794.0221/10–251
Memorandum by the Deputy Director of the Office of Northeast Asian Affairs (McClurkin) to the Assistant Secretary of State for Far Eastern Affairs (Rusk)1
Subject: Financial Provisions of United States-Japanese Administrative Agreement.
Background
In February 1951 Mr. Dulles and Prime Minister Yoshida initialed a tentative draft Administrative Agreement2 which provided that the Japanese would furnish facilities comparable to those furnished by other friendly sovereign countries where United States maintained forces, which referred in particular to arrangements in the United Kingdom, and which set out certain facilities which had been estimated to represent 20 to 30 percent of the total cost.
A review of the matter by the Department of State led to the recommendation in July 1951 that Japan should agree to furnish facilities and services by categories amounting to approximately 50 percent of total cost, the arrangement to remain in force until renegotiated, but to be renegotiated by reason of changes in such relevant factors as Japan’s defense forces, economic conditions in Japan and the United States, and Japan’s balance of payments. This recommendation was accepted informally and in its general outline has been the basis of Washington thinking since then.
The draft Administrative Agreement as approved by the JCS and submitted to the Department3 is consistent with the proposal of the [Page 1371] Department of State, except that it omits specific reference to renegotiation by reason of various relevant factors. There are several minor differences, as well.
CINCFE has recommended that the Administrative Agreement not enumerate all the categories of supplies and facilities to be furnished by Japan, but provide for a Japanese contribution of real estate and above that for a stipulated amount of yen, denominated in dollars to avoid exchange rate fluctuation. CINCFE also recommended that, for political and administrative reasons, the Administrative Agreement stand on its own feet and not refer to the partial pay-as-you-go arrangements presently in force.
Recommendations
1. If there is much delay in arriving at a United States position on the entire Administrative Agreement, the financial provisions should be agreed first, and taken up with the Japanese in order that both the Japanese and the Department of the Army may know where they stand in preparing forthcoming budgets.
2. The Administrative Agreement should not refer to the partial pay-as-you-go arrangements presently in force.
3. The Department should support CINCFE’s recommendation that the Agreement be in the form of a Japanese undertaking to furnish real estate and related facilities and above that a stipulated amount of yen denominated in dollars.
4. The Department of State should oppose CINCFE’s further recommendation that the amount of yen to be furnished by Japan should be reduced annually by an amount equal to the increased cost of Japan’s own increased assumption of responsibility for defense. In lieu of this provision, the Department should support its previous recommendation that the amount be renegotiated on the basis of changes in various relevant factors. Comment: This is not necessarily a substantive difference, but it is believed unwise to appear to guarantee Japan any given level of overall defense expenditure. Such an approach is being taken in the case of Germany, but that is because of German participation in well-understood European defense arrangements.
5. The Department should withdraw its previous recommendation that sentences of the Annex to the Agreement referring to the general principles governing the furnishing of facilities and services provided to United States forces by other sovereign countries be omitted, since it is politically desirable that the agreement recognize the principle that the arrangements should be similar, other things being equal, to arrangements with other countries.
[Page 1372]6. The provision of the JCS draft that the United States shall have complete freedom of action in using yen credits available to it in the payment of United States debts should be omitted, on the ground that the use to which yen credits which may be available to the United States can be put should be provided in the arrangements under which such yen credits are generated.
7. The Department should not object to the provision in the JCS draft ref erring to accounting arrangements.
8. (Inclusion in the Administrative Agreement of a provision establishing the right of United States to maintain military banking facilities as recommended by CINCFE. Recommendation awaiting OFD and Treasury views.)
- Memorandum drafted by Noel Hemmendinger, Officer in Chargé of Economic Affairs in the Office of Northeast Asian Affairs. The original bears the following marginal note: “D[ean] R[usk:] I think this is OK. U. A[lexis] J[ohnson].”↩
- For text, see Annex IV to the letter of February 10 from Mr. Dulles to Secretary Acheson, p. 876.↩
- See footnote 1, p. 1281.↩