Foreign Relations of the United States, 1949, The Far East and Australasia, Volume VII, Part 2

890.20/9–1249

Memorandum of Conversation, by the Director of the Office of Far Eastern Affairs (Butterworth)

top secret

[Washington,] September 12, 1949.

Participants:

For the United Kingdom:	For the United States:
M. E. Dening, Director, Office, Far Eastern Affairs	W. Walton Butterworth, FE
	George C. McGhee, NEA
C. A. Gerald Meade, Counselor	Livingston Merchant, FE
J. F. Ford, First Secretary	Raymond A. Hare, NEA
C. M. Walker, First Secretary	Elbert G. Mathews, SOA
M. B. Thresher, Second Secretary	Charles S. Reed, II, SEA
	Kenneth P. Landon, SEA
	William S.B. Lacy, SEA

At my invitation Mr. Dening opened the conversation.¹ He said that Mr. Bevin was concerned to discuss ways and means to defend Southeast Asia against Communism. In reply to my question, Mr. Dening said that, for their purposes, the expression “Southeast Asia” included Afghanistan, India, Pakistan, Ceylon, Burma, Siam, Indonesia, Malaya, Indochina and the Philippines. Mr. Dening said that his Government had earnestly considered the desirability of the development of the Southeast Asian alliance and the regional consciousness necessary to the formation of such an alliance. He said Mr. MacDonald was of the view that the key to such an arrangement was India; that Nehru’s India is at present disposed to join no bloc, believing that it can successfully provide the basis for a third force in the Asiatic world. In these circumstances Mr. Dening believed that the British Government concurs that neither a political nor a military regionalism is possible of development at this time. Mr. Dening said that it was his Government’s view that since a regional arrangement of the Southeast Asian states was necessary to the successful resistance to Communism in Asia, the economic approach to such a regional arrangement was the only one possible in the circumstances. Mr. Dening went on to say that he felt the Southeast Asian states could successfully be encouraged to make a common approach to their economic problems and through this experience to acquire the habit of thinking regionally. He stated the intention of his Government in several ways, all designed to make it clear that the British Government considered that the first and necessary step toward meeting the Communist threat in Southeast Asia was to develop the economies of the countries of the area to a degree of strength equal if not superior to Communist pressure. Mr. Dening said that his Government believed if such a program was successful even in preserving the present standard of living in Southeast Asia that area could be successfully oriented toward the West.

I replied that while we were fully aware of the importance of the economic factor in Southeast Asia, we were not convinced that a solution of the economic problems of the area was a general panacea for the general instability which has afflicted it. I suggested that perhaps in the case of Siam and Malaya, where no great political problems exist, a solution of outstanding economic problems might be helpful if not decisive but that in Indonesia and Indochina the essential political instabilities were an almost unsurmountable obstacle to the successful extension of financial and economic assistance; that indeed it was difficult to accept the desirability of extending economic and financial assistance to those areas until their political problems had approached a solution. Mr. Dening replied that he understood Mr. Bevin and Mr. Acheson had agreed on a previous occasion that no general formula for the solution of the political difficulties of the area was forthcoming and that it was possible in the circumstances to do no more than make a piecemeal or a selective contribution to the solution of the political difficulties which beset the area. I answered that it appeared to me that the Department was less pessimistic about the possible emergence of a regional arrangement in Southeast Asia than Mr. Dening appeared to be. I said that I thought India and the Philippines would doubtless play the principal roles in this development, the Philppines almost certainly playing a second to India’s first; that as we wanted any South Asian alliance to arise from indigenous motivation, we had been at pains to take no initiative toward its creation. I continued to say that whatever financial assistance we might find ourselves able to extend to the Asiatic states, we felt those states should move of their own volition toward a solution of the Communist problem, both internal and external; that India should soon recognize the character of the Communist menace not only to her but to the other states of Southeast Asia; and that India should be moved to impress upon her neighbors the fact that the great enemy to their independence and political and economic welfare was not colonialism but Communism. I pointed out that apparently India’s efforts to impress upon Burma the validity of these ideas had met with some success. Mr. Dening said that India’s approach to Burma had been the result of Commonwealth pressure and that the very fact that India did approach Burma only upon the initiative of the British Commonwealth was an evidence of the lack of cohesion between the Southeast Asian states. He agreed that it was essential for the United States and the British Commonwealth to keep out of the limelight of Southeast Asian regional affairs but felt it absolutely essential to “pull the strings” whenever necessary. I did not dissent from this general proposition and stated that we had exerted some influence on General Romulo to the end that President Quirino’s proposals for a conference between the Asian states at Baguio be modified to a somewhat more reasonable direction.

