detailed logistical planning and costing for them. In making these decisions, the U.S. whether willingly or not, necessarily affects the size of the country's forces and of its defense budget. There is much that is unhealthy in this relationship. First, it tends to insulate local military planning from the full disciplinary effect of the budget process; second, it can encourage military planners to aspire to larger forces than these countries are ever likely to be able to support unaided; third, it tends to place unnecessary responsibility on the U.S. for events in these countries; and fourth, it can make the U.S. the scapegoat and a source of resentment when because of limited military assistance appropriations the U.S. opposes plans for force modernization. The pressures for such modernization are likely to grow over the future and this in itself could be a divisive force between the U.S. and the countries concerned as well as between the competing development and security claimants for resources within the developing country. Military operating costs are rising and the problems of obsolescence are likely to become more acute as these countries aspire to more sophisticated weapons. Hard choices will have to be faced regarding the size of forces and the character of weapons systems, on the one hand, and the cost to development objectives on the other. How heavily should the U.S. become involved in these highly sensitive internal decisions?

If the answer is that direct U.S. involvement should be held to a minimum, as I believe should generally be the case, then the need for U.S. military advisory groups and missions in many countries is open to serious question. In the early days of the military assistance program, these countries were seriously short of military officers with technical and planning skills to use modern equipment. US military advisers were needed to see that US equipment was effectively integrated into local forces. But there have been many years of training in between. By now, there are large numbers of military officials in these countries who have adequate professional competence with modern arms to do their own planning. The rapid removal of separate US military missions and advisory groups in most of these countries could accelerate the necessary process of achieving self-reliance.

There is, in short, Mr. Chairman, a close parallelism between where the US seeks to go in the field of development assistance and where it should want to go in security assistance. In the former case, the President has already indicated that our assistance policies should be redesigned so that the developing countries stand at the center of the international development effort, establishing their own priorities and securing external assistance in relation to the efforts they choose to make in their own behalf. Much the same reasoning should apply to our security assistance policies. A growing number of developing countries show a determination and a capacity to assume greater responsibility for their own defense and they should be encouraged to do so. Moreover, in today's pluralistic world, these countries, along with all others, face the need to re-examine national priorities and in this light to decide for themselves how much resources they should mobilize for this purpose. Anything the US can do to encourage this trend can be good politics, good economics, and perhaps most of all, can make for good defense.

There is no easy road to effective self-reliance in defense just as the achievement of self-sustaining economic growth is the culmination of actions in many areas. But one key factor is to make defense decisions in developing countries more fully subject to the discipline of internal budgetary competition for resources. US security assistance policies should contribute to, rather than detract from, the strengthening of this process. I have three proposals in mind.

First, moving military assistance from a grant to a credit basis can serve this purpose. Unlike military grants, credits are more likely to subject military equipment requirements to budgetary review and discipline in the developing country. A shift from grants to credits, moreover, can also fundamentally alter the military aid relationship; instead of determining what arms and equipment a developing country needs and will receive, the US would much more be responding, to the degree it saw fit, to what that country determined to be its own requirements.

The Foreign Assistance Act now directs the President to shift military assistance in this direction as rapidly as the economic progress of these countries will permit. Such shifts have in fact been taking place but the pace could be accelerated.

To do so without jeopardizing the development programs of these countries, however, will require that the US increasingly view its total foreign assistance program as one fund of resources to be used to advance a common strategy as the composition shifts between security and development assistance.

For example, moving from military grants to military credit sales should mean in the first instance that the Congress be prepared to authorize higher ceilings for such credits as they replace grants. But this may not be enough. These credits could involve a serious near term debt burden for particular countries which, if not to some degree offset, could restrict economic programs. This brings me to my second proposal. The relationship between military credits and development highlights the need for the US to consider military and related economic supporting assistance together in considering security assistance programs. The phasing out of military grant assistance could be combined with wider and more flexible use of economic supporting assistance as a cushioning device. In some countries we have been closing out economic assistance while continuing military grant assistance. As a general rule, the reverse is more likely to encourage goals that are more consistent with the developing country's own priorities, and with the long term interests of the United States.

