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required for and will be used solely to maintain its internal security, its legitimate self-defense, or to permit it to participate in the defense of the area of which it is a part, and that it will not undertake any act of aggression against any other state: Provided further, That, in the case of any such transfer, the President shall forthwith notify the Committee on Foreign Relations of the Senate, the Committees on Armed Services of the Senate and of the House of Representatives, and the Committee on Foreign Affairs of the House of Representatives. (2) Whenever equipment or material is transferred from the stocks of, or services are rendered by, any agency, to any nation as provided in paragraph (1) above, such nation shall first make available the fair value, as determined by the President, of such equipment, materials, or services. The fair value shall not be less for the various categories of equipment or materials than the "value" as defined in subsection (c) of section 403: Provided, That with respect to excess equipment or materials the fair value may not be determined to be less than the value specified in paragraph 1 of that subsection plus (a) 10 per centum of the original gross cost of such equipment or materials; (b) the scrap value; or (c) the market value, if ascertainable, whichever is the greater. Before a contract is entered into, such nation shall (A) provide the United States with a dependable undertaking to pay the full amount of such contract which will assure the United States against any loss on the contract, and (B) shall make funds available in such amounts and at such times as may be necessary to meet the payments required by the contract in advance of the time such payments are due, in addition to the estimated amount of any damages and costs that may accrue from the cancellation of such contract: Provided, That the total amount of outstanding contracts under this subsection, less the amounts which have been paid the United States by such nations, shall at no time exceed $100,000,000.

SEC. 13. The present section 405 (d) of such Act is renumbered as section 405 (e) and a new subsection 405 (d) is added to read as follows:

(d) if, in the case of any nation, which is a party to the North Atlantic Treaty, the President determines after consultation with the North Atlantic Treaty Council that such nation is not making its full contribution through self-help and mutual assistance in all practicable forms to the common defense of the North Atlantic area; and in the case of any other nation, if the President determines that such nation is not making its full contribution to its own defense or to the defense of the area of which it is a part.

4. ESTABLISHMENT OF THE (INTERDEPARTMENTAL) INTERNATIONAL SECURITY AFFAIRS COMMITTEE (ISAC): Memorandum of Understanding Between the Departments of State, Treasury, Defense, and the Economic Cooperation Administration, Approved by the President, December 19, 19501

1. The tremendous step-up in our foreign and domestic programs for increasing our own national security and that of the other free nations makes it imperative that we carefully examine the organizational arrangements within the United States Government for carrying out these programs. Certain aspects of these arrangements require urgent consideration and immediate decision.

2. The most urgent organizational problem which we now face involves the proper framework in which the questions relating to the North Atlantic Treaty and economic and military assistance programs can properly be coordinated. With respect to the organization in Washington, two basic decisions need to be made: (a) The proper relationship among State, Defense, the Economic Cooperation Administration, and the Treasury, on an interdepartmental basis; and (b) the adjustments which must be made within each of these agencies as a basis for an effective and coordinated Government-wide effort. The following arrangements are agreed to as a first step in resolving these questions.

3. (a) A Director for International Security and Assistance Affairs will be appointed in the Department of State. He shall occupy the senior position authorized by section 406 (e) of the Mutual Defense Assistance Act of 1949 as amended.4

(b) The Director for International Security and Assistance Affairs, on behalf of the Secretary of State, shall represent and speak for the Department of State on matters of policy and program relating to the North Atlantic Treaty, other similar international programs, and military and economic assistance for mutual defense. He shall be responsible for coordinating all activities within the department related thereto. He shall have the authority, responsibility, and staff necessary to assure that he can speak positively and expeditiously on behalf of the Department of State.

(c) In addition, the Director for International Security and Assistance Affairs, on behalf of the Secretary of State, shall be responsible for providing continuing leadership in the interdepartmental coordination of policy and program with respect to the North Atlantic

1 Third Semiannual Report to Congress on the Mutual Defense Assistance Program, October 6, 1950 to March 31, 1951 (H. Doc. 179, 82d Cong., 1st sess.), pp. 49-50. The memorandum bears the title "Organizational Arrangements Within the United States Government for Policy Formulation and Implementation With Respect to International Security Arrangements and Military and Economic Assistance for Mutual Defense."

2 In a covering memorandum transmitting this approved paper to the Director of the Bureau of the Budget on this same date, the President suggested the deletion of the words "and Assistance" from the title of the Director. (Footnote in H. Doc. 179.)

3 See infra.

A Decade of American Foreign Policy, pp. 1356-1364, and supra.

Treaty, other similar international programs, and military and economic assistance for mutual defense. In performing this function on behalf of the Secretary of State, the Director for International Security and Assistance Affairs will be exercising responsibility for the Government as a whole.

4. (a) There shall be appointed an Assistant to the Secretary of Defense for International Security Affairs. He should occupy one of the three positions, other than the senior position, authorized by section 406 (e) of the Mutual Defense Assistance Act of 1949 as amended.

(b) The Assistant to the Secretary of Defense for International Security Affairs shall have the same responsibility and authority within the Department of Defense as is provided in paragraph 3 (b) for the Director for International Security and Assistance Affairs with respect to the Department of State.

5. The Economic Cooperation Administrator and the Secretary of the Treasury shall each designate an official who shall have the same authority and responsibility with respect to his agency as is provided in paragraph 3 (b) for the Director for International Security and Assistance Affairs with respect to the Department of State.

