Foreign Relations of the United States, 1952–1954, East Asia and the Pacific, Volume XII, Part 1

611.90/10–1154

Memorandum by the Director of the Foreign Operations Administration (Stassen) to the Secretary of State¹

secret

Washington, October 11, 1954.

Report and Recommendations on Developments in the Regional Economic Organization of South East Asia, South Asia, and the Far East (NSC 5429/2, paragraph 3.)

1. Pursuant to the recommendations of the State-FOA working group under the Chairmanship of Mr. Baldwin, and the policy guidance of the Secretary of State, initial steps toward establishing a regional economic organization of the non-communist nations of Asia and the Far East have been taken as follows:

A. An extensive preliminary consultation with the U.K. Chancellor of the Exchequer² and other U.K. officials was held (during the IMF week)³ with representatives of State, Treasury and F.O.A. Concurrence of the U.K. in the desirability of the objective, the wisdom of building on the Colombo Plan, the inclusion of Japan, and arrangements for continuing joint study were obtained.

B. The U.K. recommended an early preliminary talk with Finance Minister Deshmukh of India and Finance Minister Mohammed Ali of Pakistan.

C. At the Ottawa meeting of the Colombo Plan, Japan, Thailand, and the Philippines were admitted to full membership.

D. At Ottawa a preliminary conference with Finance Minister Deshmukh of India resulted in his expression of favorable interest in an economic organization arising from the Colombo Plan, his indication that he would study the problem, and his anticipation of conferring with the U.S. delegation on the subject during the planned journey to the area.

E. At Ottawa a preliminary conference with Finance Minister Mohammed Ali resulted in his expression of favorable interest in a broad sense, but his concern that such an economic organization would be dominated by India, and his concern that the countries which had joined SEATO should have preference in U.S. aid. It was explained to him that in any event it has not been anticipated by the U.S. that any regional economic organization would have any jurisdiction over U.S. defense support allocations, and further that the political problem of India which he raised would be studied.

F. The Ministers’ Session of the Colombo Plan was advised “We invite and will consider with care the further suggestions and the additional plans which are advanced by the nations of Asia. We shall be especially interested in the steps which are taken toward multilateral regional economic cooperation in Asia. We have been impressed with the record of economic and financial accomplishments of the European countries through their combined actions, in the past years. Thus it is constructive, as we see it, that you have unanimously decided in this session to expand and to include Japan and Thailand, and this morning the Philippines, within the Colombo Plan.”

2. The Secretary of the Treasury and the Secretary of Commerce⁴ have both been invited to send representatives to be included in the U.S. delegation which will make the journey through the Colombo area departing approximately November 20th.

A. In accordance with the policy guidance of the Secretary of State and the approval of the President, this journey will be openly for the purpose of reviewing the FOA and Colombo programs in the countries visited and the exploration of the regional economic organization will be done without fanfare and all publicity on the regional organization ideas will be stimulated from Asian national sources.

3. FOA is now preparing a thorough analysis of economic resources and trade, investment and payment patterns of the Colombo Plan countries which will be available to all U.S. departments concerned and to the U.S. delegation.

4. Recommendations

A. It is recommended that the U.S. discuss in a preliminary manner the regional economic grouping with the Prime Minister of Japan during his impending visit to Washington and encourage Japan’s early allocation of a modest quantity of yen for Colombo Plan projects. The U.S. should express a willingness that yen generated by surplus food sales to Japan under PL 480 may be used for this purpose on a matching 50–50 basis with yen appropriated by Japan up to a maximum of 5 million dollars value.

B. It is further recommended that the U.S. not contemplate the inclusion of the Republic of Korea or of Nationalist China in the initial regional economic organization because of the extreme political problems which are inescapable in these two instances and in view of the essential importance of including India and Japan.

(1) The Korean question can be re-examined after relations of Korea and Japan are normalized.

(2) The Chinese Nationalist question can be re-examined if stability is established on the Chinese issue in the United Nations.

C. It is further recommended that neither France nor the Netherlands be included in the observer status anticipated for the U.S. and U.K. and Canada as neither one could be included without the other, and the two together would inject difficult political and economic issues into the organization which are not essential to its economic success.

D. It is further recommended that ECAFE (Economic Commission for Asia and the Far East under the United Nations) should not be used in any manner for the regional grouping since it includes the USSR and does not include Japan.

5. Information

A. The Colombo Plan now includes the following area countries:

1. India

2. Pakistan

3. Ceylon

4. Burma

5. Thailand

6. Indonesia

7. Australia

8. New Zealand

9. Malaya

10. Viet Nam

11. Cambodia

12. Laos

13. Philippines

14. Japan

B. The Colombo Plan includes the following non-area countries:

• United Kingdom
• United States
• Canada

Harold E. Stassen

1. Addressed also to Cutler and Staats.
2. R.A. Butler.
3. The Ninth Annual Meeting of the Board of Governors of the International Monetary Fund took place in Washington, Sept. 24–29.
4. Sinclair Weeks.