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Declassified per Executive Order 13526, Section 3.3 NND Project Number: NND 63316. By: NWD Date: 2011  non-military economic aid was furnished in the form of "commodity imports, "an arrangement in which the U.S. purchased imports for Vietnamese who paid for them in Vietnamese currency into a "counterpart fund." The counterpart funds, in turn, were made available for support of the GVN budget — in 1956, 51% of all GVN expenditures were for defense.


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Much criticism leveled at U.S. assistance for the GVN has cited its military character as evidence that the U.S. deliberately undermined or ignored the Geneva Settlement. SEATO has been similarly suspect, its formation having drawn an immediate DRV protest to the ICC in September 1954, that the treaty violated Article 19 of the "Agreement on Cessation of Hostilities..." forbidding alliances. However, U.S. official records reveal that the nature and direction of U.S. aid programs, with their emphasis on security, were dictated by no conscious effort to contravene the Settlement, but by the desires of the GVN, and by a mutual adjustment to the circumstances of French withdrawal. In late 1954, J. Lawton Collins, the U.S. Special Representative in Vietnam, recommended an ARVN of 77,000 and reported the French willing to have NAAG expand slowly beyond the Settlement-fixed mid-1954 level of 342. The JCS initially (September, 1954) viewed the Settlement as too restrictive, and enjoined against MAAG's accepting the mission of training RVNAF. However, Defense eventually took the view that while State Department could have to rule on a possible increase in MAAG strength, its 342 personnel were probably "capable of furnishing training assistance to develop Army and Navy internal security forces...." The build-up of DRV forces was perceived, and the JCS view was that this threat entailed retention of at least four divisions of French forces in the South until they could be replaced by combat effective RVNAF divisions. There followed a period of about six months, December 1954 to May 1955, in which the U.S. government debated within its councils whether or not to throw its entire support behind Ngo Dinh Diem, or to seek alternatives. However, while this debate was in progress, the U.S. followed through in adopting direct aid to GVN, and in extending its advisory effort with ARVN to replace French advisors—steps explained as authorized by the Geneva Agreement in terms of rotation of personnel, and of implementing a 1950 pentalateral agreement for military aid among the U.S., France, Laos, Cambodia, and Vietnam. Ultimately, Ngo Dinh Diem's success in breaking the power of the sects, as well as the inability of Americans to identify other leaders for the GVN, won him unequivocal American political support and agreement to support an RVNAF of about 150,000. Thus buttressed, Diem refused to open consultations on the plebescite in July 1955, and in October held an election of his own in which Bao Dai was deposed, and himself installed as head of state of the GVN. Diem then felt confident in requesting the French to remove their forces from Vietnam. The French withdrawal came certainly before ARVN was ready to replace the Expeditionary Corps divisions, and created urgency for MAAG to help develop minimal conventional defense capabilities. Rh