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how we operate and that would be valuable to your staff in evaluating the effectiveness of how we operate, but as far as putting it in the record—it might not be advisable.

Mr. FASCELL. You have convinced me. Without objection, we will take it out of the record.

Mr. POLAND. Mr. Blair, I am referring now to tab H and my inquiry is whether or not this would be a good place to insert that in the record, so that it would serve as a basic of explanation for your working directions?

Mr. BLAIR. That is correct. I might point out that this was prepared at the request of counsel. I considered it a very excellent statement on the various aid programs and authorizing legislation.

Mr. FASCELL. You are talking about programs under mutual secu. rity legislation?

Mr. Blair. That is right. This ties in the aid programs with the source of funds and overall legislation. It is very good.

Mr. FASCELL. You feel that this would be extremely helpful?

Mr. BLAIR. I do. It is helpful to us in our operation and it is helpful to any new man. It ties in information that is spread over a number of documents on source of funds and congressional intent.

Mr. FASCELL. Without objection, we will include the first part of tab H which is the legal-sized paper headed “Programs Under Mutual Security Legislation." (The document referred to is as follows:)


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European Branch, General Accounting Office


United States assistance to foreign countries had its inception at the beginning of World War II in the form of the lend-lease program. Lend-lease generally consisted of military assistance. During the later stages of the war and immediately afterward, the emphasis shifted to relief and rehabilitation. This type of aid was administered initially by military authorities. After the end of hostilities, such assistance was expanded widely by UNRRA (United Nations Relief and Rehabilitation Administration) to which the United States contributed heavily.

In the postwar period the United States furnished large-scale economic and military aid to Greece and Turkey under the Greek Turkish Aid Act of 1947. Subsequently, the Marshall plan was instituted to reconstruct the economics of war-damaged countries, primarily in Europe. Under the Marshall plan large-scale industrial and agricultural raw materials, supplies, and equipment, as well as essential consumer goods, were supplied mainly as outright grant aid.

During the course of Marshall plan aid, a gradual shift in emphasis to so-called technical assistance was developed. At the outbreak of the Korean war and the development of NATO, United States aid shifted sharply back to military assistance. Somewhat later, the pendulum swung toward a renewed emphasis toward economic aid in its own right as well as necessary support to military programs. This latest phase of United States assistance was corered under four organic statutes: The Economic Cooperation Act of 1918. as amended : Mutual Defense Assistance Act of 1949, as amended ; Mutual Security Act of 1951, as amended; and the Mutual Security Act of 19.54, as amended. The Mutual Security Act of 1954 repealed the earlier statutes and, together with later amendments, remains the basic legislation for United States foreignassistance programs.

Pursuant to the authority in the Mutual Security Act of 1954, Executive Order 10.575, dated November 6, 1954, delegated various foreign-aid functions of the President to the Secretaries of State and Defense. The chief of the United States diplomatic mission in each country serves as the channel of authority on foreign policy and provides foreign policy direction. The chief of the mission coordinates the activities of the economic and technical assistance mission, military assistance advisory group, and other representatives of United States agencies in such country engaged in carrying out programs under the Mutual Security Act. Also, the chief of the mission has responsibility for assuring the unified development and execution of the programs in such country.

The chief of the diplomatic mission in the various foreign countries is the head of the country team which includes the chief, military assistance advisory group; chief, United States operations mission; and the head of the foreign information staff.

GENERAL PROGRAMS Military assistance

Current mutual aid falls into two major categories: Military assistance administered by the Department of Defense and economic assistance administered by the International Cooperation Administration. Military assistance includes the furnishing of military supplies and equipment, the direct training of the armed forces of our allies, infrastructure for the North Atlantic Treaty Organization (NATO), and direct forces support.' Military assistance is furnished to friendly foreign countries under mutual defense assistance bilateral agreements executed between the United States and the countries receiving such assistance.

