270. Memorandum of Conversation0
SUBJECT
- Japanese, Korean and Taiwan Programs
PARTICIPANTS
- Mr. William H. Draper, Jr., President’s Committee
- FE–Walter S. Robertson
- FE–J. Graham Parsons
- FE–Gardner E. Palmer
- W/MSC–James Wilson
- Colonel Blakefield–Draper Committee
- Colonel Lansdale–Draper Committee
Mr. Draper said he wished to report some of his observations and preliminary conclusions resulting from his recent trip to Japan, Korea, and Taiwan.1
[Here follows a discussion of the visit to Japan.]
Mr. Draper said that he saw President Rhee three times, once with General Hull. Both General Hull and he are convinced that a reduction in the number of Korean troops is both possible and desirable. He proposes that equipment from de-activated divisions be used for training reserve divisions to place them on a thirty day basis. Starting next year further divisions would be deactivated and equipment so utilized until the total is reduced from eighteen to twelve divisions or from 650,000 to 400,000, or better than 5,000 per month over a period of the next three years. He added that General Hull considered that from a tactical stand-point troops should be trained and equipped on a more mobile basis; that therefore the present situation with fourteen divisions at the front line and four in reserve would be about reversed; that this would permit the bulk of the troops to be used for a mobile defense with which he understands General Taylor agrees.
Mr. Robertson inquired whether the basis of his recommendations to reduce the forces was to save money or for better defense. Mr. Draper responded that Korean economy would be strengthened and the civilian labor force increased. In rebuttal, Mr. Robertson said that there wouldn’t be any economy if the communists came in. Mr. Draper said there are now eighteen divisions in the Korean army plus one Marine division plus two U.S. divisions, making a total of twenty-one in all [Page 546] Under his plan one division would be converted into reserve every six months beginning next year, if President Rhee agrees; he added this planned reduction could be stopped at any time if changed circumstances so dictated. Mr. Draper agreed that we must maintain a strong military posture and also with Mr. Robertson’s observation that the communists are probing everywhere, not only in the Far East. Mr. Draper said in political terms he was thinking that the ROK might announce some reduction of its forces and ask that the communist North Korea do likewise. Mr. Robertson thought this would be inadvisable because of the adverse effect of such action on other Asian countries. He added that on the basis of their past record, agreements of the communists were not kept anyway.
Mr. Draper then turned to the economic situation in Korea, pointing out that imports were over $400 million while exports totaled only $16 million supplemented by offshore procurement approximating $100 million. He said that an excellent recovery job had been done by ICA, but that he felt more progress could be made toward viability. In this connection he said that the Koreans had 200 thousand tons of rice for export, but that not enough effort had been made by either the Koreans or the U.S. to dispose of it, although some small amount had been sold to Okinawa through military channels. He mentioned that Korean fish should be sold to Japan, and that textiles should be sold generally abroad but were prevented from moving primarily by ICA rules. He said that a rice agreement with Japan was essential since Korea has an excess of high grade rice and no access to the Japanese market. He said that with a surplus of rice in the Far East and the failure to export, the Korean farmer was hurt by lowered prices. Although admitting that it was a long haul toward viability in Korea, more effort should be made and a long range plan for exports is needed.
Mr. Robertson pointed out that as long as such a high percentage of gross national product goes for military costs, there is no chance for economic viability, and the main economic job is to hold the line against a runaway inflation. Mr. Draper then touched on the exchange rate which he said was not conducive to exports. He said that the American businessmen indicated that there were different rates at present of 1500 hwan per U.S. dollar for dollars, 1200 hwan for $1 equivalent of Japanese yen, and 900 to 1000 for other currencies despite the fact that the official rate is 500 plus 150 hwan tax on imports. He added that President Rhee had mentioned to him that he wished Mr. Dodge could come over and spend three or four months on this problem. Mr. Draper said that he recognizes the great difference between Korea and Japan, where Mr. Dodge worked on financial problems. He questions, however, whether Mr. Dodge’s health would permit him to go to Korea, although he has passed the information on to him. Mr. Draper finished Korea by [Page 547] noting the various losses and theft of gasoline and other materials from the Army and the prevalence of squeeze by officials for the processing of government papers.
[Here follows discussion of the visit to Taiwan.]
- Source: Department of State, Central Files, 794.5–MSP/2–2859. Secret. Drafted by Palmer and approved by Robertson.↩
- See footnote 1, Document 268.↩