I would refer to my letter of 23rd November, 1948, in which I
promised to let you have further views with regard to the survey
of political events and trends in South East Asia which you
forwarded for my perusal on 6th October 1948. [2]

2. The Defence Committee have completed a review of the matter and
I am attaching a copy of a paper containing its observations on
the defence aspects of the survey of the political events and
trends in South East Asia prepared by the Department of External
Affairs. The general conclusions of the Defence Committee [3],
with which I agree, are as follows:

'(a) In the event of a major war in the foreseeable future, it
would be global in character, the chief conflicts taking place in
Europe, the Middle East and the Far East, and the fate of South
East Asia would be decided by the result of those conflicts.

(b) China is not a major power from a military point of view, and,
by herself, offers no threat militarily. The threat will exist,
however, of subversive attack in the South East Asia area, not
only from local minority groups of Chinese who are Communists, but
also from other communist elements.

(c) The USSR is the only major power against which the British
Commonwealth might become involved in war in the foreseeable
future.

(d) It is most improbable that the USSR would extend her armed
forces into South East Asia whilst the Naval and Air strength of
the USA in the Far East threatens the flank of such a drive.

(e) Every endeavour should be made by Australia and the Western
Powers to assist South East Asian Governments defeat the
subversive threat developing as the result of the spread of
communism.

(f) The position of India in relation to South East Asia is
important and every effort should be made to ensure that she has a
military alliance with the British Commonwealth, but, failing
this, the minimum requirement is that she should be a benevolent
neutral.

(g) The threat of subversive action should not be allowed to tie
down considerable Australian armed forces, as this would, in fact,
be furthering the Soviet aim; and
(h) To meet our strategic requirements, it is necessary that
appropriate political and economic measures should be taken to
arrest the spread of, and ultimately eliminate, communism
throughout South-East Asian countries.'

Attachment

TOP SECRET

EXTERNAL AFFAIRS POLITICAL APPRECIATION: EVENTS AND TRENDS IN
SOUTH-EAST ASIA [4]

Defence Aspects and Implications

GENERAL:

The introduction to the Appreciation reads as follows:-

'This appreciation deals with the position of Australia, as a
South-East Asian country, in the event of a conflict between one
or more of the Western powers and one or more of the Eastern
European countries.'

2. The military view in regard to the foregoing introduction is
that any future major war will be global in character and the
survival of Australia win necessitate her participation on the
side of the Western powers.

3. The External Affairs Appreciation tends to be confined to
events and trends in South-East Asia without adequate relationship
to the global issue. The military view is that the fate of South-
East Asia will be decided by the result of the major conflict
which will probably take place in Europe, the Middle East and the
Far East.

POSITION IN CHINA
4. The greater part of the Appreciation is devoted to the menace
of Chinese nationalism. However, from the Defence viewpoint, China
by herself does not now, nor in the foreseeable future, represent
a military threat to South-East Asia nor to Australia. Many years
of war have accentuated her economic difficulties; politically she
is sharply divided; her army, though large, is poorly organised,
trained and equipped; there are no Chinese naval or air forces of
any consequence; and she has very limited industrial resources.

The Japanese threat, on the other hand, had great naval, military
and air strength with industrial resources to support them.

Unless China is allied to, and assisted by the U.S.S.R., she could
not threaten Australia militarily, and even if such a threat were
possible no southward movement could take place as long as the
naval and air strength of the United States of America in the Far
East threatens the flank of such a drive.

The threat will exist of subversive attack, not only from minority
groups of Chinese who are communists, but also from other
communist elements. It is agreed that the method of meeting this
type of attack is not one for military action.

From the foregoing it is concluded that China, by itself, offers
only a subversive threat to South-East Asia and Australia.

THE GOVERNMENTS OF SOUTH-EAST ASIA-
5. The conclusion in the Appreciation that the South-East Asian
countries should be prevented from turning to the U.S.S.R. for
support is concurred in. From the Defence viewpoint, every
endeavour should be made by Australia and the Western Powers to
assist the South-East Asian Governments to defeat the menace of
Communism.

INDIA-
6. The view, expressed in the Appreciation, that the position of
India in relation to South-East Asia is one of importance is
supported. Every effort should be made to ensure that she has a
military alliance with the British Commonwealth, but failing this
the minimum requirement is that she should remain a benevolent
neutral.

U.S.A. Interest-
7. The Department of External Affairs suggests that paragraph 18
of J.I.C. Appreciation No. 1/47 [5] requires reconsideration. That
paragraph, the substance of which was embodied in paragraph 31 of
the Appreciation by the Chiefs of Staff of 'The Strategical
Position of Australia-September 1947' [6], which is appended below
was considered by the Council of Defence on 20th April 1948. [7]
The reference therein to 'Direct U.S.S.R. intervention in South-
East Asia' means activities by the Soviet armed forces in that
area.

'31. South-East Asia is important in Soviet strategy, in that it
plays a part in the economy as well as in the strategic
dispositions of the Western Powers, and unrest there could have a
prejudicial effect on their military capacity in Europe, in the
Middle East, and in the Far East. The U.S.S.R. by propaganda and
disruptive tactics in this area, could curtail the resources of
the Western Powers and hold down some of their forces. Direct
U.S.S.R. intervention in South-East Asia is most improbable, as
she would hardly risk the danger of extending her forces into
South-East Asia, while the United States remained unchallenged on
her Eastern flank.'

Those views are considered to be still valid.

Defence Implications-
8. The defence implications as stated in the Appreciation from the
Department of External Affairs are not fully supported.

It is agreed that neither China as such, nor Communist influence
as such, represents a direct military threat to South-East Asia
and Australia, but there is a serious subversive threat offered by
Chinese and other communist inspired minority groups throughout
the area. It is further agreed that against this threat
conventional military measures would not be effective, and that
appropriate political and economic measures should be enforced
where necessary by police action. It is, therefore, not misleading
to conclude-vide paragraph 73 of the Chiefs of Staff Appreciation-
that U.S.S.R. is the only major power with which the British
Commonwealth might become involved in war, more particularly as
China is not a major power from the Defence viewpoint, and does
not, of itself, constitute a direct threat.

In reference to the degree to which Australian resources can be
committed outside South-East Asia, unless Russia as a result of
success in the major conflict, embarked on offensive action in
South-East Asia, the Chiefs of Staff current estimate is that
there is only a limited threat to that area from her armed forces.

Therefore, sound strategy dictates the employment of Australian
resources to the fullest possible extent for the successful
conclusion of the major conflict, thereby preventing the
development of action against South-East Asia. If the threat of
subversive action were permitted to tie down considerable
Australian resources, particularly armed forces, this would, in
fact, be furthering the Soviet aim. It is therefore desirable, in
order to meet our long term strategic requirements, that
appropriate political and economic action should be taken to
arrest the spread of, and ultimately eliminate, Communism
throughout the South-East Asian countries.

Political Policy Implications-
9. It is only appropriate for the two following comments to be
made on this section of the Appreciation as the other implications
have no direct Defence significance:-

(a) in regard to air bases required for Defence purposes (sub-
paragraph (i)), the areas in which they are required will be
notified to the Department of External Affairs in due course; and
(b) in regard to the suggestion that observers with Defence
background should be included on Consular Staff (sub paragraph
(1)), it is considered that the provision of Service Attaches,
Defence Representatives or possibly military intelligence staffs
for various countries in South-East Asia would need detailed
consideration when the proposed increase in consular staffs had
been decided. Factors relating to the importance of military
information likely to be gained, the availability of officers with
suitable military experience, qualifications and status and the
existing sources of information would need to be reviewed in
connection with each proposed appointment. [8]