894A.00 (R)/10–1150
Memorandum of Conversation, by Mr. Robert N. Magill of the Office of Chinese Affairs
Subject: Taiwan
Participants: | Mr. Raymond Moyer, Chief ECA Mission Taiwan |
Mr. Clubb—CA | |
Mr. Barnett—CA1 | |
Mr. Magill—CA |
Mr. Moyer called at Mr. Clubb’s invitation for a general discussion of the situation on Taiwan, with particular reference to the policy direction of ECA aid. In response to Mr. Barnett’s inquiry, Mr. Moyer summarized the ground he had covered in a luncheon conversation with Messrs. Rusk and Perkins on Oct. 6 as follows:
[Page 525]Mr. Moyer had expressed the view that it would be helpful to the operations of the ECA Mission if top Chinese officials could be given, insofar as possible, a definite indication of U.S. intentions and objectives with respect to Taiwan. There has been considerable uncertainty in the Chinese Government since the President’s statement about the ultimate withdrawal of the 7th Fleet, and this uncertainty has handicapped somewhat relations between ECA and the Chinese Govt. For its part, the ECA Mission has attempted to be as frank and direct as possible with the Chinese. Regarding the ECA Program itself, Mr. Moyer had pointed out that, as a consequence of larger diversions of cotton and fertilizer from Korea to Taiwan than had been anticipated, there is likely to be a need during this fiscal year for $5 to $10 million dollars more than is available from the $40,000,000 earmarked for Taiwan. He had also drawn attention to the factors indicating that the present level of aid may need to be increased substantially before the end of this fiscal year. Significant economic improvements have been effected within Taiwan which have forestalled the likelihood of an immediate crisis. Nevertheless, a growing shortage of foreign exchange, together with further depletion of gold reserves in the face of continuing heavy military expenditures, may well result in a serious financial situation about the turn of the year which might have to be remedied through some form of ECA assistance.
Regarding Mr. Moyer’s suggestion that the Chinese be provided with more definite information on U.S. intentions, Mr. Clubb observed that our ability to provide such information is limited significantly by the facts that the ultimate disposition of Taiwan has been referred to the United Nations and that we are committed to a peaceful solution of the problem arrived at by international agreement. In response to Mr. Clubb’s query, Mr. Moyer stated that he was not aware of any Chinese Government plans for further reduction of troop strength on Taiwan, and had the impression that the Chinese believed they had had already cut down on military personnel as much as possible. According to K. C. Wu, an active training program is in progress to prepare all Chinese forces on the Island for combat operations. In this connection, Mr. Moyer observed that there were sharp differences among Chinese officials regarding the question of an eventual effort to return to the mainland, K. C. Wu having told him in confidence, for example, that he personally was not concerned with the return of the National Government as such to the mainland. Mr. Moyer pointed out, however, that there is a psychological necessity for the Chinese Government to advocate return to the mainland as its ultimate objective if the morale of large segments of the mainland Chinese population on Taiwan is to be sustained.
Mr. Clubb asked Mr. Moyer whether he could make any observations regarding Chinese opinion on the following possibilities: (a) [Page 526] achievement of an autonomous status for Taiwan; (b) political changes on the mainland which would make possible integration of Taiwan with the mainland; and (c) some form of political rapprochement between the Government on Taiwan and the Chinese Communist regime as presently constituted. In commenting on these questions, Mr. Moyer differentiated between the opinions of Chinese mainlanders and Taiwanese. Mr. Moyer stated that he had never heard Chinese officials express any thoughts along the lines of points (a) or (c) above. With reference to point (b), Chinese officials generally believe that an acceleration of present difficulties on the mainland will weaken the Communist regime sufficiently to enable their return assisted by the Chinese Army now on Taiwan, possibly capitalizing on a revolt against Peiping by regional authorities. With respect to the opinion of Taiwanese, Mr. Moyer observed that many of them hoped for an autonomous status under US or UN protection. He stated that the Taiwanese were primarily concerned with maintaining the present relatively high standard of living of the Island and would, therefore, be opposed to any arrangement which would make the Island vulnerable to exploitation from the mainland. He added that there is much nostalgia among Taiwanese for the era of Japanese control, and that they probably would not be discontented with the resumption of their previous relationship to Japan. In connection with the status of Taiwanese, Mr. Moyer observed that the local elections now being held throughout the Island give promise of a gradual increase of political strength for the Taiwanese as opposed to the mainland Chinese on the island. He stated that the Taiwanese are participating actively in the elections, are putting up their own candidates, a large proportion of which they consider to be good men, and that they had obtained an arrangement with the Chinese Government to exclude from candidacy existing office holders, many of whom are mainland Chinese.
