A meeting of the Panel on the Economic Aspects of Defence Questions was held here last Tuesday, November 15,¹¹⁹ to consider the various Annual Review problems on which you had requested instructions and to give some preliminary consideration to what briefing should be prepared for the Ministers prior to the December meeting. As a result, it was decided that four brief background papers would be compiled for further consideration by the Panel in about ten day's time with a view to submitting them to the Cabinet Defence Committee for study by those Ministers concerned with the 1955 NATO Annual Review.

2. This Department had already prepared the attached paper on the "Current Military Situation of the Atlantic Alliance" based largely on the reports of the October Defence Ministers' Conference.¹²⁰ The Panel asked us to assume responsibility for doing the first of the four papers agreed upon and it was considered that the attached paper, possibly with some revisions, might serve the purpose. In essence, it is to be a general position paper on the present condition of NATO. I should be grateful if you would examine the attachment carefully and wire your comments and suggested revisions as soon as possible and, in any event, to reach us by next Wednesday at the latest. I would draw your particular attention to the last paragraph in which we had endeavoured to arrive at some general conclusions. We would value greatly your views on these and any others which you think might usefully be added to a paper of this nature which is primarily intended to focus the attention of our Ministers on the NATO picture with which they will be confronted at the December meeting.

3. The other three papers to be prepared are on the following subjects:

(1) Reassessment and Priorities (by National Defence);¹²¹

(2) Infrastructure and Common Financing (by Finance Department);¹²²

(3) Mutual Aid (by National Defence).¹²³

All Departments concerned will, of course, be consulted in the preparation of these papers. Any views which you may wish to put forward on these subjects would also be appreciated.

G. Ignatieff

for Under-Secretary of State

for External Affairs

Top Secret
[Ottawa], November 10, 1955

A disturbing picture of the present military situation of the Atlantic alliance is emerging from the annual stock-taking now in progress. It is already evident that when Ministers meet in December to decide on force goals and to deal with the recommendations in the Annual Review, they will be confronted with the necessity for difficult decisions, some of which may have far-reaching strategic and political consequences.

2. It is not the political intentions of the Soviet Government which are causing most concern to the NATO civil and military staffs. Provided that an adequate deterrent in land, sea and air forces is maintained, and provided that there is tangible evidence of determination in NATO to use such forces should the need arise, the NATO staffs believe that the Soviet leaders will wish to avoid war in the foreseeable future.

3. The balance of capabilities, however, is tilting against the Atlantic community as the milder tactics of the Soviet leaders, and the growing public feeling that no nation will deliberately run the terrible risks of all-out nuclear warfare, produce a relaxation of effort on the part of the NATO countries. Already this has gone so far that the military threat in the estimation of the NATO commanders, is greater than ever before. Unless checked, the imbalance will necessitate a fundamental change in NATO strategy.

4. No evidence whatsoever of any slackening of Soviet effort in the development of her military capabilities is known to the NATO staffs. On the contrary, the indications are that Soviet forces are being persistently and appreciably strengthened. In ground forces their numerical strength (which has always been superior to that of the West) is being maintained, and more important, their equipment and weapons have been brought up to date, particularly through reorganization of their tank and mechanized divisions. Soviet naval strength has been improved by modernizing existing ships and by increasing the number of cruisers, destroyers and particularly submarines. These ships and submarines are not in reserve, like so many of the Allied units, but fully manned and ready for war. Every Soviet warship and submarine, and every maritime aircraft, is fitted to lay mines, and the Russians have the capability of arming their torpedoes with atomic warheads. Soviet air power has made tremendous strides and, most significantly, a long range air force has been developed which is capable of bringing every NATO country, in North America as well as in Europe, simultaneously under direct nuclear attack. The NATO military authorities believe that the Soviet Union is years ahead of previous estimates in aircraft design and production, as well as in the atomic field. In the light of these previous underestimates they think that it would be foolhardy to assume any lag in the Soviet development of guided missiles.

