Canberra, [10] February 1950²

SECRET

Economic Assistance in South-East Asia

1. The Conference of Commonwealth Foreign Ministers at Colombo has agreed to form a Consultative Committee on South and South-East Asia. The Australian Government feels that the most effective way of resisting the spread of Communism in the area is by selective economic measures designed to stabilise Governments and remove causes of unrest in the most critical areas. It is not intended that the Committee should create the impression that a spectacular increase in living standards should be inaugurated, but any form of economic assistance that is rendered must be accompanied by co-operation from the United States, France and the Netherlands.

2. The likelihood of U.S. assistance has been examined and it would appear from action already undertaken and from statements made by authoritative persons in the United States of America that a considerable amount of American aid in South-East Asia is being contemplated. On the other hand, it should be borne in mind when considering this evidence that:

(a) American policy in the Far East is as yet imperfectly formulated. This may be seen from the apparent contradictions in statements made early in January, 1950 by Truman,³ Acheson and Jessup⁴ (see P.I. Summary No. 2/50)⁵

(b) The Administration is at present being strongly criticised for its conduct of foreign policy, and any moves which may be announced must be associated with the desire to secure political support for the bipartisan foreign policy. It may therefore be possible that proposals will be withdrawn in the event of American hostility being aroused–as, for instance, after Acheson's statement on January 10, 1950 that no aid to Formosa and South-East Asia would be granted, which was subsequently modified to allow certain forms of assistance. Similarly the recent defeat in the House of Representatives by 193 votes to 191 of a motion to allow aid to Korea must not be considered as a desire by America to 'keep out' of Asia, but rather as an expression of dissatisfaction over the conduct of her foreign policy.

3. Bearing in mind these qualifications, certain recent statements on American aid to South-East Asia may be evaluated.

(a) (On January 24th 1950 a letter from Dean Acheson to President Truman was reported, in which Acheson stated:–

'It is our considered judgement that if our limited assistance is continued, the republic (of Korea) will have a good chance of survival as a free nation. Should any further aid be denied, that chance may well be lost and all our previous efforts perhaps prove to have been in vain. We are concerned not only about the circumstances of this abrupt about-face in Korea, whose government and people have made valiant efforts to win their independence and establish free institutions under the most difficult circumstances; but we are also deeply concerned by the effect which would be created in other parts of the world where our encouragement is a major element in the struggle for freedom. It is difficult for us to believe that the members of the House of Representatives who voted against this measure took sufficiently into account the serious implications of this action upon the position of the United States in the Far East. These implications were set forth in considerable detail in hearings before the Committees of Congress by the Department of State, Department of Defence and the Economic Co-operation Administration. In our judgement it would be disastrous for the foreign policy of the United States for us to consider this action by the House of Representatives as its last word on the matter'.

(b) Similarly, Acheson told the National Press club on January 13th that–'American policy in Asia and the Far East is founded on an interest in the people of Asia and in helping them to strengthen their new governments so that they will not be subject to Communist penetration'–a principle voiced also by the [Conference of Ministers].⁶

(c) On February 6th 1950 Ambassador Jessup said that he did not share the view that if one country fell to Communism the rest would follow, but it was clear that urgent action by the democracies was needed. He was not referring, he said, to military relations alone, but to economic assistance.

(d) On April 21st 1949 Drew Pearson⁷ reported a statement by the U.S. Ambassador to French Indo-China, Mr. Caffrey,⁸ that he was authorised to pledge full support of the U.S. for French plans to create an anti-Communist government in French Indo-China, even to the extent of economic assistance.

(e) On December 14th, 1949, George McGhee, Assistant Secretary of State, declared that U.S. government assistance to India was being contemplated in view of the reluctance of private capital to come forward.

(f) The reaction of Americans, both official and unofficial, to the assumption of independence by Indonesia was almost without exception to express the warmest approval and to assure the Indonesian people of the friendship and co-operation of the American people. Several newspapers referred to Indonesia as 'the pivot of the American foreign policy in Asia' and Acheson is reported as saying that he expected Indonesia to exercise a position of predominance in the area.

