Direct Military Purposes

(Billions of Dollars)

U. S. Gross Foreign Aid

Total Aid

0
1946

Non- Military

1947

1948

1949

1950

1951

1952

1953

1954'

' Grants and loans

3 Estimate for the Mutual Security Progrs

In drawing up the new fiscal year's program,
emphasis was shifted more toward Asia and the
Pacific. Including the special assistance for
Indochina, about 37 percent of the new funds for
the 1954 program will be for Asia, compared with
14 percent in the previous fiscal year. The
European program will drop from 73 percent of
the total funds in 1953, to 50 percent in 1954.

Aid Cannot Do It Alone

While it is clear that the strength needed by
other free nations cannot be developed and main-
tained without substantial American assistance, it
is equally clear that the Mutual Security Program
alone cannot do the whole job. Other measures
are necessary, and it is important that the Mutual
Security Program and our foreign relations as a
whole be conducted in such a way as to facilitate
the taking of these measures.

First, the countries of the free world need to
attain a greater degree of cooperation among
themselves. In particular, it is evident that

economic stability and the effective use of defense
resources in Western Europe depend to a consider-
able extent upon European unification. The
United States has consistently supported meas-
ures aimed at the integration of Western Europe
and has been encouraged by the progress demon-
strated by such bodies as the Organization for
European Economic Cooperation, the European
Payments Union, and the European Coal and
Steel Community. At present, the United States
Government is giving strong support to the treaty
creating a European Defense Community, now
before the European parliaments for ratification.
Second, it is clear that the economic health
required for political and social stability and for
a sustained defense effort depends largely upon
expanding trade among the free nations. Just
as a human being must exhale- as well as inhale
in order to live, so must a nation export as well
as import to survive. To keep their economies
functioning properly, the countries of Western
Europe must turn to outside sources for needed
machinery, wheat, cotton, tobacco, timber, chem-

10

icals, and consumer durables. Money for such
imports can be earned only by selling to overseas
buyers.

In 1938 Western Europe carried on two-way
trade with Soviet Russia and what are now the
European satellites in the amount of roughly
$1.8 billion. In 1952, they had reduced that trade,
in comparable prices, to $700 million — a drop of
more than 60 percent. Japan's trade with the
China mainland in 1938 was 20 percent of its
total trade; today, it is merely a trickle — less than
one-half of 1 percent.

Since we expect the European countries and
Japan to continue to curtail their exports to
Iron Curtain countries, we must help them find
other markets and sources of supply. We must
reexamine also the numerous restrictions which
deny many European and Japanese manufacturers
the opportunity to enter our markets.

Moreover, unreasonable administrative barriers
against goods of other nations work against the
overall economic interests of the United States.
American farmers and businessmen currently sell
abroad about $15 billion annually of agricidtural

and industrial products. Unless other nations
can earn their way by selling us their cheeses,
woodpulp, nonferrous metals, silks, linens, china-
ware, and perfumes, these same farmers and busi-
nessmen must be prepared to see their world
markets shrink up accordingly. The curtailment
of foreign markets in many cases would mean not
only lower sales but very likely a reduction of
receipts below the break-even point.

Third, there is general agreement that private
investment capital is a vital ingredient in any plan
for building the economies of other free nations,
especially in the underdeveloped countries. With
private capital, these countries in Asia, Africa, and
our own hemisphere can turn their own resources
to better advantage in advancing their economic
development.

The countries themselves can take steps to
supplement indigenous private venture capital.
They can seek private capital from the more
industrialized countries of Europe, from Japan,
and from the United States by reducing the haz-
ards to investment from abroad. Inequitable tax
statutes, expropriation risks, unreasonable employ-

American Farmers And Businessmen Depend Heavily On Foreign Markets

(Percent of U. S. Production)'

60

IOO

Rice

Cotton

Wheat

Tobacco

Tractors

Machine
Tools

Each symbol equals five percent
1 Baled on 3-year average, 19501952, except tractors, 1948-1951.

265593— Sa-

il

ment controls and exchange restrictions are
factors which drive away the prospective investor.
The efforts of the countries to promote a more
favorable investment climate are being assisted
by the Mutual Security Program in several ways.
Advice is given in the preparation of investment
laws and codes. Investment opportunities are
disseminated to the United States business com-
munity. The guaranty program offers investors
protection against loss from expropriation and
inconvertibility. Contracts with private firms
demonstrate to the people of the underdeveloped
areas that proper utilization of then resources by
responsible companies that have the necessary
technical knowledge and financial means will bring
lasting benefit in terms of higher living standards
and greater national strength. Extending tech-
nical assistance, improving health conditions, and
modernizing government fiscal procedures — all
these activities being carried forward under the
Mutual Security Program are helping to bring
about a better climate for foreign investment.

Freedom, Peace, and World
Prosperity

Mankind would be blessed indeed if all the
purpose and planning, the effort and resources that
now go to hammer out the weapons of war could
be put into a great common effort to improve the
hard lot of the less privileged. Unhappily, there
is no magic formula to brew instant peace.

As long as the forces of aggression threaten to
chain free men to the sordid ambitions of world
domination, so long must the free nations persist
in their collective efforts to build defensive
strength.

The United States and its allies seek a way of
security, security with strength that will eventually
force an end to the cold war and at the same time
keep us prepared for any turn of circumstances,
security that will bring greater progress and pros-
perity to the whole world. With the Mutual
Security Program, we are pursuing the best means
to achieve our objective.

12

CHAPTER II

EUROPE

IN support of United States foreign policy-
objectives, the main effort of the Mutual
Security Program in Western Europe is to develop
modern, well-equipped military forces that will
stand beside our own armed forces to deter, but
if necessary to check, any aggressive thrusts by
the Soviet Bloc.

For the United States, the defense of Europe is
more than a question of friendship or sympathy
for other free people. It is also a question of
keeping the free world's present advantage in
resources and capabilities. In blunt terms, West-
ern Europe holds the key to today's balance
of economic power. Its pool of skilled manpower
is the greatest on earth. The capacity of its
industrial plant is indispensable to our own
industrial superiority.

Steel and coal, for example, are the muscle and
sinews of war. In steel production, the United
States and its European allies now have a lead
of more than 3 to 1 over the Soviet Bloc, including
Communist China. With all Europe in Kussian
hands, the Soviet Bloc would gain the edge. In
coal output, our combined advantage is now nearly
2 to 1, but if Russia could move into the rest of
Europe the ratio would reverse to better than
1 to 2 in favor of the Soviet Bloc.

The conclusion is clear. As long as our Euro-
pean allies stay free and strong, they can make an
invaluable contribution to the defense of the free
world. The chances for peace are thereby strength-
ened. With Europe's industrial might har-
nessed to an imperialistic power, this country
would be placed in the greatest peril.

In the interest of reinforcing Western Europe's
ability to defend and support itself, the Mutual
Security Program also has important political and
economic objectives.

Politically, it stands ready to support European
measures for intergovernmental or supra-govern-
mental cooperation. These measures, grounded in
a common purpose and carried out by common
institutions, can do much to uproot the influences
which undermine democratic processes and impede
progress.

Economically, it seeks to accelerate the growth
of Western Europe's production base and the
achievement of a single European market. An
expanding European economy will bring higher
living standards, greater stability, and more
defensive strength for the long run.

Outside the NATO countries, our efforts in
Western Europe are directed toward helping
Austria, Germany, Spain, and Yugoslavia to
achieve a greater measure of economic strength
and the ability to resist aggressive pressures.

Military Defense

NATO

The North Atlantic Treaty Organization
(NATO) is an indispensable element in the free
world's defense structure. NATO stands today
as one of the strongest bulwarks against Com-
munist aggression. The source of its strength lies
in the close association and the collective power
of 14 of the free world's most industrialized and
advanced nations.

Two devastating world wars grew out of piece-
meal attacks in Europe by an imperialistic power.
Twice in our lifetime, we have been shown how
utterly futile it is for free men to go separate ways
in the face of a common danger.

NATO is a determined effort to profit from the
bitter experience of the past. Under NATO, the
United States and Canada have welded an alli-

13

ance with Western Europe based on the pledge
that aggression anywhere in the treaty area will
be regarded as an attack upon all the members.

This attempt to put teeth into free-world warn-
ings against seizure by force represents a bold
departure in our foreign policy. Never before
this treaty, had we in a time of peace agreed to
defend an Eastern Hemisphere country in case of
attack, and never before in peacetime had we
joined with other nations in active measures to
develop stronger mutual defenses. This commit-
ment to help put down aggression wherever it
might occur in the Atlantic community was made
within the framework of the United Nations
Charter.

NATO has gradually evolved into a smoothly
functioning coalition whose military forces are
integrated under a single command. The Organ-
ization provides for intergovernmental cooperation
in planning national defense contributions and in
developing harmonious political policies.

Now, military and civilian officials of the NATO
countries jointly study military requirements and
economic capabilities. Together, the representa-
tives of these nations produce a realistic program
for the buildup of forces.

During April of this year at a meeting in Paris,
the ministers of 14 countries concluded the 1952
Annual Review of the NATO Program. This
meeting climaxed 9 months of intensive study by
the NATO International Staff, the NATO mili-
tary agencies, and the major military commands.
Agreement was reached on a firm military pro-
gram for 1953 and a provisional program for 1954.
It was also agreed to schedule a meeting for
October 1953 to determine firm goals for 1954 and
provisional goals for 1955 and 1956.

The force goal agreements for 1953 and 1954
point up one development in particular. Em-
phasis has shifted from numerical increases in
forces to qualitative improvements in actual com-
bat effectiveness. Public attention in the past

:

MCimiF' '"*%! iii flr

v

B^MM

>;

-, .A

%.. -.

Six 155-mm. self-propelled guns — part of a shipment to France under the United States program for mutual
defense assistance.

14

has been focused primarily upon numbers of
ground divisions, but such numbers are deceptive.
Divisions vary greatly in fighting capabilities,
ability to mobilize reserves, strength of supporting
units, stocks of ammunition, and numerous other
factors. A single fully manned, well-trained com-
bat division is worth several with poor battle
efficiency.

It is estimated that compared with 1952, at-
tainment of the 1953 force goals, combined with
the greater quality emphasis, will result in a 30
percent increase in NATO combat effectiveness.
In ground forces, there will be a moderate growth
in major units plus heavy emphasis on support
forces. There will also be a substantial increase
in the number of combat aircraft, together with
necessary airfields, supporting installations, and
communications systems. Naval plans call for
more support both in major combatant vessels
and in the critical minesweeper and escort types.
For security reasons, it is not possible to disclose
the precise figures agreed upon by the North At-
lantic Council.

Infrastructure. — "Infrastructure" is the term
used to identify the network of military facilities
in any country which is available to support the
operations of integrated NATO forces. Under
the NATO program, agreement has been reached
to date covering financing agreements totaling
approximately $1.3 billion from the contribution
of all nations concerned for airfields, fuel supply
facilities, telecommunications, naval installations,
racial , and similar items. These arrangements will
fill the estimated needs of forces in being by
December 1954. The total United States con-
tribution, including obligations to date, is expected
to amount to approximately $534 million or about
41 percent; however, since it has been agreed that
the United States shall not be required to pay taxes
in Europe, our actual contribution will be approxi-
mately $470 million or about 36 percent.

The $1.3 billion total program through 1954 is
divided into four annual segments or "slices." The
fourth slice agreed upon by the North Atlantic
Council amounted to about $407 million. Mutual
defense fimds to meet the United States share of
this last segment were included in the fiscal year
1954 Mutual Security Program legislative request.

In addition to the four slices, the North Atlantic
Council agreed to plan on up to $700 million of
additional infrastructure in the 1954-56 period.

Utilization of this amount is to be conditioned
upon demonstrated requirements based on forces
to be created in the next 3 years.

Progress in actual construction has greatly
improved in the past year. Almost two-thirds of
the total number of airfields programmed are now
sufficiently advanced to be put into use in an
emergency.

The European Defense Effort

There is clear-cut evidence of a steady year-by-
year buildup in the defense effort of the European
countries. In terms of fiscal years, from 1950 to
1953 the European NATO coimtries increased
their defense expenditures by more than 120
percent.

These mounting defense expenditures are re-
flected in an overall increase in the number of
armed forces of the NATO coimtries. In 1949, the
present European members of NATO had a total
of approximately 2,450,000 men under arms in
all parts of the world. Lord Ismay, Secretary
General of NATO, recently reported that the
global figure has risen to nearly 3,300,000. This
figure exceeds the combined forces of all these
countries in 1938, a year when most of the major
European powers were rearming.

Despite many unforeseen difficulties, it is note-
worthy that the NATO coimtries came remarkably
close to reaching the 1952 goals projected at
Lisbon. These goals — which excluded Greek and
Turkish forces — called for 50 divisions, 4,000 front-
line aircraft, and over 1,600 ships by the end of
1952.

By December of 1952, the division goals were
virtually attained, although only about half of the
reserve divisions were up to standard in strength,
equipment, and training. This shortfall, however,
will be made up this year. The goal for aircraft
was also largely met, but ground-support and flight
training were below planned requirements. The
naval goals were filled. The goals for the end of
1953 are several divisions and several hundred
combat aircraft and naval vessels above the Lis-
bon goals. Most of the planes will be modern jet
types. Similarly, in a key naval item like mine-
sweepers, the total available for European forces
will be almost 75 percent greater than the number
in existence in mid-1952.

An increasing proportion of the European de-
fense budgets is being devoted to major materiel

15

1 Based on expenditures for self-financed production
of major materiel in NATO countries

and construction — the military hardware and
facilities needed for equipping and expanding
combat forces. Dining the buildup period, the
United States supplied most of the initial equip-
ment of European units and enabled the Europeans
to devote a greater share of their resources to the
raising and training of forces. European defense
production and construction has gained momen-
tum, however, and in fiscal year 1954, of every
$10 to be spent for defense by European NATO
countries, almost $4 will go for major materiel and
construction, compared with only $2 prior to
Korea.

For the 12 months ended June 1953, European
NATO expenditures for the production of major
materiel — aircraft, artillery, combat vehicles, am-
munition, ships, and other heavy items of equip-
ment— rose to more than $3 billion. This level
represents a fourfold increase over the pre-Korean
level of expenditures for defense production.

Offshore Procurement

It has become increasingly apparent that in ad-
dition to raising and equipping troops, adequate

preparation for defense of the Atlantic community
involves the development of a strong mobilization
base in Europe. In case of war, equipment in the
hands of troops and in reserve stocks would last
only a few weeks or months, and the ability to sus-
tain combat would depend to a considerable extent
upon the rate of output of critical items from
European production resources. Therefore, since
August 1951, the United States has been carrying
out, as an integral part of its end-item program,
an offshore procurement program designed to ex-
pand the defense production base in Europe.

In the aggregate, offshore procurement con-
tributes to meeting buildup and reserve require-
ments at a lower cost than procurement solely
from United States production. The savings
realized on certain items obtained overseas out-
weigh whatever higher costs there may be for other
foreign-produced items, so that on balance a sub-
stantial net advantage results from procurement
abroad.

In achieving the primary objective of helping
to build a European mobilization base, offshore
procurement makes a special contribution to de-

16

velopmg defense production on a selective basis,
particularly for ammunition and high consumption
rate spare parts. Furthermore, the program em-
phasizes the procurement of those items needed in
the post-buildup period and reduces accordingly
Europe's dependence on the United States for
future requirements.

From the economic standpoint, offshore pro-
curement helps to conserve United States domestic
materials and industrial resources. It also eases
the foreign payments position of European nations
by furnishing needed amounts of dollar exchange
and by cutting down the dollar drain otherwise
incurred in the purchase of spare parts from the
United States. Finally, it aids in the improve-

ment of technology and productivity abroad.

The military services of the Department of
Defense awarded over $1.5 billion in contracts to
European countries in fiscal year 1953. This was
in addition to about $630 million of contracts
placed in the preceding 12 months. Contracts
covered ammunition, naval vessels, jet fighter air-
craft, tanks, artillery pieces, radio and radar equip-
ment and a wide range of other materiel, including
spare parts for weapons, vehicles, and aircraft.

Concurrently plans have been formulated which
provide further encouragement and incentive for
United States industry to engage in the interna-
tional procurement program. Participation by
American business includes license agreements for

A British-made Centurion tank, manufactured under the offshore procurement program, being delivered to the
Netherlands. Under a $90 million offshore procurement contract placed by the United States with Great
Britain, Centurions like this are being produced for Holland and Denmark to strengthen NATO defenses.

17

the production in Europe of United States-type
equipment such as aircraft, jet engines, and spare
parts. Where United States companies already
have affiliates in Europe, as in the automotive field,
it is natural that these affiliates should be the best
sources of spare parts for items manufactured by
the United States parent company.

U. S. Participation in North
Atlantic Defense

Military aid shipments for our European allies
during the first 6 months of 1953 averaged $294
million monthly, compared to an average of $177
million in the previous 6-month period. To a
large extent, the higher rate of shipments in recent
months is due to the substantial acceleration in
deliveries of long lead-tune items which were con-
tracted for under earlier programs. Jet aircraft
have been coming off production lines in increasing
numbers, as have tanks and critical electronics
equipment. The Navy, moreover, has begun
deliveries of auxiliary minesweepers from United
States construction.

Through June 30, 1953, the value of materiel
shipped as grant aid to European countries

(excluding Greece and Turkey) totaled $4.6
billion.1 This amount included about $450 mil-
lion of items shipped from excess stocks. The
balance was charged to appropriations.

During his trip to Europe in January, Director
for Mutual Security, Harold E. Stassen, conferred
with the NATO commands regarding estimated
delivery rates of materiel to NATO forces during
the remainder of 1953. Based upon these con-
versations, a list of items reflecting most urgent
needs was compiled. Subsequent expediting ac-
tions were initiated to raise deliveries of critical
items above earlier schedules.

The Defense-Support Program

Supplementing military weapons assistance, the
Mutual Security Program for NATO countries has
provided mainly raw materials, machinery, and
equipment which in part were used directly for the
manufacture of military goods in Europe. These
defense-support items were also used in heavy

1 Includes approximately $300 million of materiel held
in United States storage, packed and marked for mutual
assistance, awaiting delivery orders.

Military Aid Shipments To Western Europe Rose Sharply In 1953

300

(Millions of Dollars)

The Trend by Years

(Monthly Averages in
Millions of Dollars)1

10

1953

' Value of materiel supplied exclusive of charges for repair and rehabilitation of
excess stocks and packing, handling and transportation. Includes value, of excess stocks.

1 March- December
3 January-June

18

industries — such as steel, transportation, and
power — to backstop defense production.

During the 6 months ended June 30, 1953, the
total value of paid shipments for defense support
and economic aid for Western Europe (NATO
countries, Austria, Germany, and Yugoslavia) was
$726 mdlion. The value of paid shipments for the
entire fiscal year amounted to $1,434 million.

The Defense Support Program For Europe Was Made
Up Mainly Of Industrial Equipment And Materials

(Paid Shipments, Fiscal year Ended June 30, 1953)
The Commodity Program

(Millions of Dollars)

600

1

t ,«,:4

Food

Raw Mor. Machinery Fue

B Semi. Fin. a Vehicles
Goods

The Major Recipients

(Millions of Dollars)1
0 100 200 300

Feed a

Fert.liier

Yugo-
slavia

Germany

(Fed, Rep)

Turkey

Nether-
lands

Includes paymenis for freight, services and EPU

Through the European industrial projects pro-
gram, economic and defense-support aid furnished
by the United States has in part gone into re-
habilitation, expansion, and modernization of

Western Europe's basic industries and public
utilities.

The facilities which have expanded directly
through purchases of dollar-financed imports of
equipment and materials, and in some cases
through United States technical services, now
constitute a vital segment of Western Europe's
defense mobilization base. These facilities in-
clude key producers such as the SOLLAC and
USINOR steel mills in France.

The SOLLAC project, now about three-fourths
completed, will be one of the largest continuous
strip steel mills on the European continent.
Located in the heart of France's iron ore region,
SOLLAC operations will be designed to produce
hot- and cold-rolled strips of the type needed for
the manufacture of jeeps, military trucks, and
armored vehicles. Another project affiliated with
SOLLAC provides for the expansion of the plate
and slabbing mill at Dilligen in the Saar. Com-
pletion of these facilities will provide France for
the first time with a domestic source of medium
and heavy open-hearth armored plates of the
type required for the construction of tanks and
naval vessels.

Other key steel projects undertaken with the
aid of United States-furnished equipment, mate-
rials, and technical services are located in Austria,
Belgium, Italy, the Netherlands, and the United
Kingdom.

Counterpart Funds

Each European country receiving defense-sup-
port assistance under the Mutual Security Pro-
gram deposits in a special account local currency
equivalent to the dollar value of aid provided on
a grant basis. These deposits are known as
counterpart funds. After a portion2 is trans-
ferred for United States use, the remaining funds
are available to the depositing countries to finance
programs approved by the United States.

Since the beginning of the defense-support
period on July 1, 1951, counterpart funds have
been released primarily to advance the defense
buildup of the NATO countries. From that date
through June 30, 1953, all counterpart releases to

2 Generally, 5 percent of counterpart funds deposited
to match dollar aid obligatedjprior to June 20, 1952, and
10 percent after that date, pursuantjto the provisions of
the Mutual Security Act of 1952.

265593—53-

19

European countries totaled $2,596 million. Euro-
pean counterpart releases were equivalent to $327
million in the 6 months ended June 30, 1953, and
$929 million for the full fiscal year. Of the last
amount, $531 million was channeled into military
projects such as the production and procurement
of major military materiel, and the construction
of military airfields, naval bases, army bases, and
other defense installations. Other defense-sup-
port activities financed with counterpart funds
include the expansion of manufacturing, agricul-
ture, electric power output and mining; and the
construction of housing for workers in essential
industries.

The Bulk Of European Counterpart Funds
Was Approved For Military Purposes
During The Past Fiscal Year

Approvals for Withdrawal
July 1, 1952-June 30,1953

$929 Million '

(In Dollar Equivalents)

During the half year ended June 30, 1953, the
equivalent of $56 million of counterpart deposits
was reserved for the United States. These funds
are used mainly to cover the cost of acquiring
strategic materials for our national stockpile and
for developing production of raw materials in
overseas areas. Other uses include overseas
local currency costs of administering the Mutual

Security Program and certain local currency
operating expenses connected with technical
assistance projects and informational activities.

Economic and Political
Developments

Economic Progress

The outstanding feature of "Western Europe's
economy since the beginning of 1951 has been the
leveling off of overall industrial production. Total
output has moved within a range circumscribed by
the seasonal variations which are characteristic
of European production. For the first 5 months
of this year, average production was 142 percent
of the 1948 base — only 3 percent above the level
of the corresponding period in 1951, and 1 percent
over the same period a year ago.

The composite picture of output, however,
obscures some shifts in the pattern of European
production. Heavy industries — those which con-
tribute most importantly to defense production —
have continued to expand at a moderate rate.
Offsetting these gains were declines in soft goods
lines. Textile production, which typifies the
trend in consumer goods output, was hardest hit,
although some recovery has been in evidence since
the middle of 1952.

Farm production for the crop year 1952-53 is
expected to duplicate the postwar peak — 15 per-
cent above prewar output — reached in the previous
year. Despite these sizable gains, farm produc-
tion per capita barely exceeds prewar levels.
Normal population gains and the large influx of
refugees from Eastern Europe almost offset the
benefits of higher agricultural output.

An important aspect of Western Europe's eco-
nomic situation in recent months has been the
improvement in its external balance of payments,
especially with the dollar area. This improvement,
however, is due mainly to national restrictions on
the use of foreign exchange reserves and to the
leveling off of production, both of which acted to
reduce imports. It is due, further, to the favor-
able shift in terms of trade — that is, the average
prices for Europe's imports have in recent months
been falling faster than the prices received for
exports.

With the improved balance of payments posi-
tion, gold and dollar reserves have been rising in

20

most countries, although they are still very low
in comparison with the volume of trade. Gold
and short-term dollar assets of European OEEC
countries (excluding Switzerland) at the end of
May 1953 were $8.1 billion, a distinct improvement
over the March 1952 low point of $6.3 billion.
The increase in reserves was particularly note-
worthy in the United Kingdom, Germany, and
the Netherlands.

Wage and price trends have been generally
stable. Wholesale prices fell moderately during
1952, and in most countries continued to decline
in the first half of 1953. Cost of living prices

showed little change, and on the whole, held close
to their post-Korean peaks.

In retrospect, Western Europe has made im-
pressive gains during the past several years in
expanding its productive capacity, in restoring
order to its war-damaged economy, and in re-
building its export trade. Considerable progress
has also been made in reducing the dollar deficit.
Nevertheless, the dollar gap is still large and re-
mains the most intractable economic problem of
the area. This persistence of the dollar deficit
was highlighted in the recent fourth annual report
of the OEEC. It was described as an obstacle to

Economic Developments In Western Europe

Industrial Production Has Leveled Off

The Annuol
i8o |-| Trend

,,= 137 138
113 "

1949 '50 51 '52

(Index: 1948 = 100)

Nol adjusted (or seasonal variation
I I I I I

JFMAMJJASOND

Trade Gap With U. S. Has Narrowed

IV"

-Exports to U.S.-

I i . I , i I i ,1 i

I . . I . . I . .

1950

1951

1952

1953

Prices are Stable or Declining

160
150
140
130
120
110
100

(Index: J

jne

1950 = 100)

Wholesale Prices

\^ France

/ \ / /*"

:x /""Vx

•1

i ^ £_s: v\J3ermon>' -■ —

Ji

ss—,^ Netherlands

if/

. . 1 . . 1 . . 1 . .

Italy
, ,1 , , 1 , , 1, ,

_,_■.! , ,

1950

1951 1952 1953

Hard Currency Reserves are Up Moderately

(Billions of Dollars)

Gold and Short-Term Dollar Assets

I Other OEEC Countries

United Kingdom

1950

1951

1952

1953

1 May data

3 Excluding Switzerland

21

economic progress, forcing the adoption of re-
strictive measures, which in turn, limit the possi-
bility of expanding production and productive
capacity.

The OEEC report emphasized the necessity for
a plan of action which would lead to a solution of
the dollar problem. Such a plan, it was indicated,
"must provide for the maintenance and develop-
ment of a Europe able to attain its basic ob-
jectives without American economic aid."

Economic Conferences

Representatives of the United States and of the
Organization for European Economic Cooperation
concluded on April 16, a week of intensive explora-
tory discussions on the common economic and
financial problems of the North Atlantic area.
The delegates stressed the urgent need for action
along particular lines.

In substance, it was agreed that the task facing
Europe is to continue the cooperative efforts which
have already produced important results. Al-
though the total volume of European exports to
the rest of the world is about two-thirds above the
prewar level, dollar earnings from exports must
be still further increased. To that end, and in
order to meet other vital needs, especially in the
field of defense, European production and pro-
ductivity must be increased. European exports
should be made more competitive. In addition,
further efforts should be made to reduce trade
restrictions, both among the European countries
themselves and with the rest of the world.

It was pointed out that the United States could
play a role in promoting conditions for the expan-
sion of world trade and payments by measures in
the fields of commercial policy, foreign investment,
and raw materials. The European countries
have a great interest in increasing exports to our
country, so as to reduce the present payments im-
balance. United States investment abroad could
assist in making possible a freer international
trade and payments system. It would be useful,
moreover, if ways could be found to moderate the
widespread disturbances caused by violent fluctu-
ations in the prices of raw materials.

Communist Strength

At the present time, Communist strength in
the Western European countries receiving United
States aid is considerably weaker than during the

immediate postwar years. Today, the Com-
munist Party has no representation in the British
Parliament, has lost ground steadily in national
and local elections, and plays an insignificant role
in the trade union movement. In Western Ger-
many, Communist voting strength has decreased
to 4 percent of the electorate, and the Party's
influence in trade union affairs is relatively
unimportant. Party membership, parliamentary
representation, and influence in trade unions have
also declined substantially in the Benelux coun-
tries, Norway and, Denmark.

In France and Italy, however, recent political
developments leave little room for complacency.
There exist in these countries, the strongest Com-
munist Parties in the free world, and the Com-
munists have substantially retained their voting
strength.

It must be remembered, however, that most of
the Communist votes in France and Italy are
protest votes against unsatisfactory living con-
ditions and unpopular political measures. Actual
Communist Party membership is only a small
percentage of Communist vo ting strength. Never-
theless, so long as the Communists can command
widespread popular support, the stability and
effectiveness of democratic governments will suffer,
and the danger of an eventual seizure of power by
the Communists cannot be ignored. This danger
would, of course, be aggravated by any serious
deterioration of economic conditions. These facts
indicate the importance of continued United
States attention to Europe's economic position,
and emphasize the importance of the principle
enunciated by Secretary of State Dulles with
respect to maintaining a realistic balance between
military efforts and economic capabilities.

Toward European Unity

European progress in economic unification and
political federation is an essential element in
providing increased strength, and it is the policy
of the United States Government to support
measures directed toward European integration.

The movement toward unity in Europe aims
at the elimination of national economic barriers
so that there can be a freer flow of trade and a
more efficient use of European manpower and
materials. It aims at coordinating and recon-
ciling national policies and programs that might

22

otherwise conflict. It aims also at the pooling of
military forces in order to create stronger defenses.
In both NATO and OEEC there has been an
intensive process of mutual examination of na-
tional economic problems and capabilities. There
has been increasing evidence of a willingness to
make policy readjustments in light of the common
need in matters which have traditionally been
considered to be questions of domestic concern
alone. Within NATO, the process of reviewing
one another's programs and achieving harmoniza-
tion of national policies is being extended through
the Annual Review and the exchange of views
on current political problems of common interest.
Another example of cooperation achieved through
INATO is the NATO International Staff's work
on coordinated defense production programming.

European Defense Community

It has been noted already that NATO possesses
a large part of the world's industrial power. But
one very important industrial nation of Europe
is missing from the Western defense system — the
Federal Republic of Germany. There is no ques-
tion that Germany's manpower, skills, resources,
and industrial facilities are of the utmost im-
portance to any satisfactory plan for European
defense.

Events of the past half century have made
many of the peoples of Western Em-ope extremely
reluctant to accept the reestablishment of a
German national army, even though they may
recognize the value of a German defense contri-
bution. The solution to this intricate problem
was largely thought out by the leaders of the
continental European governments. A plan was
drawn up which, in essence, would restore German
sovereignty, but allow Germany to rearm only as
an integral part of a supranational European
Defense Community.

In addition to Western Germany, the EDO
would embrace France, Italy, Belgium, Luxem-
bourg, and the Netherlands. It would operate
within the general framework of NATO, and its
common army would be under the supreme NATO
command. A Treaty embodying this plan was
drawn up and signed by the six participating
nations on May 27, 1952.

The United States has vigorously supported
the EDC plan as the best means of achieving an
adequate defense system in Western Europe.

However, there have been many obstacles to the
approval of EDC, and final parliamentary action
has suffered repeated delays. Aware of the
seriousness of this situation, Secretary of State
Dulles and Mutual Security Director Stassen
visited each of the EDC countries shortly after
taking office and surveyed at first hand the likeli-
hood of the Communitj-'s coming into being.
Shortly thereafter, Mr. David Bruce was ap-
pointed United States Representative to the
six-nation community. In addition to represent-
ing the United States in the Coal and Steel Com-
munity, he will also act as the President's observer
on matters relating to the proposed EDC and the
European Political Community. During March
and April, leaders of various EDC countries
visited Washington, and the importance of EDC
was discussed in their talks with the President
and Secretary of State.

As a result of these steps, EDC received new
impetus. Germany's two legislative bodies have
already ratified the treaty, and the French,
Belgian, Dutch, and Luxembourg Governments
have presented the treaty to their parliaments.
Consideration by Italy was delayed by the spring
elections. Governmental reorganization has also
delayed action in France.

Action on EDC by the European parliaments is
influenced by various political factors, some of
them extremely delicate. In so sweeping and
far-reaching an enterprise, it is only natural that
European legislators wish to consider thoroughly
the implications of giving up control over national
defense to a supranational authority. However,
executive officials of the European governments
have been unwavering in their support of EDC,
and it is hoped and expected that the European
parliaments will take favorable action to complete
this important project without undue delay.

The European Coal and Steel Community

On February 10, 1953, as previously scheduled,
tariffs and quantitative restrictions on the move-
ment of coal among the six countries of the
European Coal and Steel community were removed.
This was followed on May 1 by the opening of the
common steel market.

Each product in the common market has
presented different problems for the community.
In the coal and steel industries, the high authority
of the community acted in accordance with the

23

convention to the treaty, to avoid an abrupt shift
to free trade which might bring serious hardships,
notably to the high-cost Belgian coal industry
and the Italian steel industry. To deal with the
Belgian coal problem, the high authority imple-
mented the provisions made in the treaty for a
coal equalization fund to operate during the 5-
year transitional period. This fund is to be raised
by levies on the coal and steel products of the
low-cost producers in the community, and paid
to the high-cost segment of the Belgian producers.
These subsidies are to taper off according to the
speed with which the Belgian industry can adjust
to the new situation.

The solution for Italian steel takes a different
form. This industry is to have the benefit of a
rather gradual transition to free competition.
The tariffs protecting the industry are to be
eliminated by stages over the 5-year period,
instead of all at once. With the exception of the
special provisions for Italy, steel prices were left
free with the opening of the common market.

In the case of iron ore, the high authority felt
that the slight disturbances that might result from
the institution of the common market were worth
risking. Accordingly, the free market for iron ore
went into effect without any transitional measures.

Although the community has not been in exist-
ence long enough for a full appraisal of its effec-
tiveness, it is clear that it has successfully overcome
many of the obstacles that stood in the way of its
developing from a blueprint into a functioning
reality. In the common market, there has been a
very distinct movement away from the restrictive
policies that have previously dominated European
coal and steel, and toward a greater play of market
forces in production and distribution.

European Political Community

Plans are being considered for linking the coal
and steel community and the defense community
within a European Political Community. The
political community would absorb the institutions
provided under the coal-steel and European de-
fense treaties in a more general political framework
so that there would be a single set of European
institutions having supranational authority. In
the draft treaty, which has now been prepared by
an ad hoc assembly of the coal and steel commu-
nity, provision is made for a directly elected Euro-
pean assembly. The treaty would also charge the

political community with the task of progressively
establishing the free movement of goods, capital,
and persons within the community countries.

Trade Liberalization

As a direct result of the European Payments
Union, restrictive bilateral payments agreements
were eliminated as the usual way of doing business
in intra-European trade. A multilateral and non-
discriminatory system of payments was inherent
in the adoption of EPU.

Substantial progress has also been made in the
lifting of quantitative import restrictions. All
EPU creditors 3 and Italy have lifted quotas on 85
percent or more of their nongovernment imports
from other European countries. Ireland, Den-
mark, and Norway have liberalized 75 percent or
more of their imports. France and the United
Kingdom had achieved a very substantial degree
of liberalization during the first 18 months of
EPU, but were later forced to reimpose quota
restrictions. At the present time, such quotas
limit all of France's intra-European trade, and 42
percent of Great Britain's.

EPU has contributed greatly to the expansion of
intra-European trade and payments. In 1952,
the volume of trade of the EPU area (which in-
cludes the entire Sterling Bloc and accounts for
about 60 percent of world trade) was almost half
again as great as in 1949. EPU has provided an
effective payments mechanism for all merchandise
trade as well as for all invisible transactions, and
OEEC members have recently agreed to continue
the Union for another year.

The concept of European unity is thus finding
expression in a variety of organizational forms.
Encouragement by the United States Govern-
ment, in some cases supplemented by financial
assistance, has assisted in the development of these
principal integrating organizations.

Although progress toward unification since
World War II is striking from a historical view-
point, further evolution is necessary — in some
cases, urgently so. In seeking to promote the
integration of Europe, however, the United States
can be most successful if it encourages and assists
the adoption of measures that are European in

3 Benelux countries, Germany, Portugal, Sweden, and
Switzerland.

24

Trade Liberalization In Western Europe

As of June 30, 1953

(Percentage of Trade Liberalized)
1 00

90

80

70

60

: Liberalized Trade I

- — -

I Non-Liberalized Trade

■a

Pi

lol

sn;s:

SOt*

5%ib.% |93

55%

Austria, Iceland, Greece, Turkey

40 50 60 70

Each Country's Proportional Part of Total Intra-European Trade

I00

origin. If the movement toward unity is to have
deep and lasting effect, it will be because the
Europeans themselves believe this is the best way
to go forward.

Other Programs in Europe

Spain

In January 1953, the final portion of the $62.5
million appropriated by the Congress in the fall
of 1950 for loans to Spain was committed. Almost
60 percent of the loans approved was for capital
development of manufacturing, power, transpor-
tation, and mining facilities. The balance has
been used to finance the import of commodities
such as wheat, cotton, coal, fertilizer, and tinplate.

In view of Spain's strategic importance to the
general defense of Western Europe, the United
States is negotiating bilateral arrangements with
the Spanish Government which will contribute to
the strength of the common defense against pos-
sible aggression. These negotiations were opened
in April 1952.

The agreements currently under active negotia-

tions include: (1) the extension of economic and
technical assistance ; (2) an agreement with respect
to military aid; and (3) the use by the United
States of Spanish air bases and naval facilities.
Funds authorized by the Congress will be made
available to Spain upon satisfactory conclusion of
these agreements.

Overseas Territories

The dependent overseas territories of the Euro-
pean NATO countries play an important role in
efforts to maintain free world security. The
strength and internal growth of these territories
can permit their peoples to achieve increasing
security and self-sufficiency, to protect their
interests with less reliance on outside assistance,
and gradually to attain a more stable position in
the free world community.

The territories provide strategic bases and
supply the United States and Europe with critical
materials, the production of which, although
expanding, has failed to keep pace with growing
industrial requirements. Their political stability,
which is so essential to our national objectives and

25

interests, depends in a large measure upon our
assisting in creating an environment in which the
native peoples will feel that their aspirations can
best be served by associating and cooperating
with the nations of the free world.

