their own resources to move more rapidly toward their own chosen political and economic goals. Withholding such assistance at the present time would greatly handicap the countries concerned in their efforts to build stable and viable nations. EUROPE Today, Western Europe presents a picture of unprecedented prosperity and stability, thanks in no small measure to the great efforts which the American people have made to rehabilitate the war-ravaged economies of that area and to bolster its defense against the Soviet threat. NATO, in its 17th year of existence, continues, despite what one reads in the press, to fulfill the purposes for which it was created by its members and "to unite their efforts for collective defense and for the preservation of peace and security." Our own basic objectives in Western Europe are simply to insure the security of that area against Communist aggression and to further its economic growth and political stability. We are neither unaware of, nor dismayed by, the problems confronting us in or about NATO. Despite the disruptive actions of a present member, France, our support of the most successful defensive alliance in history will continue unabated. While we regret French actions, we know that our allies share in our determination to maintain the strength and cohesiveness of NATO. We are, and will remain, committed to the North Atlantic Alliance because it continues to provide an indispensable means of maintaining the collective security of the West. I believe that the acomplishments of NATO over the past year have demonstrated that the alliance is fully responsive to changing circumstances. As long as the Soviet Union represents a major potential military threat in Europe, there will be no substitute more effective than the collective and integrated defense of the West. The changes which have taken place in the nature of the Soviet threat to Western Europe in recent years have not affected the basic realities that made the alliance a political and military necessity some 17 years ago. Those same 17 years have, however, brought a tremendous change in Western European requirements for military assistance. Although more than half of our total investment since the inception of the program in 1950 has gone into the NATO buildup, the signal success of that common defense effort, together with the rapid economic recovery of Western Europe, have made possible a corresponding reduction in the proportionate amount of military assistance allocated to the area. This reduction is clearly reflected in the drop from a high of 79 percent to a low of 3.5 percent which represents the $36 million earmarked for grant aid to Western Europe in fiscal year 1967. Today, all NATO nations except Greece and Turkey, which I have already discussed, are capable of providing for their own self- and common-defense needs. Of the original 14 Western European recipients of grant aid, including both NATO and nonNATO countries, only 4 will continue to receive grant aid in fiscal year 1967. Two of these Norway and Denmark-will also be phased out as soon as prior-year commitments are completed in the near future. Grant aid programs for the other two-Spain and Portugal-will be continued in consonance with our continuing need for the important bases and installations which they make available to the United States. WORLDWIDE AND REGIONAL In addition to the funds we propose to allocate to the 55 individual country programs included in the 5 regional groups I have been discussing, another $259.6 million will be required to provide for the various functions and costs which are not properly chargeable to those individual country programs but which are vitally important to optimum use of military assistance as an instrument of national policy. These several items have been brought together, for presentation and accounting purposes, under the title of "Worldwide and Regional Programs," as follows: sires. I do, however, want to make two or three general points. First, the $90 million listed for NATO infrastructure is the amount required in fiscal year 1967 to fund the agreed cost of the U.S. share in the development of joint use facilities essential to effective deployment of U.S. and other national forces committed to NATO. The increase of $20 million over the amount of last year's share is attributable to accelerated progress in the NATO air defense ground environment (NADGE) program which is designed to fill a longstanding need in the Western European common defense posture. Second, despite steady increases in component costs, we have managed to reduce the administrative expenses of the military assistance program to $23.5 million-a slightly lower level than last year. Third, $69 million is earmarked for regional programs, including the $2.9 million I mentioned earlier as the amount programed for support of regional and multinational undertakings in Latin America. Sales I want to make special mention of the $56.7 million credit sales item listed among worldwide and regional programs. This amount represents only the new obligational authority which we need to augment credit funds already available in our MAP revolving account for sales. It will enable us to provide a total of $244 million in credit sales, mainly for developing countries, many of whom are shifting from grant to sales. This credit, supplemented by credit available through private and Eximbank sources for the industrially developed countries, and combined with cash sales, should make it possible to achieve military export sales orders of at least $1.5 billion in fiscal year 1967. of the sales portion of the proposed new legislation." He will elaborate on our efforts to encourage appropriate purchase of military equipment from the United States by allied and friendly countries economically capable of making such purchases. These efforts are directed toward the dual objective of shifting from grant aid