Third, the US objective should be to phase out military assistance as rapidly as possible and provide virtually all foreign assistance in a development context. In such circumstances, the burden of defense needs in particular countries I could well be one of the factors that determined the level of US bilatral economic assistance. Even so, providing US foreign assistance in this form would tend to favor development claims over defense claims in the budgetary competition within developing countries, but the bias is not likely to result in serious distortions, and in any event is one that I would in principle favor. The main point is that such foreign assistance policies would place maximum responsibility on each developing country to determine how much to spend for defense, how much and what kind of foreign military equipment and training are needed, and where to buy them.

One final comment on organization and management. I believe that all security assistance programs should be presented to the Congress in one legislative package separate from development assistance but reviewed within a foreign policy framework. While administration of military grants and credits should remain with the Department of Defense, the administration of other forms of security assistance and policy responsibility for the program as a whole should be firmly exercised by the Department of State.

Such organizational changes would contribute to the effectiveness of these programs, clarify their relation to foreign policy and make our objectives and rationale more understandable to the Congress and the American public. But we should be clear about directions. As the US moves from war to peace in Vietnam, a rapid change in the mix of the foreign assistance program from military assistance to development assistance would more effectively advance US interests in the world.

Chairman PROXMIRE. Mr. Fried, I neglected to point out that you were formerly executive director of the presidential task force on international development and that also, of course, adds to your qualifications.

Mr. Halperin, also of the Brookings Institution, we are delighted to have you, sir, and you may proceed. You also have quite a substantial prepared statement. If you would like to abbreviate the prepared statement we would appreciate it and we will put the entire prepared statement in the record.

STATEMENT OF MORTON H. HALPERIN, THE BROOKINGS

INSTITUTION

Mr. HALPERIN. Thank you very much. I will try to abbreviate my prepared statement and not repeat many of the things that have already been said this afternoon and this morning.

Let me begin by identifying what seem to me the six principal questions concerning the military assistance program: First, what military equipment and training the United States should transfer to foreign governments.

Second, how these transfers should be financed.

Third, what advice, if any, should we give to foreign governments about what equipment they need, and how they should use this equip

ment.

Fourth, in what budget should the major elements of security assistance appear.

Fifth, by what process should the U.S. Government determine the form, level, and mix of these programs.

And finally, six, how should these programs be administered.

Before considering some of the purposes of security assistance and guidelines which should apply in various categories, I propose to present in summary form based on my own experiences in the executive branch with the military assistance program for 1966 to 1969 a list of some of the inadequacies of current programs and then some recommendations as to how they might be corrected.

In my view the present process is inadequate for several reasons. First, it inhibits effective budgetary and resource allocations by the governments of the developing countries. Mr. Fried has already discussed this in some detail.

Second, it fails to engage the overall budgetary processes of these countries.

Third, it tends to encourage and to facilitate the maintenance of defense programs and defense forces which may be unnecessary as well as beyond the resource capability of the recipient country to

sustain.

Fourth, it tends to promote a continuing dependent relationship on the United States for logistic planning and support.

Fifth, it fails to provide the Congress and the public with a persuasive rationale for particular levels of funds being requested for various countries.

Sixth, it does not provide effective presidential surveillance of policy and control over the resources to particular countries.

I suggest four proposals that would at least help to deal with these inadequacies.

First, the tool of country program budgeting should be applied as quickly as possible to all countries which receive substantial amounts of security and development assistance, and this should include the development and approval by the President of force goals for these countries.

Second, all other security assistance programs should be viewed as political. No force goals should be developed within the American Government for these countries, and the State Department should have the primary responsibility for determining the shape of these programs and administering them.

Third, all grant assistance programs, both in the military assistance program and in the defense budget should be terminated beginning in the coming fiscal year for all of the nonsecurity countries, and all security assistance thereafter should be provided on a credit sales

60-050-71-11

basis. With forward defense countries fiscal year 1975 should be established as a phaseout date for all grant programs although many of the countries could be phased out more quickly.

Finally, I believe that all security assistance programs should be brought together under one legislative package with policy responsibility vested in and, in fact, exercised by the State Department.