Augumenting the self-help measures instituted
by the European countries and their dependencies,
the United States since 1949 has furnished finan-
cial and technical support for development pro-
jects. This assistance has enabled the overseas
territories to expand their efforts in exploration,
in port and transportation development, and in
the improvement of other facilities which are
needed to attract further United States and other
foreign private investment in materials production.

During fiscal year 1953, the equivalent of $14.2
million from the United States portion of counter-
part funds has been committed for basic materials
development projects, and $692,000 has been com-
mitted for technical assistance in the overseas
territories, mainly in Africa. In no instance are
funds made available if either the Export Import
Bank or the International Bank for Reconstruc-
tion and Development is prepared to finance a
project under consideration.

In addition, two African territories of the United
Kingdom will benefit from aid extended under the
provisions of the mutual security legislation which
relate to the promotion of free enterprise. Nego-
tiations provide that the equivalent of $562,500
of United Kingdom counterpart funds will be used
in Africa to expand the activities of existing credit
institutions in making credit available to local
small-business men.

Productivity

While Western European output is increasing
in absolute terms, it is not holding its own in the
rate of increase relative to the other large produc-
ing areas of the world.

To cope with the problems of lagging produc-
tivity, the members of the OEEC Council have
set up a European Productivity Agency. Its
charter, approved on June 17, 1953, provides that
the Agency "shall be guided by the principles that
competition should be encouraged while any busi-
ness practices which result in decreased production
and higher prices should be discouraged; that the
benefits obtained through an increase in produc-
tivity should be shared to the mutual benefit of
consumers, owners, and workers; and that co-

operation of management and labor organizations,
where there is goodwill on both sides, will promote
these purposes."

A total of $10 million in United States funds
and European counterpart plus funds provided by
the OEEC Council budget will be put into a 3-year
productivity program, administered by the Euro-
pean Productivity Agency.

Under the provisions of the mutual security
legislation, the Congress directed that the counter-
part arising from $100 million of defense-support
aid be used by the participating countries in sup-
port of the productivity program objectives. In
compliance with this mandate, agreements have
been reached with 11 countries involving the
allotment of $97.1 million. This amount includes
$2.5 million for the European Productivity
Agency. The use of counterpart funds generated
as a result of these agreements, and the initiative
provided by the new agency, will give this program
the impetus for a vigorous and aggressive move-
ment to improve productivity at the plant and
farm level.

The European countries have also made great
progress in developing their own technical assist-
ance exchange program, patterned after the ex-
change between the United States and European
countries. This development is most advanced
in the agricultural field, and emphasis in recent
months has been on group training courses.

Migration

Overpopulation in certain parts of Western
Europe presents a grave economic and political
problem. This problem, aggravated by the influx
of refugees from areas of Soviet domination, is a
matter of deep concern to the free nations of the
world.

Studies made by this Government and by inter-
national agencies have indicated that overpopu-
lation in Western Europe to the extent of 3.5
million to 5 million people poses the task of moving
some 700,000 migrants annually for the next sev-
eral years. The present annual movement is
estimated at 350,000. Any increase requires the
assistance of an intergovernmental organization
both to help meet the growing demand for man-
power outside of Europe and to facilitate ocean
transportation for the actual transfer. Acting
on these considerations, the United States Govern-
ment took the initiative in establishing the Inter-

26

governmental Committee for European Migration
(ICEM) at Brussels in December 1951. Since
then, encouraging progress has been made in
moving migrants and refugees from Europe to
other parts of the world.

The program adopted for calendar year 1953
calls for the movement of 120,000 persons. During
the first 6 months of 1953, the committee moved
in excess of 31,000 persons. This brings to
108,000 the number of migrants moved in the 18
months since the committee began operations.

Demands upon the committee for services are
increasing. Likewise, membership is growing.
The recent addition of Argentina and Costa Eica
has brought the total membership to 22 govern-
ments. The experience gained in the first 18
months of operations indicates that the com-
mittee can play an important role in international
efforts to deal with excess population and refugee
problems.

Escapee Program

Under the Mutual Security Program, supple-
mental care and resettlement assistance are pro-
vided for certain Iron Curtain escapees who have
sought asylum in Western Europe.

At present, 16,500 escapees are registered for
assistance under escapee program projects under-
taken in the countries of first asylum. In addi-
tion, 5,100 have been assisted to resettle per-
manently overseas — primarily in the United
States, Australia, Canada, and Brazil. Of these,
2,300 were resettled during the first 6 months of
1953.

Facilities of initial reception have been provided
in the countries of first asylum, and camps and
living conditions are being improved.

The primary objective of the program is to help
escapees resettle in countries where they can
achieve self-dependence and live under normal
conditions in a free society. To this end, voca-
tional and language training programs are under-
taken to qualify escapees for existing immigration
opportunities, and counselling and visa documen-
tation programs are provided. Prompt and ade-
quate transportation to the countries of immigra-
tion is secured through a contractual agreement
providing for reimbursement, out of escapee pro-
gram funds, to the Intergovernmental Committee

for European Migration for transportation costs
incurred in resettlement. Stringent security pre-
cautions provide for thorough interrogation and
examination of all escapees by the appropriate
agencies of the Allied Government.

Special programs of a limited nature have also
been undertaken for the resettlement or local in-
tegration of certain recent anti-Communist es-
capees from China.

The rate at which escapees arrive in the west
is determined primarily by internal conditions in
the Soviet orbit and by satellite security controls
along the border. The accomplishments of the
escapee program have provided positive evidence
of the announced concern of the west for the
populations behind the Iron Curtain and thereby
have contributed to the advancement of United
States objectives and planning in psychological
and related fields.

Transfers

On May 5, 1953, $125 million was transferred
by the President from the military appropriation
to the defense-support appropriation on the rec-
ommendation of the Director for Mutual Security,
in consultation with the Secretaries of State,
Treasury, and Defense.

This was in accordance with a provision in the
Mutual Security Act of 1951 as amended which
provides that up to 10 percent of the total value
of the European appropriations can be transferred
by Presidential determination between the sec-
tions which authorize military and defense-support
assistance. Of the $125 million, $60 million was
allotted to France, $50 million to the Berlin stock-
pile, and $15 million to Yugoslavia.

The additional French requirement was occa-
sioned by a severe dollar payments situation as
well as a budgetary crisis which directly threatened
the French military effort in Indochina. The
$50 million for Berlin was necessary to permit the
orderly and continued development in this im-
portant outpost, of an adequate stockpile of food,
fuel, and industrial raw materials. In Yugoslavia,
a severe drought had imperiled the ability of that
country to continue to support an adequate de-
fense program. Basic foodstuffs and raw mate-
rials had been reduced to critically low levels.
The additional assistance was designed to prevent
these shortages from becoming even worse.

26559J-53-

27

CHAPTER III

The Near East and Africa

THE Mutual Security Program has provided
economic and technical assistance to the
Near Eastern countries of Iran, Israel, Egypt,
Iraq, Jordan, Lebanon, and Saudi Arabia, and to
the independent African countries of Ethiopia,
Libya, and Liberia. Military grant assistance
has been provided to Greece, Turkey, and Iran.

These countries form a strategic land bridge
linking three continents. They hold some 110
million people in an area of about 3.5 million
square miles. The Near East contains over
half of the world's proven petroleum reserves and
accounts for about 40 percent of all the oil moving
in international trade.

This vital region is presently in ferment. Its
governments are beset by serious economic
difficulties and buffeted by ever-recurring domestic
crises. Insecure in then- position and struggling
to consolidate their power, these governments
suspect the intentions both of one another and
of the outside Western world.

There is the bitter feeling between the Arab
nations and Israel. The Arab people feel that
Israel will expand to threaten their interest and
territories. The Israelis feel that the Arabs may
try to clamp a military vise on their country and
ultimately squeeze it out of existence. Ani-
mosities are further intensified by the Arab refugee
problem.

There is the Anglo-Iranian controversy over oil.
Iran's economy totters with the cutoff of its previ-
ously huge oil revenues. Great Britain has used
hundreds of millions of dollars worth of its hard
currencies to purchase its oil requirements else-
where.

There is the tense situation with regard to con-
trol of the Suez. The British and Egyptian gov-
ernments cannot yet agree over final authority
and management of this vital base, its airstrips,
and supply depots.

In all these disputes, so filled with high emotion
and incendiary nationalism, the United States is
avoiding any unwanted interference. We have
been ready at all times, however, to aid in finding-
peaceful solutions, and our good offices have always
been available to interested parties.

In May, the Secretary of State and the Director
for Mutual Security, at the direction of the Pres:
ident, visited 10 countries in the Near East to see
at first hand specific country problems and issues.
It was the first time in history that a United States
Secretary of State had gone personally into this
critical area, and that fact alone made a deep and
favorable impression on its people.

The frank and intimate discussions with political
leaders of each country proved fruitful and bene-
ficial to all concerned. We learned much of their
point of view, and they in turn became better in-
formed on United States intentions and attitudes.

Despite the heavy frictions within the area, the
peoples of the Near East share common aspira-
tions for better living standards, and these aspira-
tions can no longer be ignored. Of course, it is
the governments and the peoples themselves who
must carry forward the task of bringing about a
better way of life. The United States, however,
can offer useful assistance, not with expenditures
of dollars alone, but by demonstrating practicable
applications of modern knowledge to problems of
irrigation, disease control, food growing, and other
specific fields.

28

The Near East Is The Largest Supplier Of The World's Oil
Import Needs And Holds Over Half Of All Known Reserves

Major Inter-Continental Petroleum Movements-1952

World Crude Oil
Reserves- 1953

U.S.SR and
Satellites'-

Technical and Economic
Assistance

The United States is helping provide the govern-
ments of the Near East and independent Africa
with the skilled personnel they have requested to
help cany out their country development pro-
grams. As of June 30, 1953, some 600 American
technical experts were supporting the efforts of
the people of the area in every vital field of eco-
nomic and social endeavor — in agriculture, health,
education, public administration, resource de-
velopment. Working side by side with our
technicians, the technicians of the host govern-
ment are learning through international partner-
ship the roads which lead to productivity and
progress.

In the fiscal year 1953, $34.5 million was ex-
pended for technical cooperation programs in the
Near East and Africa. This brings to $60.6 million
the total amount expended for these programs
since July 1, 1951.

More water for irrigation, better seed, modern
sod practices, improved tools — all have brought
tangible results. It has been demonstrated that
preventable diseases can be controlled. DDT
spraying has brought about a marked decrease in
malaria. Safe water wells have cut down water-
borne diseases. The training of teachers and the
improving of instructional facilities and methods
have helped expand rural and vocational education.

To make an immediate impact on the economic
difficulties now standing in the way of area stabil-
ity, and to improve relations with the West with
a view to obtaining wider participation in the
structure of the non-Soviet world, a regional
approach must also be made to the problems
underlying United States relations with the nations
of the area. For this reason, a "single package"
of special economic aid funds has been authorized
for the next year's program. This integrated
approach will enable the United States to meet
specific situations of a political and security nature
and to take prompt advantage of opportunities
for economic and social development.

29

Agriculture

Far-reaching programs are under way that will
reclaim hundreds of thousands of acres and turn
vast areas of wasteland into productive fields.

In Jordan, the Arabs have witnessed the magic
of modern methods. Water-spreading techniques
developed in the western part of the United States
were introduced, and arid land that has been
wasteland for centuries sprouted grass. The
Arabs have found that barren soil at last may be
put to fruitful use. One hundred acres of grass
grew in the desert. The yield per acre averaged
about 2 tons of hay for camels, goats, sheep, and
horses, with the stubble available for grazing.

Interest in this project sponsored under the Mutual
Security Program was not limited to officials.
Bedouins b3r the score came from great distances
to visit the area.

Egypt and the United States are cooperating in
a program to reclaim wasteland and resettle
farmers. Egypt today is over 95 percent desert
land, and virtually all the country's population is
squeezed within a narrow strip in the Nile Valley.

An Egyptian-American Rural Improvement
Service has been established, and plans are under-
way to carry out drainage and development work
in two project areas — Baheira and Fayoum — that
will reclaim 80,000 acres and make room for

A triumph of irrigation over desert at the Dujaila project in Iraq — a part of the Miri Sirf Land Resettlement
Project.. American technicians are assisting the Government of Iraq in its program to increase food pro-
duction.

30

resettlement of 16,000 families of landless peasants.
The land reform program calls for the establish-
ment of rural schools, the organization of a system
of fundamental education for adults in health,
sanitation, and agriculture, the development of
village crafts industries, and the installation of
sanitary water-supply services and health centers.

In Iraq, a similar land resettlement project is
underway with United States technical assistance.
Under an agreement reached between the United
States and the Government of Iraq, American
technicians will assist Iraqi officials in the fields of
agriculture, irrigation, education, health, and
housing. This program, known as the Miri Sirf
Land Resettlement Project, ultimately will include
19 million acres.

A battle to hold back the shifting desert sand
dunes is being waged in Libya with American help.
Mutual Security Program technicians are demon-
strating new methods of dune fixation for prevent-
ing oases from being engulfed with sand. They
are making it possible for the work to proceed
faster, with less labor and more dependable results.

The storage of grain is another problem that
has bedeviled this part of the world for centuries.
Facilities for storage and protection from pests,
weather damage, and spoilage are poor, and in
some cases nonexistent. In Jordan, grain storage
bins for demonstration purposes are being con-
structed with United States aid. In Egypt, one
of the projects is the development of a grain
storage and handling program to reduce grain
losses.

Pilots also have been trained in Egypt in the
operation and maintenance of helicopters for dust-
ing cotton. Control of crop pests and diseases is
also being achieved in other countries through
demonstration, training, and introduction of new
chemicals.

The growing of fodder for the milk and beef
herds has resulted in the adoption of new irriga-
tion and dry-farming methods. An Israeli tech-
nician in this field made a special trip to the
United States to study and observe American
techniques for possible adaptation in Israel. An
American wool expert has demonstrated to the
wool growers of the province of Cyrenaica in
Libya how their returns can be more than doubled
by better sorting, grading, and cleaning methods.

Health

Healthy people are a nation's greatest asset.
The Mutual Security Program's health and sani-
tation program is aimed directly at reducing the
incidence of preventable diseases by improving
the medical services to the people and instituting
better water sanitation facilities.

Saudi Arabia and Iran, like so many other coun-
tries in the Near East, have a high rate of malaria
and other diseases. A public health program, con-
centrating on preventive measures, is underway
in Saudi Arabia. A DDT antimalaria spraying
campaign was carried out in Iran on a nationwide
scale by Iranian technicians trained for the job by
American experts. Specially designed mobile
health units are being used to demonstrate tra-
choma treatments and to train health technicians
in Libya.

In many countries, high priority has been given
to drilling wells to supply sanitary water to meet
village needs and to help irrigate the land. In
Liberia, the government's first municipal water
supply and sewerage systems virtually are com-
pleted in the capital city of Monrovia. In Iran,
work has begun on a water-treatment plant for
Tehran, one of the largest cities in the world with-
out a pure water supply. Elsewhere in Iran,
deep-water wells are being drilled. These wells
will be equipped with pumps and turned over to
authorities to be operated by a village or a special
cooperative. The United States is also assisting
in the construction of a central government labora-
tory in Jordan that will be devoted to all phases
of plant culture, veterinary study, and general
chemistry.

In oil -rich Saudi Arabia, the development of the
country and the improvement of living conditions
depends primarily on one factor — water. There,
as in many other countries, water is scarce and
has to be carried for many miles. Finding water
in this thirsty land was a task that was tackled
by topnotch American hydrologists who described
it as the toughest geological problem anyone ever
came up against. But additional water supplies
have been found.

Education

A primary objective in education has been to
demonstrate not only how existing facilities can

31

be expanded but why certain types of programs
should be established where none had previously
existed. Fulfillment of this objective takes many
forms: training capable teachers, improving cur-
ricula and methods of teaching, reorganizing school
administration, and providing better textbooks.
The emphasis has been on elementary and voca-
tional education in both rural and urban areas.

Special courses are being conducted at the
American University at Beirut, Lebanon, in agri-
culture and engineering, public health, economics
and finance, and public administration. These
courses are designed to train students of Arab
nations for public service in the four fields con-
sidered essential to the economic development of
the region.

Under a bilateral agreement, the University of
Arizona is cooperating in the development of the
agricultural college at Abu Gheraib in Iraq.
Teachers have been provided for agricultural
courses, and the college is being developed into a
center for research and agricultural extension.
Also in Iraq, Bradley University of Peoria, 111., is
helping to establish a technical training school in
Baghdad. This school, to be named the American
Technical Institute, is expected to be in full
operation next fall with training courses adapted
to Iraq's needs.

By a similar agreement, the Imperial College of
Agriculture is being established in Ethiopia
through the cooperation of Oklahoma A. & M. Col-
lege. It is being modeled along the lines of a
land-grant college, with teaching, research, and
extension. Also in Ethiopia, American educa-
tional specialists are cooperating in the staffing
and improving of primary and secondary schools,
as well as technical, agricultural, and handicraft
schools.

In Iran, more than 6,000 children in one region
alone are now able to go to school as the result of
a school building program being carried on by the
Ministry of Education with American cooperation.

Public Administration

Substantial guidance and assistance has been
given under the Mutual Security Program in the
field of public administration.

Studies and recommendations of a United States
fiscal specialist have enabled the Government of
Saudi Arabia to set up a modern system of hand-

ling revenues and expenditures. A firm base for
financing programs for the economic betterment
of the people has been established through the
creation of a monetary agency.

Dependable statistics for economic planning now
are being made available in Jordan through the
completion of the enumeration phase of the first
census ever taken. This census, conducted by
the Jordan Government with the advice of Mutual
Security Program personnel, was designed to ob-
tain information on housing, industry, and popu-
lation. At the request of the Liberian Govern-
ment, the laws of that country are being codified
by an American specialist.

One of the major phases of Iraq's public admin-
istration activity is a greatly expanded road-
building program involving more than $13 million
of the government's own revenues. Technical
assistance is being provided by the United States.
Two of the country's principal cities, Baghdad
and Basra, will be connected by an all-weather
highway. For the first time, a set of roadway
plans was prepared by Iraqi personnel, and all the
work was done by Iraqis, under the supervision
of our technicians.

All these activities represent down-to-earth
examples of the way the United States is cooper-
ating with the governments and the people of the
Near East and Africa. Taken individually, they
are not projects of great magnitude, but moving
in concert they are pushing the clock centuries
ahead. They directly affect the welfare and
living conditions of millions of people. As
education spreads, as more practical methods
replace out-dated techniques, as today's students
become tomorrow's teachers, and as governmental
services and facilities are improved, more and more
people will be reaching into a better way of life
that never before had seemed possible.

Benefits growing out of technical cooperation
projects also serve to promote stability of govern-
ment in the region. A desert spot made to grow
food, a child cured of trachoma, a well which
provides pure water — these are tangible demon-
strations to the people that their government is
directly interested in their well-being. Popular
support is strengthened and the state rests on a
firmer foundation.

32

Palestine Refugee Program

The United States Congress appropriated $60.1
million under the Mutual Security Appropriation
Act of 1953 for Palestine refugee relief and
rehabilitation. Of this amount, $16 million was
paid to United Nations Relief and Works Agency
(UNRWA) by June 30, 1953.

The first 6 months of 1953 witnessed the
further development of programs by UNRWA
to help the Palestine refugees become self-
supporting. Previously sketchy projects became
the subject of concrete planning, with UNRWA
and Near Eastern Governments working in
active and close collaboration. Meanwhile, a
relief program was being maintained for the more
than 800,000 refugees on relief rolls.

UNRWA set aside $40 million for the develop-
ment of water storage and irrigation facilities in
the Jordan- Yarmuk watershed, and studies are
proceeding rapidly in an effort to solve the remain-
ing problems of water utilization and land settle-
ment. The Egyptian Government has made a
proposal for aiding the refugees in the Gaza area
through the irrigation of a portion of the Sinai
peninsula with Nile River water. Preliminary
engineering reports are favorable, and the tech-
nical surveys are now being carried out with the
cooperation and support of the Egyptian Govern-
ment.

Additional tracts of land have been designated
by the Syrian Government for possible develop-
ment for the benefit of refugees. Reclamation
of lands already made available by the Govern-
ment is underway, using the labor of the refugees
themselves.

UNRWA continued to receive the backing of
virtually all of the membership of the United Na-
tions outside the Soviet Bloc. Over 50 nations
have contributed since the agency was established,
although most of these contributions have neces-
sarily remained small.

Economic Aid to Israel

The United States continued to carry out a pro-
gram of special economic aid to Israel, in addition
to a program of technical assistance. This special
program was initiated in the amount of $63.5
million from fiscal year 1952 appropriations and
was continued through fiscal year 1953 with an
appropriation of $70.2 million.

Of the $70.2 million in special aid funds for
fiscal year 1953, roughly $44.6 million was ex-
pended for current consumption items. The
largest portion, about $23 million, was used to
buy foodstuffs. Other commodities purchased in-
cluded fuel, fertilizer and fodder, pesticides, raw
materials, and medical supplies.

Resettlement and capital development items
totaled $25.6 million. The two largest items of
these expenditures, totaling about $11.5 million,
were for irrigation equipment — principally ma-
terials for manufacturing irrigation pipe, motors,
and pumps — and for housing construction. Power
and industrial equipment, farm machinery, trans-
portation equipment, and similar items accounted
for the balance of expended funds.

Near East Security

From the standpoint of defensive strength in the
area of the Near East as a whole — that is, the area
stretching from the Greece-Turkey Mediterranean
region, eastward to the subcontinent of India, and
southward through Saudi Arabia and Egypt — the
Mutual Security Program has achieved sub-
stantial, if partial, success.

The substantial success lies in the greatly
strengthened posture of Greece and Turkey.
Powerful resistance could be offered to any direct
attack. Turkey is in a strong flank position to
protect the road to the oil of the Persian Gulf.

The success is only partial because, although the
area is still free of actual Soviet occupation, it
cannot by any means be considered safe for the
free world.

Military Aid to Greece, Turkey, and Iran

The United States has supplied military assist-
ance to Greece, Turkey, and Iran in order to
enable these strategically located nations to im-
prove their armed forces and to strengthen their
defensive capabilities. The value of the military
aid shipped to these three countries under the
Mutual Security Program through the end of
June 1953 amounts to over $600 million. Almost
$150 million of materiel was shipped in the first
6 months of 1953.

The military assistance program has had a
direct impact on the combat effectiveness of the
Greek armed forces. Since the beginning of the

33

■ =$fam&*-

United States Air Force section adviser gives final advice to Royal Hellenic Air Force jet students preparing
to take off on solo flights in F-84's (thunderjets) . These aircraft have been supplied to the Royal Hellenic
Air Force under the United States military assistance program.

program, the Greek military establishment has
changed from a loosely knit organization, designed
to cope with guerrilla activity, into a compact
and well-trained force. Supporting weapons
provided by the United States have included
armor and antitank weapons, as well as light and
medium artillery. The Royal Hellenic Air Force
is being provided with jet aircraft to modernize
those units now utilizing conventional propeller-
driven planes.

In improving her armed forces, Greece has
demonstrated a ready ability to assimilate United
States military advice and assistance and to
utdize efficiently the equipment provided. The
Greek Government has contributed strong mditary
units to NATO, and also to the United Nations
forces in Korea where a reinforced battalion of
Greek Infantry and a squadron of C-47 transports
have served with distinction.

The military assistance program has also
provided the necessary impetus for Turkey to
rehabilitate her armed forces. When the mditary
aid program started in 1947, the Turkish defense
establishment consisted of well-disciplined and
hardy troops, but little modern equipment,
training, organization, logistic support, or funds.
Since that time, the Turks have steadily expanded
their forces and built up their mditary strength.

The defense effort in Turkey has developed with
emphasis on a strong army. Bordering on power-
fully manned Iron Curtain countries, Turkey has
been compelled to rely on a large standing army
to meet the initial impact of any invasion. The
Turkish Army is being organized into a hard-
hitting, relatively mobile force that can be
deployed quickly along the country's critical
frontiers. The Turkish Ah Force is being equipped
for vital support missions.

34

The buildup of its armed services has enabled
Turkey to make substantial forces available to
NATO. The performance of a Turkish brigade,
fighting alongside other United Nations troops in
Korea, has displayed Turkey's magnificent fight-
ing qualities and firm determination to stand with
the free world.

In Iran, United States military aid has been
designed to assist in the maintenance of internal

security and to increase the defense capabilities
of the Iranian armed forces. Since the beginning
of the military aid program for Iran in 1950, the
major items provided have included motor vehi-
cles, tanks, mortars, rocket launchers, recoilless
rifles, ammunition, signal communications equip-
ment, and maintenance spare parts. While the
military aid has been moderate, it has been re-
flected in the general improvement of the Iranian
armed forces.

35

CHAPTER IV

South Asia and the Far East

DURING the first half of 1953, 12 nations in the
South Asian and Far Eastern area were partici-
pating in the Mutual Security Program. Four of
these nations — India, Pakistan, Afghanistan, and
Nepal — are in South Asia. Eight are in Southeast
Asia and the Pacific region — the Republic of China
on Formosa, the three Associated States of Indo-
china, the Philippines, Burma, Indonesia, and
Thailand.

If Communist expansion is to be halted, it is
essential that these countries of free Asia, with
their wealth of human and material resources,
continue to be alined vvith the free world. In
varying degree, they all face grave threats to their
freedom and independence. The Communists
have been waging open warfare in Korea and
Indochina, while fostering militant subversion —
armed and unarmed — in other parts of the area.
In most of these countries, too, there is pervasive
discontent, which can at any time flare up in
violence and revolt. While free Asia thus offers
fertile ground for communist aggression, it also
presents a challenge for effective action by the rest
of the free world. The Mutual Security Program
is the American response to that challenge.

The general instability and critical difficulties of
the area are a product of numerous, complex
factors. Most of the governments are newly
independent and consequently inexperienced.
There is an acute shortage of trained and educated
personnel, both in private and public operations.
Capital equipment is inadequate and obsolete,
and outmoded techniques keep productivity low.
Maldistribution of income produces dangerous
extremes of poverty and wealth. There is in-
sufficient domestic or foreign private investment,
with little prospect of near-term increase in the
rate of capital formation. Country development
is unbalanced and characterized by reliance on a

few major exports so that national economies are at
the mercy of fluctuating world markets. Chronic
food shortages bring recurring crises, and many
countries cannot fill their import requirements for
rice and other food grains

The solution to these basic and multiple
problems is not found in quick cure-alls or magic
nostrums but in persistent and well-planned
cooperative effort. The burden of such effort is
being shouldered primarily by the Asian countries
themselves, but the United States, under the
Mutual Security Program, is doing much to
remove bottlenecks and fortify the chances for
ultimate success. The free world needs a strong,
free Asia.

Mutual security programs are speeding progress
and promoting stability in a variety of ways — by
providing the technical advice and material aid
needed to do specific jobs; by helping to develop
local trained leaders and technicians; by demon-
strating methods to raise food production; by
making available advanced medical knowledge
and providing critical drugs; by helping to plan
and install adequate public services; by showing
how to improve educational methods, budget
practices, and tax systems. Mutual security
programs are also aimed at creating more favorable
conditions for private investment, both foreign
and domestic. In short, the aid program serves
as a catalyst, making possible the more effective
utilization of a country's own resources through
its own efforts.

In certain countries of the area — Indochina,
Formosa, the Philippines, and Thailand — the
Mutual Security Program is strengthening military
and internal security forces by providing necessary
equipment and training. Economic and technical
assistance measures contribute directly to this
objective by helping to build firmer economic

36

foundations and develop political and social
stability.

The area as a whole, as well as individual
countries, must be strengthened. Critical short-
ages of food and other essential materials can only
be met through an increase in production and
trade. By expanding trade among themselves
and with the rest of the free world, these countries
can contribute to one another's development.
The loss of prewar trade with China, makes
Japan, in particular, dependent upon the countries
of South and Southeast Asia for essential materials
and markets. The Japanese can, in turn, supply
capital equipment and technical skills which these
countries require for then development.

Production Of Rice— Mainstay Of The Asian Diet-
Has Not Kept Pace With Population Growth

(Data refer to non-Communist countries of South Asia and the Far East)

Prewar

Present '

Metric Ions of rough rice

Populalion-1938; production-average for crop years 1935/36-1939/40

Populalion-1952; produclion-average for crop years 1950/51-1952/53

The inexperience of most Asian governments in
the field of economic planning, their preoccupation
with pressing internal problems, and lack of stable
economic ties with one another in the past combine
to retard a coordinated regional effort. As the
governments gain in experience and knowledge,
however, greater progress in this direction may
be anticipated. The United States is prepared
to support efforts along this line. In the mean-
time, our bilateral assistance to each of the par-
ticipating countries takes into account both the

requirements and the opportunities for regional
development.

Supplementing Free Asia's
Resources

On the military side, in the first 6 months of
1953, materiel valued at $390 million was shipped
from the United States to the nations in the Far
East receiving military assistance. From the
start of the military assistance program in this
area in 1949 to the end of June 1953, a total of
$1,626 million worth of aid had been programed.
By the end of June, $974 million worth had been
shipped. In addition, offshore procurement con-
tracts of nearly $38 million have been placed by
the Department of Defense in Japan and Formosa
for military materiel.

Dining the 6 months ended June 30, 1953, the
total value of Mutual Security Program expendi-
tures for defense support, and economic and tech-
nical assistance in the Far East and South Asian
area, was $130 million. Expenditures since the
beginning of this program in June 1950, totaled
$391 million.

Indochina. — For over 6 years, the forces of
the French Union and the national armies of the
Associated States of Indochina have been fighting
a bloody but indecisive war against the Com-
munist-reinforced Viet Minh aggressors. France
has incurred heavy losses of her officers and men.
The French Government has been spending over
$1 billion a year to support the exhausting and
difficult military campaign, but it cannot shoulder
the entire cost without adversely affecting France's
military contribution to the forces in Europe.

The defense of Indochina, an important gate-
way to the vast resources of Southeast Asia, is a
matter of grave concern to the whole free world.
Since France cannot fulfill her commitments both
in Europe and Asia without outside assistance,
the United States is providing needed weapons
and equipment to the non-Communist forces in
Indochina.

Military assistance to the armed forces of the
French Union and the Associated States con-
tinued on a high priority basis during the first 6
months of 1953. Deliveries dining this period
included large numbers of vehicles, artillery
pieces, communications equipment, landing craft,
and certain types of vitally required aircraft.

37

Military Aid Shipments Were Accelerated To Meet The Critical Situation In The Far East

1 Value of materiel supplied exclusive of charges for repair and rehabilitation of excess
stocks and packing, handling and transportation. Includes value of excess stocks.

'April— December
3 January-June

The monthly rate of shipment was almost double
the average for 1952. These shipments, and their
effect upon military operations, have been of major
importance in improving the critical military situa-
tion in Indochina and denying Communist ambi-
tions for control of all Southeast Asia. However,
victory is far from won.

Additional empbasis is being placed on building
up the national armies of the Associated States.
In the struggle to prevent the Indochina region
from being overrun by Communist might, the
assistance of French Union military forces, in
terms of men, equipment, and training, has been
indispensable to the development of these na-
tional armies. In time, however, the Indochinese
forces should be able to take over a larger share
of the burden of protecting their fellow country-
men from Communist attack. As the local forces
become stronger, the French will increasingly be
able to transfer from Indochina to Europe the
trained officers and men who are much needed
for the buildup of NATO forces.

Despite the substantial assistance of France

and the United States, the Associated States are
obliged to strain their resources to the utmost in
order to finance their military effort. Vietnam,
largest of the three states, is now spending about
70 percent of total budgeted funds on its armed
forces.

In addition to weapons and material, the
Mutual Security Program has provided also a
substantial amount of dollar aid for defense sup-
port to the anti-Communist forces. Transport
and communication projects, for example, while
useful for the civilian economy are currently
essential to the conduct of military operations.
The total road mileage in the strategic Tonkin
Delta reconstructed or repaired with United
States assistance was considerably expanded
during the first half of 1953. Airfields and water-
ways were improved, and construction was con-
tinued on warehouses and port facilities.

To relieve the military authorities of respon-
sibility for the care of war-tossed refugees, the
United States continued to provide food, blankets,
medicines, and material for temporary housing.

38

In the past 6 months, the United States also
assisted the government of Vietnam in resettling
5,000 war refugees on 75,000 acres of idle land ia
the southern part of the country.

Eai'ly this year, the United States undertook to
help establish a pilot project at Dong Quan in the
Tonkin Delta, under which some 25 rural villages
are to be regrouped into a single fortified center.
This project is designed to prevent Viet Minh
raiders from extorting food and conscripts from
the defenseless farming population. If Dong
Quan is successful, similar defensible centers will
be built which will not only improve the difficult
life of the villagers but will also weaken the mili-
tary potential of the Communists.

Technical and economic assistance is increasing
the effectiveness of public services and helping
the governments in the three Associated States to

gain greater popular support. American medical
experts and supplies have been made available to
assist the local public health authorities. This
aid has made it possible to extend protection
against malaria to over a million people, to treat
180,000 victims for the blinding eye disease of
trachoma, to equip 1,800 first-aid dispensaries in
rural areas, and to sink hundreds of deep wells
which provide safe water and reduce the parasitism
which plagues the farming population. Assistance
has also been given to the Associated States'
campaign against illiteracy. This campaign has
been highly successful in refuting the Viet Minh
charge that the non-Communist governments are
anxious to keep the people in ignorance.

In the 6-month period, the integrated program
to aid agricultural production was continued.
Fertilizer was distributed on a demonstration

A 155 -mm. rifle being unloaded at the port of Saigon as part of the military assistance program to aid in the
defense of Indochina.

39

basis to over 270,000 farm families, irrigation
works were extended, rice storage facilities were
built, and more productive strains of rice seed
were developed.

Formosa. — -It is in the interest of the United
States to develop the military capabilities of the
Republic of China on Formosa. The Mutual
Security Program accordingly is furnishing mili-
tary equipment and training assistance to the
armed forces of the Chinese Government. This
military aid program has materially helped to
improve the combat efficiency of the Nationalist
military establishment.

Progress toward the military goals of the Re-
public of China was greatly accelerated during the
first balf of 1953 by deliveries under the Mutual
Security Program of aircraft, vehicles, and com-
munications equipment. A successful effort was
made to increase standardization both in materiel
in use and in the local production of ammunition.

A United States Military Assistance Advisory
Group bas not only supervised the supply of needed
equipment but has also helped to provide military
training, to reorganize the Chinese Nationalist
armed forces and to plan the defense of Formosa.

To complement the military end-item and train-
ing aid, the Chinese Government also receives de-
fense support from the technical and economic

Military Costs Absorb Almost Two-Thirds Of
Chinese Government Expenditures

Consolidated National and
Provincial Government Finances

1953

$132 Million1

(In Dollar Equivalents)
' Convened at Ibe rate of one U. S. dollar =z $15 65 new Taiwan dollars

assistance program. Direct assistance is provided
in the form of United States-financed imports of
food, petroleum, engineering equipment, and medi-
cal supplies. Under this program, too, dollar
funds are made available for projects recommended
by the MAAG, primarily the construction of roads,
bridges, storage facilities, and barracks. Counter-
part funds, derived from the sale of commodity
imports financed under the Mutual Security Pro-
gram, are used to defray the local currency costs
of these logistical support projects.

Chinese arsenals, rehabilitated in part with
United States assistance, now are being used to
manufacture small arms and ammunition. The
proceeds from current contracts under the offshore
procurement program, valued at $5.8 million,
are being controlled carefully so that they will
finance additional supplies of raw materials needed
for further production.

The cost of maintaining the existing military
establishment, with armed forces of all types
totaling about 550,000 men, results in expenditures
amounting to 63 percent of the combined national
and provincial government budgets. The Chinese
Government requires counterpart assistance to
cover budgetary deficits arising from the high
cost of maintaining its military forces.

Economic and technical assistance measures
also build up the capabilities of the Chinese
Government on Formosa by helping to develop
economic stability and increase the capacity for
self-support through planned development of
Formosan industry and agriculture.

The maintenance of economic stability has been
facilitated by the improvement of the economy in
general in terms of increased production and higher
exports. Certain basic weaknesses, however, still
exist. Although export earnings have gradually
increased, there is still a considerable gap between
receipts and import requirements. Production
facilities remain inadequate to support the present
population. The economy is still vulnerable to
inflation, and the price structure is highly sensi-
tive to supply shortages. The economic stability
thus far achieved is consequently only precariously
maintained.

Despite the delicate internal balance, develop-
ment of industry and agriculture, planned with a
view to achieving ultimate self-support, has moved
forward steadily. In the field of agriculture,

40

dollar and counterpart funds have been used to
finance the program of the Sino-American Joint
Commission on Rural Reconstruction (JCRR),
designed to increase crop and livestock produc-
tion, improve farmers' living conditions, and sup-
port and strengthen local agricultural services.
Increased application of fertilizers, made possible
largely by United States financing, has been a
major factor in achieving increased production of
principal agricultural crops, such as rice. During
1953, the local fertilizer distribution program is
being expanded in a drive to raise rice production
to 1.7 million tons, a figure which tops by 20 per-
cent the peak achieved before the war.

During the first half of 1953, the JCRR played
an important role in initiating the third and final
phase of the comprehensive land reform program.
After helping to carry out rent reduction and the
sale of public lands, which constituted the first two
phases of the program, the JCRR is now actively
engaged in helping to train thousands of workers
to perform the complex task of equitably trans-
ferring some 400,000 acres from private landlords
to tenant faimers.

Philippines. — Military commitments of the
Philippines include those which pertain to preser-
vation of its own internal security and those
assumed under the United Nations and the mutual
defense treaty with the United States. Military
aid has made it possible for the armed forces of
the Philippines to suppress in large measure the
Huk insurrection which has been aided and, in
part, led by Communists. The final elimination
of armed dissidence, however, depends upon im-
proved conditions in rural areas.