Military end items.-End-item assistance generally consists of the furnishing of military end items to nations maintaining forces committed to the common defense of their respective areas. Military end-item assistance is also furnished where such aid is deemed necessary to assure the internal defense and stability of foreign countries. The furnishing of military end items is generally restricted to fulfilling military deficiencies under United States approved criteria.

The military assistance advisory group (MAAG) in the various countries administer the military assistance program in accordance with the mutual defense assistance agreements and implementations thereto under the overall direction of the Assistant Secretary of Defense for International Security Affairs.

Direct forces support.-Programs for direct forces support are designed to give the military establishments of Allied countries direct support in the form of food, uniforms, petroleum products, construction materials, and other consumables in addition to the military end items which these countries are receiving. Direct forces support is extended where, despite the military equipment and training which a country is receiving, it is unable to develop and maintain without further help, the size and kinds of forces which are important from a standpoint of United States security. The Department of Defense has administered the direct forces support program since fiscal year 1956. Prior to fiscal year 1956 direct forces support was administered within the economic aid programs outside the Department of Defense.

Offshore procurement.--Offshore procurement (OSP) financed under mutual security and Department of Defense legislation is the purchase of military equipment and supplies from sources outside the United States for delivery under the military assistance program (MAP) to friendly foreign countries." It does not, when financed under mutual security legislation, include the procurement abroad of supplies for the United States Armed Forces. OSP is an integrated part of MAP programing and execution, and OSP orders are placed only to fill specific and approved military deficiencies within MAP.3

OSP contracts are let by the procurement officers of the three services pursuant to the terms of bilateral agreements concluded with the various foreign countries. The contracts are placed on the basis of refined programs developed by the three military departments and approved by the Assistant Secretary of Defense for International Security Affairs, to supply the necessary military end items within the limits of available MAP and Department of Defense appropriations.

1 Ch. 1, title I. Mutual Security Act of 1954, as amended.

2 1952 Mutual Security Act (financed out of general military aid funds). Mutual Security Act of 1954, sec. 103 (c). Specific authority for CSP repealed by sec. 2 (c) of Mutual Security Act of 1955, generally authorized thereafter by sec. 102 of the 1954 act, as amended.

3 OSP financed by various Mutual Security and Department of Defense Appropriations Acts since 1952. From inception of program in fiscal year 1952 through May 31, 1957. $4.900 million has been expended under OSP.

NATO infrastructure program.-The NATO infrastructure program provides the additional military facilities which are needed for the effective support of NATO's integrated combat forces. It consists of such essential facilities as war headquarters, telecommunications, airfields, naval bases, petroleum, oil, and lubricants (POL) facilities, radar and loran installations, and training areas.

Total cost of the program is distributed amongst the various NATO countries, the United States net share (after credit for taxes paid) amounting to approximately $795 million or 40 percent of a total of $2 billion at December 31, 1956.

United States participation in the infrastructure program is funded under mutual security legislation. Administration of the program involves a cooperative effort including civilian and military staffs comprised of delegates from the various NATO countries. Economic assistance?

Although all aid that is not concerned with the provision of military supplies and direct training to the armed forces of our allies is designated as economic assistance, this simple division is not clear, since defense support is related to military affairs.

Defense support.-Defense support is a general program of economic assistance designated to support the military efforts of countries which are receiving military assistance. Its character and nature are indistinguishable from economic or development assistance. Defense support programs are administered by the International Cooperation Administration.

Commodity assistance.—Commodity assistance is generally the direct furnishing of commodities and can be a part of defense support, direct forces support, or famine and emergency relief.' Commodity assistance may be furnished on a sale or grant basis. The furnishing of commodities conserves the foreign exchange reserves of the recipient nation and the equivalent value in local currency is generally utilized to promote further economic development of the recipient country.