Mr. Dening opined that Mr. Acheson would be unable to express an opinion as to the desirability of Western economic and financial assistance to Southeast Asia, as proposed by his Government, until he had examined the particulars of the proposals which Mr. Dening said he hoped to place at Mr. Acheson’s disposal. He went on to say that his Government had developed particular projects which it thought recommended themselves as desirable recipients of economic and financial aid from either the United States or the British Commonwealth. I observed that I thought it relevant and useful to bear in mind our experience with ECAFE. I pointed out that we had been obliged to discourage the members of ECAFE in their efforts to lay the foundations for a Marshall Plan for Asia, not only because a Marshall Plan for Asia was in itself impractical but because we felt that the Asiatic states should make increased efforts to solve their own economic problems. I told Mr. Dening that we had carefully considered what individual projects seem to recommend themselves to us as desirable recipients of economic and financial assistance and that we had come to the conclusion that public financing of practical projects should be done through the Export–Import Bank and the World Bank.

There followed a somewhat general discussion of the character of ECAFE and of the part it might play in the containment of Communism in Southeast Asia. Mr. Dening observed that ECAFE, far from proving a useful instrument to the creation of regionalism in Southeast Asia, had, because of the presence of the Russians, been virtually useless. I pointed out that while we had neither encouraged the formation of ECAFE nor participated in its proceedings with enthusiasm, we had found it necessary to address ourselves to the problems which Its very existence created; that we had been obliged to discourage the efforts of ECAFE to lay the foundations for a Marshall Plan for Asia; and that we had used ECAFE as a forum in which to instruct the Asiatic members of that organization as to the necessity of their learning to help themselves. Mr. Dening pointed out that the Asiatic powers had demonstrated, during ECAFE conferences, no great ability to agree amongst themselves on regional economic policies. I agreed pointing out that the economies of the Asiatic states were independent of each other while the economies of the West were interdependent.

I returned to consideration of the British proposal by saying that I was sympathetic to the British program of increasing food supply throughout, the Southeast Asian states and to extending economic and financial assistance to such a program through the World Bank and the Export–Import Bank. I added that I felt it was a matter of great importance that Japanese foreign trade be increased as a part of such program both for the benefit of the Asiatic countries which needed Japanese-manufactured goods and the Japanese which would benefit enormously by recovering access to food and other raw materials in Asia. As Mr. Dening appeared to agree in principle, I asked if he considered such a trade with Malaya could be further developed. Mr. Dening and Mr. Ford replied that while Japanese goods were necessary to the normal functioning of the Malayan economy, the fact that trade balances must be settled every six months in dollars inclined the Malayans to minimize their trade with Japan.