The Philippine Army maintained one battalion
combat team in Korea. The Philippine Navy
adequately supported this expeditionary force and
also performed creditably in disaster relief and
rescue missions. The capabilities of the Philip-
pine Navy, with regard to performance of its
Coast Guard functions, increased materially with
United States deliveries of Coast Guard patrol
craft.

To finance the buildup of its military establish-
ment and to defray the cost of extended opera-
tions against the Huks, the Philippine Govern-
ment has increased military appropriations from
the equivalent of $52 million in 1950 to $91
million in 1952.

In providing assistance to the Philippines, the
United States seeks to encourage and support the
government in carrying out needed economic and
administrative improvements. An essential pre-
requisite to the most effective use of American
aid is the formulation of an overall development
plan. During the first half of 1953, the Philip-
pine Government, with American advice and
assistance, directed the National Economic Coun-
cil to undertake a revision of existing, incomplete
development plans and, with the aid of counter-
part funds, provided the support which the Coun-
cil needed to initiate the task.

The past 6 months also saw marked progress
toward increasing food production, primarily rice
and corn. Distribution of fertilizer to 85,000 small
food crop producers was completed; three govern-
ment seed farms, rehabilitated with American as-
sistance, produced 75,000 pounds of improved seed.
Work progressed on 5 gravity irrigation projects,
designed to irrigate 215,000 acres. Nine pump
irrigation systems, each capable of watering 700
acres, were installed and construction of 20 more
undertaken. These varied but complementary
activities have aided so materially in increasing
production that this year, for the first time in
recent history, the Philippines has attained virtual
self-sufficiency in rice and corn.

The Mutual Security Program is assisting the
Philippine Government to open public lands to
orderly settlement and thereby reduce the pres-
sure of population on overcrowded rural areas.
In the past 6 months, land survey teams, trained
and equipped under the Mutual Security Program,
classified 200,000 acres and allocated 20,000 farm
and 1,000 urban lots.

To help the farmer retain a fair share of his
increased production, 14 rural banks offering low-
cost credit were capitalized with counterpart funds,
and 3,000 farmers were organized into credit co-
operatives during the first half of 1953. Similarly,
to help the worker obtain an equitable return for
his labor, American technical experts assisted in
drafting the new basic labor law which establishes
the right of employees to organize freely and
bargain collectively.

During the past 6 months, United States-
financed surveys of coal and mineral resources were
stepped up and resulted in the discovery of
numerous deposits suitable for economic develop-
ment. A peso industrial guaranty and loan fund

41

equivalent to $5 million, began operating to
stimulate Philippine private investment through
long-term industrial loans by commercial banks.
Despite these accomplishments, much remains
to be done if long-standing economic and social
ills, aggravated by war and insurrection, are to be
corrected. A more equitable system of land
tenure is needed to allay agrarian unrest, while
food production must be constantly expanded to
keep pace with the growing population. Perma-
nently enlarged sources of revenue, adequate to
cover needed increases in expenditures for public
services and for defense, must be found. Planning
and administration must be further improved, and
the climate for foreign investment made more

favorable if the Philippines are to realize their
economic potential.

Thailand. — The invasion of the state of Laos
by the Communist-reinforced Viet Minh forces
in April 1953 posed a potential threat to Thailand.
High priority was given to the shipment of United
States military equipment to combat this menace.
Materiel delivered during the first 6 months of
1953 enabled Thailand to continue the process of
modernizing its ground forces and training its
small but efficient air arm.

The Koyal Thai Ah Force is a striking example
of the utilization of military aid equipment. For
example, from 1947 to 1950, the entire ah' force
averaged 1,500 hours per year flying time, but in

Thai technicians studying ways to combat liver fluke infection. An estimated 1,500,000 people in northeast
Thailand are injected with this parasitic disease. Parasitic injection control units are being set up in the
area with American technical ad-vice and material help.

42

1951 and 1952, it flew 48,000 hours per year or an
increase of over 3,000 percent. Military assist-
ance from the United States helped the Thai to
maintain one battalion of troops in Korea under
the United Nations Command.

The Thai Government is devoting an increas-
ingly large share of its revenues to improving the
combat efficiency of its armed forces. In 1953,
the equivalent of $107 million, or approximately
36 percent of total national budget expenditure,
was set aside for this purpose. The recent
stepping-up of Communist activity in Southeast
Asia may obligate the Thai to devote even greater
sums to national defense.

A large proportion of aid funds for Thailand has
been spent on various measures to increase food
production. During the past 6 months, the first
phase of the extensive rice-breeding project, initi-
ated with American aid during 1951, was virtually
completed. Almost 150,000 selections of rice
strains have been made since the inception of this
project, and a large number of these show increases
in yield of as much as 50 percent above standard
varieties. These more productive strains have
now been chosen for multiplication and will be
available for distribution in 1954.

The Mutual Security Program has supplied
technical assistance and equipment for a series of
irrigation projects which have already brought
150,000 additional acres of land under cultivation.
The first 6 months of 1953 saw the successful
completion of ditching and diking projects, and of
pump installations in several areas.

With United States assistance in the form of
technical advice, sprayers, and DDT, the Thai
Government is carrying out a comprehensive pro-
gram designed to eradicate malaria. During the
past 6 months, the scope of this program was
broadened to provide protection to 3 million
people. Increased emphasis was also placed upon
training so that sufficient personnel will be avail-
able to staff the expanded public health service.

In the field of education, the United States is
helping to expand the facilities of the Technical
Institute established last year, so that enrollment
can be increased almost tenfold over the level of
June 1953. Equipment and technical advice on
training courses also have been provided for
Thailand's trade schools.

The Thai Government is taking active measures
to develop the country's resources. During the
past years, increasing amounts have been appro-
priated for development projects entirely self-
financed. The 1953 budget provides triple the
amount spent for such investments in 1949 and
earmarks particularly large sums for railroads,
highways, and power developments.

Counterpart Funds. — The foregoing four coun-
tries deposited the equivalent of over $220 million
in their local currency counterpart accounts
between June 5, 1950, and June 30, 1953. With-
drawals from these.special accounts are made for
purposes mutually agreed upon by the United
States and the depositing country. Local cur-
rencies equivalent to nearly $215 million were
available for financing counterpart programs
within these countries, following the transfer of
the equivalent of about $7 million to the account
of the United States to meet certain overseas
costs incurred in administering the aid program.

The Mutual Security Agency, through June
30, 1953, had approved the use of approximately
$180 million of counterpart funds for these Far
Eastern countries.

In Formosa, about 43 percent of counterpart
funds has been released for the procurement of
military materiel and the construction of military
installations. Major non-military uses of counter-
part have included $19 million for the operations of
the Joint Commission on Rural Reconstruction
(JCRR), $19 million for agricultural development,
$7 million for power facilities, $6 million for
highways, and $5 million for development of
manufacturing and mining.

In the Associated States of Indochina, counter-
part totaling over $23 million has been released
for a wide variety of projects. Over $5 million
has been used for highway reconstruction and
development, and a like amount for public admin-
istration. Other major projects include agricul-
tural development, public health, and low-cost
housing.

Philippine counterpart funds have been ear-
marked in large part to finance agricultural
development. Other major purposes for which
counterpart has been utilized include construction
of highways, industrial development, improvement

43

of government services, low-cost housing, and
general public works.

In Thailand, counterpart funds have been used
mainly for agricultural development and public
health programs. Counterpart funds have also
been released to finance the development of mining
and to improve and expand educational facilities.

India. — The democratic way of life is today
undergoing perhaps its most crucial test in India.
Here we have, on the one hand, the largest self-
governing nation in the free world engaged in a
great effort to lift its millions onto a higher plane
of social and economic life through the concept of
democracy and the ways of freedom. On the
other hand, in direct competition next door, so to
speak, Communist China professes a similar effort
toward progress but through the concept of
totalitarianism and the ways of the police-state.

This rivalry in method and ideals between the
two largest countries in the world directly affects
the lives of some 800 million people, almost a third
of the world's total population. It is inevitable,
therefore, that the ultimate outcome will bear
heavily upon all mankind, including ourselves.

India is presently striving under its first 5-year
plan to reach a set of minimum development goals
by 1956. These goals are concentrated primarily
on agricultural requirements, but other economic
needs are taken into account. Development plans
call for more intensive and efficient use of water
resources for agricultural production, and power
generation for industrial expansion. Railways
and port facilities will be extended. Existing
manufacturing plants will be modernized, and new
plants constructed.

India's 5-year plan proposes an expenditure of
roughly the equivalent of $4.3 billion by central
and state governments. Private industrj^ and
private individuals are expected to invest the
equivalent of another $3 billion in economic
development activities. This is a sum which
imposes the most severe strain on India's economy.

Achievement of the 5-year plan will not auto-
matically bring satisfactory living standards to all
India, but it will lay a sound foundation for pro-
gressive development of the country's economy.
It will give the Indian people the strength and hope
they need to continue the struggle for more than
just marginal subsistence levels. Success of this
plan involves demonstrated success of the demo-

India's 5-Year Plan

Major Projects

Industrial
Development

/W^\^f ^lllilllflll^

/"-*'.'■'; Ag ri cu 1 1 u re '■'■■'-'■'^N^

;|||i|f Irrigation ?||lg|i
gj|||pand P°werj||||la,

Wv •:■;'.'. Socio 1 Services .'•.'•:•
Wv.( Health, Education.etc.)

V 23%

^^Transportation $$§y
J and Communication^

$4.3 Billion '

' Proposed expendilures (in dollar equivalent) by (he central and slate governments
of India

cratic method as the right way to greater progress
for hundreds of millions of Asians.

Village improvement is a major phase of India's
development plan, and United States technical co-
operation is centered around this concept. For the
fiscal years 1952 and 1953, a total of $11 million in
United States funds and about $80 million in
Indian rupees have been obligated for community
development work. Out of 124 American tech-
nicians in India at the close of the fiscal year, over
half were working directly with more than 1,000
Indian associates in village improvement projects.
These projects are introducing more efficient agri-
cultural tools and techniques, building schools,
laying down farm-to-market roads, digging wells,
installing sanitary sewage disposal systems, and
opening new farm cooperatives.

In a typical village community, about 100 vil-
lages are grouped together in a development block
which takes in about 50,000 acres and 100,000
people. In the fiscal years 1952 and 1953, over
160 of these development blocks were initiated,
encompassing over 16 million people.

A field report from Nayagarh, Orissa, gives a
microcosmic picture of India's village develop-
ment program: "In five of the villages, drains have

44

Water for India's campaign to grow more food comes from this new tube well, financed in part by the Indian
Government and built with the assistance of American technicians.

been dug for the village streets ; hundreds of cart-
loads of earth hauled in to grade the street ; every
family has dug a compost pit; a small dispensary
and a library have been established. The vil-
lagers are working toward a goal of sowing 100
percent of their rice crops with new varieties."

The productive efforts of villagers like these to
improve their standard of living are the result of
the spirit and teamwork flowing out of Indo-
American technical cooperation.

American experts are advising the agriculture
departments of the state governments on methods
for improving cultivation techniques and raising
agricultural productivity. As a result of seed and
fertilizer demonstrations, rice production in one
development area is already 2}{ times last year's
level.

River-valley development projects are increas-
ing irrigation and expanding power-generating
capacity. The projects which the United States
is already aiding with technical advice and con-
struction equipment will bring 3.7 million acres of
land imder irrigation and provide power capacity
of 325,000 kilowatts by 1956. This will mean
almost 2 million tons of food added every year to
India's domestic supply.

The United States is participating in a program
to provide over 2,000 irrigation wells, averaging
300 feet in depth. These wells are being drilled
under a program to irrigate a land area of 640,000
acres in the region of the Ganges Plain. This
type of irrigation will bring an estimated increase
of 480,000 tons in food-grain output.

The United States is also providing India with

45

needed fertilizer, iron and steel for farm tools,
DDT for malaria control, and essential medical
supplies.

Pakistan. — The Government of Pakistan is
planning to improve the present critical agricul-
tural situation and lay a foundation for future
basic industrial development along lines suited to
the country's requirements.

One method of achieving these purposes is
through the establishment of agricultural-indus-
trial development centers to train village-level
workers in such fields as vocational agriculture,
environmental sanitation, and village industry.
These workers will then operate as extension per-
sonnel in surrounding areas to impart improved
methods and techniques to the Pakistani farmers.
It is hoped to have workers servicing about 10
percent of all Pakistan's villages by mid-1954.

Training centers are being established in both
East and West Pakistan. Village leaders in the
northwest frontier province have already begun
their training, and American technicians assigned
to the centers have helped lay the basis for further
expansion of the village development program.

Fertilizers are vital to any substantial increase
in crop yields. The United States has shipped
13,000 tons of artificial fertilizer to Pakistan under
the 1952 program, and shipments under the 1953
program will total 75,000 tons. This additional
fertilizer will add at least 170,000 tons of food
grain to Pakistan's next food crop.

Locust control work has been extremely effec-
tive in reducing locust damage to food crops. In
addition to spraying from planes, American tech-
nicians, supplemented by hundreds of Pakistani
volunteers, have assisted the ground-control opera-
tions of the Pakistan Government.

Pakistan presently is facing serious economic
difficulties. Foreign exchange reserves have de-
clined 60 percent in the past year. Two crop
failures in succession have brought the imminent
danger of widespread famine and caused the
government to turn to outside emergency aid.
In the fall of 1952, the United States made a $15
million loan to Pakistan for the purchase of wheat.

Continued damage to crops, however, resulted
in even heavier demands for food imports in order
to avert starvation and the possibility of a govern-

ment breakdown. To help the Pakistani people
through then* time of crisis, the United States
Congress authorized the President to make avai-
able up to 1 million tons of surplus wheat.
About 700,000 tons are being furnished im-
mediately on a grant basis. Disposition of the
remainder will depend on the future situation.
The first shipment was dispatched on June 26,
and every effort is being made to expedite trans-
portation of the balance.

It has been provided that the grant wheat will
be distributed without discrimination and without
cost to those who are unable to pay for it. The
Pakistan Government has proceeded to give full
publicity in Pakistan to the objectives and
progress of the aid program and to carry informa-
tion to the people of Pakistan that this program is
evidence of the friendship of the people of the
United States for them.

Afghanistan. — The major phase of Afghani-
stan's development program is a project to develop
the irrigation and power potential of the Helmand
River and its tributaries. The construction of
two high dams and other works is being carried on
by an American engineering and construction firm.
To finance the project, Afghanistan has expended
$17 million of its own funds and has borrowed $21
million from the Export-Import Bank. The
United States contribution was the cost of pro-
viding the services of 10 technicians for a 2-year
period.

Major phases of the dam construction program
have been completed, and water is already being
stored. Afghanistan now faces the problems of
organizing nomads for community life, of teaching
efficient irrigation and farming techniques, of
establishing health, education, and processing and
distribution systems. Because Afghanistan has
only a handful of men trained for this work, the
Mutual Security Program has provided a team of
specialists to help the country in its planning and
surveying problems.

Under the Mutual Security Program, the
University of Wyoming has sent a director of
vocational agriculture and three instructors to
the agricultural school in Kabul. Thirteen Af-
ghans in turn were brought to the United States
for training at the university in the fields of agri-

46

culture and engineering. American technicians
are also helping to increase Afghanistan's coal
production and develop its mineral resources.

Burma. — The government of the Union of
Burma on March 17 notified this Government that
it did not desire further United States aid after
June 30, 1953. In asking for the termination of
additional aid, the Burmese Government put on
record its gratitude for the materials and services
furnished by the United States under the Mutual
Security Program, and expressed its appreciation
of our help in implementing Burmese rehabilita-
tion measures. No new funds have been requested
for this program for fiscal year 1954.

Under a joint Burmese-American plan to close
out the program in an orderly fashion, project
agreements under which no activity had begun
were canceled. In order to complete those activ-
ities in which Inordinate waste, or dissipation of
material progress achieved, might ba caused by
complete withdrawal of United States participa-
tion on the specified date, projects which can be
completed without further ordering of substantial
equipment are being continued.

With United States economic and technical as-
sistance, Burma has made good progress toward
increasing its rice production. Milling processes
have been improved, and storage facilities have
been made more efficient.

Rehabilitation of the key port of Rangoon has
been a major accomplishment of the assistance
program to Burma. The United States has sup-
plied the necessary engineering advice and critical
supplies for this restoration project. Not only has
the port been largely rebuilt and improved, but a
large pool of skilled workers has been trained.

In the field of public health, malaria and other
rural health problems are under vigorous attack
over a wide area.

Indonesia. — The present rice shortage is a
major threat to Indonesia's economic and political
stability. In recent years, Indonesia has had to
import an average of 500,000 tons of rice annually
to feed her 80 million- people.

The technical cooperation program is assisting
in several ways the Indonesian Government's
efforts to increase food production. Over 370,500
acres of riceland are being rehabilitated, and
yields on 7,500 acres have already been doubled.
American technicians are training Indonesians to

clear land mechanically, and to operate and
maintain purchased equipment. American agri-
cultural experts have demonstrated how hybrid
corn can double yields, and are now working with
the Indonesian Extension Service to show the
Indonesian farmers how to get bigger crops.
The program also is helping to develop better
marketing techniques and improve food processing.
Particularly encouraging progress was made in
fisheries improvement. The Mutual Security
Program enabled the purchase of 60 motorized
boats, 50 to 60 feet in length, capable of going
out 60 miles and keeping the catch fresh for 3 or
4 days. These craft were turned over to village
cooperatives.

As a result of a project in ceramics production
in Indonesia, workers' wages in one area have
increased 50 percent in recent months, and a
better product is being produced at lower cost.

Nepal. — In Nepal, the idea of agricultural ex-
tension and village development was new until
about a year ago. This year, the first class of
village workers in Nepal's own village improve-
ment program — a miniature of the Indian pro-
gram— finished their training and went into the
field in five different areas of the country. The
second class was about to graduate as this report
was written.

It is planned to initiate a modern irrigation
program in Nepal. United States assistance in
demonstration and training projects will help to
carry forward the drilling of tube wells to irrigate
8,000 acres and increase food-grain production by
about 1,600 tons a year.

American technicians are also helping Nepal to
combat malaria and develop its mineral deposits.

The Situation in Japan and
Korea

Japan

Up to the present time, Japan has not partici-
pated directly in the Mutual Security Program.
Yet the progress of all countries of the Far East
is immeasurably influenced by the economic
health and security of Japan. In recent years,
almost half the value of Japan's commercial
exports has been directed to the nations of South
and Southeast Asia. In addition, Japan has

47

provided vitally needed supplies to the United
Nations military forces in Korea.

Despite these existing links with the rest of free
Asia, Japan has great reserves of technical skills
and productive capacity which are not now being
fully utilized in building the economic strength
of the region. Although significant economic
progress has been made since the end of World
War II in rebuilding industries and restoring
international trade, Japan's commercial exports
during the first half of 1953 have been far below
the level of a year ago. Sterling reserves are
nearly exhausted. It has been possible to pay for
increasing imports only on the basis of extra-
ordinary dollar receipts. These receipts amount-
ing to approximately $800 million a year are
derived from procurement for United Nations
forces in Korea, the support of American security
forces in Japan, and the purchase of yen by
those forces for their personal requirements.

As this temporary source of funds begins to
dry up, Japan will be faced with crisis, unless in
the meantime greatly augmented foreign trade
with the free world, and particularly with the
developing nations of the region, has been fostered.
At present, the level of this trade is held down by
various factors including high Japanese costs,
import restrictions throughout the free world,
reparations stalemates, and lingering distrust of
the Japanese.

In these circumstances, the United States
Government should encourage Japan to formulate
realistic and farsighted economic policies. To
assist in the development of such policies, we are
seeking careful programming of United States
procurement in Japan, and are encouraging the
growth of mutually beneficial trade and invest-
ment among the free countries of the region.

The Security Treaty between the United States
and Japan, signed at San Francisco on Septem-
ber 8, 1951, recognized Japan's inability at that
time to provide adequately for its own defense
and granted to the United States the right to sta-
tion its forces in Japan. The treaty also expressed
the expectation that Japan would "increasingly
assume responsibility for its own defense." In
its national safety forces, Japan is creating a
means to maintain internal security and order.
The United States is folio whig a policy of assist-
ing Japan in the development of these forces for
its own defense by providing certain types of

equipment which cannot be provided by the
Japanese Government. In this connection, ne-
gotiations between the United States and Japan
on a Mutual Defense Assistance Agreement under
the mutual security legislation were commenced
in Tokyo on July 15.

Korea

Even before the Communists attacked in June
1950, South Korea suffered severely from eco-
nomic disorganization and underdevelopment.
The North Koreans controlled most of the nation's
industrial capacity. Three years of bitter war-
fare has caused enormous damage to housing,
public building, transportation, communications,
and industrial facilities. Agricultural production
has been cut severely. Five million people have
been swept southward, and many remain homeless
in temporary camps. It is estimated that about
700,000 Korean men are either in the Korean
army or engaged in military-support operations.

Bilateral aid has been extended to Korea by the
United States, not as a part of the Mutual Security
Program, but under a separate program, Civilian
Relief in Korea, which was authorized by Congress
in 1951 and has been administered through the
Department of Defense and the United Nations
Command. Under this program, relief goods
valued at more than $300 million have been
provided by the United States.

UNKRA. — The United States has provided eco-
nomic assistance to the Republic of Korea by
contributions to the United Nations Korean Re-
construction Agency (UNKRA), which was estab-
lished in December 1950 by the United Nations
to relieve the sufferings of the Korean people, i.o
assist them to repair the devastation caused by
aggression, and to lay the necessary economic
foundations for the political unification and inde-
pendence of the country. The United Nations
approved a $250 million initial budget for UNKRA.
Subject to congressional approval, the United
States pledged $162.5 million as its share and has
contributed $50.8 million. Continuance of hos-
tilities deferred large-scale operations by UNKRA
until January 1953, at which time UNKRA, in
agreement with the United Nations Command,
embarked on a program calling for the obligation
of $70 million by June 30, 1953, and contemplat-
ing a $130 million program for the 12 months
folio wing that date.

48

UNKRA program obligations for the 6-month
period ended June 30, 1953, have included approxi-
mately $20 million for sustaining commodity im-
ports of gram and fertilizer. Other obligations
have been, for, the most part, divided in roughly
equal proportions among projects of economic
assistance in the fields of education and health,
agriculture and fisheries, industry, power, and
transport. TJNKRA's studies indicate that far,
greater economic assistance will be required in the

future to restore the Korean economy to the
minimum basis under which the Korean people can
survive as a free country.

A United States presidential representative
recently surveyed the Korean economy to make
recommendations with respect to additional eco-
nomic assistance needed in Korea. These recom-
mendations are now being considered in planning
measures of economic assistance to the Republic
of Korea.

49

CHAPTER V

American Republics

' I 'HERE has been little question regarding the
-*- necessity for close working relations between
the United States and Latin America. Repre-
sentatives of this Government and representatives
of the Latin American countries, in general, have
taken essentially the same position on outstanding
political issues. Furthermore, the United States
and the Latin American countries are participants
in the oldest regional organization of which this
Government is a member — the Organization of
American States. This Organization had its
beginning more than 60 years ago and has played
a vital role in political, economic, and military
cooperation among the American Republics.

The basic interests of the United States and
those of the Latin American countries are rooted
in common ground. Even greater cooperation
would be bighly beneficial to both areas; on the
other hand, decreased cooperation would be
prejudicial to the entire Western Hemisphere.

Latin America is today undergoing far-reaching
political, economic, and social change. Life as it
has been lived in the past is under heavy criticism
as the position of the relatively small group which
has heretofore controlled most of the wealth and
power is being challenged. There is an increasing
awareness on the part of a great body of the people
not only of their depressed economic and social
status but of their expanding political power.

An extreme nationalism is being nurtured in
some countries by a deceptively misleading, though
effective, dogma. This dogma holds that the
Latin American countries are poor solely because
they have been exploited ruthlessly by the more
highly industrialized countries. The great dis-
parity in wealth and power between the United
States and Latin America makes our country a
choice target for this type of insidious criticism.

Economic conditions in Latin America at the
present time vary widely as between countries,
but everywhere the lot of the bulk of the people
is hard. In Latin America as a whole, per capita
income is not more than one-eighth the per capita
income in the United States.

Such circumstances are tailor-made for exploita-
tion by the Communists who, though they con-
stitute a relatively small part of the total popula-
tion, exert an influence out of all proportion to
then number in fomenting popular discontent.
The Communists find it expedient and profitable
to associate themselves with nationalist hopes
and feed the fires of nationalist desires. They
sow suspicion, discord and hate, hoping to reap
chaos and ultimate control of governmental
processes.

It is not surprising therefore that old institu-
tions as well as time-honored concepts — even the
concept of cooperation with the United States —
are being subjected to question in Latin America.
The political orientation of the Latin American
countries and our ability to count upon their
support in a divided world, as well as our ability
to assist them, will depend to a major degree
upon the extent to which they realize that mutual
cooperation is in the mutual interest.

Our Economic Interdependence

The economic interests of the United States
and Latin America are heavily interdependent.
This is reflected both in statistics on private in-
vestment and in the flow of two-way trade.

Our direct private investments hi Latin America
amount to approximately $5 billion. If in vest-
ments in Canada are excluded, direct private
United States investments in Latin America ex-

50

The Largest Share Of U. S. Private Capital Abroad
Is Invested In Latin America

U. S. Direct Private Foreign Investment
1951,byArea

S13.1 Billion

Idlest available daia

ceed those in all of the other countries of the world
combined.

Approximately one-half of Latin American for-
eign trade is with the United States. In 1952,
Latin America exported to the United States about
$3.4 billion worth of goods and imported approx-
imately $3.5 billion worth from the United States.
Our imports in 1952 from Latin America accounted
for approximately 32 percent. of our imports from
all sources; our exports to Latin America were
equivalent to approximately 23 percent of our
total export. In appraising the significance of
these figures, it should be noted that virtually none
of our exports to Latin America were financed by
grant aid.

In addition to basic foodstuffs such as sugar and
coffee, we obtained from Latin America many of
the raw materials which are essential to our econ-
omy both in peac? and war. Latin America is
the major single source of some twenty materials
on the United States stockpde list. Its depend-
ence upon imports from the United States, how-
ever, is probably greater than our dependence
upon imports from it. Latin America's exports
to us provide employment for a large segment of
its population. These exports also earn the dol-

lar exchange needed for the purchase of man-
ufactured goods, foodstuffs, and capital equip-
ment and for servicing dollar indebtedness and
equity investment utilized in economic develop-
ment.

As a part of a broad program to encourage
participation of United States private capital in
industrial development, a cooperative project is
being undertaken on an experimental basis in
selected countries in Latin America. Competent
United States investment advisors are being sent
to these countries to help them reduce local factors
which retard the flow of investment capital and to
explore existing investment opportunities.

Continued effort is being made to coordinate
and bring into play all available facilities, both
government and private, to promote the flow of
investment capital. United States technical as-
sistance can help provide a sounder basis for eco-
nomic growth, but the flow of private capital to
Latin America can stimulate and carry economic
development far beyond the capacity of a tech-
nical assistance program and produce mutual
benefits to all participants, both here and abroad.

Hemispheric Defense

The Latin American governments have become
increasingly aware of the need to improve the
effectiveness of their military establishments.
They have been spending sizable portions of their
own budgets on national defense, and they have
continued to request and utilize the services of
United States Army, Navy, and Air Force Mis-
sions to improve the state of readiness of their
armed services. They have purchased from this
country substantial quantities of arms with a view
to modernizing their forces. They also have made
purchases in countries other than the United
States when we have been unable to meet their
needs or to provide them as favorable terms of
sale.

There is at present, however, a wide gap be-
tween the willingness of many of the other Amer-
ican Republics to share in defending the hemi-
sphere and their ability to do so. They produce
little modern military equipment. Their armed
forces, in general, are not sufficiently large or
properly trained and equipped to carry more than
a part of the burden of protecting the hemisphere.

51

It was largely for this reason that during World
War II it became necessary for the United States
to station more than 100,000 troops in Latin
America and to use our naval forces to guard in-
stallations and critical areas in the other Amer-
ican Republics.

The military grant aid and training programs
for the American Republics are designed to
strengthen Latin American armed forces so that
they will be more capable of handling tasks which
are vital to the security of the Western Hemisphere
and which might otherwise require the deployment
of United States military components.

Military assistance appropriations for the Ameri-
can Republics through June 30, 1953, totaled
$89.8 million. Of this amount $79.9 million has
been earmarked for procurement and delivery of
materiel, $1.7 million for training expenses, and
$8.2 million for the fiscal year 1954 program.
Materiel valued at $140 million (including value
of excess stocks not charged against the military
assistance appropriation) was programmed for
delivery to Latin American countries as of June
30, 1953; the value of materiel shipped totaled
$65 million.

During the first half of 1953, military aid has
been supplied to Chile, Colombia, Cuba, Ecuador,
and Peru. In May and June, Brazil, Uruguay
and the Dominican Republic were added to the
list of countries eligible for military assistance
when they ratified bilateral military agreements
with the United States.

The Latin American governments are spending
substantial sums of their own funds to support
the forces included in the military aid program.
They are defraying such costs as pay, rations, and
uniforms. They have made or are making pur-
chases of materiel to help equip these units.
Such purchases by all Latin American countries
through May 31, 1953, totaled $58.9 million.
The Latin American governments participating
in the program also have agreed to pay the admin-
istrative expenses of United States military
personnel assigned to their countries to direct the
program.

The proportion of expenditures borne by the
recipient countries is particularly large in the case
of the navy and air forces. In spite of limited
and obsolescent facilities, most of the Latin
American countries have demonstrated that they

can maintain ships and aircraft, as well as other
military equipment, in effective operating con
dition. A majority of the Latin American nations
have taken active steps toward correcting de-
ficiencies in training and organization by request-
ing and securing the assistance of United States
military missions or advisors. It is expected
that the training programs currently in effect
under the guidance of United States military
missions and advisors will be continued. To
supplement the training we give abroad, spaces
are being made available in service schools in
this country for on-the-spot study of our military
methods by Latin American military students.

The Technical Assistance
Program

Latin America has the potential in terms fo
natural resources both to build a prosperous home
industry and agriculture and to expand foreign
trade. There are, however, a number of handi-
caps that it must overcome. In terms of present
technology and the basic needs of an industrial
society, Latin America is not well endowed. To
a large extent, the geographical and physical
environment of Latin America impedes economic
development. The Andean mountain range, which
lies athwart the length of the area, constitutes a
formidable barrier to transportation and com-
munication. Climatic conditions in many regions
are unfavorable to optimum human production.
Land and mineral resources in a number of coun-
tries of the area are limited.

Through the bilateral cooperative technical
assistance program, United States skills are being
sent to 19 of our neighboring American Republics '
to help them solve their most pressing economic
and social problems.

Spurred by a widening realization among Latin
American leaders of the need for overall economic
growth, the various phases of the cooperative
technical assistance program gradually are being
combined within the framework of a single broad
effort toward total country development. Under

1 These countries are: Bolivia, Brazil, Chile, Colombia,
Costa Rica, Cuba, Dominican Republic, Ecuador,
El Salvador, Guatemala, Haiti, Honduras, Mexico,
Nicaragua, Panama, Paraguay, Peru, Uruguay, Venezuela.

52

this concept, the efforts of all technicians within
selected areas of a country are being integrated,
and each individual project is being fitted into a
pattern designed to bring about a balanced devel-
opment in the total economy of the country.

A significant factor in carrying out development
projects is the large number of Latin Americans
who have been trained as a part of the cooperative
program. To date more than 3,000 doctors,
nurses, sanitary engineers, laboratory technicians,
agriculture specialists, industry and transportation
specialists, educators, and other technicians have
received training in the United States. Most of
these professionals are now occupying responsible
positions within their own countries in the fields
in which they were trained.

In addition, approximately 20,000 Latin Ameri-
cans have received on-the-job training within the
program. Together these groups form a nucleus
of skilled Latin Americans around which broad
regional development programs can be planned
and put into effect. To supplement the efforts of
these trained Latin American technicians, there
are at present 665 United States technicians in
the other Americas who are skilled in the know-
how that has been developed in this country.

All technical assistance activities emphasize
self-help as the basis for any program. Projects
must be cooperatively administered and financed.
For fiscal year 1952, the total of the United States
contribution towards the technical assistance pro-
gram was $17.8 million; the Latin American gov-
ernments contributed about $32 million. The
United States contribution towards the fiscal
year 1953 program will total about $22 million.
The commitments of the Latin American govern-
ments to match this will total about $38 million.

Bolivia — A Typical Example of Technical
Assistance. — Bolivia is one of the countries that
illustrates the need for technical assistance on an
area development basis. In the Bolivian highlands,
averaging over 12,000 feet above sea level, little
food has been produced in comparison with what
is needed. Yet most of Bolivia's population live
in this region, and here is where the country's
extractive products — tin, tungsten, lead, zinc,
antimony, and silver — are found.

The lowland districts of Bolivia, on the other
hand, contain one-half the country's area, with
large tracts of fertile land. Yet this region is

Technical Assistance In Latin America
Is A Joint Program

Contributions to Technical Assistance Projects

(In Millions of U. S. Dollars)

60.7

49.8

1952

1953

Fiscal Years

the most sparsely populated and the least de-
veloped region in the country. To those who had
set out to make plans for improving Bolivia's
total economy, it was evident that food production
had to be increased to reduce the dependence on
food imports; that transportation facilities had to
be expanded so that available foodstuffs could be
distributed more efficiently and equitably; that
health, sanitation, and housing facilities had to be
improved; and that better mining techniques had
to be introduced to lower the cost of Bolivian
production and locate new mineral sources.

A concerted attack is being made along a wide
front to overcome these problems. Four agricul-
tural extension offices have been established.
These regional offices supervise the work of 18
branch offices and 24 national agricultural exten-
sion agents, all of whom have been trained by
United States technicians at the regional extension
and research centers. Advanced methods of
cultivation, which increase production and reduce
production costs, have been demonstrated. New
and improved seeds adapted to local soils and
growing conditions have been introduced. It
has been demonstrated to the people themselves
that the use of fertilizer can greatlv increase the

53

yields of many crops, and that modern insecticides
and pesticides can considerably decrease loss from
plant insects and diseases. Purebred cattle have
been brought into the country to bring about
greater dairy and beef production. It is expected
that large areas in the lowlands will be opened up
for farming and colonization.

Bolivia has improved its medical facilities and
hygiene with the assistance of United States tech-
nicians. Through the operation of 10 health
centers, 3 dispensaries, and 3 mobile units serving
over half a million persons annually, Bolivia has
made good progress in reducing malaria, typhus,
and intestinal diseases. United States technical
assistance has been given to municipalities and
schools in construction of water supply systems
and installation of chlorinating equipment.

A program of industrial hygiene has been initi-
ated in the mining districts to protect the miners
against silicosis. Also in the mining field, research
and tests have been carried on at two laboratories
in the United States with a view to developing
methods of concentrating and refining low-grade
tin ores and tailings in order to reduce costs of
production and increase workable Bolivian tin
reserves.

Efforts in the educational field have been con-
centrated on improving elementary teaching and
on making industrial education meet the needs of
industry itself. A large new teacher-training cen-
ter is in operation at Warisata, high in the Andes.
Here a group of United States and Bolivian tech-
nicians are preparing prospective teachers who
will be able to teach not only the 3R's but also
health measures, the production, preparation, and
processing of food, home improvement, and handi-
crafts. Thousands of children have been organ-
ized into 4-S Clubs, which correspond to our 4-H
Clubs. The one industrial school in Bolivia has
been improved with better equipment and teach-
ing materials, and other industrial schools are
being planned.

In the transportation field, 18 airport sites have
been surveyed by our technicians, and the Bolivian
Government now is independently negotiating
contracts with United States firms to begin instal-
lations on several of those sites.

Thus the cooperative effort to improve national
production and living standards in Bolivia has
been moving in an orderly fashion. It has been
initiated as a result of requests made by the

Bolivian Government for United States technical
assistance. Tt has been carried on in accordance
with agreements that carefully delineate what is
to be done and what contribution each government
is to make in both funds and personnel.

Brazil — Another Example. — Another example
of broad planning and the interrelationship of
diverse activities is found in the completed and
successful work of the Joint Brazil-United States
Commission for Economic Development, estab-
lished in 1950 to assist Brazil in planning its long-
range economic development program. The Com-
mission was expected to complete its work shortly
after July 31, 1953. The new Brazilian Economic
Development Bank will take over responsibility
for putting the plans into effect.

Following a general survey of Brazil's economy,
the Joint Commission determined that railroad
and highway transportation, power, minerals,
agriculture, and shipping should be given priority,
since they represent Brazil's fundamental needs.
On the basis of technical studies, projects were
selected in the specified fields, and loan applications
were prepared and submitted to the Brazilian
National Economic Development Bank for local
financing, and to the International Bank for
Reconstruction and Development or the Export-
Import Bank of Washington for foreign currency
financing.

The Joint Commission has given particular at-
tention to the development of adequate power
facilities, encouraging the development of hydro-
electric projects. Emphasis also has been placed
on the development and improvement of transpor-
tation facilities. Since the existing railroad and
highway networks, for the most part, lead from
inland Brazil to the coast, distribution of industrial
and agricultural commodities is limited. To solve
this problem the Joint Commission development
program laid out farm-to-market road systems,
terminal storage facilities, and improvements in
railroads, ports, and coastwise shipping.

Cornerstone of the Commission's planning has
been the selection of projects which would make
the greatest contribution to Brazil's economic de-
velopment based on that Government's ability to
pay its own way. Each project has been devel-
oped on sound banking principles necessary to
justify the loans the Brazilian Government is re-
questing. This country's participation in the pro-
gram is solely that of making available United

54

States financial, technical, and engineering serv-
ices.

Brazil's economic development will require par-
ticipation by outside private investment sources.
To expand its economy, the Brazilian Government
will have to encourage additional private, local,
and foreign capital participation.

