ANYONE who sets out to comment on the problems of NATO might well keep before him Dryden's lines to Lord Chancellor Hyde:

How strangely active are the arts of peace, Whose restless motions less than war's do cease! Peace is not freed from labour, but from noise; And war more force, but not more pains, employs.

The North Atlantic Treaty has been in effect for upward of three years. During this period NATO, the organization created under the Treaty, has been in restless motion toward its goal. And today because of NATO, and the pain and labor it has both suffered and caused, we are considerably nearer that goal--the safeguarding of the security of the North Atlantic area.

Rapid and effective organization on the military plane coupled with great leadership have stiffened military strength on the continent of Europe and substantially improved the position over that of three years, two years or one year ago. This strength, which now can be seen and felt, has brought a return of confidence that the defense of Western Europe is practicable--an intangible which is fundamental to the whole effort. The political unity of the alliance, which now extends from the North Cape to the Black Sea, has nullified, so far as its members are concerned, the Soviet tactic of dividing and absorbing which accomplished the destruction of Czechoslovakia. And, of importance beyond the present emergency, the North Atlantic Powers have found a means of bringing Germany into the circle of Western democracies; and by supporting and encouraging the European Defense Community, which is closely associated with NATO, they have made a major and, it is to be hoped, lasting contribution to the union of Western Europe.

But while many problems have been solved, many remain. A great deal of the labor and the pains of the Treaty organization went to prepare the decisions of the North Atlantic Council at Lisbon in February of this year. The Lisbon decisions were widely accepted as most important concrete steps forward--as indeed they were. But the decisions also carry important implications apart from the question of how far they have been or will be carried out, and on the analysis which is made of these and on the answers worked out will depend in considerable part the direction of NATO's future development. Since NATO can grow only by its ability to serve those it represents, stocktaking should always be in order. The purpose of these few pages is to consider one-- but not by any means the only one-- of the major areas in which NATO policy should be clarified over the next few months.


Someone has said that NATO has Federal responsibilities and is attempting to meet them through a Continental Congress--a not-inaccurate way of describing both elements of its problem. The Treaty organization has developed in response to the pressures of the tasks seen to lie ahead. It has been and is a flexible instrument, capable of adapting itself to problems as they arise. A fundamental fact apt to be overlooked is that except for the command functions vested in the military, no individual or agency of NATO up to the Council itself has any delegated power or authority. NATO is therefore not an administrative organ except in a very limited sense. It is rather a mechanism for formulating combined international plans; for obtaining agreement among the Treaty partners in support of these plans; and so far to only a limited extent for stimulating national action to carry out the agreed plans.

The key to NATO's progress and the measure of its problems lie therefore in the tasks it has set for itself. These have developed more in response to the pressure of events than according to plan or blueprint. The aggression in Korea injected both realism and urgency into its operations and provided the impetus for decisions which have very largely set the pattern of its development ever since. Thus it was undoubtedly the outbreak of hostilities in Korea which led to the Council's basically important decision at Brussels, in December 1950, to set up, in being and in place, integrated NATO ground, air and naval forces. This decision required in turn the creation of the NATO commands over the forces of the Treaty partners and the constitution of the international NATO command structure. The decision had important political implications as well, since it made some solution of the problem of German rearmament inescapable and touched off the negotiations on the series of thorny issues wrapped up in the delicate but pivotal task of bringing Western Germany back into close and peaceful relations with the North Atlantic Powers.

The Brussels decision to set up the integrated ground, air and naval forces had equally important, if less direct, repercussions in the economic field, since the Treaty partners thereby obligated themselves, whether explicitly or not, to supply them with equipment and facilities; and in the commanders and their staffs there were very articulate claimants whose duty it was to make known to the Treaty organization the expanding list of their requirements. As the projected costs of raising, training and equipping these forces were totaled up, the dimensions of the gap between the planned requirements and the resources available to meet them became apparent (mid-1951). This problem was tackled by a temporary committee of the Council (the T.C.C.) of which the "Wise Men" were the nucleus. The resulting study went to the Lisbon meeting of the Council, and upon the basis of it the Council fixed the levels of forces to become available during 1952, deferring for later consideration the programs for other years and the assumptions on which they would be based.

Under the spur of emergency, the military agencies of the Treaty met and solved their distinctively military problems with relatively little difficulty. And, indeed, in spite of the fact that the process of bringing various points of view into agreement was necessarily slow, the Council cleared its first great political hurdles successfully. In both the political and military spheres the problems were attacked as they arose.

