18. Any reduction of our forces in Germany in the relatively near future would carry very serious implications. Partial withdrawal at once or in the immediate future would have a most disturbing effect in Germany and elsewhere. It would endanger ratification of the E.D.C. Treaty and thereby the strength of the united effort on which the security of Western Europe depends. In due course, but cer- tainly not before the beginning of 1954, German units will begin to be available. for Western defence. At that stage a progressive reduction in our own forces in Germany might perhaps be contemplated. The German contribution to Western defence will, however, be based, like our own, on the normal N.A.TO. screening machinery. If, therefore, there were a general reduction in our defence effort, the Germans, and probably also the French, might similarly wish to reduce their own defence effort. The French, in addition might seek economy by withdrawal from Indo-China in order to maintain superiority vis-à-vis the Germans in Europe. Psychologically the reduction and still more the complete withdrawal of United Kingdom forces from the Continent, even if kept in being in the United Kingdom, would have a serious effect on the will of all our European allies to resist aggression. A special factor which may, however, compel us to consider some reduction in our forces in Germany is the fact that after June, 1953, we must be prepared to pay in addition to our present expenditure a sum probably amounting to about £100 million a year in foreign exchange in respect of the local costs hitherto borne on the German occupation budget. These should be fully covered by Germany as part of her defence contribution only until June, 1953.
(iv) Austria and Trieste
19. These by comparison with Germany are lesser commitments: (a) It is our aim to conclude an Austrian Peace Treaty as soon as possible, followed by the withdrawal of all foreign troops from the country. But until this is achieved, there can be no question of a unilateral with- drawal on our part. The commitment both in men and money is at present relatively small, though the question of occupation costs might become more acute next year (possibly of the order of £2 million in foreign currency).
(b) Provided that a' settlement can be reached between Italy and Yugoslavia, or be imposed on them by Her Majesty's Government and the United States Government, the British (and United States) forces could be withdrawn from Trieste. It is the aim of Her Majesty's Government to achieve this as soon as possible. This would represent a saving of the order of £1 million in foreign currency.
Category B Obligations
(i) Maintenance of security and economic and social development in
colonial territories
20. The question whether any reduction could be made in the United King- dom contribution to colonial development is outside the scope of this paper. Possibly some alleviation of this burden might be found-
(i) Through greater use of colonial troops to back our major commitments; (ii) Through allocation by the United States of larger funds for investment
in the colonial empire.
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(ii) Commonwealth
21. This is another aspect of the problem which is outside the scope of this paper, Generally speaking, however, members of the Commonwealth enjoy the fruits of the rearmament efforts of the free world without making commensurate contributions. An effort might be made to persuade other Commonwealth countries to agree to relieve the United Kingdom of some of the burden.
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22: In time of war, the Middle East will have priority second only to Western Europe: Its oil is essential to the United Kingdom in peace-time and a proportion of it might well be essential in war. But it is clearly beyond the resources of the
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of the Middle East. Our aim should be to make the whole of this area and in particular the Canal Zone an international responsibility. Hence every step should be taken to speed up the establishment of an Allied. Middle East Defence Organisa- tion. It should, however, be recognised that the setting up of such a defence organisation will not result in any immediate alleviation of the burden for the United Kingdom. The United States have refused to enter into any precise commitments in the Middle East or to allocate forces, and it should be the constant object of Her Majesty's Government to persuade them to do so. In addition, every possibility should be explored of committing the United States militarily, e.g., to the building of bases, the provision of material, the sharing and reconstruction of airfields. During the present crisis any reduction in the British forces in Egypt is a military problem in which the need for safeguarding British lives and property in case of an emergency must be the first consideration. The dilemma is that until come to an agreement with Egypt no effective international defence organisation for the Middle East can be established; and so long as there is no settlement with Egypt and no international defence organisation we are obliged to hold the fort alone.
(iv) Malaya and South-East Asia
23. The security and defence of South-East Asia is of very great importance. In conditions short of general war any sign of weakness, involving even a partial reduction of effort there, would be most damaging' to ourselves and an immense encouragement to the Communists. The remedy here lies in committing the United States and Australia and New Zealand to the defence of Malaya and Indo-China, perhaps by the establishment of a Far Eastern Regional Security Pact on N.A.T.O. lines. In the meantime, possibly greater use could be made of locally raised forces, in addition to British and Gurkha troops as available.
(v) World-wide garrisons and bases.
24. Theoretically it might be possible to obtain relief by sharing, upkeep with one or more friendly countries, on the same principle as the Canal Zone might become an international command headquarters. Thus Malta and Gibraltar could be made charges on N.A.T.O., Cyprus on the Middle East Command, Hong Kong and Singapore on a Far Eastern Regional Security Pact. Depending on the method and timing adopted, such a policy might be carried through successfully. A very minor commitment which we could endeavour to dispose of to the United States is the Falkland Islands Dependencies. I do not, however, advise such action, for public admission of our inability to maintain these traditional possessions would cause a loss of prestige wholly out of proportion to the saving in money obtained. It might precipitate a scramble by the numerous claimants to various parts of British territory.
Category C Obligations
(i) Share in international action in Korea
25. There are strong objections to a reduction of British forces. Through our contribution we have acquired not only prestige throughout the free world, but a right to American consideration in matters affecting both Korea and the Far East. generally.
(ii) Economic assistance to other countries and subscriptions to inter-
national bodies
26. The main items here are the grants in aid to Jordan, Yugoslavia, Palestine Refugees and Korean Reconstruction. The first of these is primarily a military commitment: while we could consider a reduction here, this might, in effect, be a false economy in that Jordan and the Arab Legion contribute to Middle East defence and stability at relatively low cost to ourselves. We are already tapering off our aid to Yugoslavia. We could consider reducing our contribution to rehabilitation in Korea. But we could only reduce our help for Palestine refugees at the cost of arousing ill-feeling with the Americans. We could also in theory reduce the scale of our contributions to international bodies generally, But this could only be done by international agreement and the saving in money wares
might be quite gut of Proportion to the ill-will which is likely to be engêfered towards. the United Kingdom.
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