Important gains are being scored on Brazil's
health front. In the Amazon River valley, 56
centers and their subposts are available to serve
an estimated 2 million people scattered over this
immense area. Efforts have been concentrated
on reducing malaria and infectious diseases that
affect almost the entire valley population. As a
result of these cooperative programs, the incidence
of these diseases has been reduced drastically.
When work on this project first began in 1942,
there were 40 United States technicians working
with 500 Brazilians. Today the work is being
carried forward entirely by Brazilian staffs, most
of whom were trained as part of the cooperative
program.

Other Recent Progress

Activity in the fields of agriculture and natural
resources, health and sanitation, and education
was described in the previous Semiannual Report-
Progress has continued in these fields and has
made a significant contribution to the economic
development of Latin America. During the past
6 months, increased attention has been given to
activities which may be divided into four major
categories: industry, transportation and com-
munications, public administration, and special-
ized scientific and technical services.

Although diversified, projects in these categories
are interrelated, and the program is so administered
and planned that each project contributes to the
broad objectives of the program.

Industrial Development. — A number of Latin
American countries recently have shown a grow-
ing interest in raising their industrial produc-
tivity. Local industries are developing, and the
demands for greater production are insistent. Yet
industrial productivity levels generally are low,
and the pace of development lags because there
is not available locally in most areas knowledge of
techniques necessary for optimum production.

Recognition of the need for industrial know-
how and engineering techniques has led to specific

requests from Latin American countries for tech-
nical assistance, and industrial productivity Servi-
cios have been established in Chile and Brazil.

These Servicios are jointly financed cooperative
agencies, set up by Latin American govern-
ment as bureaus within appropriate ministries, to
carry out specific programs of assistance. Under
the Mutual Security Program, there is a small
United States field party of three to six technicians
in each Servicio, and United States industrial
engineering firms provide specialized technicians
on a contract basis. As in other Servicios, the
cooperating country pays a substantial share,
usually more than half the cost of the program.
The cooperative programs in the field of industrial
productivity are directed toward assisting coun-
tries in which at least a moderate degree of
industrialization has taken place.

To aid the less industrialized countries of Latin
America, the United States has made available
assistance which thus far has taken two main
forms — economic surveys and aid to small indus-
tries. In some instances, requests have been re-
ceived for basic surveys of a country's industrial
potential. The United States is meeting these
requests by contracting with private industrial
organizations to make the surveys.

A field of activity with important potentialities
is that of handicrafts and manual industries. In
several countries of Latin America, the sale of
handicraft articles constitutes an important source
of income for portions of the population; in other
countries, it is a potential though undeveloped
source. Mutual security programs are aimed at
helping to improve methods, designs, and tools
without losing the local skills and traditions on
which the handicraft arts are based.

Transportation. — Transportation facilities in
much of Latin America are inadequate. The
entire area, twice as large as that of the United
States, has about one-third of our railroad mileage
and fewer motor vehicles than the whole State of
New Jersey. Shortage of farm-to-market trans-
portation handicaps the movement of foods and
other agricultural products.

The transportation program has been given
renewed emphasis both to achieve fuller utilization
of existing facilities and to provide new facilities
to keep pace with other phases of the overall
economic development programs. Active techni-

55

cal cooperation projects now in process and under
consideration include road development in Mexico,
Bolivia, Honduras, Costa Rica, Paraguay, and
Brazil; railroad assistance in Brazil, Ecuador, and
Peru; port development and shipping assistance
in Peru, Costa Rica, Brazil, Haiti, Honduras, and
Nicaragua; inland waterway development in
Brazil and Paraguay; and civil aviation assistance
in six countries.

Public Administration. — The main objective
of the public administration program is to help the
cooperating country, at its request, improve its
administrative methods and techniques. Pro-
grams in this field are in effect in cooperation with
the governments of the following countries: El
Salvador, Costa Rica, Honduras, Panama, Colom-
bia, Chile, Brazil, Mexico, Paraguay, and Uruguay.

In Brazil, our technicians are serving as con-
sultants to the Brazilian Board of Advisors on
Public Administration. This board of advisors
is composed of 1 1 officials who represent federal and
state governments, academic institutions, and the
legislative branch. Its functions are to identify
problems, to reduce them to projects, to assign
priorities based on the importance of the projects
to the development of the country, and to deter-
mine if there are sufficient Brazilian resources

available or if special external assistance should
be requested.

In Chile, a United States advisor is working
with a Hoover- type commission which has been
established to study and recommend possible
improvements in organization of the Chilean ex-
ecutive branch. In the other countries, a Avide
range of local projects is under way with the bene-
fit of technical advice from United States tech-
nicians— for example, reorganization of state and
city governments, establishment of civil service
systems, and surveys of national health, welfare,
and social organizations. By assistance of this
type, government administration is being im-
proved and economic progress accelerated.

Technical Services. — In addition to the fore-
going activities, the program in Latin America
includes technical assistance in census methods
and statistics. Projects in these fields are being
carried forward in eight countries.

To fit in with industrial developments, technical
labor services in industrial safety, labor statistics,
employment service operations, and industrial
relations now are being provided at the request of
seven Latin American countries.

Assistance in the fields of taxation, customs,
material standards, and surveying also is being
provided as needed.

56

CHAPTER VI

Other Parts of the Program

A number of activities under the Mutual Secu-.
rity Program cannot properly be grouped on
a regional basis. A report on these activities is
contained in this section.

Participation in International Organiza-
tions

As a member of the United Nations, the United
States contributes its share towards the cost of
carrying on international programs of technical
assistance, and relief and rehabilitation. It also
coordinates United States bilateral foreign assis-
tance operations with those of international
organizations to maximize the benefits not only
to an individual country but also to the collective
effort of the free world.

United Nations Expanded Program of Tech-
nical Assistance. — The United Nations program
is an international effort to enlist technical skills
from many nations to help the governments and
people of underdeveloped areas expand their
economic resources.

In 1950, the United States joined with 54 other
governments in making voluntary contributions
to a special United Nations technical assistance
account. At present, we provide approximately
60 percent of total contributions to this account.
By careful planning in Washington, at United
Nations headquarters and in the field, United
Nations and United States technical assistance
programs do not overlap but complement each
other. In some sensitive areas, United Nations
programs are more acceptable to governments
than those carrisd out solely by this country.
Furthermor?, the United Nations program recruits
the majority of its experts from other countries,
thereby reducing the drain on American techni-
cians and making the fullest use of the technical
resources of other nations.

Sixty-seven countries pledged slightly over $21
million in February 1953 in support of the United
Nations Expanded Program of Technical Assis-
tance for 1953. Although this figure was almost
$2.5 million more than was pledged for 1952, it
was substantially short of the target figure of
$25 million in new funds for 1953 which the General
Assembly had established.

The United States was prepared to make avail-
able to the 1953 program a total of $14.7 million.
At the 60 : 40 ratio, however, the pledges of other
countries were not sufficient to draw down this
entire amount, and the United States pledge there-
fore amounted to $12.8 million. Of this amount,
$6 million had been contributed as of June 30,
1953.

Experts have been recruited from 64 countries,
and are serving in 62 countries. Fellowships have
been awarded to nationals of 92 countries and
territories for study in 76 countries. It is note-
worthy that approximately 25 percent of the total
number of experts is drawn from underdeveloped
countries, and that about 13 percent of the total
number of fellowships awarded has been for
study in underdeveloped countries.

United Nations International Children's
Emergency Fund. — In 1952, the United Nations
International Children's Emergency Fund
(UNICEF) placed increasing emphasis on aid for
long-range child care programs, particularly in
underdeveloped countries. Such programs include
basic maternal and child welfare services and
training; and mass health programs including the
control of tuberculosis, malaria, yaws, syphilis,
and other diseases.

Under UNICEF-aided programs in 1952, 13.5
million children were tested for tuberculosis and
5 million were vaccinated; 5 million were examined

57

for j'aws and prenatal syphilis, and 1.3 million
were treated.

Also 8.3 million children were protected against
malaria and other insect-borne diseases; 126,000
were immunized against diphtheria and whooping
cough; and 3 million received diet supplements.
During the year, aid was approved for 2,000 ma-
ternal and child welfare centers, mainly in rural
areas.

A target goal of $20 million has been approved
for allocations from the central account of
UNICEF during calendar year 1953. At its
March meeting the Executive Board of UNICEF
allocated $5.3 million, including $4.7 million for
programs in 46 countries and territories and
$662,000 for freight. Allocation of these funds,
which were received in then entirety from sources
other than the United States Government, left
the UNICEF central account with an approxi-
mate balance of $2,600 in unallocated funds. Since
then, additional contributions from other govern-
ments, resulted in the availability as of June 30,
1953, of approximately $600,000. The Congress
has appropriated $9.8 million to permit the United
States to make a contribution toward the calendar
year 1953 UNICEF program.

Program of Technical Cooperation of the
Organisation of American States. — On January
22, 1953, the Inter-American Economic and
Social Council approved a program containing
11 projects, at an estimated total cost of $1.9
million, for the 1953 Program of Technical Coop-
eration of the Organization of American States.
Six of these projects, which are continued from
1952, are in the fields of agricultural extension,
cooperatives, housing, child welfare, economic
and financial statistics, and animal husbandry.
The last-named project involves a research and
diagnostic service, and a demonstration and
training center in hoof-and-mouth disease control.

As of June 30, 1953, pledges from 18 govern-
ments for 1953 totaled $1.4 million. The United
States pledged $1 million on the understanding
that its contributions would not exceed 70 percent
of total payments. As of June 30, 1953, the
United States had paid $303,230 toward its pledge.

Reimbursable Military Assistance

Reimbursable military assistance is provided
under the authority of section 408 (e) of the
Mutual Defense Assistance Act of 1949, as

amended. Under this section, the President is
authorized to transfer — or enter into contracts
for the procurement for transfer — equipment,
materials, or services to eligible foreign govern-
ments and international organizations, without
cost to the United States.

Assistance in this form provides a means
whereby the United States can help the friendly
nations of the world to help themselves. At the
same time, requests from other nations for
military items can be merged with the overall
procurement programs of the United States
military departments, thus avoiding conflicting
demands on the productive capacity of the
United States. Fifty-four countries and two
international organizations are at present eligible
to make purchases under this authority.

As of May 31, 1953, requests for reimbursable
military assistance had been submitted by 50
countries. Forty-five of these countries had made
purchases of equipment, materials, and services.
These purchases — including cost of rehabilitation,
renovation, repair, training, and accessorial
charges — were valued at $647 million. Purchases
were made by $478 million in cash advances, and
$169 million through the use of contractual
obligational authority under the "dependable
undertaking" method of payment provided for
in the Mutual Defense Assistance <\.ct of 1949, as
amended. Of the total purchases, $559 million
were for equipment and materials such as end-
items, spare parts, and supplies. Deliveries of
these items, valued at $244 million, had been
made to 43 countries through May 1953.

Almost every type of military equipment has
been purchased by the countries participating in
this program. The more important purchases
have been: 6 light cruisers, 5 destroyer escorts, 5
coast guard utility vessels, 4 patrol frigates, 430
aircraft of all types, 485 tanks, 187 gun motor
carriages, 318 armored cars, and such items as
motor transport vehicles, weapons, ammunition,
and electronic equipment.

Military Training

Foreign military students are being trained by
the United States under the military assistance
program to insure that our allies will be capable
of effectively employing and maintaining the
materiel they receive. Training requirements are
related directly to the delivery of end-item

58

equipment. A tank or an airplane will contribute
little to our defense unless our allies are trained
to use these weapons properly and can keep them
in operating condition.

Country training programs provide a cadre of
indigenous American-trained military personnel.
With this cadre as a nucleus, our allies can expand
and modernize their own training establishments
and accelerate progress toward military self-
support. We will have accomplished our training
mission when we have worked ourselves out of a
job by providing countries with a sufficient num-
ber of capable instructors to meet. then own re-
quirements. When that point is reached, only
limited training will be required for our partner
nations to keep abreast of our latest techniques

and technical developments. The training budget
amounts to approximately 1.5 percent of the total
funds appropriated for military assistance but it
is a vital factor in the success of the entire program.

The self-help provisions of the Mutual Security
Program have been stressed, and countries finan-
cially able to do so have borne a portion of the
cost involved in the training programs. For ex-
ample, these countries pay transocean transporta-
tion costs of their students and certain costs of
maintaining United States advisory and instruc-
tional personnel overseas. In the interest of
economy, training is carried on in American
overseas installations to the greatest extent
possible.

Maximum use is made of existing personnel and

A group of NATO officers and soldiers being instructed in the operation, and maintenance of a tank at an
overseas United States Ai*my ordnance school.

59

training facilities which are required to support
our own overseas forces. When circumstances
permit, training is taken directly to the forces in
the field by mobile training teams and technical
representatives. By the end of the fiscal year,
more than 32,500 allied personnel had either com-
pleted formal courses or were in training at Army,
Navy, and Air Force installations in this country
and abroad. This program has paid high divi-
dends in the improved use and maintenances of
equipment, and the training requirements of the
recipient countries should show a significant
decrease in 1954.

Small Business

During the period, activities were stepped up
to help United States small business achieve a
greater share of the export trade financed under
the Mutual Security Program. Efforts were also
intensified to promote greater participation in
overseas investments by small and medium-sized
American enterprises.

Advance procurement information on proposed
purchases by, or on behalf of, foreign governments
and private importers was provided in the form of
small business circulars. From January 1 through
June 30, 1953, 563 of these circulars were issued,
215 more than during the first half of 1952.

An important step was taken to increase this
flow of advance procurement information to small
manufacturers and exporters. All future pro-
curement authorizations issued under the Mutual
Security Program will include a provision stating
that, "the participating country agrees to make
every effort to furnish, as promptly as possible,
to the Office of Small Business, MSA/W, the names
and addresses of prospective buyers and the indi-
vidual commodity items and services to be
purchased."

The extent to which small business is partici-
pating in the United States-financed purchases
made by the Emergency Procurement Service is
reflected in a report by the General Services
Administration. This report shows that 86 per-
cent of EPS purchases made during the last
quarter of 1952 and financed under the Mutual
Security Program went to small business firms.
Small Business Circulars carry notices of proposed
EPS purchases.

To encourage and stimulate greater participation
by small and medium-sized enterprises in the effort
to increase American private investment abroad,
plans have been developed to extend "Contact
Clearing House Services" to all free countries of
the world where encouragement of private invest-
ment would promote the objectives of the Mutual
Security Program. This free service helps estab-
lish contacts between American and foreign private
enterprises interested in exploring specific oppor-
tunities for entering into investment agreements.
It effectively uses domestic and overseas private
business service organizations — such as industry
associations, chambers of commerce, and banks —
for the collection and dissemination of specific
investment proposals here and abroad. The Con-
tact Clearing House Service has been welcomed
and utilized by private concerns in the United
States, in 13 Western European countries, and in
Israel.

During the period under review, final arrange-
ments were made for extension of the Contact
Clearing House Service to the Philippines and
Peru.

Investment Guaranty Program

Through the investment guaranty program, the
United States Government has offered, for a fee,
insurance protection to new American investments
abroad against the risks of currency inconverti-
bility and loss through confiscation or expropria-
tion. All the countries for which aid is authorized
by the Mutual Security Act of 1951 are eligible to
participate in the program provided they make
certain assurances regarding claims settlement to
the United States. By June 30, 1953, the re-
quired assurances had been obtained from 17
countries with respect to convertibility guaranties;
bilateral agreements with 15 of these countries
also were made with respect to expropriation
guaranties. The 17 countries included four non-
European countries: China, Israel, Haiti, and the
Philippines.

Through June 30, 1953, 53 industrial investment
guaranties totaling $41.2 million had been issued
to cover private investments in seven European
countries. Of the total, $39.6 million insured
against inconvertibility of foreign currency re-
ceipts, and $1.6 million against loss from expropria-

60

tion or confiscation. Total fees collected amounted
to $839,000; no payments under the contracts
have been required.

Transportation

50-50 American Flag Provision. — At least 50
percent of the tonnage of Mutual Security Pro-
gram cargoes from the United States, insofar as
practicable, must be transported in American-flag
vessels. This percentage is computed separately
for dry-bulk carriers (tramps), dry-cargo liners,
and tanker services. During the fiscal year 1953,
American-flag participation in the liner and tanker
categories met these requirements.

On the basis of reports received for liftings
between July 1, 1952, and June 30, 1953, American-
flag vessels carried 56 percent of the 2.2 million
tons of MSA-financed goods shipped from the
United States by liner. During the same period.
American-flag tankers moved 52 percent of the
360,000 tons of MSA-financed tanker shipments
from the United States.

About 1.6 million tons of MSA-financed dry-
bulk cargoes left the United States between July 1,
1952, and December 31, 1952. Fifty-one percent
of the shipments moved in American-flag vessels.
Since then, under the nonavailability clause,1 MSA
has exempted dry-bulk shipments from the 50-50
provision as there were not sufficient American-
flag tramps available to carry half of the MSA-
financed shipments.

Through May 31, 1953, American-flag commer-
cial vessels carried 67 percent of all military items
shipped under the military assistance program.

Homebound cargoes of strategic materials se-
cured under the Mutual Security Program are
also subject to the 50-50 American-flag require-
ment. Of all such tonnage arriving in the United
States since June 30, 1952, 80 percent was carried

1 Section 111 (a) (2) of Public Law 472, 80th Cong., as
amended.

by American-flag vessels. All shipmeats were in
the liner category.

"Formosa Clause." — The Mutual Security
Agency, in order to implement the governmental
policy with respect to trade with Communist
China, inserted in charters of foreign-flag vessels
employed for the transportation of United States
Government-financed bulk cargoes to Far East
countries a special clause, which has become
known as the "Formosa Clause." This provides
for withholding a certain portion of the freight
as a penalty in the event that the vessel trades
with Communist ports in the Far East within a
period of 60 days after discharge. This clause
has been adopted for use in connection with ship-
ments to other countries in the general vicinity
of China.

Voluntary Relief Shipments

From July 1948 through June 1953, subsidy
payments to cover the cost of ocean transporta-
tion of voluntary relief shipments totaled over $27
million. Parcel post relief packages sent by indi-
vidual donors over the 5-year period accounted
for 69 percent of this amount. The balance went
to pay for relief shipments of voluntary nonprofit
relief agencies. The parcel post subsidy program
was terminated March 31, 1953.

The generally improved economic conditions in
Europe have been reflected in the progressive
decrease during recent years in reimbursements
to voluntary nonprofit relief agencies for ocean
freight charges on relief shipments. The subsidy
payments in fiscal year 1953, for example, were
30 percent less than those for fiscal year 1949.

In May 1953, the Department of Agriculture
made available 45,000 tons of dried milk to vol-
untary relief agencies for distribution abroad.
Over 8,000 tons of this milk were shipped by the
end of June under the program for subsidizing
voluntary agency shipments.

61

II. S. GOVERNMENT PRINTING OFFICE! 1953

83d Congress, 2d Session

House Document No. 337

m m

%cemiet J/, /953

83d Congress, 2d Session House Document No. 337

Report to Congress

on the

Mutual Security Program

December 31, 1953

PRESIDENT'S LETTER OF TRANSMITTAL

To the Congress of the United States:

I am transmitting herewith the report on the Mutual Security Program
covering operations during the 6-month period, June 30, 1953, to December
31, 1953, in furtherance of the purpose of the Mutual Security Act of 1951, as
amended.

In this report is factual evidence of valuable progress being made through
mutual efforts toward the vital goal of increased security for this Nation
and all the free world.

X_y L-iS-y L^tX^J (j~iCj^ X*^-o^\

The White House,

March 8, 1954.

in

CONTENTS

. Page

President's Letter of Transmittal UI

Chapter I. Foreign Operations: A Progress Report 1

II. Europe 12

III. Near East, Africa, and South Asia 24

IV. Far East . 37

V. American Republics 48

VI. Other Parts of the Program 57

CHAPTER I

Foreign Operations: A Progress

Report

A SERIES of new and vital measures to promote
the defense capabilities, economic strength,
and technical advance of the peoples of the free
world marked the progress of the mutual security
program during the second half of 1953. These
measures reached into every part of the globe,
from Latin America to Western Europe to the
Near East and Africa and around to South Asia
and the Far East. They embraced a multitude
of action programs, diverse in character and varied
in approach, but all with one central objective:
"to maintain the security and promote the foreign
policy of the United States." This is the objec-
tive laid down by the Congress, and every step
taken under the mutual security program has
been directed toward its accomplishment.

The Soviet Union and the governments under
its control by their actions and attitudes continue
to threaten world peace. The mutual security
program is based on the practical concept that no
one nation, including the United States, can meet
this threat with maximum effectiveness by acting
alone. The resources and capabilites of the entire
free world, strengthened and united in a mutual
effort, constitute the best insurance against further
aggression and the best means ultimately to
remove the tensions and fears which so greatly
retard world progress.

Because the threat has manifested itself in so
many forms and in so many places, the United
States of necessity has moved on a number of
fronts. But, everywhere, the basic purpose of
our operations abroad has been to build strength
and stability throughout the free world. This
purpose underlies all mutual security programs
whether they concern military aid, economic
support, technical cooperation, or world-wide use
of our farm surpluses. These measures reinforce

the security of the United States; simultaneously,
they help to increase the self-reliance of our free
world allies.

In terms of tangible returns for the United
States, the mutual security program provides
overseas military bases, combat-ready manpower
greater in numbers than our own, more productive
sources of strategic materials, added industrial
capacity, and healthier, stronger partner nations.
Above all, it encourages millions of people to work
with us in the unceasing quest for world stability
and world peace.

Economic Improvement and Shift
in Emphasis of Aid

Of particular importance in influencing the
recent course of United States mutual security
programs has been the general improvement in
world economic conditions.

One indication of the strong recovery in the
economic health of the free nations of the work)
lies iu a comparison of United States aid and
United States exports over the past 4 years. In
1949, this country financed about 35 percent of
its total exports of nonmilitary goods and serv-
ices by grants and loans. In 1953, only about
15 percent was financed by United States aid.

Western Europe, in particular, has made a
steady advance. European industrial and agri-
cultural production has risen to new peaks, gold
and dollar reserves have increased substantially,
currencies have become firmer, inflationary pres-
sures have generally leveled off, and the defense
position of the European NATO countries has
continued to strengthen.

These achievements — tangible evidence of the
successful combination of United States aid and

the energies of the European people — gradually
have made it possible to reduce our assistance to
Western Europe as a whole. For the future, as
the Director of the Foreign Operations Adminis-
tration, Mr. Harold E. Stassen, noted following his
return from the November meeting of the Ministers
of the. Organization for European Economic Co-
operation, "there is a very definite indication that
Western Europe can maintain substantially its
current defense budgets, and at the same time move
forward on a sound economic basis with a con-
siderable reduction in military aid and also —
with a few exceptions — the termination of United
States economic assistance."

The economic achievements in Europe have
permitted a proportionately greater concentration
on United States technical cooperation and special
economic aid programs in the less developed areas
of the world. By carefully planned and properly
supported undertakings in these areas, by pin-
pointing projects on a selected priority basis, by
more intensive effort on the part of the partici-
pating countries, and by our own cooperative
assistance, there is every reason to believe that
the peoples of the underdeveloped countries will
lift themselves onto much higher levels of eco-
nomic well-being.

Expanded Technical Cooperation

A world-wide technical cooperation program has
been developed and expanded by the Foreign
Operations Administration to meet the need for a
long-range and relatively economical method of
carrying out United States policy objectives for
world stability. During the last 6 months,
recruitment of qualified technicians has improved,
and the United States now has more specialists in
the field than ever before. These professional
experts, working on the spot and close to the
problems at hand, are imparting knowledge of
modern methods to the people of the less de-
veloped areas. Through increasingly productive
cooperative relationships and individual contacts,
the foundation to future progress in the under-
developed areas is being laid. Present plans
project an expanding program of technical co-
operation, with economic aid, where it is essential,
carefully geared into the objectives of the various
individual projects.

There are good and compelling reasons why
technical cooperation operations must be planned
and executed within the overall framework of the
total United States effort to help promote world

progress. In most areas, the effectiveness of a
technical cooperation program is closely involved
with important economic considerations. In some
countries, such as Bolivia, for example, technical
cooperation must be related to the problem of
diversifying a single-industry economy. In other
countries, such as India, the technical cooperation
program has to be planned with a view to the
ultimate effects on the labor force, particularly
with regard to possible increases in unemployment
or disrupting shifts as between agriculture and
industry.

Integration of technical and economic measures
for planning and operating purposes increases the
effectiveness of each component, and thereby the
impact of the total program. This does not imply
subordination or amalgamation so that the tech-
nical cooperation programs lose the enormous good
will they have built up over the years. There
continues to be a clear-cut technical cooperation
program in each country taking part in the tech-
nical cooperation effort.

The effectiveness of the technical cooperation
program is being further enhanced by enlarging
the opportunities for United States colleges and
universities to participate directly in country
projects. The Foreign Operations Administration
is assisting American universities to develop local
technical centers in the host country; there are
currently 30 universities under contract in 17
countries.

Some of these contracts are directly with the
Foreign Operations Administration; others are
with the local universities of the foreign countries.
As part of the effort to increase the participation
of United States colleges and universities in tech-
nical cooperation programs, arrangements are
being made to extend contracts over a three-year
period. United States institutions would be
encouraged to assist foreign institutions in such
fields as agriculture, health, education, public
administration, and engineering.

Aid, Trade, and U. S. Economic Health

Expanded world trade is of vital importance in
the effort to build greater world stability and I
ultimately remove the requirements for large-scale I
United States assistance. As the previous Eeport
to Congress on the Mutual Security Program*
pointed out, the American economy cannot be
divorced from the world economy. That report

'For the period ended June 30, 1953.

gave, specific instances to show that America's
great productive capacity could not be long main-
tained, let alone enlarged, without the vast quan-
tities of basic materials provided by other coun-
tries. It also showed that the high level of our
prosperity, particularly with regard to the farmer,
depends to a great extent upon the amount of
goods other countries are able to buy from us,
and it brought out the vital importance of two-
way international trade to our own continued
economic prosperity.

Kecent statistics strikingly re-emphasize these
same hard facts. United States total agricultural
exports for the 1952-53 crop year amounted to
$2.8 billion. Significant though this figure is in
showing the magnitude of American farm income
derived from abroad, it is, nevertheless, 30 percent
below the agricultural export figure for the pre-
ceding 12 months of 1951-52, and 20 percent
below the 5-year average for the crop years
1947-52. The volume of exports of wheat
and wheat flour in crop year 1953 dropped by 33
percent under the previous 1 2-month period ; lard
dropped by 33 percent; and cotton and cotton
linters, by 50 percent. Though farm exports evi-
denced an upward trend during the latter half of
1953, they were still substantially under the 1947-
52 average.

American industry, too, leans heavily on its
foreign markets. As of the third quarter of 1953,
our nonagricultural exports, excluding military
aid shipments, were running at the rate of about
$9 billion for the year. On the same basis, these
are some of the items American industry exported
for the full year 1953; over 250,000 automobiles
and trucks; almost 500,000 refrigerators and
freezers; almost 12 million barrels of lubricating
oil; and more than $1 billion worth of machine
tools, agricultural machinery, and tractors.

Our farms and factories could ill afford to lose
these enormous sales abroad, but the extent to
which the foreign market for American goods
contracts or enlarges depends in great measure
upon the amount of dollars other countries have
available to spend. With economic aid tapering
off, a constantly expanding volume of international
trade, coupled with increased outflow of private
United States investment capital, is the only real,
long-term solution to dollar shortages abroad. In
this connection, it should be noted that much of
the improvement in Western Europe's gold and
dollar reserves has been due to the extraordinary
United States military expenditures in Europe

and to the fact that the European countries as a
whole have been buying less from the hard-
currency areas. Other countries of the world,
also, have in general been trying to conserve their
dollar exchange. As a result, the overall volume
of international trade has remained rather con-
stant. This is not the sort of stability we are
seeking. Stable economies should not mean static
economies. This could lead only to eventual
economic stagnation. Rather we look to increase
the flow of mutually profitable world-wide trade.

It is an exceedingly difficult and complex task
to develop a national trade policy consistent with
America's position as the world's greatest creditor
and greatest producer, and, at the same time, not
place inequitable burdens either upon specific
segments of the American economy or upon other
nations who must earn their living in the world.
Yet, unquestionably, if the nations of the world
are to flourish and move on to higher levels of
trade, production, and living standards, the for-
mulation and activation of such a policy is of
utmost importance.

In this connection, the recommendations recent-
ly made by the President's bipartisan Commission
on Foreign Economic Policy, headed by Clarence
B. Randall, are being carefully considered.

The Need for Private Investment Abroad

Along with other measures, international invest-
ment plays an essential part in achieving a larger
volume of world trade and production. Private
investment abroad brings two-way benefits. It
enables the recipient country to make more rapid
strides toward development of its own resources,
toward greater productivity of its agriculture and
industries, and toward better living standards for
its people. For the investor, in addition to im-
mediate monetary returns in the form of earnings
and reinvestment capital, it brings new markets
and a wider demand for his products; in many
cases, it provides additional sources of needed
supplies. During the 6-month period, discussions
were carried on with various governments on ways
to utilize United States private investment capital
to the greater mutual advantage of the investor
and the country involved. These discussions
proved particularly fruitful with reference to
Turkey. The Turkish Government has passed
legislation to remove many of the obstacles which
heretofore have retarded the use of private de-
velopment capital.

290163—54-

Private Investment Abroad Has Risen

Increases in U.S. Direct Private Investment

(Millions of Dollars) 1,730

1,301

1,088

Net Reinvested
■ Earnings'

1950

1951

1952

'Includes oiher minor chonges.
Source: U.S. Deportment of Com

Raising World Living Standards

In any consideration of the various ways by
which the United States can assist other countries
in then efforts to make better use of their resources
and speed then development, we must keep sight
of the fact that our primary concern is not with
production statistics and index numbers, but with
people. The ultimate aim of our technical and
economic programs is to advance the well-being
and improve the standard of living of the individ-
ual farmer and the individual worker.

Western Europe has the world's largest reser-
voir of skilled manpower and is second only to the
United States in industrial capacity. Yet per
capita gross national product for Western Europe
as a whole — that is, the individual share of the
value of total goods and services produced — is less
than $600 a year, compared to over $2,200 a year
in the United States.

The industrial worker in Europe lags far behind
his American counterpart in terms of what he can
purchase for the work he does. In Great Britain,
for example, in 1953, one hour's wages bought
about 60 percent of the food that an hour's wages
bought in the United States. In France, it bought
about 50 percent; in Germany, 40 percent; in
Italy, 30 percent. These comparisons include

certain subsidies and allowances which in some in-
stances supplement take-home pay, but even with
these added factors the purchasing power of the
average European worker remains far below that
of his counterpart in this country.

In the less developed areas of the world, the
situation is far worse than in Europe. In most
of Asia and the Near East, per capita gross national
product is less than $100 a year. In Latin Amer-
ica, although there is wide variation among
countries, the average is below the levels required
to support an adequate standard of living.

It is essential to any forward economic move-
ment that effective steps be taken to improve
world living standards by increasing the real
wages of the worker, and by achieving higher
productivity and greater output to meet the
expanding purchasing power.

The United States has consistently encouraged
the efforts of other nations in their work toward
these ends. It has actively supported European
measures to eliminate restrictive practices, lib-
eralize intra-European trade, and create a single
European market based on expanded production
and healthy competition. It has attempted,
through its productivity programs in various
countries of the world to insure that the benefits
of increased turnover and greater productive
efficiency are shared equitably with workers and
consumers. Through pilot projects and person-
to-person demonstration methods, our technicians
have shown practical means by which the farmer
and the worker in the underdeveloped areas
can improve their methods of production.

These measures, however, cannot do more than
stimulate and reinforce the far greater self-help
measures of the other nations of the free world.
Theirs is the main task of carrying forward the
difficult, but imperative, actions required to
satisfy the needs and aspirations of their peoples.

A Period of Positive Actions

The period covered by this report — July 1
through December 31, 1953 — was highlighted by
a number of noteworthy actions under the mutual
security program:

Military Defense

Global Military Shipments. — A growing
supply of essential military weapons and equip-
ment continued to flow to our allies in all parts

of the world. Total shipments in 1953 amounted
to $3.8 billion — more than 60 percent higher than
in 1952, although shipments during the second
half of the year were running at a somewhat
lower rate than during the first half-year period.
The cumulative value of military grant-aid ship-
ments from the inception of the military assistance
program in October 1949 through December 31.

1953, totaled $7.7 billion. Almost 50 percent of
this 4-year total was shipped during 1953.

On a global basis, the major items delivered
through December 31, 1953, included:

99,444 electronics and signal equipment
items.

30,792 tanks and combat vehicles.

176,343 motor transport vehicles.

30,037 artillery pieces.

35,372,000 rounds of artillery ammunition.

601 Navy vessels.

5,340 aircraft.

Almost 2 million small arms and machine

guns were shipped, along with about 1,100

million rounds of small- arms and machine

gun ammunition.

NATO Buildup.— The NATO force goals for

1954, agreed upon by the 14 member countries
at the end of 1953, call for a 5-percent increase in

U. S. Military Shipments Help Build
A Global Defense

Value of Military Aid Shipments Through
December 31, 1953

Latin America

83

$^724 Million

army divisions, a 15-percent increase in naval
vessels, and a 25-percent increase in aircraft. The
European NATO countries spent over $11.5
billion on defense measures in 1953. To meet the
force goals, these countries plan a moderate in-
crease in their military expenditures during 1954.
This increase follows a more than twofold rise in
expenditures since Korea.

The combined NATO forces had grown con-
siderably by the end of 1953. As compared with
January 1951, NATO's active divisions had
more than tripled, and naval strength had also
been considerably expanded. Plane strength
had increased more than 2% times; old-type
piston-driven aircraft had been replaced by
modern jets. Airfields had increased from 15
to more than 120; more were planned for the next
2 years.

Reinforcing the Military Effort in Indo-
china.— The United States made available an
additional $385 million to reinforce the effort of
France and the Associated States of Indochina
Cambodia, Laos, and Viet-Nam in the 8-year-old
war against the Communist-led Viet Minh forces.
This amount was in addition to the $400 million
previously appropriated by Congress for special
financial aid for fiscal year 1954. During the
latter half of 1953, arrangements were made to
channel this assistance to the Indochina theater
of operations in order to give full support to
General Navarre's plan for revitalizing the cam-
paign against the Viet Minh aggressors.

The rate of United States military shipments
to Indochina in 1953 was 50 percent higher than
in 1952. Deliveries under the mutual security
program have included substantial quantities of
ammunition, aircraft, transport and combat
vehicles, naval vessels, and a wide range of other
needed materiel.

A Combined Program for Spain. — After 18
months of negotiation, the United States signed
three bilateral agreements with Spain in Septem-
ber 1953 to strengthen the defense capabilities of
the West. These agreements covered: construc-
tion and joint use of military bases in Spain;
military assistance; and economic aid and technical
cooperation. For the fiscal year 1954, $226
million has been programed for military and
economic aid to Spain.

By the end of the year, a United States Opera-
tions Mission, for economic and technical pro-
grams, and a Military Assistance Advisory Group,
both under the Ambassador, already were estab-

United States-supplied 155-mm. howitzers in Indochina. Shipments of American military equipment to
aid the French and the Viet-Namese in their resistance to Communist aggression were 50 percent higher
in 1953.

lished in Madrid and working with the Spanish
authorities to carry out the proposed programs.

Economic Strength

Support to Korea. — Within 4 days of con-
gressional approval in August of a $200 million
emergency aid program for Korea, the Foreign
Operations Administration had dispatched initial
supplies of needed rice, barley, and cotton; later,
fertilizer and rubber were added. By the end of
1953, substantial quantities of these commodities
had arrived in Pusan harbor.

Over $400 million has been programed for
fiscal year 1954 to be used to assist the courageous
Korean people in their effort to rebuild and
strengthen their war-torn country. This amount
includes activities of the Foreign Operations Ad-
ministration, the Department of Defense, and

the United Nations Korean Reconstruction
Agency. In December 1953, an agreement was
signed with representatives of the Republic of
Korea, covering necessary arrangements for an
integrated program of economic recovery and
financial stabilization.2

Bolstering Iran's Economy. — Iran was
confronted with financial disaster at the time
Prime Minister Zahedi took office in August 1953.
To help the new and friendly Iranian Govern-
ment through its economic crisis, the President
made an emergency grant of $45 million to Iran
in September. Substantially all of these funds
had been obligated by the end of the year for
financing imports of urgently needed commodities

2 On January 26, 1953, Congress approved the Mutual
Defense Treaty between the United States and the
Republic of Korea.

and for temporary budget support. The immedi-
ate crisis was successfully met, but Iran continued
to face a variety of deep-seated problems. The
problem of oil exports, in particular, must be
solved if the country is to move toward more du-
rable economic strength.

Aid to Bolivia. — Special programs of emergency
economic aid and expanded technical cooperation
were initiated for Bolivia to help the country
meet a critical situation brought on by the sharp
drop in world tin prices. Almost 60 percent
of Bolivia's export trade consists of tin. With its
foreign exchange seriously depleted by the loss of
earnings from its main export item., the Bolivian
Government lacked the resources to finance
imports of needed food and other commodities
in short supply.

In October 1953, $5 million worth of surplus
wheat and wheat flour were programed for
shipment to Bolivia. Moreover, up to $4 million
of mutual security funds was programed for
further economic aid, including the purchase of
additional United States agricultural commodities.

In conjunction with these emergency programs,
other measures were taken to provide more basic
solutions to Bolivia's food problems. Another $2
million was added to the technical cooperation
funds for the country, and emphasis was placed
on those projects which will most rapidly increase
Bolivia's food production.