5. The NATO forces, on the other hand, are considered to be increasingly deficient in both quantity and quality to meet this threat. Under present national programmes the overall force levels planned for 1956 will not be met even by the end of 1958. The German contribution, which it had been hoped would be available in 1957, will be delayed at least two years. Thus two of the major assumptions on which present NATO military planning for Europe is based are not being realized. In quality there has been only a little improvement in this theatre since a year ago, when SACEUR estimated that over 1/3 of the army M-day units and well over 1/2 of the air force units were not fully effective for combat. The withdrawal of regular French divisions for service in North Africa¹²⁴ and the dispute between Greece and Turkey have been further weakening factors. Most serious of all the European problems, however, in the view of the NATO staffs, is the absence of any effective system of air defence, and in particular of any overall early warning system. Air defence in Europe has remained a national responsibility. The NATO military authorities are strongly of the opinion that it is essentially an international problem; indeed, SACEUR has emphasized that in his view the air defence system of NATO must be considered as a global problem, with the North American and European systems complementing each other. The reason he gave for this opinion was that an attack on one of the two systems could be used to give warning to the other. Underlying the concept, of course, is the conviction of the military authorities that the air defence of NATO must rest on its capacity for immediate retaliation.

6. The situation in Allied Command Atlantic, as reported by SACLANT, is no less disturbing than the situation in Allied Command Europe. The Soviet Navy has now more submarines than all other nations combined, and nearly as many as the total number of D-day NATO ocean escorts. The protection for a 50 to 80 ship convoy could be no more than 0 to 3 escorts, a most discouraging prospect when seen in terms of long-endurance submarines equipped with long-range torpedoes having atomic warheads. There are ever-increasing shortages even in anti-submarine aircraft which now provide a large part of the available protection force. In discussing his plans for dealing with the immediate threat at sea, SACLANT attached particular importance to the vital requirement for blocking the Baltic exits immediately and completely, to prevent egress of Soviet naval forces.

7. One principal strategic conclusion is drawn by the NATO commanders from this picture of a growing imbalance of strength. It is that if the present shortages, both quantitative and qualitative, are not corrected, it will be necessary to abandon the forward strategy (involving defence of the Ruhr and blocking of the Baltic exits) and to adopt instead a rearward strategy. SACEUR told the Defence Ministers that he was convinced this would be disastrous from a military as well as from a political point of view. To emphasize his concern, General Gruenther said that if there were any relaxation of effort on the part of NATO, or any weakening in the unity of NATO countries, it would certainly not be true to say that then the Soviet forces could surely be defeated if they were to attack.

8. The inter-relationship of the military problems of the alliance has been repeatedly emphasized by the NATO commanders. SACLANT put the case succinctly to the Defence Ministers when he said that it was impossible to assess the relative importance of the defence of Europe, the defence of the Atlantic, and the defence of North America, because the successful achievement of each was indispensable to the others.

9. The general recommendation which seems likely to emerge from the Annual Review is that a reappraisal and readjustment of the total defence effort of the Atlantic alliance is urgently necessary, for the following reasons:

(a) presently planned forces are inadequate to provide effectively for the defence of the NATO area in the light of constantly increasing Soviet capabilities;

(b) present national programmes do not provide fully even for the long-term maintenance of the forces now planned;

(c) large increases in defence expenditure would be required to overcome existing, critical deficiencies and also to implement the integrated atomic strategy, which is of cardinal importance;

(d) in the present international climate, such large increases in defence expenditure are unlikely;

(e) priorities must, therefore, be established to ensure that what is most important under the concept of atomic war is provided, if necessary at the expense of other elements.

10. It seems to be the consensus of opinion that the procedure adopted last year, by which the NATO military authorities would advise on priorities when requested to do so by member countries, has proved inadequate and unsatisfactory. The Standing Group is accordingly now working on a study of machinery for producing priorities for nations. They expect to present their recommendations to Ministers at the December meeting. A suggestion made by some countries, that a working group be set up immediately in Paris, where it could be given full political as well as military guidance, was not generally acceptable.

11. The implications of creating an effective system for the international "production" of national defence priorities are obviously of the highest importance. An extension of the principle of common responsibility is involved which was certainly not contemplated when nations agreed to integrate certain of their forces. It is, however, arguable that the situation revealed by the current appraisal makes such an extension a vital requirement of Western security. Until the implications have been more carefully studied, and until Ministers have had an opportunity to consider such specific proposals as may emerge at the December meeting, any firm expression of Canadian opinion would be premature. Two considerations of a general nature may, however, be suggested: (a) a continuation or extension of the recent tendency of NATO countries to take unilateral decisions without full regard for the overriding importance of maintaining the collective deterrent would imperil what has been attained so far; (b) so far as Canada is concerned, the evident interest of our European partners in maintaining the flow of North American aid to the defence of Europe, no less than our joint interest with the United States in the defence of North America, make it imperative that we coordinate even more closely than in the past with the United States our policies and attitudes on the defence problems of the Atlantic Community.