It is safe to assume that whatever Administration took office last January in the United States would have found international and domestic conditions sufficiently changed to warrant a re-examination of the basic premises on which U.S. defence policy had been built since June of 1950. The fact that the re-examination was made by the representatives of a party long unaccustomed to the responsibilities of control of the United States Government, bound by campaign promises to reduce Government expenditure and made up in large part of "hard-money" men, probably made the re-examination more searching and gave greater priority to economic factors that would have been the case had Democratic tenure of office continued. The Republican party which must bear the political consequence of any modifications in the United States defence establishment, is fortunate in having a highly respected soldier in the White House. The voter is less likely to be disturbed at the prospect of changes in the defence establishment carried out under the leadership of President Eisenhower with his long and distinguished military background than might otherwise be the case.

2. The many aspects of United States defence policy which are of interest to the free world make it essential to limit the objective of any single report. I have thought it wise, therefore, to direct our main efforts in this despatch to an attempt to answer one question. Does the "new look" at defence, taken by the Eisenhower Administration and the recently appointed Chiefs of Staff, involve any radical change in United States defence policy and United States grand strategy?

3. We offer the immediate opinion that no radical change in United States defence policy (insofar as United States policy means United States commitments within the structure of collective security) is under consideration, but that there have been and will continue to be over the next few years gradual changes in United States strategy (in the sense of the dictionary definition "the science and art of employing the armed strength of a belligerent . . . to meet the enemy in combat under advantageous conditions"). The case in support of these opinions follows and, while we believe it is a good case, we recognize that it is not incontestable.

4. The circumstances and opinions which are shaping the defence policy of the Eisenhower Administration are numerous, and implicit in the choosing of any number of "governing factors" is the danger of over-simplification of a highly complex subject. Nevertheless I think four such factors among many which can be adduced are of first-rate importance:

(a) the attitude taken by the Administration, not unrelated to the Republican campaign promises for reductions in Government expenditures, that the United States economy cannot maintain in peacetime the levels of defence built up after the outbreak of the Korean war,

(b) the appreciation of the Administration that there has been some slight reduction in world tensions and that the threat of Soviet aggression is not as immediate as it was considered to be for planning purposes during the Truman Administration,

(c) the reports presented to the Chiefs of Staff on the capabilities and availability of nuclear weapons taken together with the decision on the part of the Administration to seek Congressional approval to share with friendly allies certain knowledge concerning the tactical use of nuclear weapons,

(d) the decision taken by the Administration with the concurrence of its highest military advisers to rely on the "deterrent of massive retaliatory power" to a greater degree than on "local defences", i.e. the meeting of aggression on the ground where it occurs.

These factors are all interrelated and it would seem unwise and unnecessary to assign priority to any one of them. They do, however, provide a convenient framework on which to base our general comment.

Defence and the United States Economy

5. The balanced budget became a Republican party slogan in the election campaign. It was good politics and was adopted, we think, for that reason rather than because it was good economics. It was argued that Government expenditures under a Republican Administration would be cut and when, as a result of these cuts, an approximate balance of the budget was achieved it would be possible to reduce taxes. When the Administration took office its campaign promise made sense economically as a means by which inflationary pressures in the nation's economy could be lessened. (With the down-turn of business this argument is less cogent at the moment.) The prospect of tax reduction was attractive to the voter at the time the Administration took office and remains so. Reduction of defence expenditures, the single largest set of expenditures of the United States Government, was the obvious goal. These economic considerations were in the minds of Administration appointees who took over responsibility for United States defence planning. It is reasonable to assume that their view of the world situation as it affected the United States defence programme was to some extent a rationalization of their desire for economy in Government. The same is probably true of their thinking as to what defence load the United States economy could bear. In any event the President and his Cabinet colleagues most concerned with United States defence policy and its cost have from the first days of their tenure of office stressed two ideas. One is that the national defence effort can only be as strong as the nation's economy and the other that the defences of the United States must be geared to the "long pull" rather than to any particular year of crisis.

6. It is tempting to take issue with the statements of responsible Administration officials that the current load of United States defence spending may lead to "practical bankruptcy", for it seems to us that the United States economy could stand much higher defence expenditures than those of the past three years if the world situation demanded them. It must be recognized, however, that whatever the economic facts may be the Administration has chosen its ground and for the purposes of this despatch that is the important fact. It must be admitted, in addition, that no matter what view one takes on the capabilities of the United States economy in time of crisis, there is some justification for the argument that the health of the economy will be affected adversely by excessive defence expenditures over a long period of watchful waiting when no foreseeable crisis is imminent.