Recovery in Austria. — The determined efforts
of the Austrian people, supported by United States
assistance during the critical postwar years, have
brought the Austrian economy to the point where
no direct economic aid funds are required for the
fiscal year 1954. Another name was thus added
to the list of European countries whose economic
progress has enabled them to continue building
strength without further economic aid. These
countries include Belgium, Denmark, Iceland,
Ireland, Luxembourg, the Netherlands, Norway,
Portugal, and Sweden.

Austria's economic progress testifies to the suc-
cess of the joint recovery programs of Austria and
the United States. For example, Austrian gold
and dollar reserves increased by $95 million during
1953 to reach a total of $238 million at the end
of the year. This represents a rise of more than
130 percent since 1951. Exports climbed from
$286 million in 1949 to an estimated $530 million
in 1953. Industrial production increased by
nearly 40 percent in the same period.

The Austrian Government, in carrying forward
its programs to increase industrial and agricul-
tural productivity, will continue to participate in
the United States technical cooperation program.

Constructive Use of Farm Surpluses

Agricultural Surpluses for Friendly Coun-
tries.— The desire of Congress to reduce surplus
farm stocks is being meshed with our foreign
economic programs. Under Section 550 of the
mutual security legislation, Congress provided
that from $100 million to $250 million of mutual
security funds appropriated for fiscal year 1954
shall be used for the purchase of surplus agricul-
tural commodities to be sold to friendly countries
for foreign currencies.

The proceeds from such sales can be used for
providing military assistance to our allies, for
purchasing goods or services abroad to provide
economic assistance, for loans to increase the pro-
duction of strategic materials, and for similar con-
structive purposes. By the end of 1953. nearly
$60 million had already been allotted for sales of
agricultural surplus commodities. (Total allot-
ments through January 31, 1954, increased to
nearly $90 million. By the end of January, also,
about $80 million of additional sales were under
active negotiation with a strong probability of
concluding such sales within 60 days. Another
$100 million worth were under consideration, of
which it was estimated that $50-$60 million worth
might materialize.) Special precautions are being
taken to safeguard against displacing usual
marketings of either the United States or friendly
countries.

Food Parcels to East Germany. — In a little
over 2 months, nearly 1 million East Germans
crossed to the western side of the Iron Curtain to
pick up and take home about 5% million parcels,
containing 18,000 tons of American food products.
The United States, acting in cooperation with the
West German Republic, instituted this food pro-
gram, in July 1 953 to show by concrete action the
concern of the West for the hungry people of East
Germany.

Despite various pressure tactics by their Soviet-
dominated government, the East Germans
swarmed into the Western Zone to get the food
they needed. The good will evoked by this
humanitarian program, and the better under-
standing fostered between East Germans and the
West, more than repaid the program, cost.

Under the East German Food Program, about a million people crossed to the western side of the Iron Curtain.
These grandmothers from East Germany later picked up their- share of 5% million parcels distributed in West
Berlin over a 10-week period. One-sixth of Germans under Communist domination benefited by this program.

Special Food-Package Program. — The

various food programs of the United States serve
as a means whereby the people of free world
countries share directly in the benefits of our
operations abroad. In addition to the "550"
agricultural surplus and East German food pro-
grams, special food packages were distributed on a
world-wide basis during Christmas-time 1953.
These packages, holding 12 to 14 pounds of food-
stuffs in abundant supply in this country were
delivered to needy families in Western Europe,
the Near East, and Latin America. With the
cooperation of the foreign governments involved,
the packages, marked with the clasped-hand
emblem symbolic of United States programs
abroad, were distributed through local charitable
groups and other relief agencies.

Emergencg Wheat Shipments. — The Pak-
istan wheat program was inaugurated in late
July 1953 to counter the threat of famine which
faced the friendly Pakistani people after two suc-
cessive years of drought. By the end of Decem-
ber 1953, about 600,000 tons of wheat, pro-
gramed under special legislation, had been
delivered or was en route. The Ambassador of
Pakistan stated in November that receipt of the
wheat from the United States was helping to save
millions of his people from starvation.

During the second part of 1953, food relief
programs were also carried out for Bolivia, Jordan,
and Libya. Under these programs, 57,200 tons
of surplus wheat are being furnished to alleviate
serious food shortages in these countries. Bolivia
will receive 45,000 tons of wheat under the $5

million emergency authorization for the country
previously mentioned. Jordan received 10,000
tons of wheat; and Libya, 2,200 tons. The total
value of the grain shipments to these three coun-
tries, programed under Public Law 216, is esti-
mated at $6.5 million.

Streamlining for Greater Efficiency

The Presidential reorganization plan creating
the Foreign Operations Administration (FOA)
became effective on August 1, 1953. By October
1, the necessary reorganization measures were
completed. The Mutual Security Agency, the
Office of the Director for Mutual Security, the
Technical Cooperation Administration, the Insti-
tute of Inter-American Affairs, and several other
formerly segmented foreign operations were merged
into a single unified structure.

In carrying forward its various activities abroad,
the FOA receives foreign policy guidance from the
Secretary of State and guidance on military policy
from the Secretary of Defense. Broad proposals
for any major undertaking overseas are passed
upon by the National Security Council. On this

Council regularly sit as statutory members the
President, the Vice-President, the Secretaries of
State and Defense, and the Directors of the Foreign
Operations Administration and the Office of De-
fense Mobilization. Approval by the National
Security Council thus insures that the actions
carried out under the mutual security program
are coordinated with the nation's security interests.

The Public Advisory Board and the Interna-
tional Development Advisory Board, both com-
posed of outstanding private representatives of the
American people, also provide valuable advice on
basic matters of foreign operations.

This integrated pattern of operation permits
a more concentrated and effective approach to
the problems of free world security and develop-
ment. A specific situation of assistance to a
given country, for example, may involve not
only technical cooperation but also the question
of raw materials prices, the relationships to our
own stockpiling, the issue of East-West trade
controls, the extent of the country's available
markets, its economic and defense ties with
neighboring countries, and its capacity to absorb

Free distribution of American wheat at the supply point at the Mansur Camp in Punjab, Pakistan.

a certain scale and type of aid. All these complex
matters, so closely interwoven, are now being
considered in the light of one consistent operational
policy so that the greatest possible advance can
be made toward the desired goals.

For most rapid and efficient action, the field
of FOA operations was organized into four regional
divisions — Europe; Near East, South Asia and
Africa; Far East; and Latin America. These
regions correspond exactly in area coverage to
the geographic regions of the Assistant Secretaries
of State. This regional breakdown thus insures
a direct coordination between program operations
and policy formation.

Another component deals with the difficult and
far-reaching problem of controls on trade relating
to the Soviet Bloc, more familiarly known as
East-West trade. In addition, since various
problems that arise in different parts of the globe
have many similarities in method of treatment,
a number of technical activities — for example,
food and agriculture, industrial and labor affairs,
trade and investment — were grouped to operate
on a functional basis.

Along with these fundamental organizational
principles, the Director of the Foreign Operations
Administration, Mr. Stassen, also introduced a
fresh approach to the actual conduct of the various
programs and projects. Procedures were worked
out to decentralize to a much greater degree than
ever before the authority and responsibility for
taking the initiative and making decisions. In
line with this emphasis on decentralization,
increased reliance has been placed on the judgment
and effectiveness of the regional directors in the
Washington organization and the Mission direc-
tors in the field. The overseas Missions, in turn,
have decentralized their own operations by
working more in the grass roots areas and less
in the capital cities.

The consolidation of agencies and functions
into the organizational framework of the FOA
made it possible to effect a heavy reduction in
administrative overhead. Total direct employ-
ment in Washington was reduced by 24 percent,
or some 450 positions, between January 31 and
December 31, 1953. In the same period, the
European Regional Office in Paris was cut by
56 percent in personnel strength; also, the three
ambassadorial positions in Paris were reduced to
one. Direct employment in the European Mis-
sions was reduced by about 30 percent. On the
other hand, the number of United States techni-

Mutual Security Funds Have Been Gradually
Reduced In Recent Years; The Major Share
Has Been For Direct Military Purposes

(Billions of Dollars)

Appropriations for Mutual Security

Direct Military Aid

1951

1952

1953

1954

Fiscal Yeors

clans in the field in the underdeveloped areas
has been increased by 35 percent to accord with the
invigorated technical cooperation effort. In sum-
mary, Washington overhead has been reduced,
and overseas effectiveness has been, increased.
These personnel shifts have been carried out in
conformance with the expressed wish of Congress
to reduce administrative costs by 20 percent.
The FOA has been woven into a cohesive, tightly
knit organization, working with maximum econ-
omy and full efficiency to accomplish the objec-
tives of United States policy.

Mutual Security and the Future

As strength in the free world, particularly in
Europe, has grown, total funds appropriated for
United States programs overseas have been grad-
ually decreased. The reductions in military and
economic aid, in general, have paralleled the
growing self-reliance of the nations we are helping.
In several countries, the need for United States
aid is over; in others, this aid has been consider-
ably reduced in magnitude; in still others, aid
will most probably reach an end in the near future
as economic strength is built up. On the other
hand, a number of new or expanded programs
have been initiated — such as the increased effort
against Communist aggression in Indochina, the

10

rebuilding of war-shattered Korea, and the new
agreements with Spain. We are also working
out methods of using our domestic food surpluses
overseas.

To produce truly worthwhile and durable
results, United States programs abroad must be
planned and carried out in the context of long-
range calculations. The development of the
NATO aUiance, the global buildup of military
bases and military forces, the technical coopera-
tion and special economic aid programs in the
less developed areas — these programs are being
contracted or expanded in accord with plans to
attain positions of solid free world economic
and military strength to combat a long-term
danger and enhance the opportunities for world
stability. Such programs cannot be drastically
cut without undoing much of the rewarding
success that has been so painstakingly and
laboriously achieved.

The amounts and types of aid we give must
depend, of course, on changing world conditions.
As long as the United States maintains its prom-
inent position in world affairs, and as long as
the harsh threat to world peace exists, our
country will continue to shoulder the heavy obli-
gations of world leadership. The United States
cannot properly live up to the unavoidable re-
sponsibilities of power and at the same time
serve the best interests of the American people
without responding in a positive way to the needs
of other free peoples who require some measure
of ouLside support in trying to lay the stepping-
stones to their own advancement. The long-
term goals of the mutual security program are
inseparably interwoven with the long-term se-
curity of the United States and with world efforts
for freedom, progress, and peace. It is on this
basis that mutual security program operations
are moving forward throughout the free world.

290163—54-

11

CHAPTER II

Western Europe

IN Western Europe, the North Atlantic Treaty
Organization is the foundation rock upon
which United States policy is built. A strong and
free Europe is vital to our own security, and a
powerful NATO partnership is the best way to
guarantee that the area's vast resources, skills,
and manpower remain firmly on the side of the
free world.

To help build up the military forces of NATO
and to insure that those forces are maintained in a
high state of readiness, the United States has con-
tributed nearly $6 billion in arms to Western
Europe, undertaken extensive military training
programs, and actively participated in the Organi-
zation itself through its North Atlantic Council,
its International Staff and various military com-
mands, and its annual ministerial reviews. This
United States contribution has supplemented the
efforts of the European nations, who have spent
over $35 billion on NATO defense.

To promote the economic and political strength
on which the military forces of NATO must rely,
the United States has also vigorously supported
efforts to promote greater European unity. The
measures which the European nations are taking
to create regional organizations, develop a single
market, raise living standards, and generally
integrate their economic and political activities are
of fundamental importance to the preservation of a
strong and free Europe.

The second half of 1953 was marked by further
progress in the buildup of NATO's military power
and by a continued improvement in Western
Europe's economic position. On the other hand,
the effort to establish the European Defense Com-
munity met with further delay. On balance, how-
ever, Western Europe at the close of the year
showed an encouraging picture of increasing self-
reliance.

Military Defense

NATO Grows More Powerful

During the period July-December 1953, the
North Atlantic Treaty Organization carried out its
annual assessment of NATO forces, military re-
quirements and economic capabilities. At the
close of the annual review in December, the
Ministers of the 14 NATO countries, at a meet-
ing of the North Atlantic Council in Paris,
reaffirmed their conviction that the threat of
Soviet aggression to the world must be faced over
a long period, and that accordingly the Atlantic
Community must be prepared to maintain for a
number of years the forces and weapons to deter
or repel such aggression. It was agreed that the
size of these forces will be so planned that the
member countries can make the most effective use
of their joint capabilities, meanwhile maintaining
at least their present pace of economic and social
development. Support was given to the staff of
the Supreme Allied Commander, Europe, to aid its
current studies of the effect of atomic and other
new weapons on NATO military planning and
costs.

It also was reported at the December meeting
that the 1953 force goals had been met, except for
a moderate shortfall in aircraft. This achieve-
ment represented a considerable increase in num-
bers and quality over the forces available in 1952.

The Ministers concluded this important review
with the adoption of firm force goals for 1954,
provisional goals for 1955, and planning goals for
1956. The targets projected for December 1954
call for an increase of 5 percent in Army divisions.
The number of aircraft is scheduled to increase by
25 percent, and naval vessels by 15 percent. The
buildup will stress heavily the combat-readiness

12

and fighting power of active forces and the higher
training levels of reserves.

Clearly, NATO has reduced the gap between
Soviet Russia's offensive strength and the West's
defensive and retaliatory capacity. As late as
January 1951, the Supreme Allied Commander,
charged with the defense of Europe, had at his
disposal only about 14 combat-ready divisions.
There were some 1,800 planes, of which half were
from Britain's home defense force, and only 15
airfields. This was small strength with which to
defend all of Western Europe.

By the end of 1953, NATO had grown consider-
ably more powerful. The number of active divi-
sions had increased threefold, and the number of
ships had also increased substantially. Plane
strength had increased more than 2}{ times. Pis-
ton-driven aircraft had been largely replaced by
jets. Instead of 15 airfields, there were over 120
which were available for at least limited use;
more were planned for the next two years. The
Supreme Allied Command, Atlantic, whose pri-
mary task is to keep the North Atlantic sea lanes
open in the event of conflict, was also fully
organized.

To expand this strength and meet projected
force goals, the European NATO countries plan
to increase their military expenditures in 1954.
Although the increase is expected to be moderate,
it follows a more than twofold rise in expenditures
since Korea. Defense expenditures by these coun-
tries were over $11.5 billion in 1953, compared to
$5.4 billion in 1950. Their expenditures for mili-
tary hard goods are currently about $3 billion an-
nually, almost four times as high as the pre-Korea
rate.

In NATO, considerable progress has also been
made in coordinating national planning for civil-
ian defense, and for wartime control and distribu-
tion of commodities and transport facilities. The
highly technical work on standardization of weap-
ons and components has produced a number of
important results, including a recent agreement
on a standardized 30-caliber rifle cartridge.

Infrastructure: Military Facilities
for Joint Use

Infrastructure is the term used to identify the
basic military installations which are financed

A

;r::;" s

inues To Grow

15

THE ANNUAL TREND

\ i

(Billions of Dollars)

Defense Expendit
by European NATO Coi

ures
ntries

P

4m

(

l

liner

8B& asset

K$w*

=55555

Wssss

^^

^ ESSSSI

^^

S^S

1949 1950 (S5t 19%2 (953

The Goals for 1954:

Army Divisions up 5%
Navy Vessels ... up 15%
Aircraft up 25%

1 Includes personnel, conslruclion, and operating costs.

13

jointly by the NATO nations and are available
for the use of the forces under NATO command.

In December 1953, the North Atlantic Council
reached agreement on additional military con-
struction totaling $251 million. This brought the
total programs agreed upon to date by all NATO
countries to $1,523 million, to which the United
States has contributed $601 million. The con-
struction will furnish the military facilities neces-
sary for integrated operations of the NATO forces
planned for December 1955. Of the $251 mil-
lion, approximately 50 percent will be used to
build the fuel pipelines and fuel storage systems
for the airfields that NATO has been constructing
over the past 3 years. Other main categories are:
naval facilities — 19 percent, signals and commu-
nications— 14 percent, and airfields — 12 percent.
The balance will be used for navigational aids
and military headquarters.

In addition, $28 million worth of military con-
struction was agreed upon for Western Germany.
These requirements are to be financed under
arrangements between the Allied powers and the
Federal Kepublic of Germany.

Noteworthy progress has been made in the
actual construction of the projected military facil-
ities. More than 75 percent of all airfields pro-
gramed were available for at least limited use by
the end of 1953. This is twice the number which
was available at the end of 1952. Also, more
than one-half of the 211 different telecommuni-
cation projects were completed last year, and the
remainder will be finished during 1954 and 1955.

Construction of the petroleum pipeline system
is under way. Under this system, over 3,000
miles of pipelines will be linked up with ports on
the Channel and Mediterranean Coasts so that
the network can be supplied by the NATO tanker
fleet. The system will assure a constant flow of
jet fuel to the NATO air forces. Portions of the
pipeline system will be available for operation in
the summer of 1954, and completion is scheduled
for the end of 1955.

During 1953, the NATO system of international
competitive bidding showed results when a large
number of infrastructure projects were opened
to bidding by firms of all the NATO countries. In
several instances this step has brought significant
cost reductions to NATO. Many United States
firms are actively engaged in bidding on NATO-
financed facilities, and several have already been
successful in obtaining contracts.

Offshore Procurement Strengthens
Defense Production Base

The United States program to purchase in
friendly countries abroad a portion of the military
items furnished under the military assistance pro-
gram is now in its third year.

Contracts placed in Europe during fiscal years
1952 and 1953 totaled $2.2 billion and included
the procurement of ammunition, aircraft, naval
vessels, radio and radar equipment, tanks, artillery
pieces, and numerous spare parts.

The effect of the offshore procurement program
is being felt in Europe not only in terms of an
expanded mobilization base, but also in the im-
provement of the foreign exchange positions of the
European countries. Payments by the United
States for deliveries against offshore contracts are
expected to amount to about $500 million in fiscal
year 1954, and will constitute an important source
of dollar earnings.

In order to make the maximum contribution
toward building a European defense production
base, the placement of United States offshore
procurement contracts is being more closely co-
ordinated with European-financed production. A
series of studies by the International Staff of
NATO resulted in such correlated programs for

Military Items Contracted For In Europe Consist
Mainly Of Ammunition And Aircraft

1,000

(Millions of Dollars)

400

Offshore Procurement

Contracts Placed Through •

December 19531

Ammu- Air- Ships Elec- Combat Other
nition craft tronics Vehicles

Excludes $400 million placed in France for Indochina, (or which caregory breakdown
is nol available.

14

the production of ammunition, aircraft, ships,
artillery, and other materiel.

NATO recommendations will be considered in
placing a large part of the contracts for procure-
ment abroad in fiscal year 1954. In addition to
this support from the United States, it is antici-
pated that the NATO International Staff's recom-
mendations will also be broadly accepted by the
other NATO countries. Underlying these corre-
lated production programs is the expectation that
they wdl bring about better productive efficiency,
a larger measure of standardization, and a greater
degree of European self-sufficiency in defense
materiel.

U. S. Support: Military Shipments
Up 60 Percent

Nearly $3 billion worth of mditary weapons
and equipment was shipped to our European
allies during 1953. This represented the greatest
volume of military supplies shipped abroad to
our allies in any 12-month period since the begin-
ning of the military assistance program. In total,
1953 shipments were 60 percent higher than in the
previous year.

Through December 31, 1953, the value of
materiel shipped as grant aid to European coun-

tries (excluding Greece and Turkey) totaled $5.7
billion.

During the second half of 1953, new allotments
of funds for other than direct mUitary purposes
were made to only 3 countries in Western Europe.
A total of $61 million was allotted as follows:
$35 million for the United Kingdom for needed
agricultural commodities, $15 million for East
German Food Relief, and $11 million for Spain
to finance the purchase of raw materials and equip-
ment. Paid shipments totaled $402 million; the
bulk of this amount represented deliveries against
authorizations issued during previous fiscal years.

Counterpart Funds Channeled
Into Military Programs

Each European country receiving mutual de-
fense-financing or economic assistance deposits in
a special account local currency equivalent to
the dollar grant aid provided. These deposits
are known as counterpart funds. After a portion '
is transferred exclusively for United States use,

1 Generally, 5 percent of counterpart funds deposited
to match dollar aid obligated prior to June 20, 1952, and
10 percent after that date, pursuant to the provisions of
the Mutual Security Act of 1952.

Almost $6 Billion Worth Of Military Supplies Has Been Shipped
To European Countries

(Billions of Dollars)

The Trend by Years

{Billions of Dollars)

,,„„,,.,.,, I

I... .-. ■! i . .

.

1950 1951 1952 1953

Cumulative Shipments'

Q 20 3Q

1950

1 Includes value of excess slocks

20

1951

3Q

40

IQ

20

1952

40

20

1953

40

15

to cover administrative and other local expenses,
the remaining funds are available to the depositing
countries to finance country programs approved
by the United States.

In accordance with the policy established after
the passage of the Mutual Security Act of 1951,
the bulk of the European counterpart funds has
been channeled into direct military programs. Of
a total of $3,306 million of counterpart funds re-
leased from the special accounts from July 1, 1951,
through December 31, 1953, 44 percent or the
equivalent of $1,463 million was earmarked for
military purposes. These funds have been used
for the production and procurement of major
materiel such as combat vehicles, ammunition,
ships, transport vehicles, and electronics equip-
ment. They also have financed the procurement
of military clothing and supplies, and the con-
struction of military bases, airfields, and other
defense facilities.

Counterpart funds released for other than
military purposes have been used to strengthen the
economic base of the participating countries.
They have financed the expansion of manufactur-
ing, agriculture, electric-power output and mining ;
the improvement of transportation facilities; and
the construction of housing for workers in essential
industries.

European Counterpart Funds Have Been Released
Mainly For Military Purposes In The First Half Of
The Fiscal Year

Approvals for Withdrawal
July 1-December 31,1953

$711 Million

(In Dollar Equivalents)

Counterpart releases during the second 6
months of 1953 amounted to the equivalent of $711
million, of which $471 million, or 66 percent, was
for direct military purposes. Productivity proj-
ects accounted for counterpart releases totaling
$47 million during this period; the cumulative
total of releases for these productivity projects
amounted to the equivalent of $72 million.

The portion of counterpart funds deposited in
the 6 months ended December 31, 1953, which was
reserved for the exclusive use of the United States,
amounted to the equivalent of $39 million. All of
the United States portion of counterpart funds
generated after June 30, 1953, and unobligated
balances as of July 1, 1953, were deposited in
United States Treasmy accounts overseas. United
States Government agencies, including the Foreign
Operations Administration, needing foreign cur-
rencies for administrative expenses or other pur-
poses, purchase the required currencies from
Treasury Disbursing Officers with appropriated
dollar funds.

Economic and Political
Developments

European Region Makes
Economic Gains

At the close of 1953, the countries of Western
Europe, on the whole, were in a stronger economic
position than at any time since the end of World
War II. Four main developments characterized
their economic progress during the year:

1. Industrial production gained nearly 5
percent over the average level of 1952, and
reached a new peak.

2. Agricultural output of the OEEC coun-
tries for the crop year 1953-54 was estimated
at 22 percent above the prewar average.

3. Inflationary pressures were largely elimi-
nated.

4. Western Europe's balance of payments,
in total and with the dollar area, was much
improved.

The industrial production rise in 1953 followed
a year of generally stationary levels of output; on
an overall basis, production in 1952 had gained less
than 1 percent over 1951. Progress in 1953, how-
ever, has not been uniform. Germany, for ex-
ample, after a slow recovery in the early postwar
period, has been able to accelerate output at a

16

much faster rate than most of her European
neighbors. In contrast, industrial production
levels in France and Belgium at the end of 1953
were under post-Korea peaks.

The considerable improvement in Western
Europe's world-wide balance of payments is, to a
large extent, the result of a reduced trade deficit.
Much of this reduction, however, reflects lower
imports rather than increased exports.

Concurrently with the improvement in Western
Europe's payments position, gold and dollar re-
serves rose more than one-fourth during 1953.
Excluding Switzerland, reserve holdings of the
OEEC countries increased from $7.3 billion to $9.4
billion during this 12-month period.

These developments in balance of payments
and reserve positions have served to strengthen
European currencies. Black market and free
market exchange rates have moved closer to
official rates, and the possibilities for achieving
free convertibility of European currencies have
considerably improved.

Despite improvements in industrial output and
greater internal financial stability, the European
nations are not inclined to view their recent ac-
complishments with complacency. Individually,
and collectively through the OEEC, these coun-
tries have expressed the view that their production
must expand at even a faster rate if Western
Europe is to raise its living standards and main-

Western Europe's Economy Has Strengthened

Production Continues to Rise

Industrial Production
(Index, 1950 = 100)

109 "0

Agricultural Production

(Index, Prewar =100)

117

104

_

1111

I II

~_

ill

II

.1

III

I IP

w. % %

II

ill

122

1938 '49 '50 '51 '52 '53 Prewar 48 '49 '50 '51 '52 '53

(«') (est.)

Calendar Years Crop Years

The Trade Gap is Smaller

2,500

2,000

1,500

1,000

500

(Millions of Dollars)

Trade With Rest of World '

Q1 ' ' I I ' ' ' ' I ' ' ' ' ' I ' ' I ' ' I ' ' I ' ' I ' ' ' ' ' I ' '

1951 1952 1953

Including Overseas Territories includes Military Items

Prices are Generally Stable

150

100

(Index, 1950=100)

Wholesale Prices

Gold and Dollar Reserves Have Increased

^Excludes Switzerland

17

Most European Countries Raised Production To Peak Levels In 1953

Industrial Production of Selected OEEC Countries

(Index, 1950=100)'

100

UNITED K/NGPOM

l

ri-mri

1938 49 50 5152 53 IQ 20 30 40

GERMANY (Fed. Rep.)

100

1938 49 '50 '51 '52 '53

1938 49'50'5I '52'53 IQ 2Q 30 4Q

BELGIUM

-

-1952-

938 '49 '50 '51 '52 '53 IQ 2Q 3Q 4Q

1938 '49 '50 '51 '52 '53 IQ 2Q 3Q 4Q

tain a leading position in the world economy.
Production gains have not kept pace with new
investment and technical progress. There are,
therefore, considerable opportunities for raising
output per man.

The European Community

Over the past eight years, the nations of Europe
have taken steps toward unity which, when
measured against a long history of bitter hostility,
represent real and remarkable progress. The first
significant developments were in the economic
field and were largely outgrowths of the European
recovery program. The Organization for Euro-
pean Economic Cooperation and the European
Payments Union are the principal organizations

which were developed in this phase of the unity
movement. These organizations have given great
impetus to actions designed to remove the eco-
nomic barriers which, for so many years, have held
back the growth of the European economy.

The European unity movement has now become
concentrated in the development of a six-nation
European community, with Belgium, France,
Germany, Italy, Luxembourg, and the Nether-
lands as members. The outline of a truly supra-
national organization is being shaped. The Euro-
pean Coal and Steel Community moved across
national borders to open a common market for the
two basic industries of coal and steel. This long
step forward was followed by the negotiation and
signing of the European Defense Community

18

Treaty, which is now in process of ratification by
the parliaments of the member nations. Yet
another step toward building European solidarity
is in process. The six nations are actively working
on a draft treaty to establish a European Political
Community which will round out the measures
taken for economic and military cohesion. These
developments all have an important bearing on
the effort to build strength and security in the
NATO area.

European Defense Community Ratification
Delayed. — The EDC Treaty, when ratified, will
merge French, German, Itahan, Dutch, Belgian
and Luxembourg armed forces into a single unified
European army. These forces will serve under
an integrated command and will be under the
general direction of supranational institutions.

The EDC Treaty was signed over a year and a
half ago on May 27, 1952. In spite of the impor-
tance of the EDC, there has been a prolonged delay
in the completion of parliamentary approvals.
As of the end of 1953, parhamentary bodies in
three countries had acted. Last spring, both
houses of the German parliament voted to ratify
with votes of 222 to 165 in the Bundestag, and 23
to 15 in the Bundesrat. During the six months
period covered by this report, the lower houses in
both the Netherlands and Belgium approved the
Treaty. The Netherlands Second Chamber voted
approval by a 75 to 11 vote on July 23, 2 and the
Belgian Chamber of Deputies approved on Novem-
ber 26 by a vote of 148 to 49. These votes reveal
a strong margin of support for the EDC.

To date, the principal delays have been encoun-
tered in France and Italy. Although the French
Assembly held a general debate on the EDC in
November, no final measures were taken. Action
on this critical issue has been delayed further by
the presidential elections which took place in
December. In Italy, the situation has been
affected by the difficulty in forming a stable
Government.

It is true that progress toward ratification has
been made, but continuing delay in the entry into
force of the Treaty is a matter of serious concern.
There continues to be an urgent need for Germany
to do its part in the common defense effort. The
EDC provides the only good means for making
possible the German defense contribution in a
form which is acceptable to those nations in

2 The Netherlands First Chamber also ratified the EDC
Treaty on January 20, 1954.

Europe which have suffered from German aggres-
sion, since Germany will contribute its forces to a
unified European army under an integrated
command.

In addition to its military importance, EDC
ratification has become an essential next step
forward in the movement to eliminate once and
for all the conflicts which have so long afflicted
the continent of Europe. It thus provides a sure
basis on which to build greater strength in the
NATO area.

Coal and Steel Community. — The European
Coal and Steel Community continued its efforts
to build a common, competitive market in coal
and steel for its six member countries. The
Community, through its supranational institu-
tions, moved forward with additional measures to
remove national barriers to trade and to elimi-
nate private agreements which limit the produc-
tion and marketing of basic commodities.

The Community has been giving special atten-
tion to an investment program designed to lower
production costs and raise productivity. Several
members of the High Authority held preliminary
discussions in the United States with the Presi-
dent and members of Congress on the possibilities
of obtaining loan capital which would be repaid
from Community earnings. As a result of these
discussions, concrete investment loan proposals
are expected to be presented to the United States
early in 1954.

During the last half of 1953, the Community's
commercial policies were favorably reviewed by
the members of the General Agreement on Trade
and Tariffs. Also, an agreement was signed with
the International Labor Organization which pro-
vided for closer collaboration in the field of labor
and social matters.

Trade Liberalization. — At the ministerial
meeting of the Organization of European Economic
Cooperation held in Paris during October 1953, the
OEEC Council reaffirmed the objective of pro-
ceeding toward the complete abolition of quanti-
tative restrictions on imports — that is, restrictions
placed on the amounts of certain commodities that
may be imported into a particular country. It
also noted that this objective was part of the gen-
eral process of freeing trade on a world-wide basis.

Under the European Code of Liberalization, the
standard level of liberalized trade — in other words,
the level to which import quotas are removed — is
fixed at 75 percent of commercial imports in
1948. At present, many countries have freed

290163—54-

19

The OEEC Countries, As A Whole, Have Reached
The Current Trade Liberalization Goal

(Percent of Private Intra-European Trade Liberalized)

100

75

50

(Current 75-Percent Goal)

1949 1950

1951

(End of Year)

1952

1953

their imports well beyond that percentage. For
example, Italy and all creditors in the European
Payments Union except Austria (Belgium, Luxem-
bourg, Germany, the Netherlands, Portugal,
Sweden, Switzerland) have lifted restrictive quan-
tity quotas on 85 percent or more of their com-
mercial imports. These 8 countries account for
half of all intra-European trade.

During the latter part of 1953, 3 member
countries — the United Kingdom, France, and
Austria — again progressed toward fulfilling their
obligations under the Code. These countries had
been permitted by the OEEC to suspend or limit
temporarily their liberalization measures for bal-
ance of payments reasons. The United Kingdom
has now re-liberalized to 80 percent. Austria has
liberalized to 50 percent, and France, who had
been forced to reimpose quotas on all its imports,
re-liberalized to the extent of 20 percent.

Of the other OEEC countries, Denmark, Ire-
land, and Norway have reached the 75-percent
stage. Turkey, for balance-of-payments reasons,
does not apply liberalization measures; Greece, on
an unofficial basis, has adopted a system of almost
complete liberalization.

Another important recent development in the
field of trade liberalization has been the new in-
terest displayed in freeing restrictions on imports

from the United States. At its October meeting,
the OEEC Council decided that member coun-
tries should report on the nature of the restrictions
which they have been unable to remove. This
information should form the basis for a coordi-
nated policy to promote liberalization toward the
dollar area.

Western Europe has also taken an important
step toward achieving a greater mobility of man-
power across national borders. It has been
agreed by the OEEC countries that if a job in
one country remains unfilled and listed with the
employment service for 30 days, the employer
may bring in a qualified workman from another
Western European country.

Other Programs in Europe

5/2 Million Food Parcels to East Germany. —

On July 4, 1953, Chancellor Adenauer, in a letter
to the President of the United States, described
the concern of the Federal Republic of Germany
over the steadily worsening food situation of the
German people in the Soviet Zone and East
Berlin. The Chancellor expressed the hope that
the United States would participate with the
Federal Republic in making funds available for
food supplies to be sent to the Soviet-occupied
areas to protect the population from hunger to
the extent possible.

On July 10, the President replied that this
Government would join immediately in furnish-
ing needed food to the hungry people of East
Germany. At the same time, he offered to the
Soviet Union, as the occupying power for distri-
bution, food shipments valued at about $15 mdlion
and made up of items of high nutritional value.

On July 11, the Soviet Government rejected
this proposal. On the same day, the President
announced that the offer of food to the German
people, in their distressed situation, would stand.
The Director of the Foreign Operations Admin-
istration was given the operating responsibility
for carrying the program through.

FOA initiated procurement of food at once, and
late in July the first consignment of American lard,
flour, and dry milk arrived in Germany. Other
shipments quickty followed, and included canned
milk, dry beans, canned meat, and cottonseeed oil.
The Federal Government of Germany accepted
responsibility for distributing the food and carried
the domestic costs of handling.

On July 27, the distribution of food parcels
started (in West Berlin. Parcels were given to

20

East German Food Program

300

(Thousands of Parcels Per Day)

Number of Food Parcels Issued Daily, July 27- October 10, 1953

Food Content

Number of Parcels
Total 5,559,782

>■'-'"'•-'•'

-July

"August-

First Distribution Period

Interim Period

September-
Second Distribution Period

■October-

Dislnbulion officially limited lo Soviel Zone and peripheral area residenls.
2 No distribution on Sundays alter August 23.

the German residents of the Soviet Zone and
East Berlin who came personally or through their
representatives to collect it. Some of the food
came from supplies in Berlin, to be replaced later
by United States shipments. To the unskilled
East Zone worker, parcels for a family of 4 repre-
sented about 40 percent of a month's wages. The
nutritional value of the packages, far outweighing
their monetaiy worth, provided the equivalent of
a family's ration of fat and protein for one month.
The Soviet and East German authorities
attempted to hinder distribution by resorting to
propaganda, confiscations, arrests, and restric-
tions on travel. In defiance of these pressure
tactics, however, the people of East Germany
swarmed over the borders to the West Berlin food
distribution centers. In a little over two months,
over 5}i million parcels containing nearly 18,000
tons of food had been distributed, and it was
estimated that nearly one-sixth of all Germans
under Soviet domination had directly benefited.
Tbe first two phases of the program ended on
October 10, and buildings and facilities used as
distribution centers were released for the reopen-

ing of schools. A third -phase of distribution was
then initiated.

The distribution program has been successful
beyond all expectation not only from a humanitar-
ian standpoint but because it gave the people on
the other side of the iron curtain tangible and
undeniable evidence that the West stood with
them in a time of crisis.

Spanish Program Begins. — On September 26,

1953, the long negotiations with Spain for over-
seas military bases were successfully concluded
with the signature of three basic agreements.
These agreements, designed to strengthen the
capabilities of the West for the maintenance of
peace and security, cover: (1) development and
use of Spanish air and naval bases jointly by the
United States and Spain; (2) military end-item
assistance to Spanish armed forces; and (3) eco-
nomic and technical aid. For the fiscal year

1954, assistance earmarked for Spain totals $226
million — $141 million for military aid, and $85
million for economic aid.

The agreements provide that, in addition to
setting aside 10 percent of counterpart funds for

21

exclusive United States use, Spain will contribute
a portion of the counterpart to finance local
currency costs of the base construction program.

To facilitate carrying out the terms of the
agreements, a United States Operations Mission
and a Military Assistance Advisory Group, both
under the general direction of the Ambassador,
have been established in Spain. The Mission
will be responsible for economic aid and technical
cooperation, while the Military Assistance Ad-
visory Group will coordinate the military program
with the Spanish authorities.

The Navy Department's Bureau of Yards and
Docks will administer the program to develop air
and naval facilities which will be used jointly by
American and Spanish forces. The Bureau has
appointed representatives of four firms to carry out
the overall architectural-engineering phases of the
program. In addition, a United States contractor
has been appointed to act as prime contractor on
a cost-plus-fixed-fee basis.

Work on programing the $85 million in
economic aid is now going forward. First priority
is being given to economic projects which support
the joint military programs in Spain. In addition,
selected raw materials and equipment for con-
sumer-goods industries will be furnished to
counteract as much as possible the inflationary
effects of the base construction program. Some
United States surplus agricultural commodities
will also be useful for this purpose.

As of December 31, 1953, $11 million of eco-
nomic aid had been allotted Spain under the
current program. Procurement authorizations
totaling $4.5 million had been issued against this
allotment for the purchase and shipment of crude
rubber, steel plates and structural shapes, tin-
plate, hot-rolled strip iron, copper and aluminum.

Productivity Program: Expanded Effort by
Europe. — Special local currency productivity ac-
counts have been established in Western Europe
as provided for in special agreements concluded in
fiscal year 1953. Establishment of these special
funds for the first time insures the availability
of substantial European financing for purposes
which are directly related to increasing productiv-
ity throughout European industry and agriculture.
These agreements specify that as output rises,
wages are to be increased and prices lowered.

As of December 31, 1953, $94 million in dollar
aid was allotted under agreements with 11
countries which required counterpart financing
of productivity programs. Ten percent or the

equivalent of $9.4 million, was reserved for
use by the United States. Of the remaining
$84.6 million in counterpart funds, $77.1 million
was allotted for individual country programs, and
$7.5 million for an OEEC European Productivity
Agency. An amount of $2 .5 million in dollar funds
was also allotted for the Productivity Agency.

