894.50/10–947
The State Member of the State-War-Navy Coordinating Committee (Saltzman) to the Committee
Subject: The Economic Recovery of Japan—SWNCC 384.
I cannot approve SWNCC 384 for the following reasons.
There is no disagreement between the Department[s] as to the urgent need for making Japan self-supporting or as to the need for SCAP to place more emphasis on recovery. However, it should be pointed out that since there is already another paper before SWNCC—The Revival of the Japanese Economy, SWNCC 381, submitted by the Department of State on July 22, 1947,76 a new paper on this same subject does not seem appropriate. The comprehensive economic recovery program contained in SWNCC 381 includes the “Japanese recovery plan” suggested in SWNCC 384, but the Department of State regards such a “Japanese plan” standing by itself as of doubtful value. If the Department of the Army considers the comprehensive recovery program contained in SWNCC 381 to be incomplete in any respect, the Department of State would be happy to study specific amendments. For over two months the Department of State has been engaged in detailed discussions with the Department of the Army and has already incorporated in SWNCC 381 many changes which have been requested.
I would like to comment generally on the proposal that a directive seeking to foster Japanese recovery be issued unilaterally. Even if there were no objections to the content of the directive the Department of State would oppose the proposed procedure since unilateral action by the United States is bitterly resented by other countries in [Page 303] the Far East whose cooperation is absolutely essential to Japanese recovery in the long run. Many of these countries are concerned that the United States is apparently placing Japanese recovery ahead of the recovery of the rest of Asia. Rational or not, this concern must be reckoned with when commerical planning inherent in the Japanese recovery program is being worked out. The approach to obtaining international cooperation in Japanese recovery suggested by SWNCC 381 has somewhat greater possibility of success than a unilateral directive to SCAP. There is also the need for obtaining maximum cooperation of other countries in drafting a Japanese Peace Settlement.77 A blatant assertion of United States emphasis on Japanese recovery at this time would hardly be conducive to the attainment of our objectives at the Conference.
If the purpose of SWNCC 384 (final paragraph) is to modify the responsibilities of SCAP under established Far Eastern Commission policies covering demilitarization, reform, etc., it is suggested that a proper procedure would be to invite SCAP to offer for SWNCC study proposals for modification of specific reform policies which seem to conflict with economic recovery. The language of the final paragraph of SWNCC 384 is so general as to give SCAP a blank check, which is objectionable to the Department of State, and would impose without adequate guidance extremely difficult implementing decisions upon the SCAP. It should be pointed out, in addition, that the United States has the authority to issue emergency interim directives only in areas of policy not covered by Far Eastern Commission decisions. If it is not the intent of SWNCC 384 to propose modification of existing policy directives, then no directive to SCAP would appear necessary.
Further, if a purpose of SWNCC 384 is to reopen consideration of the United States position on level of industry as set forth in SWNCC 236/43,78 the Department of State takes strong exception. The position in SWNCC 236/43 was reached after prolonged study and discussion and represents agreement not only among the Departments concerned but also by Mr. Strike and Mr. Pauley, and has been transmitted to Overseas Consultants in Tokyo as their policy reference in determining the availability of industrial facilities for reparations. It represents, in the view of the Department of State, a soundly conceived United States policy on this question. Furthermore, the United States is already engaged in negotiations to obtain Allied agreement on SWNCC 236/43. In the light of these negotiations it is clear that any new United States proposals for level of industry more lenient to Japan than those in SWNCC 236/43 would be regarded as a repudiation [Page 304] of existing United States commitments and might be resisted so strenuously by our Allies as to rule out any possibility of agreement. At the very least, reaching Allied agreement would be greatly delayed. Yet it has always been agreed by the Departments of State and the Army that failure to reach level of industry decisions in the Far Eastern Commission has complicated Japanese recovery.79
The Department of State considers the first three and one-half pages of SWNCC 384 to be inappropriate in a directive to SCAP, especially in an interim directive. If publicity for SCAP’s fine performance is desired, this can be accomplished as previously by comments and speeches of appropriate officials in the United States Government.