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

890.00/9–1349

Report by Mr. Charles W. Yost, Special Assistant to the Ambassador at Large (Jessup)

top secret

[Washington, September 16, 1949.]

Discussion of Far Eastern Affairs in Preparation for Conversations With Mr. Bevin

held in the secretary’s office september 13, 1949

Present:

• The Secretary
• Mr. Webb
• Mr. Jessup
• Ambassador Stuart
• Mr. Kennan
• Mr. Rusk
• Mr. Fosdick
• Mr. Case
• Mr. Butterworth
• Mr. McGhee
• Mr. Merchant
• Mr. Yost
• Mr. Wilds¹
• Mr. Mathews²
• Mr. Satterthwaite

At the Secretary’s request, Mr. Jessup outlined what he considers the basic factors in the Far Eastern situation in regard to which he felt the Secretary should state the U.S. attitude before entering into a detailed discussion of concrete issues covered by the briefing papers. Among these factors were:

1. The central position of India in the Far East.

2. The Far Eastern Association or Pact.

3. The Japanese Peace Treaty.

4. Rapid implementation by the French of their agreements in Indochina.

5. Our over-all policy toward the Chinese Communists which will serve as a frame of reference for our action in regard to recognition, trade, Hong Kong, and the proposed Nationalist case before the United Nations General Assembly.

Mr. Butterworth then summarized his recent discussions with Dening of the British Foreign Office. He said that the British were now desirous of pressing vigorously forward with the Japanese Peace Treaty, urging that all the eleven nations concerned be invited to attend the conference but that the conference be held even though Russia and China did not attend. The British felt that U.S. security requirements such as for bases can be met through a separate agreement between the United States and Japan.

Mr. Butterworth said that he had impressed on Mr. Dening that before calling a peace conference the United States must have firm commitments from the British Commonwealth powers that they would support a common attitude on the key issues. Mr. Butterworth urged that the Secretary press this same point with Mr. Bevin and that he also attempt to obtain from Mr. Bevin a more tolerant attitude in regard to extending the authority of the Japanese Government prior to conclusion of the treaty.

As to China, Mr. Butterworth said the British were willing to control exports of 1–A commodities and petroleum, including control of exports from Hong Kong, and to join the United States in seeking an agreement of the other principal trading countries. They would not, however, agree even to stand-by controls for 1–B commodities. As to Hong Kong, the British are fully determined to hold the Island and not to negotiate in regard to its ultimate disposition with any unfriendly Chinese Government. They consider Hong Kong one end of the bastion in Southeast Asia, of which India is the other. The British would not, however, defend Macao and doubt that the Portuguese could hold it. The over-all British attitude toward China is that the Civil War is over, that they must deal with the Chinese Communists, that they will not liquidate their commercial interests, that they will not hurry recognition but will probably recognize sooner or later. Mr. Butterworth pointed out that this British attitude represented an unusual alliance between the City, which was interested in the commercial stake, and the Left, which wishes to normalize relations with the Communists. Mr. Kennan commented that the British are suffering from a delusion if they think they can profit in China from a policy of disunity between themselves and the United States. The important point is on whose terms trade is carried on. Mr. Butterworth mentioned the necessity of keeping in mind the effect on Japan of a restrictive trade policy. Ambassador Stuart remarked that the top Communist leaders are quite aware that they cannot get economic help from the Soviets and must obtain it from us in order to survive.

Mr. Kennan referred to telegram No. 1994 of September 5 [3] from Nanking³ as being an excellent brief statement of the desirable overall policy to pursue toward the Chinese Communists. It developed that the Consultants, FE and Ambassador Stuart were all in general agreement with the line of policy stated in this telegram. Mr. Kennan felt that in addition it was vital that there be a firm stand on protection of U.S. representatives and nationals in China and that this implied the application of unilateral sanctions if necessary. He also pointed out that the policy outlined in the telegram may require different action than Britain on the question of recognition and that the U.S. public should be prepared for this difference. The Secretary pointed out that there would be some difficulty in applying the policy set forth in this telegram in view of the attitude of U.S. public opinion and the Congress. For instance, there was the question of the use of 75 million dollars of discretionary funds in the MAP Act. Mr. Jessup urged that the apparently negative aspects of the proposed policy should be counteracted by affirmative action wherever possible, such as a reaffirmation of the “Open Door” policy and action on the Japanese Treaty. The Secretary inquired what concretely would the phrase about not making the Communists’ bed easier have on our trade policy. Dr. Fosdick suggested that we follow the policy set forth in NSC 41.⁴ The Secretary indicated there might be contradiction between the telegram’s recognition that the Communists be forced to learn the “hard way” that they cannot get along without the West, and the suggestion in NSC 41 that such a policy might throw them into the arms of the Soviets. Mr. Butterworth felt that in view of all the present obstacles to trade with Communist China, the mere continued absence of loans and credits from the West would keep it to small proportions and result in the Communists learning the “hard way” that they cannot get along without the West.