Moreover, the 1 1 countries have contributed an
additional $28.7 million in their local currencies
for productivity programs. Thus, a total of
$115.8 million in local currency and dollar funds
is now available for specific productivity projects
carried on by the Europeans themselves.

Broad plans for the individual country pro-
grams have already been mapped out. The
equivalent of about $65 million will be used to
provide medium-term, low-interest loans princi-
pally to small and medium-sized business enter-
prises in connection with efforts to raise their
productivity. The equivalent of another $45
million will finance productivity projects on a
nonrepayable basis. Blueprints for these projects
include training programs for management and
labor, expert management engineering services,
support for productivity centers, marketing and
distribution improvement, and better processing
techniques.

The establishment of local currency productiv-
ity funds under the European Productivity Agency
and in the various countries insures the continued
growth of local self-help programs in Em-ope.
Some United States assistance in giving direction
to the programs will, however, still be needed.
This assistance will give particular emphasis to
the fields of management development and mar-
keting and distribution, since they are the areas
where our contribution to the European produc-
tivity effort can be most effective.

87,000 More Emigrants and Refugees Moved
Out of Europe. — The United States took the
initiative in establishing the Intergovernmental
Committee for European Migration (ICEM) at
Brussels in 1951, to facilitate the movement of
emigrants and refugees out of the overpopulated
areas of Europe. With the addition of Colombia
and Uruguay, who joined in November 1953, the
membership of ICEM was brought to 24 govern-
ments. An estimated 3 million persons, who are
unlikely to be absorbed in the economies of
Germany, Austria, Italy, the Netherlands, and
Greece, face the need of emigrating from the
continent during the next five years.

In 1952, ICEM moved 77,626 persons from

22

French workers building giant 100-ton dynamos in France's largest electrical construction plant at Beljort.
Greater efficiency of production has been achieved at this plant, due to the joint productivity programs oj France
and the United States.

Europe to Australia, Canada, Latin America, and
the United States. In 1953, the Committee
moved 87,000 persons, 55,000 of whom were
processed and transported in the last six months
of the year. This 85-percent increase in move-
ment over the first part of the year encouraged
ICEM, at its sixth session in Venice during
November, to raise the 1954 quota of movement
to 117,600 persons.

The higher quota for 1954 was also justified by
the improvement in the selection and processing
procedures in Europe and by the greater oppor-
tunities for placement in many of the receiving
countries. The Latin American countries, for
example, are interested in limited numbers of
urban workers and larger numbers of agricultural
workers. They are also anxious to take in the
families of earlier migrants who are already estab-
lished and employed. Over 20,000 wives and
children have been nominated for immediate

movement to Argentina. Others are listed for
transportation to Brazil, Chile, and Venezuela.

Australia has increased its quota of immigrants
for 1954; Canada is expected to maintain its cur-
rent rate of intake. In addition, an estimated
30,000 refugees who will receive visas to the United
States under tbe Refugee Relief Act of 1953 will
move under ICEM auspices in 1954. For the
calendar year 1953, the United States has contri-
buted $6.1 million from fiscal year 1953 funds to
ICEM's operational budget of $24.3 million, and
$716,000 to its administrative budget of $2.3
million.

At its November meeting in Venice, the Com-
mittee approved the final text of a draft constitu-
tion which was later presented to the member
governments for acceptance. The constitution,
if adopted, will give the committee a more formal
status and establish it as a temporary organization
with an anticipated life of 3 to 5 years.

23

CHAPTER III

Near East, Africa, and
South Asia

THE countries and territories of the Near East,
Africa, and South Asia lack, in varying de-
grees, the skills, techniques, and institutions that
are essential if the 700 million people of the area
are, through utilization of their human and natural
resources, to eliminate widespread poverty and to
create stable governments and sound economies.
In few parts of the world are there more pressing
needs or greater opportunities for progress toward
a society where the people can increase their per-
sonal freedom.

The United States is eager to help promote such
progress, and under the mutual security program
is providing assistance to the following countries:

In the Near East: Egypt, Greece, Iran,
Israel, Iraq, Jordan, Lebanon, Turkey, and
Saudi Arabia.

In Africa: Ethiopia, Liberia, Libya, and the
overseas territories of certain Western Euro-
pean countries.

In South Asia: Afghanistan, India, Nepal,
and Pakistan.

The primary objective of United States pro-
grams in these countries is to aid the various
governments and peoples in their efforts to develop
their own resources and build up their economic
and social structures. In some countries, we are
furnishing military supplies and training assistance
to help the governments increase their defense
capabilities.

United States technicians work with the nation-
als of the various countries to develop and spread
locally the knowledge and techniques which can
be profitably applied in agriculture, health and
sanitation, industry, education, transportation,
communications, and government administration.
Technical cooperation efforts are supplemented,
in certain countries, by special economic aid

to provide needed supplies and equipment in
order to strengthen the economy and enable the
people to make the best use of their new and
growing skills.

In this far-spread area, with its many newly
independent governments and its diverse racial,
cultural and economic backgrounds, there is
fertile ground for friction and conflict. The ten-
sions between Arab and Israeli have not abated,
and only a precarious truce is maintained. Boy-
cott of Israeli goods and firms has been extended ;
the Arab refugee problem remains as a tragic
barrier to regional harmony.

Control of the Suez Canal is still unsettled, and
difficulties beset consideration of integrated de-
velopment and use of the waters of the Nile
watershed. Dispute over the Jordan waters has
stirred hatred and bitterness and has aggravated
nationa'ism to a degree which threatens the possi-
bility of cooperative development of this vital
resource.

In late summer of 1953, the smoldering unrest
in Iran flared into rioting and revolt. Prime
Minister Mossadegh was removed from office, and
the Shah resumed leadership of his country. With
the Anglo-Iranian oil controversy unsettled, the
new Iranian Government found itself perilously
near economic collapse.

All these factors have made it essential that
United States policies in the area be mad?
clear and impartial. The success of working rela-
tionships between representatives of our Govern-
ment and those of the countries participating in
mutual security arrangements depends upon
patience, mutual understanding, and common
objectives.

Programing of Funds. — Under the mutual
security program for fiscal year 1954 in the Near

24

East, South Asia, and Africa, $574 million was
made available for military aid, and $424 million
for economic assistance and technical cooperation.
The bulk of the military-aid funds has been pro-
gramed for Greece, Turkey, and Iran. Through
December 31, 1953, special economic aid in the
amount of $57.5 million has been announced for
India; $56 million for Iran; $26 million for Israel;
and $11.3 million for Pakistan. The balance of
the $424 million had been programed for other eco-
nomic aid and for technical cooperation for coun-
tries in the area. A relatively small part of these
funds — $320,000 — was obligated to pay for freight
costs of emergency wheat shipments to Jordan
and Libya.

Military Aid to the Near East

From a military standpoint, it is vital that the
Near East remain safe from external aggression.
The region's enormous oil reserves — almost half
of the world total — its key land and water ap-
proaches, and its vast human resources constitute
indispensable assets to free world security.

A program of military assistance to Greece and
Turkey was initiated by the United States in 1947.
Military aid to Iran was begun in 1950. The
importance to the free world of sovereign and
independent governments in the three countries

The Near East Holds More Than Half Of
World Oil Reserves

World Crude Oil Reserves as of January 1, 1953

U.S.S.R.and Satellites

6.2%

115 Billion Barrels

More Military Supplies Are Being Sent To Build
Near East Defense

300

(Millions of Dollars)

Value of Military Shipments to
Near East Countries'

1950 1951

deludes value of excess stocks

1952

1953

was. emphasized by these actions. In February
1952, Greece and Turkey were admitted to full
membership in the North Atlantic Treaty Organi-
zation. Ethiopia has been declared eligible for
military assistance, and a small grant aid program
was inaugurated with the first shipment of mili-
tary equipment in mid-1953.

Military aid shipments to the Near East as of
December 31, 1953, amounted to $761 million;
59 percent of the total was directed to the Army
establishments, 19 percent to the Navy, and 22
percent to the Air Force.

In addition to the military equipment and sup-
plies provided under the military assistance pro-
grams, the armed forces of the three Near East
countries have been strengthened through coor-
dinated training activities. Instruction has been
provided in service schools and by mobile training
teams. American technical specialists have en-
gaged in on-the-spot instruction of country na-
tionals in the maintenance and operation of the
specialized or complex equipment furnished under
the mutual security program. Nationals of the
countries have visited installations of the United
States armed forces to familiarize themselves with
the methods and procedures used in our military
establishments.

Since the beginning of the military assistance
program, the Greek Army has changed from a

25

loosely knit organization, designed to cope with
guerrilla activity, into a strong force with well-
trained units that are familiar with the tactical
use and technical aspects of their equipment.
Supporting weapons provided through the aid
program have included armor and anti-tank weap-
ons, as well as light and medium artillery. Major
items of equipment have been integrated within
the active army upon arrival in Greece.

The Royal Hellenic Ah Force, in addition to its
functions of defending Greece against air attack
and furnishing tactical air support to the Greek
National Army, has also had the responsibility,
since the admission of Greece to NATO, of exe-
cuting missions assigned by headquarters of Allied
Air Forces, Southern Europe, a NATO command.

In spite of its extremely limited resources and
the precarious state of its economy, Greece has
been spending relatively large amounts on its de-
fense program. Total defense expenditures for
the past 4 years have amounted to the equivalent
of $331 million, or 7.5 percent of the country's
gross national product for the period. This ratio
has been exceeded only by the United Kingdom

and France, among the European NATO countries.

Turkey also has been steadily expanding its
rate of spending for defense. The Turkish Gov-
ernment's military expenditures in the past 4
jrears have amounted to over $1 billion. This was
equivalent to 6.6 percent of Turkey's gross na-
tional product.

When the military aid program began, the Turk-
ish defense establishment consisted of well-dis-
ciplined personnel with a will to fight but with
little modern equipment, training, or logistic
support. In recent years, Turkey has been
transforming its armed forces into one of the most
powerful and dependable military organizations
in the Near East region. The strategic location
of the country makes it desirable for Turkey to
maintain a large standing army, quickly expand-
able on mobilization to receive the initial impact
of an overland, amphibian, or airborne invasion.
The Turkish army is therefore being organized
into a hard-hitting, compact, and relatively mo-
bile force which can be quickly deployed. The
air and naval forces are being trained and equipped
for important supporting roles.

A Turkish armored unit passing in review at Ankara, Turkey.
States under the mutual security program.

The tanks were furnished by the United

26

The military assistance supply program for
Iran is in the form of items which will increase the
strength and efficiency of the Iranian army and
gendarmerie, so that the country can guard itself
against internal subversion or external aggression.

The economies of the countries, as well as their
defense, capabilities, have been aided by the
United States program to finance the production
of military supplies in friendly countries-. We
have entered into contracts with Greece, for ex-
ample, totaling $35 million for military procure-
ment in that country. Such procurement was
made possible by development of a new ammuni-
tion plant. Our contracts with Turkey for pro-
curement in that country amoimt to $8.5 million.

Special Economic Aid

India's Development Plan
Aided by U. S.

Supplementing the technical cooperation pro-
gram in India, the United. States has furnished
critically needed supplies and equipment to rein-
force the efforts of the Indian Government to
reach the development goals set forth in its first

5-year plan. This plan, projected through mid-
1956, is aimed at improving the living conditions
of India's 363 million people and calls for sub-
stantial increases in agr/icultural production,
along with a general development of basic re-
sources, and industrial aud transportation facilities.

The primary emphasis of the development plan
has been on agriculture, and accordingly the
United States programs in India for the past 2
years have concentrated on measures which would
increase agricultural production. These measures
have included the financing of fertilizer imports, as
well as technical cooperation for expanding India's
Sindri fertilizer plant, the largest in Asia. Mate-
rials have also been supplied for the production of
agricultural implements and for the drilling of
irrigation wells.

For fiscal year 1954, $57.5 million was pro-
gramed for India for special economic aid which
will further assist the country's development
programs. The bulk of these funds has been
allocated for the supply of steel and for rehabili-
tation of India's railroad system.

India's requirements for certain types of steel for
the fiscal year 1954 have been estimated at
725,000 tons; domestic production for the period

India's Food Situation

Production of Food has Increased

(Index, 1936-38 = 100)

All Foods

/

/

7

Cereals

1946-47 "47-48 '48-49 '49-50 '50-51 '51-52 '52-53

Crop Years

. . . But Supplies are Below
Population Requirements

2.250

Estimated
Requirements

Total Calories

■ Cereals

Calorie Food Supply
Per Capita Daily- 1952-53

290163—54 5

27

will not exceed 340,000 tons. Without the needed
steel, India's development progress would be
greatly retarded. To help make up the de-
ficiency in domestic production, the United
States has agreed to finaiice the purchase of
200,000 tons of steel at a cost of $25.5 million.
The equivalent of $25.5 million in local currency
proceeds from domestic sale of the steel will be
used for economic development projects mutually
approved by the United States and India. The
steel shipped under the mutual security program
will be used for development projects in agriculture
and industry, and for major river-valley proj ects.

The rehabilitation and maintenance of India's
railroad rolling-stock, which had badly deteriorated
during World War II, is essential to the develop-
ment and expansion of all sectors of its economy.
India's railway system is the fourth largest in
the world. Each day, some 3,800 trains carry
more than 3 million passengers over 34,000 miles
of track. In December 1953, the United States
agreed to use $20 million of special economic-aid

funds to help finance the purchase of 100 new
locomotives and 5,000 new freight cars. India
will deposit the equivalent of this amount in a
fund to be used for additional development proj-
ects jointly agreed upon by the Governments of
India and the United States.

During the latter part of 1953, discussions were
carried on between the Foreign Operations
Administration and the International Bank for
Reconstruction and Development to explore
the possibilities of establishing a private financial
institution to promote industrial expansion in
India. As the year ended, the International Bank
was planning to send representatives to discuss
the matter with potential private investors and
the Indian Government.

Iran Gets Aid To Meet a Crisis

In August 1953, the Government of Iran faced
economic catastrophe. The Iranian treasury was
virtually empty, the Government was deeply in
debt, consumer goods were in short supply, and

Construction of the Hirakud River dam in India. This multipurpose dam will eventually irrigate almost 2
million acres. The dam is 3 miles wide, with the dykes extending 11 miles. The Indian Government is
spending the equivalent of $175 million for this project, and the United States has contributed technical knowl-
edge and earth-moving equipment.

28

prices were rising rapidly. The United States
acted quickly to help improve this critical situation
in an important and friendly country of the free
world. On September 5, the President approved
$45 million of emergency aid to supplement the
$23 million previously programed for economic
assistance and technical cooperation.

The Foreign Operations Administration took
immediate steps to make $10 million of the $45
million grant available to finance Iranian imports
of certain Heeded essentials such as foodstuffs,
drugs, cement, iron and steel products, and repair
parts. An additional $12 million was used to buy
100,000 tons of sugar, since Iran's annual sugar
output is nearly 130,000 tons below its needs.
These commodities have been programed and
shipped as fast as possible. The first shipment of
sugar, for example, arrived in Iran on November 1,
three weeks ahead of schedule.

The remainder of the $45 million has been pro-
gramed for additional needed commodities and
temporary budget support. The local currency
obtained through the sale of the imported supplies
will be used in part for government operating
expenses, and in part for needed projects in
housing, road improvement, and health.

These emergency aid actions have been effective
in remedying a number of the immediate difficul-
ties faced by the Iranian Government, but long-
term improvements "in Iran's economy depend, of
course, upon settlement of the oil dispute.

Israel Is Helped To Stabilize
Its Economy

In addition to providing the services of Ameri-
can technicians and to training Israeli nationals
under the technical cooperation program, the
United States has provided Israel with special
economic assistance.

The $70 million of economic assistance funds
which had been appropriated for the fiscal year
1953 was a major factor in helping the Israeli
Government to stabilize its economy. The bulk
of these funds — roughly $45 million — was used for
items such as foodstuffs, fuel, fertilizer, raw mate-
rials, and medical supplies. The remainder was
used principally for resettlement, housing con-
struction, and for capital development items,
mainly in the field of irrigation.

In November 1953, an additional $26 million
was made available. These funds have been used
to finance imports of consumer and industrial

goods necessary for the stabilization and increased
productivity of Israel's economy. Within 2
months, $20.5 million worth of procurement
authorizations had been issued.

Operations under the grant aid program have
resulted in the deposit of Israeli currency in a
special counterpart account. Use of these counter-
part funds has been closely coordinated with the
release of dollars under the grant-aid program,
and with technical cooperation. In rangeland
development, for example, purchase of equipment
and livestock was financed from grant-aid funds,
essential relocation costs were covered in part by
counterpart funds, and specialists working under
the technical cooperation program helped to draw
up the plans and put them into effect.

Pakistan Program Stresses
Food Output

In the latter half of 1953, $11.3 million was
made available for the special economic aid pro-
gram to Pakistan.

Under this program, project agreements have
been signed for importing and producing needed
fertilizer to raise food output. The sum of $3.5
million has been earmarked to assist in the
construction of a fertilizer factory; another $3.1
million has been used to finance fertilizer imports
into the country.

Food Program. — To aid the people of Pakistan
in a time of threatened famine, an Act was passed
authorizing the President to make available up to
1 million tons of excess reserve stocks of Com-
modity Credit Corporation wheat. Operating
under Executive Order, the Foreign Operations
Administration immediately made available up to
700,000 long tons on a grant basis. The law
making it possible to transfer the wheat was
passed by the Congress and approved by the
President on June 25, 1953. The first shipload
of wheat left the port of Baltimore the next day.

By the end of December, about 600,000 tons
were already shipped; over 475,000 tons of wheat,
requiring 71 voyages, had arrived at Karachi.

The main objective of the emergency wheat
program was to alleviate Pakistan's food crisis
after 2 successive years of drought. The program
was also aimed to prevent large-scale hoarding
and speculation which would boost basic food
prices and start an inflationary spiral in Pakistan's
already precarious economy.

29

U. S. Surplus Wheat Is Sent To Relieve Pakistan's Food Shortage

600

500

300

100

(Thousand Long Tons)

Retail Wheat Prices
in Karachi

tBushel Equivalents)

$2.95

:i$2.5l:i

Before First After First
U.S. Wheat U.S. Wheat
Shipment Shipment

Liftings from U.S. Ports
and Arrivals in Karachi
June-December. 1953-

Shipped by
Dec.3l

597

Thous. Tons

Pakistan Wheat Bi

Approved

June 25

Both objectives were accomplished. The Am-
bassador of Pakistan has stated that millions of
his people were saved from starvation by American
wheat. In addition, simultaneously with the
arrival of the first relief shipment in late July,
the official price of wheat in Pakistan was lowered.
Quantities of local wheat, probably being hoarded
after two consecutive drought seasons, found
their way into the nation's food markets.

The wheat is being shipped from the United
States in bulk and bagged in the hold of the
ship upon arrival in Karachi. The bagged wheat
then travels by rail, truck, and even by camel
to the villages in west Pakistan. The Food
Minister of Pakistan has said, "We can account
for every grain of wheat that we have received.
There is nothing we have lost, there is nothing
that has been pilfered, there is nothing that we
have squandered."

The legislation provided that the American
wheat was to be distributed without cost to those
who through no fault of their own were unable to
pay for it. A system of free distribution to the
needy has been put into effect. Work relief
projects, which include a 25-percent bonus in
wheat to the workers, have also been initiated.

In addition, wheat has been issued to charitable
organizations, such as the Red Cross and the
Memon Relief Society, to assist in the care of the
aged, orphans, and refugees.

From the outset, the Pakistan Government has
given favorable publicity to the gift of wheat
through newspaper coverage, radio broadcasts,
and speeches by Government and local officials.
It has produced and issued a documentary film in
English, Bengali, and Urdu on the subject. The
proceeds derived from that portion of the wheat
sold provide funds to support new projects to
expand food production and guard against future
shortages. The expenditure of the counterpart
funds is jointly approved and administered by
representatives of the United States Government
and the Government of Pakistan.

There is no doubt that the expeditious action
by the Congress and the prompt implementation
of the Pakistan wheat program prevented a calam-
ity in that country. The American people's gift
of wheat has served to strengthen a yoimg, but
large and important, nation during a trying period
of its early existence.

Emergency Food Programs to Jordan and
Libya. — The Jordan Government in early August

30

requested aid from the United States in the form
of a wheat grant. It had become apparent tha't
the 1953 wheat crop in a large area was almost a
complete failure. Moreover, the country was
still suffering from the effect of the 1951 drought.
The aid was approved by the President on Sep-
tember 2, 1953, and an agreement between the
United States and Jordan was signed on October
20. In early November, 10,000 tons of hard
spring wheat were shipped.

This aid was extended under provisions of
Public Law 216, approved in 1953, which au-
thorizes the President to use stocks of agricultural
commodities held by the Commodity Credit
Corporation to assist friendly peoples in meeting
famine or other urgent requirements. Some of
the wheat was sold at prevailing prices to obtain
funds for defrajung costs of distribution; the
balance was being distributed free to destitute and
unemployed persons.

A serious food shortage also developed in Libya
following a severe drought. In December 1953,
Libya was declared eligible for assistance under
Public Law 216, and shipment of 2,200 tons of
wheat was made in December to relieve suffering
in the famine-stricken areas.

Palestine Refugee Program:
Jordan Valley Development

As a result of hostilities between the Arab States
and the State of Israel, hundreds of thousands of
Arabs fled from Palestine into neighboring Arab
countries. These refugees — destitute, homeless,
and almost totally dependent on outside assist-
ance— constitute a serious problem which is woven
inextricably into the economic, social and, political
frictions that afflict the Near East. The refugee
problem remains as one of the principal unresolved
issues between Israel and the Arabs. The Arab
refugee population totals some 850,000 persons and
is growing at the rate of 20,000-25,000 annually.

The United Nations Relief and Works Agency
for Palestine Refugees in the Near East (UNRWA)
gave increased attention during the latter half of
1953 to ways and means whereby the Arab
refugees may become self-supporting. The most
significant development during the period was the
preparation of a plan for unified development of
the Jordan Valley. The plan, prepared at the
request of UNRWA by an American engineering
firm under the supervision of the Tennessee Valley
Authority, was deliberately developed without re-

gard to political factors or present national bound-
aries. It was designed to show how the waters of
the Jordan may be efficiently stored and controlled
for irrigation and hydroelectric power for the bene-
fit of all of the peoples of the Jordan watershed,
including the refugees.

In view of the economic and political importance
of such development, the President, in October
1953, sent Mr. Eric Johnston as his Special
Representative, with the rank of Ambassador, to
explain the significance and benefits of the plan to
the governments of the countries concerned. Mr.
Johnston discussecl the proposal for the coordi-
nated development of the Jordan River watershed
with the leaders of Jordan, Syria, Lebanon, and
Israel. The statesmen of all four countries have
been studying the proposal, and the President has
asked Mr. Johnston to return to the area for
further discussions as soon as the governments
complete their review.

It is estimated that 240,000 acres of land, now
idle and unproductive, can be put into production
if the proposed development plan is accepted.
Most of this land would yield three crops a year.
In addition, more than 65,000 kilowatts of power
could be made available to aid the industrial
development of the area.

In October 1953, UNRWA concluded an agree-
ment with the Egyptian Government for extensive
technical surveys in connection with a proposal to
reclaim land in the Sinai Peninsula for refugee use
by siphoning water under the Suez Canal from a
fresh-water canal fed by the Nile. These surveys,
expected to be completed in mid-1954, are being
made under a general program agreement between
the Egyptian Government and UNRWA, for
which $30 million has been reserved by UNRWA.

The General Assembly of the United Nations,
after reviewing the UNRWA program, adopted in
November a resolution extending the life of
UNRWA through June 30, 1955, and authorized
a budget of $24.8 million for continued relief of
the refugees during the fiscal year 1954.

Pursuant to section 549 (a) of the Mutual
Security Act of 1953, the Director of the Foreign
Operations Administration appointed a special
3-man commission to survey the refugee situation
in the Near East and to recommend means of
seeking a solution of the refugee problem. This
commission had not yet been able to make a survey
in the field, and consequently filed on December
14, 1953, an interim report which was transmitted
to the Congress. The report recommended that

31

the United States support the decision of the
United Nations General Assembly to continue
UNRWA, and endorsed the plan for the unified
development of the Jordan River as the best
forward step in a practical program^ for putting
the refugees on a self-supporting basis.

Technical Cooperation

United States technical cooperation programs
have matched the particular needs of the area.
A fisheries adviser for Liberia; an engineering sur-
vey for Saudi Arabia; a fertilizer expert for India;
a team to establish an agricultural school in
Ethiopia; a tax consultant for Iran; a wool-grading
expert for Libya; teacher training specialists for
Jordan — these are representative of the variety of
technical skills needed to carry forward our tech-
nical cooperation projects. Within each country,
however, the various projects are being integrated
into a planned development program in order to
produce results which will fit in with the country's
overall needs.

The successful impact of the technical coopera-
tion programs is evident in the numbers and types
of activities in which the United States has been
asked to participate. Almost 800 American tech-
nicians are working with nationals of the host
countries in the area, imparting needed skills and
teaching them how to teach others in order to
spread the knowledge among their countrymen.
In addition to augmenting a country's own efforts,
this work is paving the way for greater interest in
private investment, both local and foreign. The
increasing participation, not only in money but in
the provision by the host governments of land,
buildings, equipment and labor, is a healthy sign
of growing awareness that these activities are for
the benefit of the participating countries, and that
United States objectives are simply to assist them
in accelerating their development and combatting
the ravages of hunger, poverty, and disease.

Land Projects Bring Striking Results

The water-spreading project in Jordan is a dra-
matic demonstration of what American experience
and know-how can accomplish in helping the people
of a less developed country. As a direct result of
the construction of a system of simple earthen
dikes by our technicians working with the Jor-
danians, lush grass grew in a 200-acre area
where there was no record of grass ever growing
before. A hay crop, equivalent in volume and

nutritive value to a crop grown in the United
States, was harvested and distributed to the desert
tribes. It is now planned to grow grains in the
reclaimed area.

Word of the success of this project has spread
throughout the Near East. A similar project has
been started in Egypt. A group of 23 agricultural
leaders from 9 countries was brought to the United
States to observe various water-spreading and
irrigation techniques, and to take intensive train-
ing courses in planned water-spreading and related
range and forage management. These men, offi-
cials of their governments, have returned to their
home countries to work there with United States
technicians in making use of the methods learned
in this country. In addition, plans have been
made for a water-spreading training program in
Jordan. Each country in the Near East will be
asked to send an official and two technicians to
participate in the course.

The Government of Iraq has requested assist-
ance in making a scientific and practical attack
on the problem of land reclamation. Proposals
have been made to establish a Grazing Division
in the government and to develop a broad program
of testing forage and range plants. Information
on techniques and local adaptations will be sup-
plied to other countries.

A comprehensive land-reclamation program is
under way in Israel as part of a long-range project
for the development of at least half a million acres
of range grazing land which have been badly dam-
aged by centuries of overgrazing. The land-
reclamation program is aimed at reclaiming 25,000
to 40,000 acres each year and is expected to revo-
lutionize Israel's cattle industry. When the
projected program is completed, about 10,000
tons of dressed beef will be produced annually, and
Israel will be able to cut down its heavy expendi-
tures for meat imports. American experts in
range management and cattle production are pro-
viding technical guidance.

Programs of community development or village
improvement — some of which include land recla-
mation, land tenure, and better utilization of land
resources — are also under way in a number of
countries. Egypt is undertaking a demonstra-
tion community development program in two
provinces where landless farmers will be resettled
on land which is being reclaimed. In Iran, the
Shah's land reform program is being given fresh
impetus by United States technical cooperation in
farm management, rural credit, sanitation and

32

supervised farming methods. In Lebanon, a proj-
ect to irrigate lands in the Kasmie Valley includes
technical cooperation in agricultural extension,
education, and public health .

Water utilization programs are also being car-
ried on in the African territories. In the^Belgian
Congo, a technical cooperation project is now
under way for the better control and use of the
area's water facilities. In Italian Somaliland,
FOA has completed a ground-water survey, and
an American, expert is teaching well-digging
techniques to the natives.

In Angola, a contract has been signed with an
American firm to carry out a program of explora-
tion and development of underground water
supplies. Another contract has been approved
for a survey to select the best possibilities for
water-power development.

Agricultural Gains and New Techniques

The obstacles to progress in agriculture, im-
posed by outmoded methods and untrained work-
ers, gradually are being overcome. Production of
foodstuffs and fibers is beginning to reflect the
improved techniques introduced under the tech-
nical cooperation program.

In Greece, for example, agricultural production
reached an all-time high in 1953. For the first
time in many years, self-sufficiency was achieved
in the production of such items as rice, beans,
and peas. There was more than enough olive oil
for domestic requirements, almost enough fresh
vegetables, and nearly enough fish. Gross agricul-
tural output for the crop year beginning in 1953
was 28 percent higher than the prewar average.

These increases are, in large part, due to the
continuing technical and economic programs which
began in 1947. American specialists in various
branches of agriculture have worked with Greek
officials in the program to increase production.
They helped to establish the first agricultural
extension service in the country; 400 trained
experts are now working directly with farmers and
farm families. Land has been reclaimed, wells
drilled, and irrigation facilities extended. Im-
proved seeds, farm equipment, fertilizers, and
pesticides have been provided. Aid in the form of
fishing vessels and equipment, and technical
advice by American fisheries specialists, have
enabled the Greek people to raise their supply of
fish about 20,000 metric tons above prewar levels.
The annual increase is worth about $6 million;
new equipment for fisheries costs about $2 million.

A permanent agricultural extension service is
now being inaugurated in Iraq. The Iraqi
Government last fall adopted a plan, prepared
jointly by United States and Iraqi technicians,
which included not only provision for annual
budgeting and legislative action, but specific pro-
posals for numbers and types of workers through
1957, location and operation of demonstration
farms, orderly expansion to insure complete
coverage of all areas of the country, and training
courses in specialized fields. Through coordinated
programs, trained workers will be provided from
the Iraq Agriculture College, and technical support
will be furnished by the University of Arizona.

Liberia's new Research Center at Suakoko was
dedicated in October 1953. The Center is dis-
seminating, through extension work and training
courses, information on improved varieties of
crops for local consumption and for export.
Liberia's annual food shortage is reportedly less
severe this year because of the country's increased
agricultural production. More fish are now on the
market, at lower prices, because of more effective
marine fishing techniques brought about through
the work of an American fisheries expert.

Sixty thousand chicks donated by American
farmers have been distributed to villages in Iran to
bring up the standard of farm flocks ; 5 million head
of livestock have been vaccinated or treated by
mobile veterinary teams; 50 pure-bred cattle have
been distributed for breeding purposes. An im-
proved native variety of wheat, which showed an
average increase in yield of 25 percent in test
plantings, has been developed, and 100 tons of this
variety were distributed for seed in 1953.

Three forest nurseries have been completed in
Libya, and 160,000 seedlings are being planted by
farmers and government workers on the sand dime
stabilization project. Over 500 varieties of grains,
grasses, legumes, and vegetables from 33 different
countries have been brought into Nepal. It is
estimated that crop production in Nepal can be
increased by 20 percent through higher-yielding
and disease-resistant plants. Mechanical grading
machines, bought on the advice of American
technicians, have increased the sale of Lebanon's
potatoes and onions in the Persian Gulf area.

Negotiations have been started for programs of
technical cooperation in Kenya, Uganda, and
Tanganyika in vocational training, agricultural
extension work, and hydrology. In Madagascar,
an American rice specialist is helping to develop a
program for increasing the island's rice production.

33

Auger supplied by FOA drills holes for tree plantation, in Libya. Up to 1,000 holes per day can be bored
with this rig in soil so hard that output per man with pick and shovel is only 6 to 8 holes. Planting of
90,000 trees is scheduled.

Health Conditions Block
Economic Development

A major obstacle to the economic development
of the countries in the area is the low productivity
caused by debditating diseases and the relatively
short life span. Health facdities and trained
personnel are inadequate in most countries. In
India, for instance, there is only 1 physician for
6,300 persons and only 32 hospital beds for 100,000
persons. The infant mortality rate is 116 per
1,000 births; the average life expectancy is 27
years. Comparable figures for Egypt are 1 phy-
sician for 5,000 persons, 110 hospital beds for
100,000 persons, an infant mortality rate of 130,
and an average life expectancy of 39 years. In
the United States, by contrast, we have one phy-
sician for 750 people and 900 hospital beds for
100,000 persons. The infant mortality rate is 29
per 1,000 births, and our life expectancy is 68
years.

Health and sanitation activities carried on under
the technical cooperation program are designed to
provide better health facdities, reduce the incidence
of preventable diseases, and improve environ-
mental sanitation. About 125 American public
health specialists, including physicians, public
health nurses, and sanitary engineers, are working
in 14 countries of the region to foster better
health practices.

The annual pilgrimage to Mecca gathers to-
gether Moslems from all over the world. To re-
duce the threat of epidemic outbreaks caused by
overcrowding and insufficient housing and sani-
tary facihties, assistance is being given to the
Government of Saudi Arabia, in cooperation with
the World Health Organization, to complete a
quarantine station at Jidda.

A maternal and child-health demonstration and
training center has been established at Samawa, a
city in southern Iraq. This center is organized

34

Infant Mortality Rates

Number of Deaths Under 1 Year
of Age Reported for 1,000
Live Births in the Same Year1

130

116

78

40

U.S.

Israel Ceylon India Egypt

1 Based on latest available data

and 'equipped to train midwives and nurses. A
continuous training course is in progress and
serves as a model for the extension of similar serv-
ices throughout Iraq. A new Division of Environ-
mental Sanitation in the Iraq Ministry of Health
has also been organized, and health technicians
are advising on sanitary engineering and sanita-
tion activities.

I Forty practical nurses and midwives are ready
for work after attending Jordan's first nurses'
training school, which opened in 1953. Classes
have begun for a small group of women whose
educational background qualified tbem for careers
as professional nurses.

Some villages of the Bekaa Valley of Lebanon
are now served, for the first time, by a health
center. Medical teams are attacking trachoma in
Libya, principally among the school children and
their teachers. In Iran, the Ministry of Health
and the United States Operations Mission have
entered into a cooperative health program operat-
ing under a joint fund arrangement. The em-
phasis is on a program of training and demonstra-
tion, principally in disease prevention.

Education

Schools beyond the secondary level are rare in
most of the countries in this area, and consequently
the facilities for the training of teachers have been
extremely limited. The technical cooperation

program, therefore, has placed considerable em-
phasis on the development of teacher training
schools. Training of teachers creates a fast "mul-
tiplying factor" to accelerate the spread of
knowledge.

Another educational area in which the countries
are particularly deficient is professional and voca-
tional training. It is not practicable, of course, to
develop professional colleges in aU fields in each
country, but technical and vocational schools are
established where there is an active demand for
trained personnel. A commercial school in Saudi
Arabia, for example, was started with the support
of local businessmen.

Jordan now has a teacher training college for
women, and another for men. These are the first
institutions beyond the secondary school level that
Jordan has ever had. New buildings for both
colleges are now under construction to replace the
present makeshift quarters. Training courses for
nurses, nurses' aides, and midwives have also been
started. Teacher training also is being expanded
in Liberia and Libya.

The enthusiastic cooperation of Oklahoma A. &
M. College, in little more than a year, has given a
great boost to the educational level and school
facilities of Ethiopia. Its assistance has enabled
an agricultural secondary school in Jimma to
begin its second year with the enrollment, in
addition to the high school group, of 17 students
qualified for first-year college work. The college
is also operating the technical education high
school in Addis Ababa and assisting in the technical
school at Asmara. Moreover, it is providing the
coUege staff for the Agricultural and Mechanical
College at Harar. The activities of Oklahoma
A. & M. College, under an extended contract, are
to be expanded not only in agriculture but also in
vocational education.

Public Administration and
Government Services

As experience has been gained in technical
cooperation programs, one problem common to all
the underdeveloped countries emerges. There is
a great lack of managerial skills. Many of the
programs undertaken in technical cooperation
must be operated as public services. The under-
lying purpose of United States programs is to
enable the host governments independently to
carry on the work once it has been started with
our help, but American technicians in the field
have found few established mechanisms for carry-

35

V

Jr\

Today he gets well, despite "red spots" and "choking." This combination — measles followed by pneumonia —
was certain death before local nurses, trained under the United States-Iranian health program, set up village
health clinics and made penicillin available. Nurse, on left, and mother watch a life saved through shared
knowledge.

ing out the normal functions of government.
Most of the governments in the area are in tran-
sition from dependency or highly centralized
power to a broader base where responsibility is
delegated to elected or appointed representatives.
Good intentions alone cannot bring a public
health program or an agricultural extension serv-
ice into being. Planning and administering
national programs require management ability
and empirical knowledge of how to get things done.
Our representatives are advising the host
governments on methods of organization, and
selection and training of their people. Practical
application of that advice is woven into the work
itself. A step is taken toward annual budgeting
when the program and project agreements commit

each government to provide specified sums at
specified dates. Provision for continuity leads
to legislative action. In Jordan, for instance,
cooperative service agencies, jointly staffed and
administered by United States and local tech-
nicians, are set up as bureaus within the Ministries
of the host government. In other countries,
a joint fund serves not only as a financing and
management function but also as a means to
prepare nationals for their orderly assumption
of complete responsibility when American assist-
ance is withdrawn.

The success of our technical cooperation pro-
grams must ultimately be measured against the
principle of continuity and the preparation of
nationals to carry on the programs.

36

CHAPTER IV

Far East

' I 'HE mutual security program in the Far East
-*- is designed to help the nations of the area
develop the economic and military strength they
need to achieve and maintain political and social
stability. This stability is essential if the Asian
governments are to preserve their independence
and continue to work toward improving the living
conditions of their masses of people. In 1953, the
Far East region was given greater emphasis in the
mutual security program in terms of both funds
and activities. In the last half of the year, for
example, an expanded program of economic aid
and technical cooperation was initiated for the
rebuilding of Korea; over three-quarters of a
billion dollars of special financial assistance was
earmarked to strengthen the military effort in
Indochina.