7. It is a fact that the armed forces of the United States are to receive reduced appropriations and are to sustain a reduction in personnel. The Army is committed to a reduction by June 1954 of 10 percent from its March 1953 strength of approximately 1.5 million personnel. The Army has been asked to "see what it can do" to achieve a further 10 percent reduction by June 1955 to a personnel complement of approximately 1.2 million. It has also been suggested that the manpower of the Navy and the Marine Corps should be further reduced by June 1955 by approximately 100,000 personnel to levels of 670,000 personnel for the Navy and 207,000 for the Marine Corps. The Air Force on the other hand is to be increased in personnel strength to approximately 970,000 personnel during fiscal year 1955 from a strength currently below the authorized level of 942,000 personnel. The Administration will request of Congress $31 billion of new obligational authority for the military functions of the Defence Department in fiscal 1955 as compared to obligational authority for the current fiscal year of $34.4 billion. The Administration estimates defence spending in fiscal 1955 at $37.6 billion as compared with estimated expenditures in the current fiscal year of $41.5 billion. The Secretary of Defence maintains, and we think with some degree of reason, that these reductions will not cut into the total effective combat strength of the United States armed forces. My own military advisers are of the preliminary opinion that the effects of these reductions, if they are carried out as presently planned, will mean no reduction in the combat effectiveness of the Navy, some possible reduction in the Army's active force (in the neighbourhood of two divisions) and an actual increase in the hitting power of the Air Force. (A brief note on the military implications of the budgetary decisions of the Administration prepared by my service attachés is enclosed.?)

8. Together with these reductions we must consider Mr. Wilson's repeated promise to bring more effective and more economic organization to the Defence Department. He argues, it seems to us soundly, that the inefficiencies of what was a crash defence programme after June 1950, can be removed in a period in which no immediate emergency is being met without damage to United States defence muscle. There have already been cut-backs in procurement contracts and according to Mr. Wilson there has already been applied to continuing contracts more rational and economic planning which will result in the saving of considerable sums of money. A good deal of attention has also been devoted to the need for strengthening the mobilization base. President Eisenhower, in his State of the Union message listed the attainment of a realistic mobilization base with all it involves in stockpiling requirements, industrial capabilities, manpower resources, etc., as one of the most important considerations affecting United States defence planning. ¹ The Secretary of Defence has on a number of occasions stressed the importance of maintaining a mobilization base which will be adequate within the economic capabilities of the nation to stand the initial shock of crisis, which will be capable of rapid expansion in the event of the outbreak of a major war and which the nation is capable of sustaining over an indefinite period.

9. I do not believe that the numerous actions taken by the new Administration to reduce defence expenditures represent an attempt by the Administration to get bargain basement defence but rather a decision to ensure the careful shoppers attitude that the most effective use must be made of every defence dollar. The press describes the Administration's objective in the colourful if inelegant phrase, "a bigger bang for a buck". Cost alone is not to my mind the only factor which will guide United States defence planners but on the other hand they will not, under the new Administration, be able to consider a new defence project with the attitude of mind that cost is no object.

Reduction in World Tension

10. It seems to us that the current re-appraisal of United States defence policy has been affected by broad political considerations with almost the same force as it has been by economic considerations. There is evidence that the United States Government does not consider the threat of Soviet aggression to be as immediate as it was taken to be for planning purposes over the last three years. In addition the past year has brought an end to the fighting in Korea and we think it reasonable to assume that United States planners do not believe, barring some unforeseen circumstance, that the war there will be renewed. The presentation of United States views at the last NATO Ministerial meetings on the long-pull concept rather than the year-of-crisis concept of NATO defence planning seems to support our estimate of United States thinking in this respect. There has already been some comment in the United States press that the United States Government is in the process of working out a satisfactory policy to deal with a period of "cold peace". The argument goes something like this: just as the cold war involved warlike moves in various parts of the world without the actual outbreak of a major war, so the cold peace may involve peaceful gestures in various parts of the world without complete removal of the tensions which exist between the free and the Communist worlds. If there is any substance to this argument it stands to reason that modified defence machinery is required. It must be efficient, it must be modern and it must be economic.