4. Existing U.S. assistance programmes in South-East Asia are as follows and it appears unlikely that they will be greatly curtailed.

(a) President Truman's Point IV⁹ plans for technical assistance to the underdeveloped areas have been approved by the Senate Banking Committee and need only to receive congressional approval for their implementation (considered unofficially to be a likely step by April 1950). Truman said on January 25th 1950 that he expected to ask for between 25 and 35 million dollars, and the assistance proposed for South-East Asia would include technical assistance in health, education, agriculture and industry.

(b) On January 9th, 1950, Representative M.G. Burnside (D)¹⁰ introduced a bill to provide for technical co-operation, programmes of $1,000,000 to promote coffee production in South East Asia.

(c) An informal approach has been made by Indonesia for a $100,000,000 loan from the United States, to which the State Department has indicated its approval. The Department will also support any application for a loan by Indonesia from the International Bank, and has expressed the likelihood of American acquiescence in a request from Thailand for military assistance.

(d) A report has been informally confirmed that the Joint Chiefs of Staff have recommended that from 10 to 15 million dollars of the 75 million dollars allocated for Presidential distribution in the China area be diverted to Indonesia.

(e) In November, 1949, the E.C.A. voted $37,000,000 as Marshall Aid for Indonesia, and on December 6th, 1949 new purchase authorisations of $2,000,000 were sanctioned.

(f) The American-Indonesian Chamber of Commerce was established in January, 1950, open to American companies and citizens interested in trade with the U.S.I. The Indonesian Charge d'Affaires in New York has received about 1,000 requests for visas, mainly from businessmen wishing to initiate commercial relations.

(g) It was announced in November, 1949 that E.J. Bell of the Oregon Wheat Commission, and Messrs. A.M. Camp and H.A. Bachr of the State Department of Agriculture would soon leave for South-East Asia to gather information on food habits, consumption and foreign trade in grain in Japan, the Philippines, Singapore, Malaya, Indonesia, Thailand and India. In February 1950, Phillip B. Sullivan, Labour adviser to the State Department's Bureau of Far Eastern Affairs, arrived in the Far East to acquaint himself with labour conditions there. It was announced at the same time that State Department officials would hold conferences with the numerous congressmen who have just completed recent tours of South-East Asia, for as Acheson stated on February 6th, 1950, 'it is for us to extent a helping hand with tact and understanding'.

5. A Conference of United States Ambassadors in South and South-East Asia is at present being conducted in Bangkok and it seems probable that the question of economic assistance in the area will be discussed. It has also been recently announced that Fulbright Agreements¹¹ have been reached by India and, in principle, by Pakistan.

6. From these considerations, it would appear that the policy of the Consultative Committee may be formulated in the anticipation of considerable support from America in the reconstruction and stabilisation of the countries of South-East Asia.

[matter omitted]

[NAA: A1838, TS708/9/2 part 1]

1 R.N. Birch, Third Secretary, American Section, Department of External Affairs.

2 The handwritten date on the document appears to read ' 10/2/50'.

3 Harry S. Truman, President of the United States.

4 Phillip C. Jessup, US Ambassador at Large.

5 Not published. For statements by Truman, Acheson and Jessup concerning Asia in early 1950 see Department of State Bulletin, Vol. XXII, Jan–Jun 1950.

6 For the full text of Acheson's address to the National Press Club, Washington, actually dated 12 January, see Department of State Bulletin, Vol. XXII, 1950, pp. 111–18.

7 US journalist.

8 Jefferson Caffrey.

9 In his inauguration speech of 20 January 1949, Truman had called for 'a bold new program'–the 'Point IV Program'–to help the underprivileged peoples of the world.

10 Representative from West Virginia.

11 Under legislation introduced in 1946 by US Senator, William C. Fulbright, the United States provided scholarships to potential leaders abroad.