The nations in the Far East area which par-
ticipated in the mutual security program during
the second half of 1953, were: the three Associated
States of Indochina, Burma1, the Republic of
China on Formosa, Indonesia, the Republic of
Korea, the Philippines, and Thailand. Negotia-
tions for a Mutual Defense Assistance. Agreement
were under way with Japan. Together, these
nations comprise the front line of free world
defense against Communist aggression in the
Far East. The fall of any one would menace the
security of all.

The amounts and types of aid provided vary
greatly, depending upon the nature and extent of
the problems individual countries face. To in-
crease their armed strength, the nations of the Far
East require certain weapons and materiel to
equip their forces. They also require outside help
in building up military production capacity and
in constructing and modernizing transportation

1 Although Burma has received no new aid funds since
June 30, 1953, activities already in process are being
completed.

facilities and other installations necessary to
military operations.

For greater economic strength, some countries
need special support in financing then defense
efforts; others need guidance in improving mone-
tary and fiscal management policies. All must
expand total and per capita industrial and agri-
cultural production. For such expansion, tech-
nical cooperation is urgently needed to introduce
modern technology, to train technical and gov-
ernmental administrative personnel, to improve
the utilization of power, and to help design broad
policies favorable to increased economic activity.

By meshing United States efforts with the
efforts of the individual countries, the mutual
security program has helped strengthen the mili-
tary defenses of the Far East against armed ag-
gression; equally significant, it has made impor-
tant contributions to the building of sound eco-
nomic and social structures. Our technical and
economic programs in the area have been designed
not only to strengthen weak spots, but to help
lay firm foundations for further economic and so-
cial advancement. Some countries are moving
forward more rapidly than others, but most have
made a good start toward identifying the prob-
lems obstructing development, toward remedying
their more critical structural weaknesses, and
toward formulating programs for further positive
action. In the main, our assistance has served as
a catalyst, helping the countries to solve their
multiple problems through more effective use of
their own resources.

The building of internal strength in each coun-
try, however, is only an intermediate step. To
achieve mutual security, it is necessary to obtain
a greater degree of regional cooperation among the
free Asian nations as a whole. Thus far, pressing
domestic problems, general inexperience with eco-
nomic planning, and unstable intra-area economic

37

relationships have combined to retard a coordi-
nated regional effort. Id fact, growing competition
for markets for the same products, such as rice,
rubber and tin, has recently become a compli-
cating, divisive force. The decline during the past
year in world market prices of these basic com-
modities has reduced the foreign exchange earnings
of some of the Southeast Asian nations — notably
Indonesia, Malaya, Burma, and Thailand — and
made increasingly difficult the mobilization of
additional resources for further economic develop-
ment or for adequate employment of their expand-
ing populations.

Prices Of Key Exports Of Far East Countries
Have Dropped Sharply

(Index, Jan. 1950 = 100)

Japan, on the other hand, a large importer of
rice and raw materials, has been running a huge
commercial trade deficit. In recent - years, this
deficit has been largely covered by extraordinary
United States military expenditures in the country.
The temporary nature of these expenditures, how-
ever, dictates the urgent need for Japan to expand
its exports of manufactured goods. By mutually
beneficial regional arrangements and by increasing
trade both among themselves and with the rest of
the free world, the countries of the Far East area
could greatly contribute to one another's develop-
ment.

The disruptive economic effects of the continued
dependence of the Asian nations on agriculture

and the export of raw materials is creating another
dilemma for the area. In many cases diversifica-
tion, with more emphasis on industrial develop-
ment, is essential to a satisfactorily balanced
economy, to efficient use of resources, and to the
maintenance of satisfactory levels of employment.
The forward progress of currently underdevel-
oped areas is not merely an end to be sought for its
own sake, but is a necessary means to the achieve-
ment of economic stability throughout the free
world. To bring the nations of Asia into closer
partnership requires continued effort by both the
Far East nations and the United States to develop
long-term national and regional strength in the
Far East area.

Security Buildup

While the recent cease-fire agreement stopped
the fighting in Korea, the Communist-backed Viet
Minh warfare in the Indochina region continues
to threaten the security of the Far East. At the
end of 1953, a rebel Viet Minh drive was launched
in central Laos. The stability of the Southeast
Asian region was further threatened by increased
signs of intensified Communist agitation in north-
east Thailand and in Indonesia.

Unaided, the free countries of Asia cannot estab-
list or maintain the military forces and the ex-
pensive weapons of modern war that they must
have for their own defense. Their resources must
be supplemented if the military buildup necessary
to ward off the aggressive threats of Communism
is to be attained.

In the last sLx months of 1953, the United States
military programs in the Far East have resulted
in the shipment of weapons and equipment valued
at $205 million to the Associated States of Indo-
china, the Republic of China on Formosa, the
Philippines, and Thailand. From the beginning
of the military assistance programs in 1949 to the
end of December 1953, a total of $2,393 million
worth of materiel had been programed, of which
$1,179 million worth had been shipped to the
Far East.

In addition to these end-item shipments, de-
liveries to Indochina and Formosa of "common-use
items" — that is, items such as petroleum, textiles,
construction materials, and hospital equipment
which can be used for both military and civilian
purposes — have been accelerated. For both coun-
tries also, there has been an increase in military
appropriations for the fiscal year 1954.

38

Military Aid Shipments To The Far East
Have Increased Rapidly

800

600

400

(Millions of Dollars)

Value of Military Shipments '

%$&&$$&,

ill!

1

1950 1951

1 Includes value of excess stocks

1952

1953

Indochina: French — Viet-Nam
Effort Reinforced

December of 1953 marked the beginning of the
eighth year of Communist-led Viet Minh aggres-
sion against the State of Viet-Nam. In the same
month, the rebel Viet Minh made a thrust into
the neighboring state of Laos, moving across the
waist of Laos to the Mekong River. This attack
on Laos gave further proof that Viet Minh activi-
ties are motivated by a chive for expanded Com-
munist power outside Viet-Nam.

For the past seven years, the military contest
in Indochina has been virtually stalemated. Con-
trol over the battle areas has seesawed back and
forth, and net gains or losses in territory have
been small. The protracted military operations,
however, have put a continuous and serious strain
on France's financial and military resources,
draining off the equivalent of about $1 billion a
year and thousands of French officers and men.
The fighting has also strained the already hard-
pressed economies of the three States of Viet-
Nam, Laos, and Cambodia and brought acute
privation and hardship to thousands of war
refugees. The rate of losses incurred by the
French Union forces and the national armies of
the Associated States have been comparable to
United States losses in Korea.

The military assistance we provide to support

the efforts of the French Union and Associated
States forces in Indochina receives the highest
priority. The monthly rate of military shipments
in 1953 was 50 percent higher than in 1952. By
the end of 1953, almost 400 ships bearing arms for
Indochina had arrived in Viet-Nam ports and had
delivered to the French and Associated States
forces significant quantities of mihtary supplies,
including small-arms ammunition; transport ve-
hicles and trailers; combat vehicles; military air-
craft; naval vessels and small craft; radio sets;
and a wide range of other essential materiel.
These supplies were vital to the efforts of French
Union and national forces. Without the military
aid furnished through the mutual security pro-
gram, the hope of Indochina's people for freedom
could be quickly smothered under Communist
domination.

During the latter half of 1953, France intensi-
fied her efforts in Indochina. General Henri
Navarre, who took command of the campaign in
late spring, formulated a comprehensive plan to
retake the offensive in the Indochina area by
building up native units into mobde, hard-hitting
combat forces. The Navarre Plan was accepted
by the French Government, and in September,
French Union forces in Indochina were strength-
ened by 9 infantry battalions, including the French
battalion from Korea, as well as by additional
naval and ah forces.

Concurrently with the intensified French effort,
steps were taken to build up the national armies
of the Associated States. The Joint French-
Viet-Nam High Military Committee has decided
to create additional "Kinh Quan" (light) battal-
ions and heavy companies, all manned and staffed
by Viet-Namese. The new "Kinh Quan" bat-
talions are expected to match the Viet Minh
guerrillas' own tactics, to safeguard newly liber-
ated areas, and to increase the total number of
effectives in the field.

To support this augmented effort, the United
States in September 1953 approved up to $385
million in addition to the $400 million of financial
aid initially made available for fiscal year 1954.
These amounts were exclusive of the cost of
military materiel and direct economic aid to the
Associated States. The increased buildup of
French Union and Associated States' forces, to-
gether with the financial aid and military equip-
ment supplied by the United States, should permit
an intensified effort in Indochina without entading
any basic alterations of the French Government's

39

A new commando-type light battalion of the Viet-Namese national army. These units, strengthened with
United States equipment, are especially trained to combat the Communist guerrillas.

military commitments to the North Atlantic
Treaty Organization.

Formosa's Military Capabilities
Strengthened

United States support to the Government of the
Republic of China on Formosa is helping to rein-
force the military capabilities of that Government.
Our Military Assistance Advisory Group is aiding
the Chinese military establishment in the organiza-
tion and training of its armed forces and in the
utilization of the military weapons and equipment
provided under the mutual security program.

During the latter half of 1953, particular empha-
sis was placed on the delivery of jet planes for use
of the Chinese air forces. Four major airfields
have been rehabilitated and expanded to accom-
modate the modern aircraft which are being in-
corporated into the Chinese military buildup.

In addition to military end-item aid, the United
States has provided defense-supporting economic
assistance. Funds have also been provided to
finance the import of "common-use" items which
are delivered to the military, such as soybeans for
rations, raw cotton for uniforms, petroleum

products, medical supplies, and construction
materials. These "common-use" items have
helped to build the Chinese soldier, once poorly
clothed and undernourished, into a stronger,
better-fed, better-housed fighting man.

A barracks construction program, carried out
with United States assistance, has provided proper
quarters for thousands of troops who were formerly
housed in civilian homes, warehouses, schools, and
office buildings. The program to rehabilitate and
expand transportation facilities is not only pro-
moting the economic progress of Formosa but is
also assisting in meeting military needs. For
example, the Island's principal north-south high-
way is being hard-surfaced to provide better
mobility of troops and supplies.

Domestic output of ammunition for small arms
is being increased by providing existing munition
plants with modern equipment and technical
guidance. The improved efficiency of the local
munitions industry has led to awards of offshore
procurement contracts totaling nearly $6 million.
Proceeds from these contracts are being used to
finance additional supplies of raw materials needed
for further production.

40

U ^sks,"

* ^

fC- -}"'-*-:

-*■*;; . . £»

Chinese air force mechanics overhauling a Continental aircraft engine at the Cadet Flying School in For-
mosa. A United States Military Advisory Group is helping to train the armed forces of the Republic of China.

The security buildup is also proceeding in other
friendly countries of the Far East. The Philip-
pines, assisted under the mutual security program,
has been enabled to maintain a battalion combat
team in Korea and to strengthen further its security
forces in the home islands. Military grant assist-
ance is also helping to modernize the armed forces
of Thailand, which shares its long border with the
Associated States of Indochina. Under the mutual
security program, the Thai Government is being
aided in the modernization and equipment of its
ground forces and the strengthening of its small,
but efficient, air force. In 1953, Thailand devoted
36 percent of its total national budget expenditure
to improving the combat efficiency of its armed
services.

Counterpart Funds

Through December 31, 1953, the foregoing four
countries deposited the equivalent of $282 million
in their local currency counterpart special ac-
counts. Of this total, the equivalent of about $8
million was transferred to the account of the
United States to meet certain overseas costs in-
curred in administering the aid program.

Withdrawals from the countries' share of these
counterpart funds accounts are made for purposes
mutually agreed upon by the United States and
the depositing country. By the end of December
1953, the FOA had approved for withdrawal
almost 80 percent of the $274 million of counter-
part funds available for country use. Actual
withdrawals from the accounts totaled the equiva-
lent of $210 million.

41

In Formosa, FOA had approved the withdrawal
of the equivalent of $154 million through Decem-
ber 31, 1953. About 45 percent of the total
approvals was earmarked for military purposes.
Approvals for nonmilitary uses included: $23 mil-
lion for operations of the Joint Commission on
Rural Reconstruction, $19 million for agricultural
development, $10 million for power facilities, $8
million for highways, and $6 million for develop-
ment of manufacturing and mining.

Counterpart releases in the Associated States of
Indochina totaled the equivalent of $29 million
through December 31, 1953. Over 40 percent of
this amount was used for public administration
and highway construction and development.
Projects to improve the highway system, which
called for some $7 million in local currency, were
of particular importance to the conduct of mili-
tary operations. Counterpart funds were also re-
leased for agricultural development, public health
services, and low-cost housing.

Philippine counterpart funds amounting to $12
million, or 41 percent of the $30 million approved
for release, have been channeled into agricultural
development projects. Other important projects
for which counterpart funds were used included
industrial development, highway construction,
improvement of government services, low-cost
housing, and the development of public health
services.

In Thailand, counterpart funds have been used
mainly for agricultural development and public
health programs. Counterpart funds released for
these two categories amounted to the equivalent of
$4 million out of the total of $7 million approved
for country use by the end of December 1953.
Other significant approvals for withdrawal were
for the development of mining and for the im-
provement of educational facilities.

Special Aid to Korea

Three years of bitter warfare have inflicted
enormous damage on the Korean economy and
brought intense suffering to the Korean people.
Some 1 million South Koreans have been killed.
Five million people depend on some measure of
relief to stay alive; over 2% million have been
made homeless.

Immediately after the suspension of hostilities
in mid-1953, the United States took the lead in
assisting the valiant Korean people to rebuild
their devastated country. On July 27, the Presi-

dent asked Congress for $200 million for interim
emergency aid to be used for the rehabilitation
and economic support of the Republic of Korea.
On August 7, the Congress approved the transfer
of this amount from the Department of Defense
to the Foreign Operations Administration. Four
days later, rice, barley, and cotton left the ports
of Houston and San Francisco, bound for Pusan
Harbor. In the next 15 days, 5 more ships left
with aid supplies. By the end of the year, sub-
stantial amounts of United States-financed food
supplies, cotton, rubber, and fertilizer had arrived
to aid the Korean people in their reconstruction
efforts. Through December 31, 1953, about $50
million had been allotted from the $200 million
authorization.

Economic Aid Has a
Twofold Objective

The basic objective of an economic program for
South Korea is to develop an economy which can
meet the needs of the Korean people and, at the
same time, support the military forces required to
deter external armed aggression.

The Korean Government faces a number of
immediate and multi-faceted problems. Urgent
relief measures must be carried out. Inflationary
pressures must be curbed. A greater measure of
governmental financial stability has to be achieved.
To strengthen the economy, there is a growing
need for more of almost everything — food, coal,
fertilizers, textiles, power, transportation and com-
munication facilities. Skilled manpower, trained
technicians and managerial personnel are in short
supply in almost all fields of endeavor.

Over $400 million has been programed for fiscal
year 1954 to be used for economic support to
Korea. These programs are being administered
by the Foreign Operations Administration, the
Department of Defense, and the United Nations
Korean Reconstruction Agency. Since the eco-
nomic aid program represents a joint undertaking
on the part of the Government of Korea, the
United States, and the United Nations, the Presi-
dent on August 18, 1953, appointed Mr. C. Tyler
Wood to serve on the staff of the United Nations
Command as Economic Coordinator to coordinate
the various programs in order to avoid duplication
of effort. Mr. Wood also was given the task of
working out the necessary arrangements with rep-
resentatives of the Korean Government by which
the economic program could move forward most
effectively.

42

On December 14, an agreement was signed
under which the Combined Economic Board — a
joint agency of the United Nations Command
and of the Eepublic of Korea — would insure that
the funds programed for economic assistance
will be used to produce the greatest possible bene-
fits for the Korean people.

The signing of the agreement and the establish-
ment of coordination procedures will permit the
current assistance effort to move ahead on a
greatly expanded scale. Much progress has al-
ready been made. For example, in the first 10
months of 1953, electric power production was 21
percent above the corresponding period of 1952.
Cotton cloth production was up 84 percent, and
coal production was up 64 percent. Rice output
in 1953 was 7 percent over the previous year.

The programs of the United Nations Korean
Reconstruction Agency (UNKRA), and the De-
partment of the Army have been responsible for
a large part of this progress.

In 1953, UNKRA delivered $30 million worth
of supplies and equipment to Korea. The bulk
of the deliveries — about $22 million worth- — con-
sisted of .agricultural items such as grain, fertilizer,
irrigation equipment, farm implements, and live-
stock. School books and school equipment were
also provided, as well as transportation vehicles,
a harbor dredge, and hospital supplies. The
Department of the Army has provided subsistence
for 2 million persons, and partial relief for an
additional million. It has helped to keep in
operation vital highways and railways. The
Army-operated health programs have been largely
responsible for the pronounced reduction in epi-
demic deaths; for example, deaths due to typhoid
were reduced from 2,500 in 1951 to 30, in 1953.

Negotiations With Japan

The proposed inclusion of Japan in the mutual
security program resulted in the initiation of
negotiations in July 1953 for a Mutual Defense
Assistance Agreement between the United States
and the Japanese Governments. These negotia-
tions have been proceeding satisfactorily and are
nearing conclusion.

During October 1953, a series of conferences
was held in Washington which covered a variety
of problems of common concern, such as the appli-
cation of the mutual security program to Japan,
Japan's defense program, and its general economic
situation. These conferences laid the groundwork

for continued cooperation between the two
Governments.

Although Japan experienced a consumption
boom in 1953, it currently faces extremely serious
economic problems. The lagging export trade
and increasing requirements for imports have
progressively widened the trade gap over the past
3 years. In 1950, Japan's merchandise trade
was out of balance by about $150 million. The
gap between imports and exports increased more
than threefold dining the following year, and in

1952, it exceeded $750 million. Although final
trade data are not yet available for all of the year

1953, the imbalance in Japan's merchandise, or

Special U. S. Dollar Expenditures In Japan Have
Largely Offset The Country's Trade Deficit

1,200

300

(Millions of Dollars)

1950

1951

1952

1953

visible, trade will be about $1.1 billion — ro uglily
half the value of Japan's total imports. Taking
into account a probable net surplus of about $150
million from invisible-type earnings, the country's
total deficit on both merchandise trade and invis-
ible earnings for 1953 will still be about $975 million.
During the last 3 years, Japan's trade imbalance
has been largely offset by special expenditures of
the United States related to the Korean war and
the maintenance of our military forces in Japan
under the terms of our Security Treaty. This
situation, of course, cannot continue indefinitely.
United States special expenditures are expected
to taper off in 1955, and Japan's economic

43

position increasingly will depend upon the mainte-
nance of a high level of economic activity and trade
throughout the world, and an improvement of the
competitive position of Japan's manufactured
goods. The Japanese Government is now plan-
ning budgetary and other steps to strengthen the
nation's economy and defenses.

Negotiations with the Japanese Government are
in progress for the sale of United States agricul-
tural products under Section 550 of the Mutual
Security Act. A program of approximately $50
million has been tentatively agreed upon. Twenty
percent of the local currency proceeds are to be
used to help develop Japan's economy; the balance
will be used to purchase military items under
United States military assistance programs.

Economic Assistance and
Technical Cooperation

The economic assistance and technical coopera-
tion programs in the Far East, jointly developed
and financed by the Foreign Operations Adminis-
tration and the participating countries, constitute
a tangible expression of the United States policy to
advance the freedom and welfare of the Asian
peoples so that they can become effective and self-
reliant partners in the free world.

United States technicians are working with the
Far Eastern governments and people to make bet-
ter use of available resources, to increase produc-
tion, and to improve governmental services and
administration. Our economic assistance and
technical cooperation activities in the Far East
produce results which go beyond measurable im-
provements in food output, health conditions,
power production, and transportation facilities.
A child cured of yaws or malaria, a farmer who is
given the means to save and expand his crop, a
factory or a mine laborer who benefits from better
working conditions, a small businessman who gets
needed credit support — these are the kind of re-
sults which cannot be computed in cold statistical
terms, but which, taken together, win popular
support for the free governments of Asia, reduce
the disruptive social factors which breed discon-
tent, and nullify the efforts of Communist propa-
ganda and attempted subversion.

Economic and technical development, however,
is. neither a self-starting process nor a goal quickly
accomplished. Our programs in the Far East are
designed to provide the impetus and show the
way. Where financial and technical support is

needed and requested, we are prepared to give
such support within the limit of our capabilities.
It is up to the countries, themselves, to push for-
ward with all strength toward the desired ends.

A total of $126 million was programed during
fiscal year 1954 for economic aid and technical
cooperation programs in the countries of the Far
East, exclusive of Korea. Almost one-half of these
funds have been earmarked to finance shipments
of essential commodities to the Associated States of
Indochina and the Republic of China on Formosa.
These commodities consisted mainly of food, con-
struction materials, machinery, and other con-
sumer-type goods required to meet the needs of the
civilian economy, help control inflationary pres-
sures, and rehabilitate war refugees.

The remainder of the funds were channeled into
economic and technical programs which empha-
sized agriculture, manufacturing and mining, and
transportation and power. These fields of activ-
ity accounted for 38 percent of the funds pro-
gramed for the fiscal year. The remainder was
used for projects in public health, public adminis-
tration, education, and engineering advisory
services. The cumulative total programed for
Far East countries from July 5, 1950, through
June 30, 1954, amounted to $770 million.

At the end of 1953, there were 300 American
technicians working in the Far East countries
which participated in the mutual security pro-
gram. In addition, about 430 national trainees
were taking part in specialized training programs
in both the United States and abroad.

Some Examples of Progress
in a Few Short Years

The measure of the overall success of our opera-
tions in the Far East is evident in the number of
noteworthy gains made in the few short years
since a program was begun.

Agricultural Improvement. — In the Philip-
pines, United States technical experts, and sup-
plies of fertilizer and seeds, have helped the Fili-
pino farmer greatly to expand his output of rice.
Over 50,000 tons of fertilizers were sold to more
than 220,000 farmers and used to fertilize 900,000
acres of farmland. Irrigation pump units, pro-
viding water to 22,500 acres have been installed.
One gravity system, irrigating 7,500 acres has been
completed, and at present 3 gravity systems, for
which dollar requirements were financed by the
Foreign Operations Administration, are being con-
structed to irrigate over 100,000 acres.

44

The 1953-54 rice crop is estimated at 3.2 mil-
lion tons, 23 percent more than the 1950-51 crop
and about 50 percent higher than prewar harvests.
This yield marks the attainment of virtual self-
sufficiency in rice output for the country.

Also in the Philippines, a management contract
to analyze and reorganize the vital land registra-
tion and title service of the Bureau of Lands, elim-
inate the backlog of title applications, and install
modern methods is being carried out by an Ameri-
can management consultant firm.

Thailand depends on rice exports for the greater
part of its foreign exchange earnings. Over the
past 2 years, demonstrations on more than 1,000
one-half-acre plots have shown the Thai farmers
that rice yields can be doubled and tripled on cer-
tain types of soil by proper application of fertilizer.
The technical cooperation programs in that coun-
try have been instrumental in boosting rice output
considerably. The 1953-54 rice crop is estimated
at 75 percent above prewar.

To help the Thai Government in its efforts to
export its rice surpluses, work of United States
technicians is being directed toward the improve-
ment of the country's marketing and distribution
facilities and efficiency. These efforts are aimed
at reducing costs so that Thailand will be in a
better competitive position to meet the price
requirements of the area.

Transportation and Power. — The economic
progress of the Far East countries is retarded by
poor transportation facilities and inadequate
power output. Improvement of these basic
sectors of the economy is essential to development
of both the agricultural and industrial bases of
the area.

Our assistance efforts in the fields of transporta-
tion and power have been particularly effective
in the case of Formosa. United States technical
advice and raw materials helped the Chinese to
complete the longest steel-span highway bridge
in the Far East, at Silo. The 6,500-foot Silo
Bridge, links the main north-south highway along
Formosa's west coast and permits through traffic
on the highway even during the annual 5-month
rainy season. The major port at Kaohsiung,
on the Island's southwest coast, has also beea
improved so that the unloading and "turn-around"
time of ships has been considerably shortened.
These accomplishments are not only necessary to
the progress of the civilian economy, but are also
important to the buildup of military strength.

Industrial Production In Formosa Has
Expanded Considerably

150

50

(Index, 1949=100)

Total Production of all Industries

1937

Increases in Key Sectors
1949 to 1953

~ Transportation ... up 30%

Power up 75%

Fertilizer up 300%

Textiles up 475%

_l I I I I i

'47 '48 '49 '50 '51 '52

53

( Est)

Mutual security programs have also helped the
Chinese Government considerably to expand the
Island's power facilities. Power output has risen
over 75 percent from. 1949 to 1953. This added
power has made possible the increase in Formosa's
fertilizer and textile production and has enabled
the expansion of military and defense-supporting
industries.

In Thailand, 800 miles of highway have been
improved for all-weather use. Nearly 100 Thais
have been trained in highway maintenance at the
Heavy Equipment and Operations Maintenance
School in Bangkok. With a dredge furnished
under the mutual security program, the Thai
Government is dredging a ship channel at Bang-
kok; the project is scheduled for completion in the
early part of 1954. Our aid programs in Thailand
have also helped step up the country's power out-
put. Electric power production in Bangkok for the
first half of 1953 was recently reported at over
34 percent above 1951.

These improvements have encouraged the Thai
government to procure substantial amounts of
modern equipment with its own funds to carry
forward additional rehabilitation and expansion
projects in the fields of transportation and power.

Better Health and Sanitation. — A great need
exists for expanding and improving medical edu-
cation programs in all Far East countries to in-

45

crease the number of competent physicians and
trained health workers. In Indonesia, the present
ratio of doctors to population served — about
1 per 70,000 — is one of the lowest in the world.
The Foreign Operations Administration has en-
tered into contractual arrangements with American
medical schools to provide for exchange of medical
school professors and training of local doctors and

teachers in the United States. At present such
an arrangement is in effect in Thailand and is
pending for Indonesia and Formosa.

Rural health units of various types have been
established to demonstrate both preventive and
curative health services, and public health doctors,
nurses, and sanitarians are giving special in-service
training. In Indochina, United States public

Viel-Namese children now enjoy clean water from village pump near Saigon. United States technicians
and supplies have helped, build thousands of village pumps and wells like this in the underdeveloped areas.
Simple and inexpensive, these pumps not only improve living conditions but prevent diseases spread by polluted
water.

46

health technicians, supported by aid shipments of
medical supplies and equipment, have helped to
set up more than 1,700 rural dispensaries which
now give first aid and treatment to almost 3 million
people annually.

In rural areas, the drilling and installation of
artesian wells and construction of springs and other
dug-wells are demonstrating the value of a sanitary
water supply. Over 800 sanitary wells for villages
have been completed in Indochina, principally in
north Viet-Nam.

Mass campaigns against malaria, trachoma,
yaws, and beri-beri are in various stages of devel-
opment. A 6-year program for the con trol of malaria
is under way in the Philippines, where economic de-
velopment has been retarded because of the high
incidence of malaria. More than a million persons
have so far been protected by this program, and
three-fourths of the local technical personnel
utilized in this large-scale program have received
training. The 6-year program provides for the
extension of protective measures to all malarious
areas in the Phdippines, and it is anticipated that
upon completion the Philippine Government will
assume total financial responsibility for continu-
ing malaria-control work.

Effective malaria-control programs also are
showing results in Indonesia, Formosa, and
Thailand. It has been estimated that the 1953
program in Thailand prevented 600,000 primary
cases of malaria. This means 600,000 individuals
who, instead of being dependent or ineffective,
can contribute fully to the support and develop-
ment of themselves and their country.

Public Administration. — The acute shortage
of skilled local technicians and trained officials is
a powerful inhibiting factor on governmental

efforts to meet the growing demands of their
people for better living standards. The lack of
competent professionals at the government level
is felt perhaps most strongly in the field of public
administration. It is in this field that our aid
programs can make a valuable contribution with
relatively small expenditures of funds.

Our efforts to build effective public administra-
tion systems have been especially emphasized in
the Philippines. United States experts have
worked closely with Philippine Government plan-
ning agencies to help formulate plans and policies
for the broad economic development of the
country. Technical advice has also been furnished
to the Department of Finance to achieve a better
tax structure and to improve enforcement pro-
cedures.

An Institute of Public Administration was estab-
lished at the University of the Philippines with the
advice and assistance of the University of Michi-
gan. Over 700 government officials have taken
supervisor courses at the institute; 600 govern-
ment employees have enrolled in specialized in-
service training courses. The Institute is ex-
pected to assume importance as a regional training
center in management skills. Negotiations are
under way with another United States university
to provide assistance in connection with a proposed
Labor-Management Relations Center.

An American management-consulting firm is
presently engaged in making a wage and position
classification survey for the Philippine Budget
Commission and the Bureau of Civil Service.
United States technicians have also cooperated
with the Philippine Government in improving its
administration of the minimum wage and indus-
trial relations laws.

47

CHAPTER V

American Republics

Close economic and military cooperation be-
tween the United States and our Latin American
neighbors is essential to Inter-American well-being
and security. Such cooperation is mandatory if
there is to be a solid foundation to the Inter-
American Treaty of Reciprocal Assistance which
was signed by the United States and the Republics
of Latin America in 1947 at Rio de Janeiro.
Hemispheric solidarity in the conference diplomacy
of the United Nations also is dependent upon
mutual understanding and joint interests.

Report by Dr. Milton Eisenhower

Dr. Milton S. Eisenhower, in reporting to the
President on United States-Latin American rela-
tions, stressed the fact that this country and our
neighbors to the South share common aspirations
and common goals. "While there is a wide gulf
between the most authoritarian and the most
democratic of the regimes," Dr. Eisenhower
stated, "* * * virtually all the nations of Latin
America seek the goals of permanent peace, inde-
pendence, rising levels of economic well-being,
and the attainment of the basic values of Western
civilization.

"In our conversations we developed the convic-
tion that common dedication to the achievement
of these goals is the greatest single guarantee we
have that the nations of this hemisphere will
continue to work amicably together. This co-
operation can be made more effective as under-
standing among peoples and governments
increases."

Dr. Eisenhower and his group spent several
months in studying ways to strengthen the bonds
between the United States and the American Re-
publics. These studies included not only intensive
discussions with government and private leaders in
this country, but also a 20,000-mile, fact-finding
trip to the cities and farms, the factories and
schools of the South American countries.

Dr. Eisenhower's report made several observa-
tions on the current political and economic situa-
tion in the Latin American region. On the
political aspect, he noted: "Highly disciplined
groups of communists are busy, night and day,
illegally or openly, in the American Republics,
as they are in every nation of the world. While
many persons may now think of Latin America
as not being in the line of attack in the modern
world struggle, success by the communists in these
nations could quickly change all the maps which
strategists use in calculating the probabilities of
the future.

"One American nation has succumbed to com-
munist infiltration. With this exception, however,
the other American Republics share our desire
for peace, freedom, and independence and continue
to cooperate effectively in the political councils
of the world."

On the economic picture, the report emphasized
the interdependence of the United States and
Latin America with respect to commodity trade,
investment capital, and raw materials.

Latin America's Economic Importance

The three-way economic interdependence which
Dr. Eisenhower's report cited is basic to any
consideration of United States policy toward the
American Republics. This country's export and
import trade with Latin America in 1952 amounted
to nearly $7 billion. In the first 9 months of 1953,
it was running at about the same rate. Latin
America is second only to Western Europe as a
market for United States exports, and supplies a
larger part of our imports than any other trade
area.

Our direct private investment in the Latin
American countries at the end of 1952 totaled
almost $6 billion, or about 39 percent of all United
States direct private investment in foreign coun-
tries. In 1952, also, our income receipts from

48

Latin Ai
Materia

Commodity
Quebracho

( For Tanning)

Asbestos
( Crocidolite)

Quartz
Crystols

Bauxite

Antimony

Beryl

Sisal

Cadmium

Copper

Fluorspar

Manganese

Vanadium

Tin

Tungsten

1 Based on la

nerica Is A Key Supplier Of Our Strategic
Is Needs

(Percent of U.S. New Supply from Lotirt Americo)1

J 20 40 60 80 100

1 1 1 1 i

1

III

1

1 1 1

1

1

1 1 1

I , '

1

1

!

1

~ ""■ r

,.„■ \^

'

1

_J

„,„;„„„ !

test available data

this private investment capital was about $600
million, or over 40 percent of such receipts from
all areas.

Latin America ranks high on the list of major
sources for basic raw materials. The area is our
biggest supplier of petroleum imports — almost 300
million barrels annually. It furnishes important
quantities of copper, tin, bauxite, manganese, and
other minerals so vital to our civilian and defense
production and to our strategic stockpile.

The recent economic growth of the American
Republics indicates that the region will assume an
even greater importance both to this country and
to the free world as a whole. Since the end of the
war, the gross national product of 20 Latin
American countries — that is, the total value of all
goods and services produced — has increased at the
rate of nearly 5 percent a year.

Pressing Problems Retard
Economic Progress

Latin America's rapid economic growth has
highlighted some of the basic weaknesses which
exist throughout the area. These weaknesses
must be overcome if the Latin American people
are to move ahead to greater accomplishment.

Lag in Food Production. — Farm output has
risen only slightly and has not kept pace with the

rapid growth of population. The postwar rate of
population increase has been about 2.5 percent a
year. Agricultural production on the other hand,
increased only about 2 percent in the entire 8-year
period 1945-52. As a result, Latin America's
postwar food imports have been double their
prewar average.

Non-Diversification. — Many countries look to
one or two commodities or industries for a sub-
stantial portion of their national income and the
bulk of their foreign exchange earnings. Bolivia,
for example, is almost wholly dependent on tin.
Colombia relies on coffee; Chile, on copper; Cuba,
on sugar; Venezuela, on oil; Costa Rica, on coffee
and bananas. A crop failure or an upset in the
world market can seriously damage the economies
of these single-crop or single-industry countries.

Lack of Transportation. — Transportation fa-
cilities in Latin America are generally inadequate.
Better roads, highways, railroads, inland water-
ways, ports, and coastwise shipping facilities are
needed to make possible greater economic develop-
ment in the area.

Need for Power. — The shortage of power and
fuel is another roadblock in the way of further
economic advancement. Countries short of capital
find it difficult to keep up with the ever-growing
demands for hydroelectric and other power-gen-

Many Latin American Republics Depend Primarily
On One Product For Foreign Exchange

Country

(Exports os Percent of Total Exports)'

Venezuela

Petroleum j

El Salvador

Coffee

% 88

Cuba

Sugar

Ij 85

Colombia

Coffee

H 82

Guatemala

i> Coffee

M$ 82

Brazil

Coffee

PHI

74

Haiti

I? Coffee

m 66

Honduras

Bananas

B 66

Chile

Copper

3 63

53
59

Bolivia

Tin

Costa Rica

f£. Bananas

Nicaragua

H Coffee

1 % 5,

Dominican
Republic

Sugar

msi 50

' Based on latest available data

49

erating facilities. This is one field in which foreign
capital could provide invaluable support.

Better Health and Education. — Improve-
ment in the health and education of the growing
numbers of Latin American people is, of course,
basic to any real progress. Widespread disease
and mass illiteracy greatly retard efforts to develop
greater productive capacity and move on to higher
living standards.

The countries of Latin America generally possess
in abundance the human and natural resources
they need for further economic growth. These
resources, coupled with proper incentives, stable
political and economic conditions, and necessary
capital, can expand development and raise living
standards in the American Republics to unprece-
dented levels in the years ahead.

Economic and Technical
Programs

The primary purpose of the technical coopera-
tion program in Latin America is to help the par-
ticipating countries achieve an accelerated and
balanced economic development. To this end,
cooperative efforts are concentrated on two broad,

Technical Cooperation In Latin America Has
Emphasized Agriculture And Health Projects

Program For Fiscal Year 1954
By Field Of Activity

Transportation, Power
and Communications

$24 3 Million

interrelated objectives: (1) to increase the produc-
tivity per worker and the number of skilled
workers by carefully planned programs in health,
nutrition, housing, and education; and (2) to in-
crease total production by selected programs in
agriculture and industry, public administration,
natural resources, power, and transportation.

These efforts involve helping the host govern-
ments to correct imbalances in the national econ-
omies which result from concentration on single
industries and products or from too rapid indus-
trialization at the expense of needed agricultural
development. Our program, in Latin America has
been successful in some instances in creating
incentives for private investment, both local aad
foreign. Special study is presently being given to
additional measures which might attract the
private capital needed for basic development
projects.

An important factor in carrying out a country
plan for economic development is to have at hand
a sufficient number of local technicians who can
perform the work required. Local training is pro-
vided to Latin American nationals through semi-
nars, adult-education courses, on-the-job training,
summer schools, normal-school training of teach-
ers, and day-by-day association with their United
States colleagues. In the last 1 1 years, more than
20,000 Latin Americans have been trained on the
job. In addition, more than 3,000 trainees have
been brought to the United States for study.

Competent Latin American technicians are now
becoming increasingly available to carry programs
through successfully. International lending agen-
cies have pointed out that there is a need for major
improvements in the management of develop-
mental enterprises and that the amount and types
of loans are determined, in large measure, by the
degree of administrative knowledge demonstrated
by Latin Americans.

The Cooperative Approach

The principal method used to carry forward
programs in agriculture, health, and education is
the Servicio, or cooperative service. The Servicio
in essence, is an agency set up by a Latin American
Government to carry out a particular program of
technical cooperation in which the United States
participates by supplying technicians and a por-
tion of the necessary funds. Operations under
the Servicio are jointly planned, directed, and ad-
ministered by United States and Latin American
personnel. The Servicio device is used with ap-

propriate modifications in new fields which the
technical cooperation program is called upon to
enter.

