CA Files: Lot 59 D 228
Memorandum by the Deputy Assistant Secretary of State for Far Eastern Affairs (Merchant) to the Assistant Secretary of State for Far Eastern Affairs (Rusk)
The attached papers1 are the latest items foreshadowing a massive economic-military aid program which we are drifting into for Formosa. Last year the ECA program was about $25 million and the military aid program about $10 million. For fiscal 1952 the JCS-S/ISA military program comes to $237 million with over $200 million additional tentatively projected for fiscal 1953.
The economic aid program for fiscal 1952 will run close to $100 million unless I miss my guess. What is disturbing, however, is that the groundwork is being laid by the Chinese and by ECA for “budgetary assistance” within the coming year with the alternative “economic collapse”.
S/ISA is shooting for a March 1 deadline for clearance of the Formosa military aid figure. They won’t meet it, but the pressure is on us.
Having set our foot on the road we are on, I am inclined to think that we are in no position to contest a JCS estimate of the cost of a program designed to make the Island militarily defensible. Similarly, I believe we are in little better position seriously to contest an ECA estimate of what may be required to keep Formosa economically healthy and enable it to absorb the impact of a massive military aid program.
I believe, however, that we owe it to the Department and the taxpayer to take a good hard look at the total price tag which I estimate will run over $400 million for fiscal 1952. On a per capita basis a comparable economic-military aid program for Japan would run about $5 billion a year.
I suggest that you call Messrs. Clubb, Barrett,2 Parelman and myself [Page 1586] to meet with you as soon as convenient with a view to establishing or confirming an FE position. We should then meet with ECA and S/ISA preferably in a joint meeting.