to military sales wherever possible and of exerting a favorable influence on the U.S. balance of payments. Our growing sales program is closely coordinated within the Government to insure its compatibility with our economic assistance program and with foreign policy. SUPPORTING ASSISTANCE Although supporting assistance is a responsibility of the Agency for International Development rather than the Department of Defense, it is an integral part of our total effort to promote free world peace and progress. Once again this year, I consider it appropriate to advocate favorable legislative action on the administration's $747.2 million fiscal year 1967 request therefor. The $550 million earmarked for Vietnam is the largest single item in the proposed economic aid budget, and it is vital to an eventually favorable outcome of the struggle in the hard-pressed country. Another $197 million will be used for aid to countries whose security is directly threatened. It is concentrated in programs for Laos, Korea, and Thailand, which are directly threatened. CONCLUSION It is my firm and final conclusion, after taking into careful consideration all pertinent factors and possible alternatives, that the authorization and the appropriations requested by the administration are clearly consistent with the national interest and represent the most economical means for attaining the specific security and foreign policy objectives which milltary assistance is designed to promote. I know of no other means by which we can make equivalent contributions to our own and to free world security at comparable cost. I sincerely hope that your own evaluation of the proposed program will lead you to the same conclusions. The use of military assistance funds to facilitate military export sales in cases where the purchasing nation cannot afford to buy for cash is clearly consistent with both the national interest and the intent and spirit of the pending Military Assistance and Sales Act of 1966. The director of the sales program will testify later in support 39 See footnote to doc. 25 XII-2, ante. 40 See pp. 477-505 of the source text. [Security deletion.] Document XII-5 Report of the National Advisory Council on International Monetary and Financial Policies, Submitted March 31, 1967 (Excerpt)“1 Operations of the Agency AID LOANS Under the provisions of the Foreign Assistance Act of 1961, as amended,12 the President is authorized to make loans to stimulate the economic development of less-developed friendly countries and areas, with emphasis upon assisting long-range plans and programs designed to develop economic resources and increase productive capacities. The act also authorizes the provision of supporting assistance in those situations where development lending in adequate amounts would be inappropriate and where other forms of aid are insufficient to achieve the objectives of the United States. Development loan authorizations During the period July 1, 1965June 30, 1966, the Agency for International Development authorized a total of $1,232 million for 94 development loans in 37 countries, compared with $1,162 million in fiscal year 1965, and $1,314 million for the comparable period a year earlier. Nearly 90 percent of the $1.2 billion authorized during fiscal year 1966 was concentrated in the Near East and South Asia, and in Latin America, which together accounted for $1,082 million. An additional $80 million went to Korea, with the remaining $70 million for developing countries in Africa. Two-thirds of the loans authorized during the current period, or $822 million, were authorized for commodity 41 H. Doc. 92, 90th Cong., April 3, 1967, pp. 49-61. 42 22 U.S.C. § 2151 note; see infra. financing (program assistance) in 10 countries, with the largest amounts going to India ($390 million), Brazil ($150 million), and Pakistan ($120 million). The remaining one-third of the loans authorized was allocated for individual projects. The largest project loan was one for $28 million to finance the foreign exchange costs of necessary machinery, equipment, materials and services in connection with Turkey's program of increasing coal production. Other large project loans included two for power development, one for $22.5 million for construction of a thermal power plant and related facilities in the vicinity of Seoul, Korea; and the other for $21.7 million to assist in filnancing the construction of a dam and associated hydroelectric facilities on the Finchaa River in Ethiopia. The two next largest project loans were for Brazil-$20 million for highway construction and $20 million for importation of fertilizer. The financial aspects of all development loans authorized during fiscal year 1966, are indicated in table 22. All development loans authorized during the period July 1, 1965-June 30, 1966, require repayment in dollars. Since enactment of the Foreign Assistance Act of 1964," loans have generally required, after the grace period, a minimum of 22 percent interest per annum with 1 percent interest during the grace period. Most AID dollars under these loans are spent directly in the United States for the purchase of American goods and services. Supporting assistance and contingency fund loans In addition to the development loans authorized, the AID also approved six additional loans in fiscal year 1966, totaling $65 million, of which $44 million was funded from the "supporting assistance" appropriation and $21 million from contingency funds (see table 23). The supporting assistance loans included two, totaling $25 million, for the Dominican Republic, and one for $19 million for the Congo (Kinshasa). The three loans from the contingency fund were for Ceylon, Ecuador, and Panama. All supporting assistance and contingency fund loans approved during the year were for program assistance and are repayable in U.S. dollars. 43 Text in American Foreign Policy: Current Documents, 1964, pp. 1267–1275. |