11. A further factor in this same context is the recognition that the Soviet Union now has an atomic arsenal. At first glance this might seem to be in direct contrast to what has been said above about United States thinking on the threat of Soviet aggression. However we think that this is not necessarily so. Soviet possession of atomic weapons is simply a new fact which must enter into United States military planning. It does not in itself seem to us to make more imminent or less imminent the possibility of Soviet aggression. It would add to Soviet strength if committed against the West but will not necessarily unleash that strength. However it does impose new conditions on United States planning for the use of its defensive strength which lead to much the same conclusions as those noted above, namely the development of the most efficient and effective defence mechanisms.

Development of New Weapons

12. While the certain knowledge that the Soviet Union possesses the secrets of thermonuclear weapons has shattered many of the theories basic to United States military planning in recent years, the important supposition remains that the United States is well ahead of its potential enemy in its knowledge of and capability to use a variety of atomic weapons of more manageable order than the bomb. In the last analysis, of course, the bombs, atomic and hydrogen, are the backbone of the deterrent power of the United States of which more is to be said below. However, weapons such as the atomic cannon, which, according to President Eisenhower and his senior defence aides, "have assumed almost conventional status", may prove to be an element of United States military strength of almost equal significance to the bombs.

13. We have good reason to believe that it was reports on the capabilities and availability of these new weapons which came to the United States Joint Chiefs of Staff at about the same time as they received instructions to carry out reductions in the service establishments, which enabled them to accept those reductions without serious objection and without pointing out any need to reduce United States commitments throughout the world. They were aware, in addition, that the President himself would be urging Congress to alter restrictive legislation in force in order that some knowledge concerning the tactical use of nuclear weapons could be shared with the United States' allies. It is only logical to assume that a gradual change in basic strategy will result. An opportunity, it seems, has been offered the United States to maintain or even increase its effective fighting strength with more advanced weapons and comparatively fewer personnel. Since manpower is one of the costliest elements in United States defence overhead, significant savings may be possible without any reduction in effective military strength. These two objectives have been given equal prominence by the Administration.

14. It must be remembered, in addition, that these decisions are being taken just as the only shooting war involving United States personnel has ended even though the punctuation mark of peace has not yet been inscribed. It may be a time of peril but it is not a time of emergency in any sense comparable to the crisis period 1950 and 1951. All responsible United States defence officials have made it clear that every available resource of the nation in manpower and commodity will be mobilized to meet the demands of total war if that eventuality occurs. In the present circumstances, however, new weapons in the hands of slightly reduced forces would seem to satisfy those responsible for the nation's security.

15. The inevitable logic of this set of circumstances, it seems to us, will demand decisions sooner or later as to how liberally atomic weapons of "almost conventional status" are to be used. Has a decision been taken to use such weapons in local wars of aggression on the Korean model? We do not believe that such a decision has been taken. On the other hand we tend to the view that no restriction now remains on consideration by the military planners of the possible use of atomic weapons in any critical situation involving the commitment of United States military strength. It is a fact that potential aggressors have been warned of new United States capabilities and should be in no doubt of the peril to themselves in any undue provocation of the United States. Moral considerations (e.g. the public conscience) completely divorced from military necessities will, we think, have an important bearing on any decisions leading to the use of these weapons. For the moment we cannot carry this argument further. Speculation on such a significant development in United States military thinking may be tempting but it cannot be informed without access to the innermost views of the President himself.

United States Retaliatory Power

16. Consideration of the effect of new weapons on United States strategy leads us to the last of the four general factors set out in paragraph 4 above, United States reliance on the deterrent of retaliatory power. This in itself is not new. In the period of United States monopoly of the atomic bomb it represented the only significant strength in the free world counterbalancing the preponderant strength of Soviet land armies. The breaking of that monopoly does not automatically dispose of the United States capability to retaliate against any Soviet attack with devastating power. It does, however, bring the need to add to United States capabilities in this field with a view to off-setting insofar as that is possible the atomic accretions to Soviet power. It is significant, we think, that in spite of the general effort to pare down the size of the United States defence establishment there is to be an actual increase in United States air power. Much of the increase will be in the power of the strategic air arm. At the same time, in the words of President Eisenhower to Congress on January 7, "Military and non-military measures for continental defence must be and are being strengthened". Because of active Canadian participation in joint efforts with the United States to strengthen the defences of the continent, we have detailed knowledge of United States thinking on this score and particularly of the concern felt by responsible United States officials that the greatest strength actual and deterrent, available to the free world may itself be exposed to sneak attack.