Surplus agricultural commodities.—Surplus agricultural commodities enter into the foreign-aid program under section 402 of the Mutual Security Act of 1954, as amended, and the Agricultural Trade Development and Assistance Act of 1954 (Public Law 480), as amended. Both acts provide for the sale of surplus agricultural commodities and for the use of the proceeds to further the purposes of the two acts. The former act is a foreign-aid bill, and although the latter is primarily domestic in significance, proceeds from sales thereunder may be used to procure military items for the common defense and to finance the purchase of goods or services for other friendly countries without charge to mutual security appropriations. This Agricultural Act also provides for emergency and famine relief on a grant as well as sales basis.

Section 402 of the Mutual Security Act provides that a certain minimum quantity of the funds made available pursuant to the act shall be used to finance the export and sale for foreign currencies of surplus agricultural commodities, in addition to such commodities transferred pursuant to the Agricultural Trade Development and Assistance Act of 1954. Funds are not specifically appropriated to finance the sale of surplus agricultural commodities under mutualsecurity legislation.

The transfer of surplus agricultural commodities funded from mutual-secu. rity appropriations is administered by the International Cooperation Administration and transfers under the Agricultural Act are administered by the Department of Agriculture. All sales are made pursuant to bilateral agreements with the recipient countries. These agreements are negotiated by the Department of State after interested United States agencies (Agriculture, ICA, State, Budget, Defense, Commerce) have reached accord with respect to a program consisting of commodities to be exported and the use of local currencies to be received.

Industrial project assistance.—Industrial project assistance consists of the financing of specific projects, as opposed to the furnishing of needed commodities, to promote industrial expansion. The industrial project program in Europe with United States aid funds has been completed. Under the Marshall plan the basic objective was the rehabilitation and reconstruction of normal productive facilities. With the advent of the Korean war, the emphasis shifted under successive extensions of the Economic Cooperation Act of 1948 and the Mutual Security Act of 1951, as amended, toward increasing production capacity for rearmament and mutual defense.

* Various foreign aid and mutual security appropriations from 1952 to 1956 provided a total of $610.2 million for infrastructure.

5 Sec. 521, Mutual Security Act of 1951. Sec. 104, Mutual Security Act of 1954, as amended.

6 Belgium, Canada, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands Norway. Turkey, United Kingdom, and the United States.

7 Titles I, II, and III of the Mutual Security Act of 1954, as amended.
$ Ch. 3, title I, Mutual Security Act of 1954, as amended.
• Program is administered by the International Cooperation Administration.

Under title II, Development Assistance, of the Mutual Security Act of 1954, as amended, similar projects are authorized to promote the economic development and to help maintain economic and political stability in free Asia, the Middle East, and Africa.

Programs for industrial project assistance are administered by the International Cooperation Administration.

Technical assistance.-Technical assistance and technical cooperation (point IV) are essentially the same, the former generally relates to projects for demonstration, training, surveys, and the like in Europe, while the latter generally relates to such projects in various underdeveloped areas of the world. Although the terms are often used interchangeably, technical assistance projects in Europe and other advanced areas are implemented pursuant to general authority contained in title I of the Mutual Security Act of 1954, as amended, while technical cooperation in underdeveloped areas is specifically covered in title III of the act. The technical assistance programs are administered by the International Cooperation Administration.

In Europe, the program initially emphasized the increase in production of existing industrial facilities. Secondary emphasis was laid on agricultural production. As physical production increased, efforts were directed toward greater productivity; that is, increasing man-hours output.

Benton-Moody amendments.-The so-called Benton-Moody amendments were enacted to foster our programs to increase productivity, reduce monopolies and cartels, and otherwise to further free enterprise in Europe. The Benton amendment declared that the mutual-security program should be administered so as to discourage cartels and monopolies, increase productivity and competition, and private development of the resources of foreign countries, and promote and strengthen free labor unions.10 The Moody amendment provided that counterpart resulting from $100 million of mutual-security aid would be used exclusively for revolving funds to carry out the purposes of the Benton amendment."





