6. Spain. Although negotiations with the Spanish Government regarding the basis for an aid program have not been completed, the United States executive branch has made known to the Spanish Government its intention to recommend that the amounts earmarked for military, economic, and technical assistance to Spain in earlier appropriations be kept available ($100 million from the fiscal year 1952 appropriation and $25 million of the fiscal year 1953 appropriation), and that subsequent amounts of such aid as appropriate be made available, after satisfactory agreement has been reached on the matters now under discussion between the two governments. No specific amounts of such additional aid have been indicated. 7. United States contributions to multilateral programs.-Through the mutual security program, the United States helps to support a number of international programs, to which contributions are made on a voluntary basis. United States participation in these programs does not involve an obligation to provide financial support on the basis of assessments determined by international agencies. In the absence of specific congressional appropriations, United States representatives never make unconditional pledges to the voluntarily supported programs. However, United States representatives have, on occasion, indicated that under certain conditions their Government would be prepared to support various activities. For example, the United States voted in the United Nations General Assembly, on January 26, 1952, in favor of a 3 year $250 million reintegration and relief program for Arab refugees, to be carried out through the United Nations Relief and Works Agency for Palestine Refugees, and to be financed by voluntary contributions. Since that time, the executive branch has sought funds in order to make possible the contribution of up to 70 percent of the funds needed to carry out this program, on an annual basis. No financial commitment, however, has at any time been made in absence of an authorization and an appropriation from the Congress. In 1950, the United States took a leading role in the establishment of the United Nations Korean Reconstruction Agency by the United Nations General Assembly, and in the process voted in favor of a program target calling for a budget of $250 million in contributions to carry out the work of the Agency during its first full year of operation. The United States further indicated that it was prepared to pledge $162.5 million toward this initial program, subject to favorable action by the Congress. Congressional action since that time has permitted contributions by this Government in the amount of $50 million toward meeting the actual needs of the Agency. Last November a United States representative to the United Nations, Senator Wiley, was authorized to state that funds would be requested from Congress for the purpose of contributing the difference between funds authorized ($14,708,750) and appropriated ($8,171,333) by the Congress for United Nations Technical Assistance (UNTA) during fiscal year 1953, and the difference between funds authorized ($16,481,000) and appropriated ($6,666.667) for the United Nations International Children's Emergency Fund (UNICEF) during current year 1953. This statement, however, was specifically conditioned on adequate pledges and contributions from other member nations, on the approval of the new administration which had not as yet taken office, and on favorable action by the Congress in making available the necessary appropriations. In February 1953, Ambassador Lodge confirmed the intention of the new administration to support these activities, and made a pledge, subject to the remaining conditions previously expressed by Senator Wiley. On the basis of formal pledges received to date this administration is requesting Congress for supplemental appropriations for the full difference ($9,814,333) between authorization and appropriation for UNICEF, and an amount of $4,595,812 for UNTA. It should be added that the cases referred to above are not the only cases in which countries may have developed expectations about United States executive branch plans. Since most of our programs are based on fairly intensive examination and discussion with the countries concerned of their plans, requirements, and deficiencies, and since our general program objectives and programing criteria have been carefully made known to them, country governments naturally have some basis for predicting United States action. These expectations may be right or wrong, but in neither case, of course, constitute any sort of specific commitment either by the United States Government to provide a particular amount of assistance or by the executive branch to recommend it. In particular instances, as mentioned above, the executive branch may find it advisable to advise a country that its expectations are quite wrong, if extreme public disappointment needs to be averted, or if there is any danger that failure to challenge a stated planning assumption might be genuinely misinterpreted as acquiescence. It should be recognized that the United States does have a general commitment to its partners in the free world. This is not a quantitative commitment expressed in specific magnitudes or kinds of aid; nor is it the kind of commitment that the executive branch ever could undertake independently of the United States Congress and the American people. It is a commitment to continue our leadership and to continue to make a contribution-in all the various forms that such a contribution may take to free world security consistent with the material and spiritual resources on which our leadership is based. This commitment is not expressed in any single undertaking, but is rather to be found in our record over the last decade. It is expressed in ratification of the North Atlantic Treaty and the United Nations Charter, in the legislation of our assistance programs and the record of the funds we have contributed. It is a bipartisan record, going back to well before the Marshall plan, which does more to persuade our partners of our continuing intentions than any promise the executive branch might attempt to give. It is based on repeated confirmation by the Congress that the United States will meet the threats of aggression, instability, and poverty, with constructive measures. It is equally based on continuing insistence that recipients of our help do their share. This record leads our partners to have expectations-some reasonable, some perhaps unreasonable-as to our future course of action. It has led many of them to assume substantial risks and obligations in a joint enterprise with us. This is what commits us-within the limits of our conscience, our resources, and our judgment of the requirements of our security-to the kind of program that the Congress is now considering. (An addendum to the foregoing statement has been deleted because of security classification.) OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE, Hon. ROBERT B. CHIPERFIELD, Chairman, Foreign Affairs Committee, House of Representatives, Washington 25, D. C. DEAR MR. CHAIRMAN: While presiding over the House Foreign Affairs Committee, Friday evening, June 5, Representative Vorys requested me to provide you with certain supplementary information bearing on the need for additional MDAP appropriations in fiscal year 1954. In undertaking to provide this information I stated that we would be working on the subject of lead time financing for the