As to recognition of the Communist regime, the Secretary said he would urge Bevin to go slow and to exact satisfactory performance from the Communists on their international obligations. Mr. Butterworth expressed the hope that recognition would not come soon and that there would definitely be consultations before any action was taken. He asked the Secretary to mention to Bevin the ambiguous effect of continued presence of the British ambassador in Nanking. Mr. Jessup urged that we and the British jointly approach the Southeast Asian governments at a somewhat later time in order to explain fully our position on recognition before action is taken. He felt that we must consider very carefully before we put ourselves in a unilateral position on this question. Mr. Rusk urged that we in any case wait until it was clear that the Communists controlled substantially all of China.

The Secretary inquired what we should do about Formosa. Mr. Jessup suggested the possibility of a United Nations commission if Chiang Kai-shek could be persuaded to ask for it. Mr. Merchant declared the British were defeatists on this subject and felt that referring the matter to the U.N. would do more harm than good. Mr. Rusk urged that we at least approach Chiang on the matter and pointed out that U.S. opinion will demand some action by this Government on the Formosa question short of military intervention. The Secretary was doubtful whether reference to the U.N. would be successful. He felt it might only show off the weakness of the United Nations. Ambassador Stuart pointed out the danger of inflaming anti-United States sentiment in China by our stand on Formosa. Mr. Merchant expressed doubt that Chiang would make any substantial concessions in view of the fact that he expects shortly war between the United States and Russia.

The Secretary summed up our attitude on trade with Communist China by saying that we would let normal cash trade go, that we would prevent exports of 1–A items and that we would place 1–B items under control but would for the present issue licenses freely.

As to Indochina, Mr. Butterworth said that the British are cautious of supporting Bao Dai and of putting pressure on the French to this effect. He hoped the Secretary would urge Bevin to persuade the Commonwealth Governments to take the lead in recognition of Bao Dai and to press Schuman to carry out French commitments rapidly. Mr. Jessup strongly supported this recommendation. Mr. Butterworth urged, however, that it would be desirable that recognition by the Asiatic states precede recognition by the Western states.

Mr. Butterworth mentioned briefly two or three of the more serious issues which confront the Round-table Conference on Indonesia but did not feel these need be taken up with Bevin at this time.

As to a Pacific Pact, Mr. Butterworth reported that the British are reluctant to have a rival to the Empire in this part of the world; that they consider the Asiatics will be reluctant to do much unless pressed from behind and they consider the Empire the proper instrument of pressure. Bevin will, however, ask what economic help we can provide in Southeast Asia. Mr. McGhee pointed out the difficulty created by the fact that on the one hand the other states of the area are suspicious of India’s taking the initiative, while India will refuse to let others take the initiative. The British solution appears to be a program of economic aid country by country rather than jointly. It does not appear, however, that they intend to dump India’s economic problems into our lap. He doubts that the International Bank would be able to meet India’s needs fully but pointed out that we had no overall policy in regard to the area on which we could base a program of grants. The Secretary commented that this problem had been discussed in the recent financial talks and that it would be further studied by a continuing body. He said that the British realize they cannot go on bearing this burden indefinitely. Mr. Jessup pointed out that our economic approach is close to that of the British and it should not be difficult to merge projects which we may both propose. Mr. McGhee said that a grant program in fact is not necessary for India and that we need in any case a better accounting of the use India is making of her dollars. Mr. Butterworth recommended that the Secretary point out to Bevin that we believe a Pacific Union should have indigenous roots but that we also believe we should encourage it. A security pact in that area is not necessary at this time but may eventually be so. Mr. Jessup suggested that the Secretary in his conversation with Bevin refer to the latter’s support in the April conversations of a Far Eastern regional grouping.⁵ He also recommended there be discussed with Bevin the proposed reaffirmation of the “Open Door” policy in connection with Chinese United Nations case. Mr. Butterworth agreed but urged there be no mention of the Nine Power Treaty which had been so ineffective.⁶

As to the Middle Eastern problems, Mr. McGhee asked the Secretary to urge Bevin to give full support to the Clapp Economic Survey Mission. He also said that the British may raise the matter of Kashmir and offer to press the arbitration proposal once more with India.

1. Walter Wilds, Deputy Assistant Secretary of State.
2. Elbert G. Mathews, Chief of the Division of South Asian Affairs.
3. Scheduled for publication in volume viii.
4. February 28, approved March 3; vol. ix, p. 826.
5. See Mr. Bevin’s April 2 letter to the Secretary of State, p. 1135, and Mr. Butterworth’s April 4 to the Under Secretary of State, p. 699.
6. For summary of conversations with the British and French Foreign Office heads, see memorandum of September 28, in Part 1 of this volume, p. 83. For discussion of China, see memoranda of September 13 and 17 of conversations with Mr. Bevin and M. Schuman, vol ix, pp. 81 and 88.