Mr. Lacy, referring to Mr. Dening’s belief that the influence of India on the political orientation of Southeast Asia, asked if Mr. Dening believed that the influence of anti-Communist minded Asiatic states would have any appreciable influence on India. Mr. Dening replied that he did indeed believe so; that India was learning more about Communism in Asia as time went on; that for example Ho Chi Minh’s radio association with Stalin had had a salutary effect upon the Indian estimates of the Communist character of Ho Chi Minh’s Government. Mr. Landon asked if Mr. Dening believed that Marshal Phibun’s proposal for a convocation of the Southeast Asian states to plan an anti-Communist front could be helpful in the circumstances. Mr. Dening said that he thought India might be resentful of such proposals coming from small powers since she had, as recently as the winter of 1949, failed in her effort to create a South Asian confederation. Mr. Dening repeated again his conviction that no cohesion in Southeast Asia was possible unless provided by the Western powers.

Mr. McGhee asked if it was the British plan that projects for economic development in Southeast Asia to receive assistance from the West should receive that assistance from the World Bank and Export–Import Bank. Mr. Dening replied in the affirmative. Mr. McGhee asked if it was the British proposal that each project be accepted or rejected in accordance with its practicality as a bankable proposition. He added that a bankable project is not always necessarily the most desirable project from a political point of view. Mr. Dening replied that he hoped in the course of his visit to the United States, Mr. Nehru might acquire some useful economic and financial education.

I adverted to the subject of Southeast Asian regionalism by stating that we were inclined on balance to consider that we could make use of a regional arrangement in Southeast Asia in our anti-Communist operations as long as we were at pains to avoid the appearance of initiating the development of that regionalism. Mr. Dening appeared to agree. I referred to the presently irreconcilable differences which appeared to separate India, Pakistan and Afghanistan, and pointed out that the influence of India in bringing about a regional arrangement of the other states of Southeast Asia might be lessened by the effect of those very differences. Mr. Dening neither agreed nor disagreed with this proposition but added that there existed throughout Southeast Asia a considerable fear of India and that this would require India to move very slowly in any regional arrangement of states in Southeast Asia. I said that the presence of Chinese minorities in Indochina, Siam, Malaya and Indonesia had alerted those states to the imminence of Chinese Communist pressure. Mr. Dening anticipated me somewhat by saying there were no Chinese minorities in India which perhaps accounted for the lower sensibility on the part of Indian leadership to Communist danger as compared with leadership of other Southeast Asian states. Mr. Dening remarked in this connection that he understood that US–UK war plans contemplated great commitments in Europe and in the Middle East—commitments so large that very little would be left over for Asia; that in these circumstances it was important that we bend every effort in the pre-war period toward enabling the Asiatics to stand on their own feet in the event of conflict. I agreed.

Mr. Hare asked Mr. Dening if he considered Chinese Communism the principal threat against which Western preparations should be made. Mr. Dening replied that while Chinese Communism was certain to continue to be a grave threat to the internal stability of the states in that area, it was not considered that Chinese Communist armies would engage in open aggression toward those states in the near future. Mr. Hare then asked what plans if any the Commonwealth had for the education of Indian leadership to the imminence of Communist danger. Mr. Dening replied that Indian leadership was still inclined to think in terms of India as a third world force. He added that he thought India, as well as certain other Asiatic states, was inclined to avoid associating itself with political blocs because it feared U.S.S.R. opposition in the United Nations. He thought that India, for example, should know that the U.S.S.R. would veto Indian membership on the Security Council on [or?] Indonesian Membership in the United Nations without regard to the association of those states with any political coalition. I agreed, pointing out that world Communists regarded the present Indonesian Republic leadership as inplacable enemies.