6. (a) The review and coordination of policy and program as between the several departments and agencies shall be carried on by [a] senior staff committee to be known as the Committee on International Security Affairs. The State Department Director for International Security and Assistance Affairs shall be the Chairman. In addition, the membership shall consist of the Assistant to the Secretary of Defense for International [Security] Affairs, a representative of the Special Assistant to the President, Mr. Harriman, and the ECA and Treasury officials provided for in paragraph 5. Representatives of other departments and agencies may be asked to sit with the Committee as appropriate.

(b) The Committee on International Security Affairs shall establish such permanent or temporary working groups as it finds necessary and shall develop such arrangements as are necessary for guiding interagency coordination outside of the Committee.

7. It is essential that operating responsibility be delegated to the greatest possible extent to those agencies which are equipped to handle it. This means that with respect to mutual defense and within the framework of established policies, the Department of Defense has primary responsibility for determining the military character of international programs, for developing and implementing the end item and military training programs, and for developing United States determinations as to military requirements in the formulation of programs for military production abroad; and the Economic Cooperation Administration shall have primary responsibility for developing and implementing plans for economic assistance required to support an adequate defense effort abroad, and for implementing approved programs for additional military production abroad.

8. The foregoing administrative arrangements shall be carried on with due regard for the established responsibilities of the National

Security Council and other officials and agencies of the Executive Office of the President, and of the National Advisory Council on International Monetary and Financial Problems, and the existing authorities and responsibilities of these officials and agencies are in no wise modified by this agreement. This means that the National Security Council shall continue to be the agency "to advise the President with respect to the integration of domestic, foreign, and military policies relating to the national security."

9. Arrangements should likewise be made as quickly as feasible for improved coordination between United States Government officials and representatives at both the regional and country levels.

5. ESTABLISHMENT OF THE OFFICE OF INTERNATIONAL SECURITY AFFAIRS IN THE DEPARTMENT OF STATE: Departmental Announcement 248, December 27, 1950 1

Effective January 8, 1951, there will be established in the Department of State the position of Director, International Security Affairs. The Office of the Director, Mutual Defense Assistance established October 25, 1949,2 is abolished and its personnel, records, and functions, including the functions vested in the Secretary of State by Executive Order 10099, as amended, have been transferred to the Director, International Security Affairs.

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The Director, Thomas Dudley Cabot, will occupy the senior position authorized by section 406 (e) of the Mutual Defense Assistance Act of 1949, as amended. The Director shall perform his functions under the direction of the Secretary of State. He shall have authority over, and be responsible for, the general direction and coordination of all activities within the Department of State relating to:

a. The North Atlantic Treaty and other similar regional and bilateral arrangements concerned primarily with collective defense or mutual defense assistance;

b. the military security phases of other regional or bilateral arrangements, such as the Organization of American States;

c. military assistance programs;

d. programs of economic assistance which are designed to support programs of military assistance;

e. the export or foreign sale of military materiel or the release to other nations of classified military information. In addition, the commitment of United States military resources for United Nations purposes shall be coordinated with the Director. As to all such

1 Department of State Bulletin, Jan. 22, 1951, pp. 155-156.

2 See Departmental Announcement 194, Oct. 25, 1949; First Semiannual Report to Congress on the Mutual Defense Assistance Program, October 6, 1949 to April 6, 1950 (H. Doc. 613, 81st Cong., 2d sess.), pp. 64-65.

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matters, he shall represent and speak for the Department of State. In performing these several functions, he shall be responsible for appropriately relating his performance to the development and execution of other foreign policies and programs.

The Director shall have such staff as may be necessary for the effective execution of his responsibilities but shall, to the extent consistent with the effective discharge of his responsibilities, utilize the resources of the regional and functional bureaus and offices. The regional and functional bureaus and offices of the Department shall give to the Director all appropriate assistance and shall be responsible to the Director for all activities within the field of his responsibility. The Director within the area of his responsibility set forth shall:

a. Coordinate and direct the development of objectives, policies, and programs for international security and assistance affairs.

b. Approve programs for military and economic assistance for mutual defense, and review, coordinate, and expedite the implementation of approved programs.

c. Assure the establishment and maintenance of effective working relationships concerning international security and assistance matters with all Government agencies having policy, advisory, or operational responsibilities within this area.

d. Evaluate the effectiveness and progress of policies and programs in the field of international security and assistance and prepare or direct the preparation of all necessary reports with respect thereto. e. See that appropriate instructions to United States representatives abroad concerned with international security and assistance matters are developed and issued.

f. Assure development, coordination, and implementation of policies to control, under appropriate provisions of law, the export and import of arms, ammunition, and implements of war.

g. Assure formulation of Department of State policy on all questions relating to disclosure to foreign powers of classified information in the field of international security and assistance affairs.

h. Have primary responsibility, subject to the budget and fiscal policies and procedures of the Department of State, for the control, allocation, and utilization of funds made available for aid and assistance programs and related activities, including responsibility for budget formulation, for budget justification before the Bureau of the Budget and Congress, and for budget execution.

i. Assure the development, through existing organizational arrangements, of domestic and overseas programs of public information with respect to international security and assistance affairs.

The Director shall be the Department of State representative on and chairman of the Committee on International Security Affairs.1 The Director shall determine, in consultation with the Deputy Under Secretary for Administration, State Department representation on, and shall be responsible for and generally supervise State Department

1 See supra.

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