It is fair to say, however, that the economic problems were more generally avoided than attacked. It is therefore in this field that NATO's record is least impressive. To be sure, there was agreement on formulas for sharing the administrative costs of military and subordinate headquarters and the construction of common air fields and telecommunications (known as infrastructure), but these facilities did not involve heavy amounts in comparison with the over-all commitments, and agreement was reached after long negotiations ending in the Council itself. In more important respects where NATO plans pointed up the need for funds, the organization sheered away from making the necessary decisions. During 1951, the Defense Production Board made an effort to work out plans for combining European production facilities, in order to narrow the equipment gap. The plans depended upon funds being provided from national sources, which would have involved the raising or resetting of priorities within national defense budgets. The Board's recommendations were not acted upon. In early 1951 proposals were made that a Finance and Economic Board should undertake studies and make recommendations in the broad field of economic mobilization. However, there was reluctance to give these functions to the Board and as a result it limited its efforts to an analysis of the impact of rising defense costs. In the fall of 1950, when scarcity of raw materials became a problem for virtually all of the Treaty partners and a severe one for some, a NATO agency to coordinate the policies of Treaty members in this field was established. With the setting up of the International Materials Conference, however, the effort to deal with raw materials in NATO was abandoned.

These early and abortive ventures of NATO into the economic field are unimportant except as a matter of history, since in the process of reconciling NATO requirements and resources the "Wise Men" raised in their Committee virtually the whole range of economic problems of the Treaty members. The agreement reached at Lisbon merely fixed the forces which each partner was to raise and train in 1952. But to lay the basis for this agreement and at the same time assure, as the Committee undertook to do, that the economic and social foundation in each country should remain sound and healthy, the Committee reviewed the national accounts for each and made recommendations to governments on a series of necessary economic measures to support the defense buildup and avoid undermining the various national economies. The Council's action at Lisbon on the T.C.C. report was therefore of significance in three respects: it set the size of the forces each member was to contribute in 1952; it recognized the link between the requirements for troops and the measures necessary to safeguard the economic base in each case; but it left these measures entirely to national action.

The execution of the Lisbon agreements, as the time approaches when the divisions and groups are to be trained and equipped and ready, has involved each of the major Treaty partners in domestic political problems which have served to focus attention on the difference between promise and performance. It is easy to see why domestic political controversy should arise, since defense expenditures of the kind and size called for by the Lisbon agreements can very easily become involved in the crossfire of three sets of powerful political conflicts which operate in each country: the perennial contest between guns and butter; the difficult question of finding a balance between internal effort and external aid; and, in the case of certain members, the problem of allocation of resources between NATO and non-NATO commitments. Since NATO commitments have become almost the dominant factor in national budgeting and economic planning, they are likely targets for political attack.

The aftermath of the Lisbon Conference is also important in another respect. If measures to ease the economic strain caused by the defense buildup are within the realm of national action only, then NATO has created pressures which it can do nothing to relieve. In the long run this will accentuate the political difficulties, since public opinion is less likely to accept the burdens imposed by NATO defense plans if there is no collective effort among the Treaty partners themselves to cushion the impact of the burden and deal with the related economic and social problems.

NATO may therefore have reached a critical stage in its development. In its advance toward its military objectives it has uncovered most of the hard economic questions but has avoided dealing with them. Since the solutions adopted for economic questions will determine the base on which military development will rest, the method by which these problems are handled will also determine NATO's future. Thus far the Treaty organization has moved largely in response to events, but it is now at a point where we must decide whether or not NATO is to serve as the central agency for handling the common economic problems of the Treaty partners which underlie the defense effort.


What are the practical possibilities that NATO can make an effective contribution in the economic field? Can governments be assisted in finding solutions to their present insistent problems within the NATO framework? Would it be to the advantage of the United Kingdom to attempt to solve through NATO its problems of terms of trade and dollar balance? Could France get help through NATO in solving its budgetary problem and rebuilding confidence in its currency? Can the United States work through NATO to find devices to supplant its heavy commitments for overseas aid and to deal with the longer range problem of raw materials which it eventually will have to face? Can NATO be used to help Italy remedy her problem of overpopulation?

On the record to date one would hesitate to venture an affirmative answer to these questions. As we have seen, the Treaty partners have so far been reluctant to deal with economic problems in the framework of the North Atlantic Treaty. The tendency has been to regard matters in this field either as suitable for national action only, or as coming within the province of other international agencies. This has led to unilateral and bilateral action in many cases, rather than multilateral action in NATO. But with the strengthening of the international organization by the appointment of Lord Ismay as Secretary General, these tendencies to look for solutions outside the treaty framework should diminish; and the placing of the North Atlantic Council and its Secretariat in Paris, at the side of the Organization for European Economic Coöperation (O.E.E.C.), should make for much closer association with the latter organization. This might make possible the substantial merger of the two agencies--a step which may well be indicated if NATO is to be called upon to deal extensively with problems in the economic field.