I turned the conversation to Indonesia by saying that it was the general view in the Department that the creation and maintenance of stability in Indonesia was in some part dependent upon the presence in the area of Dutch troops; that as a practical matter the Netherlands was short of transport capacity, a shortage that would make a swift withdrawal of Netherlands forces impossible. I asked Mr. Dening if he did not agree that withdrawal of Netherlands troops from Indonesia should be both gradual and staged. Mr. Dening agreed and said that he thought India and Pakistan should be convinced of the desirability of a gradual withdrawal of Netherlands forces and that he thought the Indian Ambassador at The Hague could be helpful in this respect. He said the Indian Ambassador at The Hague seemed convinced of the desirability of the Indonesians retaining Dutch advisers after their independence had been attained. I then asked Mr. Dening to dilate on his previously expressed view that the matter of the Dutch retention of military and naval bases in Indonesia should be left to informal agreement between the Dutch and the Indonesians, and conversely should not be incorporated in the statute of the union. Mr. Dening said that this was precisely the view of his Government; that the British Ambassador at The Hague had discussed this proposal with the Netherlands Foreign Office; that the Netherlands Foreign Office had appeared to agree in principle but had replied that unfortunately the problem of defense arrangements was to appear early on the agenda of The Hague Conference, and that they considered it unlikely that the Indonesians would be prepared to defer to a later date discussion of this matter. I referred to a report received by the Department to the effect that Mr. Nehru had advised the Indonesians to avoid permitting disagreements on the matter of Dutch bases in Indonesia to disrupt the negotiations at The Hague. Mr. Dening said he had no knowledge of Mr. Nehru’s position in this particular but thought the Indian Ambassador at The Hague should be considered. I said, in summary, that the United States Government was particularly anxious to preserve Dutch influence in Indonesia in the economic, political and strategic sense; that it was our hope that the Dutch, when they withdrew, would provide the Indonesians with both training and equipment so that the Indonesian armed forces could gradually take over the responsibility for the preservation of law and order.

Mr. Hare suggested that some of the confusion in analyzing the likelihood of the emergence of a Southeast Asian union of states arose from a failure to recognize that India, taken by itself, was perhaps not the strong point in such a union that some had supposed. Mr. Dening agreed. There followed something of a general discussion on what could be done to contribute to a solution of the Kashmir dispute. It was the consensus that the acceptance of the principle of partition would only result in narrowing the area and not the problem; that Pakistan would not be satisfied by partition and that Nehru was incapable of a reasonable approach to the Kashmir problem. It was also agreed that while a solution reached through arbitration and imposed on both parties seemed the logical solution, an imposed solution is invariably unsatisfactory to either side and results in the abuse of the arbitrator. In answer to Mr. Hare’s question, Mr. Dening and Mr. Meade expressed the view that India’s record in the Kashmir case would undoubtedly have an adverse effect upon her candidacy for membership on the Security Council. Mr. Dening suggested that India might well be made aware of the fact that her performance in Kashmir had made her unpopular in the United Nations to the end that her intransigence in this particular might be reduced. Mr. Hare suggested that perhaps it would be necessary to “accept the absurd” and recognize the Afghanistan dispute as involving a complex of special factors giving rise to a problem for which no solution presently exists. There appeared to be general agreement with this view; Mr. Mathews and Mr. Dening observing that no rational solution was possible when the individuals involved were of an unreasonable frame of mind.

Mr. Dening then addressed a few remarks to the Burmese problem stating that his Government believed it had no choice but to support the present Government of Burma in spite of its highly unsatisfactory character. Further discussion of Burma was deferred until Wednesday morning at 10:30.

In answer to questions concerning the present status of the Dutch–Indonesian dispute, Mr. Dening expressed the opinion that: (a) the Indonesians could not be brought to accept the principle of the retention by the Netherlands–Indonesian union of executive power. He added that since only consultative powers resided in the British Commonwealth arrangements, his Government would find it difficult to press the Indonesians to accept a different principle for the Netherlands–Indonesian Union, and (b) that the Indians could be helpful, if not decisive, in inducing the Indonesians to adopt a reasonable and constructive attitude toward compliance with the cease fire order, the embodiment of reasonable economic and financial provisions in the constitution of the United States of Indonesia, and in the granting of military and naval bases to the Netherlands; and (c) that the Indonesian attitude toward the formation of a common front against Communism would coincide with that of India.

1. For earlier conversation oil Southeast Asia, see memorandum of September 9 in Part 1 of this volume, p. 76.