As the Latin American people have seen at first
hand the real and growing benefits of the technical
cooperation programs, the proportionate contri-
butions of the host governments have increased.
For the fiscal year 1954, the host governments will
make available the equivalent of $44.6 million as
compared with the United States programed con-
tribution of $24.3 million. Programs for use of
these fimds emphasized projects in agriculture,
forestry and fisheries, as well as public health.
These broad fields of activity accounted for almost
60 percent of the funds allotted to the various
Latin American countries for the 12 months ended
June 30, 1954. Almost 25 percent of the remaining
funds were earmarked for training and education
programs, and projects in industrial and natural
resources development. The cumulative total
programed for the Latin American Republics from
June 30, 1950, through December 31, 1953
amounted to about $65 million.

On December 31, 1953, there was a total of 44
Servicios and joint-fund arrangements in opera-
tion— 16 in the field of health, welfare, and housing;
15 in agriculture and natural resources develop-
ment; 10 in education, and 3 in industry. Many
projects in public administration such as budget-

Host Country Contributions Keep Pace With
The Expanded Program

Programmed Contributions to Technical Cooperation
Projects in Latin America

(Millions of U.S. Dollars)

68.9

60.7

49.8

:MlTBv///

United States
Contribution

:::::::::: 22.3 ;:>:>:

952

:?>>:24.3::>>

1954

Fiscal Years

ing, personnel, statistics, and census were also
being carried out on the basis of specific agree-
ments with 12 host countries. Approximately 600
United States technicians were participating in
these activities, working with more than 14,000
Latin American nationals. In addition, about
600 Latin American trainees were participating in
training programs in the United States.

Illustrative Projects Show
Scope of Joint Efforts

Technical cooperation programs are being
carried out in 19 countries of Latin America:
Bolivia, Brazil, Chile, Colombia, Costa Rica,
Cuba, the Dominican Republic, Ecuador, El
Salvador, Guatemala, Haiti, Honduras, Mexico,
Nicaragua, Panama, Paraguay, Peru, Uruguay,
and Venezuela.

Since it is not possible within the space of this
report to describe all of the technical cooperation
programs in each of these 19 countries, a number
of key projects have been singled out as illustrative
of the type of activities now in progress.

Health. — A good example of what has been
accomplished in the health and sanitation program
is to be found in Brazil. In the Amazon River
Valley, 56 health centers and their subposts
minister to 2 million people scattered over an
immense area. Efforts have been concentrated on
reducing malaria and intestinal diseases that had
affected almost the entire population. As a
result of cooperative measures, these diseases have
been substantially reduced. When the health
program for the area was first initiated in 1942, life
expectancy at birth was estimated at 37 years.
Results of a study, recently made available, show
that by 1952 the longevity figure had risen to
nearly 48 years, a gain of almost 30 percent.
Also, when work was begun in 1942, there were
40 United States technicians cooperating with 500
Brazilians. Today, not a single United States
technician is permanently stationed in the Amazon
Valley. The work is being carried forward almost
entirely by 1,000 Brazilians, most of whom were
trained as a part of the cooperative program.

Another interesting example is the industrial
hygiene program being carried on in the mines of
Peru. Many of the mines in the Andes Moun-
tains of Peru are from 14,000 to 16,000 feet above
sea level, and only Peruvians who are native to
these high altitudes can work there. This
valuable labor force is a diminishing one, however,

51

A mass vaccination campaign carried out jointly by FOA and Panamanian personnel was completed Decem-
ber 31, 1953. Seventy percent of all the people under 30 were vaccinated.

since occupational diseases, including silicosis, are
incapacitating men who cannot be replaced
These high-altitude mines contain copper, zinc,
lead, vanadium, antimony, bismuth, and other
important strategic products.

The Peruvian Government in 1947 passed a law
making an industrial hygiene program mandatory
and made provision to finance it. The Govern-
ment then asked the Health Sermcio staff to accept
responsibility for supervising this program. A
Department of Industrial Hygiene within the
Peruvian Ministry of Health was established at
Lima under the technical direction of United
States health specialists. These specialists have
helped to train personnel, start education and
health control measures, and win the support of
labor and industry. Medical and engineering
studies have been carried out in the mining
industries, and almost 10,000 workers have
received physical examinations.

This industrial hygiene program has been so
successful that other Latin America countries are
sending personnel to be trained at the Lima

laboratory. Industrial hygiene programs have
been established in 5 countries besides Peru — ■
Bolivia, Brazil, Chile, Colombia, and Mexico;
preliminary work in this field has been started in
Costa Rica, El Salvador, Uruguay, and Venezuela.
These 10 countries contain 75 percent of the
working population of Latin America.

Agriculture. — In Costa Rica, marked increases
have been achieved in food production and exports
through the development and operation of 30
agricultural extension agencies throughout the
country. By the end of 1953, these agencies were
staffed 100 percent by Costa Ricans. Urgent
requests have been received from local farmers to
establish extension agencies in three new areas to
impart basic agricultural knowledge and tech-
niques to Costa Rican farmers and to develop
rural youth organizations and home demonstra-
tion programs.

The technical cooperation program has assisted
Costa Rica in increasing production of food items.
The country is now exporting certain foods that it
formerly had to import, such as corn, rice, and

52

Members of a Costa Rican 4-H Club learn
agricultural -program.

modem j arming methods. This work is part of the cooperative

beans. Fresh tomatoes are being shipped to the
Panama Canal Zone in growing volume. Estab-
lishment of approximately 10,000 family gardens,
combined with programs of extension work in food
preservation, has helped to increase and diversify
the rural diet. Milk supplies have increased by
25 percent, and annual losses of beef cattle have
been reduced materially so that imports of cattle
have ceased despite the increase in local consump-
tion.

The Government of Haiti is being helped under
the technical cooperation programs to develop a
150,000 acre agricultural project in the Artibonite
Valley. In cooperation with Haitian technicians,
a United States held party prepared the develop-
ment plans which included permanent irrigation
for 70,000 acres and land reclamation. Provisions
were also made for project management, operation,
and maintenance. The Export-Import Bank has
approved a $14 million loan to assist the Haitian
Government in financing the project, and construc-
tion is now under way. In time, this project
should narrow the gap between crop production
and food needs in overpopulated Haiti.

Similar projects, which point the way to a new
agricultural economy, are being carried forward
in other countries of Latin America.

Education. — In the field of education, there
are currently programs in 10 Latin American coun-
tries with special activities in 3 additional
countries. These programs are designed to assist
in improving public elementary school systems,
mainly in rural areas, and vocational education,
primarily in urban areas.

The education program in Paraguay mav illus-
trate the progress made in both these tields. A
technical cooperation program has been operating
to help Paraguay establish a system of vocational
training. Starting from a situation in which
Paraguay had no trades school and no vocational
teachers, technicians working under the program
have helped to build and equip a school in Asuncion,
organize its curriculum, train its teaching and
administration staff, and guide its first few years of
operation. At first, all instruction had to be
given by United States instructors; now, the school
is entirely staffed by Paraguayans. Courses are
being offered in automotive mechanics, radio, re-

53

frigeration, carpentry, leather work, plumbing,
and black-smithing. The school is currently ex-
panding operations by building new shops and
adding courses in graphic arts and electricity.

The Asuncion school is running at a capacity
enrollment of about 240, with a long list of waiting
applicants. In November 1953, the third gradu-
ating class of 53 received diplomas. The school is
now planning to establish both trades courses and
industrial arts courses in other parts of the Re-
public of Paraguay.

In the rural education field, a new demonstra-
tion school has been established at San Lorenzo,
which not only tests and demonstrates improved
methods of rural teaching, but also serves both as
a center for in-service training for normal school
facilities and rural teachers throughout Paraguay,
and as a laboratory for working out an improved
curriculum for rural elementary and rural normal
schools. A new "laboratory" normal school with
a 5-year course is also planned for establishment
at San Lorenzo; the curriculum is now before the
Minister of Education for approval.

Industrial and Natural Resources Develop-
ment.— The concept of balanced economic de-
velopment- has prompted numerous requests for
assistance in a range of activities going beyond the
basic fields of health, agriculture, and education.
These requests cover particularly projects to de-
velop industrial enterprises and natural resources.

At present, industrial development programs
are operating mainly along the lines of increasing
industrial productivity, since a program in this
field should begin with already existing industries
to help them improve their methods, cut costs,
increase quality, and lower prices. This, of course,
is only one phase of a total industry program, but
it is an excellent place at which to begin making
efforts toward broad industrial development.

The organizational pattern which has been
adopted in industrial productivity programs is to
establish cooperative technological and invest-
ment advisory centers for small and medium in-
dustries. In addition, field staffs of vocational
industrial programs are aiding small industries to
increase productivity by selecting machinery
adapted to their needs and to their resources, and
by assisting in the solution of shop organization
and management problems. This program is also
concerned with technical cooperation in the field
of handicrafts, such as weaving, ceramics, leather
working, and carving.

A significant development in the natural re-
sources field in recent months was the initiation
of a mining and a geological survey project in
Cuba. Under the mining project, the Cuban
Development Bank is being helped to train engi-
neers in improved methods of appraising mine
properties for the extension of credit. This proj-
ect also provides for the establishment of a metal-
lurgical testing laboratory for which Cuban per-
sonnel are now being trained in the United States.
Under the geological survey project, the Ministry
of Agriculture is being given assistance in reorgan-
izing its own geological work and in carrying out
field work with Cuban geologists to define specific
deposits to the point required for commercial
development. Technical cooperation in various
phases of minerals development, including coal,
is being given also in Brazil, Chile, Colombia,
Mexico, and Peru.

Public Administration

United States technicians in public administra-
tion have been requested by many Latin American
governments to serve as advisors on management
and administrative methods to ministry officials,
agencies, and special commissions.

The Brazilian Board of Advisors on Public Ad-
ministration is the main body responsible for
improvements in public administration in Brazil.
United States technicians are working with the
Brazilian Board on various public administration
studies, such as a position classification survey of
the Federal Government and the State of Sao
Paulo, budget management assistance for the
State of Minas Gerais, organization and man-
agement study of the Institute for the Retirement
and Pensions of Commercial Employees, and the
establishment of a school and institute of public
administration at the University of Minas Gerais
in Belo Horizonte. In this cooperative program.,
the Brazilian Government contributes about $4
for every $1 contributed by the United States.

The United States public administration advisor
in Panama, at the request of the Panamanian
Government, worked with the manager of the
Colon Free Zone in carrying out an extensive man-
agement survey of the Free Zone's operations.
As a result of this joint study, the flow of goods
through the Free Zone is being expedited. Also
in Panama, a United States expert is helping to
carry out a government-wide training program in
records management.

54

In Costa Rica, the United States public admin-
istration advisor is helping the Costa Rican Direc-
tor of Civil Service to carry out plans to establish
a government civil service system.

Special Aid to Bolivia

Bolivia's economy is exposed to the dangers
inherent in a one-product economy, since exports
of tin account for about 60 percent of the coun-
try's total exports. In spite of the Government's
current efforts to remedy the situation by a pro-
gram of diversification, the major portion of the
country's food requirements, as well as a sizeable
volume of other essential commodities and equip-
ment, must still be imported. The price of tin in
the world market determines the amount of ex-
change earning available to Bolivia to satisfy these
essential needs of its economy.

During 1953, a sharp decline in the world price
of tin precipitated a serious economic crisis. Since
the Bolivian Government had virtually no finan-
cial reserves, extraordinary assistance was ur-
gently needed to cover foreign exchange costs of
essential imports, primarily agricultural com-
modities.

The President, on October 5, 1953, authorized
assistance to Bolivia in the amount of $5 million
worth of surplus agricultural commodities.

This authorization was made under Public Law
216, 83rd Congress. The Bolivian Government
indicated that its most urgent need was for
wheat and flour, and it was agreed that the entire
$5 million grant would be used for these com-
modities. On November 13, 1953, FOA author-
i ed the first transfer of 3,000 tons of wheat from
the stocks of the Commodity Credit Corporation
for shipment in November and December. An-
other authorisation followed for 42,000 tons of
wheat, of which half is to be milled into flour in
the United States. Shipments are scheduled at
the rate of 4,000 tons of wheat and 3,000 tons of
flour monthly.

In addition to the $5 million worth of wheat
authorized under Public Law 216, the President,
determined that up to $4 million of economic and
defense-support funds might be transferred from
the European area to furnish urgent economic
assistance to Bolivia. A portion of these funds
is being used to cover costs of ocean transportation
and miscellaneous handling charges for the wheat
and wheat flour, and approximately $1.7 million
will be used for cotton, lard, and cottonseed oil.

The disposition of the balance of funds will be
determined at a later date.

Moreover, $2 million for an expanded food pro-
duction program was added to fiscal year 1954
technical cooperation funds of $1.5 million for
Bolivia. The bulk of this money is being used
for agricultural supplies and equipment needed by
Bolivia in its efforts to diversify its economy and
to accelerate domestic production of vital food-
stuffs now in short supply.

Overseas Territories

The European overseas territories in the West-
ern Hemisphere provide strategic bases for the
free world and supply many critical raw materials.
Their continued stability and economic growth is
essential to hemispheric security.

The technical cooperation programs in the over-
seas territories have moved forward with good
results. In Surinam, Antigua, Jamaica, Barbados,
and the Windward Islands, United States special-
ists have helped the local authorities in their
efforts to develop low-cost housing facilities. In
Barbados, St. Lucia, and St. Vincent, soil con-
servation and land-use studies are under way.

As the year ended, a survey team was being sent
to Surinam and British Guiana to discuss the
initiation of technical cooperation programs in
those countries.

Hemispheric Defense

The purpose of military grant aid program for
the American Republics is to enable them to
accomplish the military roles and missions as-
sumed in the mutual defense of the Western
Hemisphere and to strengthen their collective
effort against possible Communist or other
aggression.

In pursuance of this policy, military assistance
appropriations for the American Republics from
the beginning of the mutual security program until
the present time have totaled $105 million. Of
this amount, $83 million has been used to furnish
these countries with equipment which will
strengthen their armed forces; $900,000 has been
spent in training programs, the majority of which
have been carried on in the United States.

The Latin American countries have devoted
much of their own budgets to support the basic
policy of hemispheric defense. They have de-
frayed the major portion of the costs of such a

55

policy by using their own funds for pay, rations,
and uniforms, and for purchasing in the United
States a total of $38.3 million worth of military
items.

Although most Latin American countries are
hampered by a lack of adequate facilities and by
a preponderance of obsolete military equipment,
they have shown themselves fully capable of
utilizing and maintaining modern ships and air-

craft. Colombia is a good example. Throughout
the Korean conflict, Colombia maintained forces
in Korea. The majority of the Latin American
Republics have requested assistance from the
United States in the form of military missions or
advisors. The military assistance we furnish will
help insure that these countries will be able to
continue to develop military establishments of
increased size and effectiveness.

56

CHAPTER VI

Other Parts of the Program

There are a number of activities carried out
under the mutual security program which are
global in scope and cannot be grouped regionally.
A report on these activities is contained in this
section.

Farm Surpluses Sold
to Friendly Countries

Section 550 of the Mutual Security Act of 1951,
as amended, provides for the purchase of between
$100 million and $250 million worth of surplus
agricultural commodities to be sold by the United
States to friendly countries for foreign currencies.
Commodities bought by a foreign country under
section 550 must not substitute for or displace
usual marketings by the United States or friendly
countries. The surplus commodities are generally
sold at prevailing United States export prices, as
required to meet the price criteria set by Congress,
and private trade channels are being used to the
maximum extent practicable.

Illustrative of the types of commodities that
may be included in the program are cotton,
tobacco, corn, wheat, beef, dairy products, fruits,
fats, oils, and some oilseeds. This list is subject
to change upon recommendation of the Secretary
.of Agriculture.

Congress did not appropriate additional money
to cover the purchase of these surplus commodities,
but provided that a portion of the funds appro-
priated for the mutual security program, including
those for military assistance, defense support and
economic aid, should be used to carry out the
provisions of section 550. The foreign currencies
received from the sale of surplus agricultural
products will be used for military production
programs, payment for offshore procurement of
military materiel for use in the country where
purchased or elsewhere, and for other purposes as
prescribed by this section and in accordance with
agreements reached with each government.

Negotiations with a number of countries,
including Afghanistan, Formosa, France, Finland,
Germany, Indochina, Italy, Israel, Japan, Nether-
lands, Norway, Spain, the United Kingdom, and
Yugoslavia, have been actively carried on to
develop programs for the direct sale of surplus
agricultural commodities. Plans are also being
made to use section 550 sales proceeds to promote
triangular trade arrangements; that is, FOA
would sell agricultural commodities to one country
in return for local currency to be used to purchase
and export items required for the economic aid of
another country.

Through December 31, 1953, allotments of $59.1
million have been announced, including $55
million to the United Kingdom, $2.1 million for
Norway, and $2.0 million for West Germany.
Procurement authorizations providing for sales of
$20 million worth of tobacco, $5 million of prunes,
and $19 million of fats and oils were issued to the
United Kingdom. By the end of the year, also,
nearly $60 million of additional sales were in
process of negotiation. Shipments of all purchases
will be subject to the usual requirement that 50
percent be sent in American ships. Authoriza-
tions, which are issued on the basis of requests
submitted by the foreign government, provide the
terms and conditions of sale. The commodity
may not be re-exported without prior agreement
of the United States Government, and the foreign
currency is to be deposited to United States
account and used for the approved purposes.

In evaluating requests received from the foreign
governments for surplus agricultural commodities,
appropriate consultations are held with the De-
partments of Agriculture and State to determine
that the furnishing of each commodity in the
amount requested would be consistent with the
provisions of section 550.

57

The Christmas Food-Package Program

The Christmas food-package program pro-
vided for the distribution of special food packages
during the period of the Christmas season to needy
families in a number of countries in Western
Europe, Latin America, and the Near East. The
program was conceived as a means of bringing
a sense of direct participation in the programs of
the United States to people in the various countries
of the world. Most of the gift food was shipped
in individual, consumer-sized packages, and later
assembled into special parcels stamped with the
FOA clasped-hand emblem and holding about 12
pounds of food for each family.

Prunes, raisins, rice, dry beans, evaporated milk,
canned beef and gravy, shortening, cheese, and
sugar — all foodstuffs in abundant supply in the
United States — were included in the parcels.
Funds to finance the program, totaling $15.5
million, were drawn from mutual security appro-
priations under the provisions of Section 513 (b)
of the Mutual Security Appropriation Act of 1954.

According to arrangements made by the foreign
governments, the food was distributed on a family-
by-family basis through local charitable groups
and other agencies. CARE, Hadassah, and the
American Middle East Eelief also participated in
the program, as did units of the United States
Armed Forces which helped to distribute some of
the food to individual families, or through local
Christmas parties in institutions such as orphan-
ages and refugee camps.

Transportation: Over 50 Percent
in U. S. Ships

The urgency and speed required to carry forward
the special programs of the Foreign Operations
Administration in the last 6 months of 1953 posed
difficult ocean shipping problems. The shipment
of 600,000 tons of wheat to Pakistan, other grain
shipments to Jordan and Bolivia, the East German
food program, the Christmas-package program,
the rush shipments of commodities to Korea — all
these necessitated the most careful coordination
and scheduling.

It was also necessary to obtain the complete
cooperation of the steamship industry inasmuch as
the time requirements for procurement, packaging
and shipment in each case involved numerous
schedule changes, re-routing and diversion of
vessels. Despite the many complexities of the
situation, all programs were expedited and carried
forward in excellent time.

Congress, in establishing the Foreign Operations
Administration, renewed the provision requiring
that at least 50 percent of the tonnage financed
from FOA funds and shipped from the United
States must move in United States-flag vessels.
This requirement has been met in each fiscal year
period since 1949. Only preliminary reports for
the first four months of fiscal year 1954 are avail-
able, but on the basis of these preliminary figures,
American-flag vessels in the liner category carried
50 percent of the tonnage shipped during July-
October 1953 to European destinations, and 72
percent of the tonnages moving to Far East
destinations.

For this same 4-month period, unofficial re-
ports show that, in the "tramp" category, Ameri-
can vessels carried 50 percent of the total of
575,000 tons shipped to Europe. There were no
other bulk movements on shipments reported to
date. Four vessels in the tanker category had
been FOA-financed, two of which were American-
flag vessels.

Homebound cargoes of strategic materials
procured under the Foreign Operations Adminis-
tration program similarly are subject to the flag
rule. For the last 6 months of 1953, 77 percent
of these shipments was carried in American vessels,
all in the liner category.

At least 50 percent of the tonnage financed
under the military assistance portion of the mutu-
al security program also is required to be shipped
in United States vessels. Through October 1953,
American-flag vessels carried 66 percent of all
military items shipped under grant aid.

Ocean Freight Paid on Voluntary
Relief Shipments

For the fiscal year 1954, Congress appropriated.
$1.8 million for financing the freight costs of
voluntary relief shipments. Another $2.5 million
was authorized by the President as essential to
support this program, so that a total of $4.3
million was made available.

From July 1 through December 31, 1953,
$2.1 million was expended to subsidize transpor-
tation of relief shipments of American voluntary
nonprofit relief agencies registered with the Ad-
visory Committee on Voluntary Foreign Aid.
This brought to a total of $29.4 million the pay-
ments since July 1948 to subsidize the cost of
ocean transportation of voluntary relief shipments.
Of this total amount, $18.6 million or 63 percent

58

was used to pay for parcel-post packages sent by
individual donors. The parcel-post subsidy pro-
gram was ended on March 31, 1953.

The ocean freight subsidy at present is paid on
voluntary agency shipments to Austria, France
(including Morocco and Tunisia), Germany,
Greece, Italy, Trieste, Yugoslavia, India, Pakistan,
Korea, Formosa, Lebanon, and Iran.

Since May 1953, the Department of Agriculture
has made available under Section 416 of the Agri-
culture Act of 1949, 70,000 tons of dried milk,
25,000 tons of cheddar cheese, and 25,000 tons of
butter for distribution to needy persons abroad.
By the end of December 1953, the freight costs of
over 45,500 tons of these commodities were either
financed or marked for financing under this sub-
sidization program.

Escapee Program for Those Who
Flee Communist Oppression

Through the escapee program, the United States
provides help to those who flee from Communist
oppression by supplementing the considerable
assistance rendered these refugees by the countries
which give them first asylum. The escapee pro-
gram also provides major assistance in the re-
settlement of the escapees by migration to other
countries of the free world. At the end of 1953,
there were 14,500 escapees registered for care and
resettlement assistance under projects adminis-
tered through United States Operations Missions
in Europe. More than half of this number were
located in West Germany and Austria. In addi-
tion, about 3,000 persons were registered for re-
settlement assistance onlv.

Albanian and Bulgarian escapees from Communism at a vocational school in Athens, Greece, are being
trained for resettlement opportunities under the Escapee Program. By the end of 1953, almost 8,000 persons
had been resettled in various free world countries.

59

For the 6 months ended December 31, 1953,
2,700 escapees were resettled in the United States,
Canada, Brazil, Australia, and other countries of
the world. This brought to a total of 7,800 the
number of persons resettled since the inception of
the program. Screening procedures provide for
thorough interrogation and examination of all
escapees. Although the escapee program thus
far has operated mainly in the European area,
special projects have been undertaken for reset-
tlement of recent anti-Communist escapees from
the China mainland and in the Near East, and
this phase of the program has been expanded and
intensified in accordance with the expressed wish
of the Congress.

Resettlement projects provide visa opportunity
searches and visa processing, give counseling and
legal aid, and furnish language and vocational
training so that the escapee is better able to take
advantage of existing emigration opportunities.
In addition, CAEE projects are undertaken to
supplement the food, clothing, lodging, and medi-
cal aid which are provided for the escapees by
the countries of asylum and by relief organizations.

These care and resettlement assistance projects
are administered in most instances by private
voluntary agencies under contract. Transpor-
tation to the countries of resettlement is secured
through a contract with the Inter-Governmental
Committee for European Migration. In carry-
ing out the escapee program, close liaison is main-
tained with the Department of State in order to
utilize added resettlement possibilities made avail-
able under the Refugee Relief Act and to insure
proper coordination in regard to escapee resettle-
ment activities.

The escapee program gives tangible evidence of
the concern of the West for populations behind
the iron curtain, and interviews with recent ar-
rivals indicate that knowledge of the favorable
treatment accorded escapees is spreading within
the Soviet orbit.

Basic Materials Development

For the fiscal year 1954, $19 million was ap-
propriated for a basic materials program to finance
projects which will contribute to the supply of
essential raw materials for the collective defense
of the free world.

Under the basic materials program, paramount
consideration has been given to country efforts
which are geared to the development of primary
supporting facilities, such as the construction of

roads and railways, and the improvement and
expansion of port facilities. Governmental as-
sistance is particularly required in the transport
field because, as a rule, private capital flows into
projects which are directly tied to materials pro-
duction rather than into supporting-type projects.
The development of their transportation base
will permit underdeveloped countries to exercise a
greater attraction for foreign and domestic private
investment capital.

Present plans for use of the basic materials
program funds are limited to the geographical
areas of Africa and Asia and call for some 9
projects, primarily in port and road development,
which will aid in the increased production or
transportation of critical materials. A number
of these projects are still in the engineering survey
stage. In others, the initial surveys have been
completed and applications are being prepared.
Some projects are still subject to negotiations
with the foreign government concerned.

Guaranty Program for
U. S. Investments Abroad

Through the investment guaranty program, the
United States Government has offered, for a fee,
insurance protection to new American investments
abroad against the risks of currency inconverti-
bility and loss through expropriation or confisca-
tion. The Mutual Security Act of 1953 provides
that guaranties shall be available to protect
investments in any country in which the United
States has agreed to institute the guaranty
program.

Agreements in connection with the program
provide certain assurances by the government of
the foreign country concerned regarding claims
settlement to the United States. By December
31, 1953, the required assurances had been ob-
tained from 18 countries with respect to con-
vertibility guaranties; bilateral agreements with
16 of these countries also were made with respect
to expropriation guaranties.

The Mutual Security Act of 1953 also provides
that guaranties may be written for a maximum
term of 20 years from the date of issuance and
extends the authority to issue guaranties to June
30, 1957.

Through December 31, 1953, 57 industrial
investment guaranties totaling $42.4 million had
been issued to cover private investments in 7
European countries. Of the total, $40.6 million
insured against inconvertibility of foreign cuf-

60

rency receipts, and $1.8 million against loss from
expropriation or confiscation. Total fees col-
lected amounted to $888,600; no payments under
the guaranty contracts have been required.

Small Business Informed
on Export Opportunities

During the last 6 months of 1953, the Foreign
Operations Administration, through its Office of
Small Business, maintained a steady flow of
advance procurement information to the American
business community. In this way, American
small business has been able to keep in touch with
opportunities for export trade financed under the
various FOA programs. During the period, 455
small business circulars and memos of advance
procurement were issued to manufacturers, sup-
pliers, and exporters who had expressed active
interest in receiving such information. These
circulars and memos now include information on
procurement handled by the United Nations
Korean Reconstruction Agency. Arrangements
were also completed to have the General Services
Administration publicize its purchases which are
financed with FOA funds.

The Directory of Combination Export Mana-
gers, listing commodities and services which
United States small business enterprises could
supply tlirougn combination export managers, was
distributed. A total of 37,500 copies were issued,
33,000 abroad and 4,500 in this country. This
Directory has given valuable assistance to Amer-
ican manufacturers and suppliers who cannot
afford export departments of their own. By ar-
ranging for combination export managers to carry
out the necessary export functions, these manu-
facturers and suppliers are able to participate
more fully in the procurement programs financed
by the FOA.

The FOA conducts a Contact Clearing House
Service which is designed to establish direct con-
tact between private American and foreign firms
interested in exploring specific opportunities for
entering into investment agreements. This serv-
ice has been operating in 13 Western European
countries, Israel, and Formosa. During the
period under review, it was established in the
Philippines and the British overseas territories.
Arrangements for clearing house services are in
their final stages in Japan, and preliminary nego-
tiations are under way to extend these services to
India, Iraq, Switzerland, and Mexico.

During the period, approximately 220 specific
investment proposals from American and foreign
concerns have been published. This brought to
a total of nearly 2,000 the proposals made since
the operation was started in 1950. It is intended
to extend the Contact Clearing House Service to
all free countries of the world where encouragement
of private investment would promote the ob-
jectives of the mutual security program.

Reimbursable Military Assistance
to 46 Countries

Under existing legislation, the President is
authorized to transfer equipment, materials, and
services to certain nations and international organ-
izations on a reimbursable basis and to provide
them with procurement assistance, without cost
to the United States. Assistance of this type is
characteristic of the basic philosophy of the mutual
security program as a whole. It provides a means
whereby the United States can help the friendly
nations of the world to help themselves. More-
over, it permits requests from friendly nations to
be merged with the overall procurement programs
of the military departments, thus avoiding con-
flicting demands on the productive capacity of
the United States.

As of December 31, 1953, 46 countries have
contracted to buy $676 million worth of equip-
ment, materials, and services. Their purchases
were allocated as follows: Army, $214 million;
Navy, $113 million; Air Force, $349 million. By
the same date, the purchasing governments had
advanced $543 million, the remainder of $133
mfilion will be liquidated by cash payments to
the military departments concerned before the
materiel or services are furnished by the United
States.

The purchases made under the reimbursable
assistance program have covered the whole range
of military end-items and have included: 6 light
cruisers, 5 destroyer escorts, 5 coast guard utility
vessels, 4 patrol frigates, 464 aircraft of all types,
486 tanks, 187 gun motor carriages, 318 armored
cars and such items as motor vehicles, weapons,
ammunition, and electronic equipment.

Canada has been the largest purchaser. Not
only has Canada bought for cash from the United
States the munitions required to convert her armed
forces from British to United States-type equip-
ment, but it also has transferred substantial
quantities of its military stocks to other North

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Atlantic Treaty Organization nations on a grant
basis.

Among the Latin American countries, purchases
to maintain equipment of United States origin
already in their possession have been particularly
important. A number of naval vessels have been
sold to members of the Inter-American Com-
munity. Argentina, Brazil, and Chile purchased
2 light cruisers each. Three destroyer escorts
have been sold to Peru, 2 destroyer escorts to
Uruguay, and 2 patrol frigates to Colombia.

These ships added new strength to hemispheric
defense by providing vessels manned by trained
crews who are prepared to protect strategic com-
munication lines.

Military Training for Effective
Use of Equipment

The combat effectiveness of our allies is growing-
daily as unit after unit is being furnished with
modern equipment. To insure that this equip-
ment is employed and serviced in the most effective
manner, foreign military students of the allied
governments are being trained by the United

States under the military assistance program.
Through the end of 1953, over 33,000 allied stu-
dents had been given specialized training courses
both in this country and abroad.

The particular type of training given — whether
it be formal courses of instruction, orientation
tours, or special training in the use of a particularly
complex piece of equipment — is based upon the
recommendations of the United States Military
Advisory Group in each country. One example
of the kind of training given is the pilot program.
Over $100 million has been used to train pilots to
fly the latest type of jet planes. Program students
are given exactly the same training as our own air
cadets, and today allied pilots are capable of flying
the powerful F-84 Thunderjets from any one of
the free world's far-flung air bases. In the same
way, the latest electronic equipment is being effi-
ciently operated and maintained on a world-wide
basis by crews trained under the military assist-
ance program.

The large-scale military training program is en-
abling the countries which receive our defense
weapons and equipment to maintain high stand-

French, Italian, and Portuguese armor personnel being trained in the operation of the United States M-4-6
medium tank at the NATO Training Center in Mailly-le-Camp, southeast of Paris, France.

62

ards of operating and servicing. In addition, close
association of foreign trainees and American in-
structors and students has helped promote a better
understanding abroad of the characteristics and
capabilities of our form of government and way
of life.

Participation in International
Organizations

United Nations Expanded Program of Tech-
nical Assistance. — The United Nations technical
assistance program is an international effort to
enlist specialized skills from many nations to help
the governments and peoole of underdeveloped
areas expand their economies. The United States
has supported this program at the same time that
it has developed and carried on its own bilateral pro-
gram of technical cooperation. Each approach —
the multilateral and the bilateral — has its par-
ticular merits, and the use of both produces more
substantial results than the exclusive use of either.

Continuous attention has been given to the
problem of coordinating the United Nations and
the United States programs so that the two com-
plement each other, rather than overlap. As a
result, coordination between the programs is good,
and is based primarily on active cooperation both
in the field and at headquarters level to assure the
best use of total resources.

As of October 1953, about 1,100 United Nations
experts, drawn from 60 countries all over the
world, were at work in the field. Of this number,
17 percent were technicians of underdeveloped
countries whose particular skills were desired by
the governments of other underdeveloped areas;
21 percent were drawn from the United States.
In addition, as of the same date, 1,528 new fellow-
ships had been awarded under the 1953 program,
and 788 fellows from 45 countries had completed
their studies.

Contributing governments have increased their
financial support of the United Nations program
for 1954. The fourth Technical Assistance Con-
ference met in New York in November 1953 to
raise on a voluntary basis funds for the calendar
year 1954 program. Fifty-eight countries made
valid pledges totaling slightly over $23 million.
Twenty-three of these pledges represented in-
creases over the previous year.

The United States had, at previous conferences,
offered to contribute 60 percent of total pledges.
At the November meeting, however, the United
States representative declared the intention of

his Government, subject to Congressional ap-
proval, to match the first $8.5 million validly
pledged by other nations at a 60-40 ratio and to
match up to $3 million in additional pledges at
a 40-60 ratio. This formula was designed both
to elicit greater financial support of the technical
assistance program from other governments and
to reduce the United States share below 60
percent.

Subsequent to the pledging conference and
prior to December 31, 1953, the cut-off date for
making pledges for the purpose of matching
contributions, 10 more countries made pledges,
bringing total pledges for 1954 to $24 million.
Under the new formula, the United States pledge
to the 1954 program is $13.9 million, of which
about $10 million is subject to appropriation by
the Congress. The United States pledge is 58
percent of total pledges.

The United States has contributed $11.1 million
toward the calendar year 1953 expanded program.
This sum was approximately 60 percent of the
total contributions received through December
31, 1953.

Technical Cooperation Program of the
Organization of American States {OAS). —
In contrast to the United States and United
Nations programs of technical cooperation in
Latin America, which emphasize direct assistance
to individual countries on specific projects, the
OAS program is presently limited to the estab-
lishment and support of regional training centers
to which all participating governments may send
persons for technical education. With funds
contributed voluntarily to the OAS technical
cooperation account, training centers are devel-
oped by enlarging existing facilities in institutes
and universities located in various Latin American
nations.

During the latter half of 1953, there were 5
centers in operation, giving training in the fields
of agricultural extension, housing, child welfare,
economic and financial statistics, and animal
husbandry. The proposed program for 1954,
now under review by the Inter-American Eco-
nomic and Social Council, would continue these
centers and, if sufficient funds become available,
would provide for additional projects in rural
education and natural resources.

A special meeting of the Council in November
1953 opened the pledging of funds for the 1954
program. By the year's end, 12 governments
including the United States, had pledged $1.3

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k

Children in a day nursery at Athens, Greece, try on their new shoes made from the leather supplied by the
United. Nations Children's Fund.

million. Five pledges represented increases over

1953 contributions. As in earlier years, the
United States pledged $1 million, provided that
its contribution would not exceed 70 percent of
total contributions. Additional pledges to the

1954 program are expected to be made early in
1954.

By December 31, 1953, the United States had
paid in $716,968 toward the 1953 program, and
other countries had contributed $98,489.

United Nations Children's Fund. — In Oct-
tober 1953, the United Nations General Assembly

voted unanimously to continue the International
Children's Fund. The name of the agency was
changed officially to "United Nations Children's
Fund"; however the initials UNICEF were re-
tained. The word "Emergency" was chopped
from the title in accord with the General As-
sembly's desire that the fund emphasize the
establishment of basic child care programs in the
underdeveloped countries.

UNICEF's program in 1953 was directed
principally to assisting underdeveloped countries
of Asia, Africa, and Latin America in the develop-

64

ment of their own permanent maternity and child
welfare programs. These programs included
assistance to rural maternal and child welfare
centers in areas where child-care services have
previously been non-existent; the training of
auxiliary medical personnel, such as village mid-
wives, to staff these services; and extensive health
campaigns against diseases affecting large numbers
of children, such as tuberculosis, malaria, and yaws.
Aid for these long-range programs rose from 25
percent of the total in the period 1947-50 to 66
percent in 1951-52, and to 82 percent in 1953.

UNICEF is currently aiding 213 programs in
75 countries and territories. This aid will reach
over 60 million children. During 1953, approxi-
mately 17 million persons were protected from
malaria. Also, 10 million children were tested for
tuberculosis, approximately 37 percent of whom
were vaccinated. In the 3 years 1951-53, some
10 million children were examined for yaws, and
nearly 3 million treated with penicillin. During
this same 3-year period, aid was approved for
5,300 maternal and child health centers.

UNICEF has provided emergency assistance to
the victims of catastrophes. This emergency aid,
primarily in the form of food, clothing and drugs,

was provided in 1953 to children in the famine
areas of India and Pakistan, the earthquake-ridden
Ionian Islands of Greece, the flood-stricken areas
of southern Japan, and the war-torn regions of
Korea. For example, the Greek earthquake in
August included among its victims 40,000 children
and 3,000 expectant mothers. UNICEF im-
mediately made available 20,000 blankets, 300,000
pounds of milk powder, and fish liver capsules
and soap.

A significant development in the latter half of
1953 was the increase of UNICEF assistance to
central Africa, particularly for the control of
disease rampant in that area. An allocation for
leprosy control in Nigeria constituted the first
UNICEF aid for this disease.

At its September meeting, the Executive Board
of UNICEF allocated $9.9 million. This amount,
plus subsequent allocations of $276,000 brought
the total allocation for 1953 to $15.9 million.
These funds from UNICEF 's central account
were more than matched by contributions made
from local resources by governments receiving
aid. In the latter part of 1953, the United States
paid its contribution of $9.8 million for the
calendar year 1953 program.

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