Countries receiving commodity aid under mutual security legislation are generally required to deposit local currency in a special account in amounts equivalent to the dollar value of the commodities received." These deposits are what is commonly referred to as counterpart and are not required when the commodities received are military end items or direct forces support under the military assistance section of mutual security legislation. A portion of such counterpart is made available to the United States for its requirements and the remainder is utilized for programs for which funds made available by mutual security legislation would themselves be available. Local currency-sales proceeds

Local currency sales proceeds are those funds derived from sales of surplus agricultural commodities under both the Mutual Security Act of 1954, as amended, and under the Agricultural Trade Development and Assistance Act of 1954, as amended (Public Law 480). Foreign currency proceeds accruing from such sales are deposited in United States disbursing officer accounts and may be used to further the purposes of the two acts. Contributed currencies

Contributed currencies are local currency funds made available by foreign countries for the administrative support of United States activities under the various mutual defense assistance agreements. These local currencies partially support activities of the military advisory assistance groups (MAAG) and the military procurement offices.

10 Sec. 516, Mutual Security Act of 1951.
11 Sec. 115K. Economic Cooperation Act of 1948, as amended.
12 Sec. 142 (b), Mutual Security Act of 1954, as amended.




Facilities assistance program

This program is concerned with the establishment and expansion of facilities which are required for the manufacture and maintenance of essential military equipment and components. The foreign country must contribute an equitable share toward the projects for which United States assistance is requested. The United States contribution is in the form of production equipment and technical assistance while the foreign government provides land, buildings, labor, materials and some equipment. The program is administered by the Department of Defense through a director of facilities assistance located in Paris. Mutual weapons development program

This program was initially authorized by the 1953 Mutual Security Act as the mutual special weapons program which had for its purpose the procurement of advanced weapons through NATO countries. In 1954 the concept was changed to provide for United States assistance in the development of promising weapons already being developed by the NATO countries. The conditions of United States assistance are set forth in bilateral agreements and in implementing agreements covering specific items for development.17

The program is administered by the director of the mutual weapons development program located in Paris. Program guidance and policy direction is furnished by the Assistant Secretaries of Defense for Research and Engineering and Secretary of Defense, International Security Affairs, with the advice and consultation of the various departmental assistant secretaries for research and development.


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In addition to the general and special aid programs described above, mutual security legislation provides for various other programs such as refugee relief and escapee program, special manufacturing in the United Kingdom, and special assistance in joint control areas.18


The implementation of the various aid programs generally is accomplished by specific agreement with the foreign country. Usually these undertakings are executed under statute or independently by the executive department to definitize the operation, scope, and mutual understandings relating to a particular program, Mutual defense assistance and economic cooperation

Section 142 (a) of the Mutual Security Act of 1954, as amended, enumerates the essential provisions to be contained in agreements as prerequisites to the furnishing of mutual defense assistance under title I of the act.

If the furnishing of materials or commodities will result in the accrual of proceeds to the recipient country, section 142 (b) of the Mutual Security Act of 1954, as amended, requires that agreement be reached as to the establishment of a special account for the generated counterpart funds. The agreements generally cover the operational and fiscal aspects of the aid program within the discretion of the two governments. Offshore procurement (OSP)

Memoranda of understanding relating to procurement practices, mutual responsibilities, and duties are executed to implement United States military purchases outside the United States. These agreements generally provid that the governments of countries in which OSP contracts are let shall not realize a profit from those contracts. The agreements generally provide that contracting shall be in accordance with United States law.

13 Sec. 102 of the Mutual Security Act of 1954, as amended. 11 Through June 30, 1937, approximately $56 million has been programed from general military assistance appropriations.

15 Sec. 542 of the Mutual Security Act of 1951, as amended. 18 Sec. 102 of the Mutual Security Act of 1954, as amended.

17 Through fiscal year 1956, projects totaling approximately $64 million have been programed.

1s Secs. 122, 403, and 405, Mutual Security Act of 1954, as amended.

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