17. While it would seem that increasing reliance is to be placed by the United States on nuclear weapons, we cannot ignore the recent emphasis placed by the President and his senior Cabinet members on the need for a mobile strategic reserve of armed strength. In his State of the Union message the President, in dealing with important considerations in U.S. defence planning, said, "Our armed forces must regain maximum mobility of action. Our strategic reserves must be centrally placed and readily deployable to meet sudden aggression against ourselves and our allies". When questioned on the subject at a press conference on January 8, Mr. Wilson replied, "We are thinking more of the United States as the proper location for our strategic reserve". The evident weaknesses in the state of readiness and organization of United States reserve forces has been noted with concern by almost every prominent defence official. Attempts to correct these weaknesses we think should be regarded as actions taken out of normal military prudence and not as indications of a United States intention to withdraw to fortress America. With the majority of its combat forces tied down in Korea and with all that commitment meant in re-enforcement, supply and expenditures, United States strength lost almost any element of flexibility. The enemy knew where United States fighting strength was and what difficulties United States defence chiefs would face in moving it. The object of the Administration now is to change that situation as soon as possible and to create a strategic reserve under the immediate control of national commanders thereby allowing them some lee-way in the choice of methods with which they can meet any new security threats which may arise. Mr. Dulles has described this objective recently as "A selection of military means . . . ready to meet the enemy's many choices" and a break with "the traditional policy of meeting aggression by direct and local opposition". The decision to withdraw two divisions from Korea, we believe, stems from this broader objective and we have Mr. Wilson's words to back us up in this belief. (On the other hand we have no indication that there is to be any similar withdrawal of effective combat forces from the NATO theatre.) We have it on good authority that the United States defence Chiefs do not regard the withdrawal of troops from Korea as in any way reducing the authority of the United Nations forces there since increasing numbers of ROK divisions are to be left with the backing of United States support in the form of naval and air strength. The actions taken in Korea as opposed to what we know of likely United States intentions in Europe give some evidence, we believe, that the United States does not intend to fight a major war in the Far East.

Conclusions

18. We have already stated that the considerations outlined in this despatch lead us to the view that there has been no important change in United States defence policy but that there probably will be gradual changes in United States strategy. We must be somewhat more reserved in our predictions of what these changes will be but it is possible to cite briefly some of the more obvious shifts of emphasis which will affect the planning of United States strategy in the foreseeable future. These seem to us to be the following:

(a) A general tightening up on United States defence expenditures which will mainly affect personnel strengths and administrative overhead.

(b) A greater reliance on new weapons including nuclear weapons shared with friendly allies to compensate for reductions in United States manpower and to offset additions to the Soviet arsenal.

(c) Further strengthening of United States air power and especially of its ability to deliver the atomic goods.

(d) Increased attention to continental defence in co-operation with Canada to protect the main base of the striking power of the free world.

(e) The build-up in the United States of a strategic reserve of trained soldiery and weapons which will be committed to action where the service Chiefs think they will do the most good, not necessarily at the point of actual aggression.

(f) A highly cautious approach to involvement in any further incidents of the Korea type which would result in the commitment to battle of United States ground troops.

19. These changes or shifts of emphasis do not, in our opinion, we repeat, involve any significant change in United States defence commitments. In fact there is some evidence that the United States is willing to assume additional commitments in the Middle East and in South East Asia. All the evidence points to continued support of the NATO collective security effort and it does not appear that combat personnel presently assigned to that area will be reduced. On the other hand United States land forces are unlikely again to be committed in Asia and there may in fact be withdrawals from Asia in addition to those already planned. United States commitments in the Far East, however, will be honoured, according to President Eisenhower, with the help of "highly mobile naval, air and amphibious units with even greater effect than heretofore". Finally United States defence plans assume the early addition to the forces of the free world of German military strength within some federated European Army and if the European Defense Community founders on French opposition we believe that the United States will press for some alternative which will permit formation of German units.

20. The views contained in this despatch have taken shape gradually as a result of discussions within the Embassy and the Joint Staff and with United States officials. They are not related directly either to the President's recent State of the Union message to Congress or to Mr. Dulles' address before the Council on Foreign Relations in New York City on January 12. ² However, we believe our analysis is consistent with the views outlined in these two statements, both of which we regard as being especially significant in their indication of the direction which we may assume United States defence planning is to take. We hope to have an opportunity in the near future to have further and more detailed discussion on defence policy with senior United States officials and we shall make every effort to keep you informed of any developments which in our opinion will have significant effect on the framing and implementation of United States defence policy.

A.D.P. HEENEY