Since the United States economy, by any standard of measurement, represents well over two-thirds of NATO's total resources, closer economic collaboration under the North Atlantic Treaty will depend on the willingness of the United States to adapt its economic policies and its methods of administering them to that end. Through the programs of military and economic aid to its treaty partners, the United States has made a massive contribution in direct grants of dollars and equipment. A real move toward collective action in NATO in the economic field will probably involve further contributions, but of a different nature. The United States can, for example, take two important steps in this direction which call for no new transfer of resources. First, so long as it continues its foreign aid it can administer it more directly as an element of NATO plans and put less emphasis on bilateral arrangements. This is possible within the present framework of Mutual Security legislation and should be facilitated by steps recently taken to centralize in Paris, and in the office of Ambassador Draper, both the administration of the aid programs and United States representation in NATO. Thus dollar aid might be used to prime the production pump in Europe, not solely through bilateral grants and off-shore procurement by the United States, but by multilateral arrangements bringing in European resources.

The United States should also do everything possible to define the extent and duration of its aid programs. The prevailing lack of certainty makes difficult any firm long-term plans in which United States aid is an element. Conversely, so long as there is a possibility of aid dollars, European officials will naturally be reluctant to spend their defense funds or contribute to multilateral financing arrangements. The factor of certainty is very important.

Several possible areas in which closer economic collaboration may be feasible are suggested by the report of the T.C.C. to the Council at Lisbon which was based on the over-all study of the "politico-economic" capabilities of each Treaty partner to support its contribution. The Committee recommended to NATO governments that they should take all practical measures in promoting the following objectives: 1, to encourage general economic expansion; 2, to increase production of scarce raw materials and to control their use as may be necessary to conserve supplies and insure that defense requirements are met; 3, to prevent inflation by adoption of necessary sound fiscal, financial and monetary policies; 4, to facilitate labor mobility among NATO countries, and to alleviate manpower shortages in defense industries; 5, to adopt measures to improve the equitable distribution of the internal burden of defense in the NATO countries; 6, to maintain essential imports through a satisfactory solution of balance of payments problems, in particular by increasing the dollar earnings of European countries.

Of these six recommendations, the first, third and fifth would seem to call mainly for national action. The other three, however, are appropriate for international action and suggest areas for inquiry, consultation and possibly intergovernmental agreement through NATO.

The satisfactory solution of the balance of payments problem through increased dollar earnings leads directly into the field of trade restrictions and tariffs. This will indoubtedly become one of the major issues to be worked out between the United States and its European NATO partners as the necessity for substituting trade for aid becomes greater on both sides of the Atlantic. The United States has dealt with its tariff problems through its network of reciprocal trade agreements and, latterly, under the General Agreement on Tariffs and Trade (GATT). Within this general framework, however, NATO seems a logical forum for these important negotiations. The problem of dollar balances is, in a sense, a NATO preoccupation, since it has been accentuated by the impact of defense expenditures. Restrictions on East-West trade, which have curtailed efforts to ease the payments pressure by dealings east of the Iron Curtain, have also been a direct concern of NATO. The treaty machinery with its close, informal method of consultation--particularly if augmented by the experience and know-how of the O.E.E.C.--might be most helpfully used. The range of negotiation might be broadened, for example, by tying agreements on tariffs in with the annual NATO review of economic capabilities. In this manner economic quids could be balanced, not only against economic but also military quos, an interesting possibility.

The T.C.C. recommendations also stress the need for the increased production of scarce raw materials, and their control in the interest of meeting defense requirements. Here again the problem has been accentuated by the defense buildup, and by the competition for available supplies which in 1950 and 1951 caused trouble to most of the Treaty members. The problem in NATO would be one of harmonizing the policy of the NATO partners; it would not exclude the possibility of resorting to pooling, joint purchasing or like arrangements in support of combined production planning, if and when NATO production planning should become a reality.

The problem of labor mobility was also given careful attention by the T.C.C. Surplus manpower is an acute problem with several Treaty partners, particularly Italy, and manpower shortages exist in others. Several bilateral arrangements among the NATO powers have been made. Since in this case manpower problems have been accentuated by the defense buildup, and since they represent critical domestic problems for several of the Treaty members, common NATO action in this field might also be indicated.

In venturing these suggestions I realize that I am proposing to put on NATO's agenda a series of the most sensitive political and economic problems facing the NATO Powers today. But this may and should be an advantage, for the record shows that the Treaty organization has gained strength when it had the courage to deal with knotty problems, and lost strength when it evaded them. The ability of the Treaty partners to collaborate and reach solutions in the area of these vitally important issues is the real test of the Treaty machinery. Fortunately, it is flexible and adaptable, handicapped neither by rigid voting procedures nor the veto. Both within the permanent Council and the ministerial groups there has been a high degree of mutual confidence and a capacity to adapt national points of view in dealing with varied, complex and demanding problems.


