894A.00–R/5–951
The Assistant Secretary of State for Far Eastern Affairs (Rusk) to the Director, Far East Program Division, Economic Cooperation Administration (Griffin)
Dear Allen: On May 3 Mr. Foster1 discussed with Mr. Acheson, among other subjects, the possible need of some modification in the general policy framework within which the ECA Mission in Formosa should conduct its relations with the Chinese Government. He expressed the view that circumstances now justify statement of a more [Page 1665] forceful policy than that contained in my letter of March 19 to you. There, our policy is stated as being that “The ECA Mission should advise but should not give direction to the Chinese, overtly or tacitly, in the conduct of the economic administration of the Island.” You have met since then, with Mr. Merchant, and agreed, I understand, that it would be desirable for the Department to provide the Economic Cooperation Administration amplification of our intent in the above policy statement.
The Department of State fully recognizes the importance that the ECA Mission on Formosa should exert its influence vigorously and firmly, in the Economic Stabilization Board and elsewhere, for the improvement of Chinese Government policies and practices in the broad fields of agricultural reform, export and import controls, industrial rehabilitation and in the basic field of fiscal administration. In general, the ECA Mission should attempt to achieve the proper and effective use of Chinese revenues from all sources as well as the most effective utilization of American economic aid. To this end the ECA Mission should, of course, be adequately staffed, work closely with MAAG and the Embassy to insure consistent policies and the exercise of coordinated pressures, and should continue to assign as observers on the Economic Stabilization Board representatives qualified to provide sound technical and policy advice.
An important and relevant problem arises from Chinese military expenditures on Formosa. It is probably inevitable that the military establishment must continue to impose a heavy burden on the national budget. It is not necessary, however, that its charges on Formosan resources be so unpredictable, arbitrary, and irresponsible, in terms of the social and economic consequences they produce, as to render sound economic planning almost, if not completely, impossible. I have requested Mr. Cabot to give careful and urgent consideration to the feasibility of working out arrangements, perhaps as a condition for the delivery of United States military assistance, for bringing under some kind of rational control the military expenditures of the Chinese National Government. If we can work out and then obtain the cooperation of the Chinese National Government in such arrangements, they would contribute basically to the prospects for the genuine and enduring results which ECA is seeking in the economic field. I am certain that Mr. Cabot will, in the near future be inviting the cooperation of the Economic Cooperation Administration as well as that of the Department of Defense in his study of this problem.
Sincerely yours,
- William C. Foster, Administrator, Economic Cooperation Administration.↩