Let me turn now briefly to the purposes of security assistance. I think these should be seen in three rather distinct categories. First, for some countries the United States has a specific and direct security interest in the combat capabilities of the military forces of these countries. In some cases threats to their security could require the use of American combat forces and in some of these cases there is a direct tradeoff between levels of American military forces and local capabilities. These countries are Korea, Greece, Turkey, Taiwan, Thailand, Vietnam and Laos, and also, I think, increasingly one should think of Israel, Jordan and perhaps Cambodia in this category.

The second category are those countries where we wish to maintain base and operating rights, and which we, in fact, pay for, in effect, by military assistance. These include Spain, Portugal, Libya, the Philippines, and Ethiopia.

And finally, there are a whole range of countries in which we have a general political interest in the orderly political, social and economic development and foreign policies consistent with our own. For these countries we use military assistance, I would argue, with very limited success as a political instrument to pursue foreign policy goals.

Let me turn then more specifically to the security countries. The specific U.S. security interest in the capabilities of these countries is dependent on an appraisal of the external threat of aggression to these countries and upon the U.S. strategy or intentions for using its own forces to deter such aggression and to respond should contingencies arise.

I think, in general, it is clear that the U.S. would prefer that these countries develop their own capability to deal with threats to their security, and the commitment of the United States to intervene, of course, varies a good deal from country to country. For some countries, Laos, Cambodia and Thailand, there are now specific legislative injunctions against the use of American combat forces, and in other countries such as Jordan, and Israel, the United States has no explicit commitment to intervene.

In the case of Korea, Greece, Turkey, and Taiwan, the United States clearly would be involved given our security treaty commitments if there was a threat to their security.

It has generally been argued that changes in the capabilities of combat effectiveness of the forces of these countries could affect inversely the requirements for U.S. force structure and budgetary costs so that there is a tradeoff between U.S. forces and the deployment of U.S. forces and the local forces.

It seems to me this is particularly true, and perhaps uniquely true, in the case of Korea since American forces have been maintained specifically for the defense of Korea, and in fact have been deployed

in Korea. If one looks at the other cases, the situation is much less clear. There are no clearly identified American forces which are maintained for the defense of Thailand, Taiwan, Greece, Turkey, or other forward defense countries, and it is not at all clear that any American forces could or would be disbanded if the capability of these countries increased. And in most of these cases their own forces are not designed or deployed to meet the threat which would call into question our security commitments. Thai forces, for example, seem to me to be designed and deployed primarily to affect political development in Thailand, and to some extent to cope with the problem of insurgency.

Taiwanese forces are designed to help perpetuate the myth of a return to the mainland.

Greek and Turkish forces continue to be deployed and maintained largely against each other rather than against Warsaw Pact forces. Thus it seems to me that only in the case of Korea is there a clear trade-off between American and local forces which permits a saving in American peacetime defense expenditures if local forces are improved.

In the other cases, improved local forces could avoid facing the United States with the choice between intervention or seeing friendly local forces defeated. However, in such cases, I think we need to ask the very hard question of whether U.S. aid is likely to make a critical difference to whether the local forces will be effective and also to ask whether increases in American aid will not increase the American commitment or the bureaucratic momentum which would make American intervention more likely.

As others have indicated, the Joint Chiefs of Staff, in the so called JSOP do develop force goals for a large number of countries including the forward defense countries based largely on the recommendation of the MAAG's and the unified commanders. These recommendations are generally for maintaining or improving forces rather than for reducing them, and these force goals are not in any way approved or even reviewed at higher political, civilian and budgetary levels in the United States or indeed in the recipient country. Rather they become planning recommendations which form guidelines for resource transfers and for determining so called shortfalls in U.S. military assistance programs.

I would argue, Mr. Chairman, that the primary burden in determining what military forces to maintain should rest with the local government. The United States should insist that the local governments develop a plan which relates security expenditures to development and which provides a rationale for the desired military forces in relation to the threat. Every effort must be made to see that this plan is, in fact, indigenously developed. To accomplish this objective, as has already been suggested, American MAAG units should be eliminated in most cases and in all cases greatly reduced.

Moreover to engage the responsible officials of the local government they should be forced to budget for the military forces which they wish to maintain and this means that our aid should be provided on a credit sales rather than a grant basis.

A reduction of the role of American military advisers would, I