Mr. Barnett asked Mr. Moyer whether he had observed any developments tending to diminish the Gimo’s absolute authority over the Island which he exercised through his control of the Army, the secret police, and the gold reserves. Mr. Moyer stated that he believed that the extent of the Gimo’s control was frequently exaggerated and that over the last year or so there had been a substantial increase in the strength of the provincial government. This is illustrated, according to Mr. Moyer, by the fact that the provincial government exercises de facto discretion in a wide range of operational matters, and that K. C. Wu has frequently been successful in his tilts with the Gimo. K. C. Wu, with the backing of C. K. Yen, and Jen, the provincial Finance Commissioner, has brought about the unprecedented achievement of a government budget, and has obtained a commitment from the Gimo that the 1951 budget will not exceed the current level of [Page 527] expenditures. In commenting on the possibility of further progress in reducing the budget deficit, Mr. Moyer observed that, while there undoubtedly was room for improvements in the tax system and its administration, some tax increases had already caused hardship, and additional taxes, if carried too far, might well create extreme resentment and political instability. Mr. Moyer stated that ECA was anxious to give careful attention to the tax system and that a recent visit to Taiwan by a Mr. Moss, a tax expert with SCAP, had been most helpful. It is anticipated that associates of Moss may be able to visit Taiwan for a longer period in the near future. In response to Mr. Magill’s inquiry, Mr. Moyer said that Moss and company were detailed by SCAP to ECA Taiwan (i.e. continued on SCAP’s payroll while in Taiwan, although ECA paid travel and per diem) and that it was; understood that the purpose of this detail was to enable them to do a job for ECA.
Mr. Clubb asked Mr. Moyer whether there had been any basic changes since June 27 in the ECA Mission’s thinking regarding the economic aid program on Taiwan. For its part, Mr. Clubb said, the Department considered that policy regarding economic aid to Taiwan remained unchanged pending a clarification of what the long-run US relations with Taiwan would be. He said that it should be recognized that our present relation to Taiwan was a “strange interlude” resulting from military exigencies which would not, in and of itself, justify a fundamental readjustment of U.S. objectives in the economic field. Mr. Moyer observed that ECA was faced with a choice, on the one hand, of continuing a relatively passive role in providing economic assistance to Taiwan versus an effort, on the other hand, to use its position and material resources to the maximum extent possible for the creation of a stable economic base on Taiwan. He stated that ECA was now proceeding on the basis of the second alternative within such policy limitations on relations with the Chinese Government as had been indicated by the Department—thus, ECA’s interest in an Economic Stabilization Board and intensive study by experts of Taiwan’s economic, fiscal, and administrative problems. Mr. Clubb commented that he saw no necessary conflict between this approach and Department policy regarding Taiwan. Mr. Barnett stated that the policy limitations imposed thus far by the Department on ECA relations with the Chinese Government reflected, in part, the view that assumption by ECA of substantial responsibility for the policy and administrative decisions of the Chinese Government would result in undue dependence by the Chinese on U.S. initiative and guidance and thus, in the long run, impede rather than foster the emergence of a self-sustaining regime on Taiwan. Mr. Moyer acknowledged the validity of this consideration.
Mr. Barnett referred to a recent telegram to ECA Taiwan recommending [Page 528] that a “military economist”, which both ECA and the Department had urged that Army assign to Taiwan, should be attached to a U.S. Military Advisory Group on Taiwan rather than to the ECA Mission or the Military Attaché’s Staff at the Embassy. He stated that it was his understanding that there is presently no plan for the establishment of a U.S. Military Advisory Group on the Island and suggested that such a “military economist” might best be attached to the ECA Mission in view of the fact that his raison d’etre would be economic rather than military and because, if he were thus assigned, he could be influenced to avoid improper participation in strictly military activities. Mr. Moyer asked whether there would be any objection to the assignment of such a man to Admiral Jarrett’s staff. Mr. Clubb stated that this might be the most appropriate arrangement since, whatever the objective of his assignment, his function would be military in character. Mr. Moyer added that his attachment to the ECA Mission would lend a certain military color to the economic program which ECA had thus far been careful to avoid.
- Robert W. Barnett, Officer in Charge of Economic Affairs, Office of Chinese Affairs.↩