The most important questions raised by the above suggestions, however, are not the willingness of governments to commit economic issues to NATO and NATO's competence to deal with them. The whole range of relationships of the Treaty partners to non-NATO nations and to other international groups is also involved. They are aspects of one question: how, at this juncture, can the growing necessities of international dealing be most effectively organized?

The answer may turn on the emphasis we give to what might be called the extensive as against the intensive method of seeking international coöperation. Is it better to establish a common pattern of dealing among many, or to concentrate on solving serious issues with a few? The answer may also turn on the emphasis we give to the functional as against the geographical approach to international organization. Is it preferable to create a group on a world-wide basis dealing with specialized problems in a particular field, or to deal in a limited area with all interrelated matters--economic, political and military?

Obviously no clear-cut solution is possible. But in studying this problem, especially as it affects NATO, it is perhaps relevant to note how much the growing interdependence of the nations of the free world has broadened the area of international collaboration. In the realm of defense, NATO's experience shows that political, economic and military problems are inextricably caught up in one another--that defense is indivisible. Since it is an axiom that a common denominator in the way of common frontiers, extensive trade relations and common cultural background make for closer collaboration, the varied but interrelated problems thrown up by the pressures of today can be better handled where the common denominator is greatest, that is, regionally as in NATO. The difficulty, of course, is that regional organizations comparable to NATO in strength cannot at present be visualized in other areas; but this should not deter us from strengthening the vital North Atlantic area as quickly and effectively as possible. It goes without saying that emphasis on regional organization does not exclude looser arrangements over wider areas. And equally should it be clear that friendly relations with each nation do not mean that the United States can or should follow the same pattern with respect to each area or enter into the same type of relationship with every one.

Emphasis on regional arrangements should not prejudice or be harmful to the United Nations. The primary function of the United Nations is to provide a world organization in which security can be maintained, if not immediately through worldwide collective action, then through mediation between various groups and the provision of a forum in which these groups may compete for the support of others and of world opinion. If effective regional organizations develop within the framework of the U. N., the world organizations will eventually be strengthened. Long before there was any thought of NATO it was a respectable theory that the United Nations should be supported by regional organizations which would "screen out" local issues and thus serve as a sort of corps headquarters in support of the universal or general headquarters which the United Nations provides.

The real question, perhaps, is whether there is any alternative to progress in the direction suggested. If the assumptions upon which NATO policy has been based are correct--that collective strength is required to correct the existing disparities in power between the free nations and the Soviet bloc; that effective collective strength means strength in being; that strength in being cannot be had without the heaviest demands upon national resources; and that measures to meet these demands and to cushion their economic impact are not within the individual control of any one of the NATO partners but require collective action --then, unless NATO is prepared to venture further into the economic field and to control the economic pressures it has in part created, it may not outlast the emergency. On the other hand--to put the question in more constructive terms--if, through effective collective action NATO can help ease the strains upon the members of the coalition during the next few critical years, a basis will have been laid for future close association, which could turn out to be the most lasting and most important result of the whole tremendous effort toward Western defense.

This idea is, of course, as old as the Treaty itself. In fact, Article II obligates the parties to do just what the logic of developments under the Treaty now seems to require them to do, that is, to "seek to eliminate conflict in their international economic policies and . . . to encourage economic collaboration between any or all of them." The thesis I have sought to express was well stated by Lester B. Pearson, present Chairman of the North Atlantic Council and Secretary of State for External Affairs of Canada, in Foreign Affairs for April 1949, just at the time of the signing of the Treaty. Mr. Pearson wrote:

In the past, alliances and leagues have nearly always been formed to meet emergencies and have dissolved as the emergencies vanished. It must not be so this time. Our Atlantic union must have a deeper meaning and deeper roots. It must build up habits and desires for coöperation which go beyond the immediate emergency. By ministering to the welfare of the peoples of its member states, it must create those conditions and desires for united effort which make formal pacts unnecessary. Threats to peace may bring our union into being. Its contribution to welfare and progress will determine how long it is to survive.

It is in the tradition of the democratic states centered about the North Atlantic to develop the fiber of their institutions through growth and seasoning--in other words, through adjustment to change. Labor and pains are the price of stability as well as of peace. The complexities of the present problems should not make us despair of the possibility of achieving an Atlantic community of closely-linked but sovereign democratic states. If we believe that we are living not only through an era of crisis and possible destruction, but through one of the potentially constructive periods of history, then the question of the future of NATO offers a magnificent challenge to the statesmanship of the North Atlantic Community. In meeting that challenge we shall test our greatest secret weapon--the strength and flexibility of our common political institutions.

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