Appropriations Committees and would try to provide as soon as possible the data desired. The task of developing a precise and complete analysis of this problem is complicated and could not be completed short of a few weeks. However, we have developed the attached statements and materials, which we expect to develop more completely for the appropriation phase of the congressional hearings. In using the enclosures the committee is respectfully urged to consider the nature of the MDAP requirements. In general they are for long lead, heavy "hardware" items. It takes from 3 to 9 months to put the funds to work producing these items. Then it takes anywhere from 3 months to 3 years to manufacture them. If they are not then diverted from the MDA program to some higher priority purpose, they result in an expenditure chargeable to MDAP funds. The requirements continue, the military deficiencies in meeting the Soviet threat remain, regardless of how long it takes us to place contracts and to deliver equipment. As General Stewart has demonstrated, previously approved programs do not provide for the new and additional requirements of fiscal year 1954. These equipment requirements, to be met in time, must be put into the process of production and distribution unless deliveries are to be delayed with proportionate increase in risks to our American security interests. In short, our allies need more equipment than Congress has provided for mutual defense. The money already voted has been committed. New money is required so that the equipment can be delivered in the coming months. The fact that much remains to be delivered is an unfortunate fact, but it does not reduce the risk of failing to get the added items into production as soon as practicable. The responsibility for this delay is one that we have not been willing to assume. Sincerely yours, N. E. HALABY, Deputy Assistant Secretary of Defense (ISA). ANALYSIS OF MDAP WORKING CAPITAL RELATION OF FISCAL YEAR 1954 PROGRAM AND FISCAL YEAR 1950-53 OBLIGATIONS AND EXPENDITURES There have been earmarked for the Department of Defense out of funds authorized and appropriated by the Congress in the last 4 fiscal years $15.5 billion. All but about $600 million of these funds will have been put to work by June 30, 1953, and obligated in accordance with the new bookkeeping rules by December 31, 1953. By the end of this month between $6.8 and $7.1 billion will have been spent. MDAP savings of approximately $400 million have been made. The requirements of the Korean war which caused diversion of equipment intended for the MDA program, and other diversions and delays have prevented until recently large scale deliveries and expenditures that have been planned. A sharp increase in expenditures during the last quarter has occurred. For example, expenditures during March 1953, were the highest reported for any month since the inception of the MDAP, $498 million. There is reason to believe that the average rate in fiscal year 1954 will exceed $400 million per month. Thus the large working capital made available by the Congress in the last 4 fiscal years can now "pay off" and the policy of building national security through strengthening our allies can be more rapidly carried out. The question arises: Assuming the Congress approves the President's request that all unobligated and unexpended MDAP funds be carried over and made available in fiscal year 1954, why do additional apropriations need to be authorized? To answer this question requires an analysis of current working capital and the effect of adding the new funds requested. If, as now estimated, there remain unexpended from fiscal year 1950-53 funds approximately $8 billion on June 30, 1953, and it is assumed that about $5 billion in MDAP goods and services can and should be delivered in fiscal year 1954 and fiscal year 1955, then the Department of Defense now has available in the aggregate about 20 months working capital. However, when you subtract unpaid bills of about $300 million for training, accessorial and administrative costs, infrastructure, etc., and the $2 billion recently initiated program for procurement of long lead time equipment offshore, there is, according to current estimates, about 18 months average lead time financing available for procurement of hardware in the United States. If the President's request for obligational authority in fiscal year 1954 (approximately $4 billion new obligational authority plus carryover of unobligated funds) is approved there would be added about $3 billion for materiel procurement and there would then be about $11 billion available in unexpended procurement working capital. In the aggregate, therefore, and assuming a $5 billion annual rate of expenditure, the fiscal year 1954 request would add about 8 months average lead time or working capital for United States procurement; the period for offshore procurement would be somewhat longer. These estimates will vary by end item and source of procurement, and, of course, final delivery of some highly expensive, long lead items such as naval vessels and fighting aircraft which constitute a considerable proportion of the end-item program will extend beyond this period. As demonstrated to the committee, since offshore procurement is not only designed to procure end items, but to build an overseas defense mobilization base and provide incidental economic benefits, it must be treated separately for this purpose. In view of the fact that the program has only been in progress for a relatively short time and taking into account the large number of obstacles to high-speed production in Europe (similar in some respects to difficulties in the United States immediately after Korea), certain European-built items such as aircraft and naval vessels will not be completed until 1956 under present contracts and even later under new contracts to be let in fiscal year 1954. The problem of administrative lead time also must be recognized because in the process of authorization-appropriation-allocation-service procurement there exist necessary, time-consuming operations which must be performed if procurement is to be accomplished in an efficient, orderly manner. For example, it may require 6 to 9 months from the final action of this committee until a contract (e. g. an inshore minesweeper (AMI)) is let and production is initiated in the United States. This period has been longer overseas for some items. Finally, it should be noted that the carryover of unexpended MDAP funds, including fiscal year 1954 appropriations, will be reduced $1 billion during the next 12 months; the unexpended balance for United States procurement will be worked down from $5.8 billion to $3.9 billion-a reduction of almost $2 billion in the carryover. The NATO portion of the program averages about 70 to 80 percent. DEPARTMENT OF THE ARMY, MDA PROGRAMS FOR MATERIEL, FISCAL YEARS 1950-53 Relation of programs and expenditures (lead time analysis) DEPARTMENT OF THE ARMY, MDA PROGRAMS FOR MATERIEL These figures do not take into consideration the fiscal year 1955 program. The values will be increased by the amount of the approved fiscal year 1955 programs. DEPARTMENT OF THE AIR FORCE, MDA PROGRAMS FOR MATERIEL The following tabulation is extracted from information relating to current contracts for delivery of items from United States production both to MDAP and United States military services. They are items which are included in 195053 MDA programs and proposed in the fiscal year 1954 program. |