249. Memorandum of a Conversation, Department of State, Washington, September 21, 1957, 11 a.m.1
SUBJECT
- Finance Minister Kim’s Call upon Mr. Robertson2
PARTICIPANTS
- Mr. Kim Hun-chul, Minister of Finance, Republic of Korea
- Mr. C.H. Kim, Governor of the Bank of Korea
- Mr. Philip Han, Minister, Embassy of Korea
- Mr. Lee Hahn-bin, Ministry of Finance
- Mr. William Warne, Director of the Office of the Economic Coordinator in Seoul
- Mr. Walter S. Robertson, Assistant Secretary for Far Eastern Affairs
- Mr. Howard P. Jones, Deputy Assistant Secretary for Far Eastern Affairs
- Mr. William G. Ockey, Acting Director, Office of Northeast Asian Affairs
Minister Kim called upon Mr. Robertson by appointment at 11 a.m., on September 21, 1957. After expressing his appreciation for the opportunity of meeting with Mr. Robertson before Mr. Warne returns to Korea, Minister Kim said that President Rhee had been worrying greatly about the possibility of cuts in United States aid for this year.
Mr. Robertson replied that despite all efforts to have Congress appropriate the full amount requested by the Administration, an over-all cut of about 20% was made. Consequently we must face this reality and adjust the various programs accordingly.
Minister Kim said that in the spring of this year Mr. Warne and he developed a financial stabilization program and that since then financial conditions in Korea have been kept well under control. If there is a large cut in aid for Korea this will hurt what has been done along stabilization lines. He said further that Mr. Moyer of ICA had mentioned a figure of about $200 million for defense support. If this is the actual amount allocated, Minister Kim said he does not see how Korea can survive.
Mr. Robertson replied that he considers the Korean program one of the most important that we have any place in the world. We will do everything we can to make the largest allocation possible for Korea but we do not know definitely what it will be. There will be, however, a cut in the program and our problem is to determine how we can adjust the program to the funds that are available. Mr. Robertson mentioned that Mr. Warne is fully acquainted with the problem. [Page 514] We have only so much money and there will inevitably be a cut in the Korean program.
Mr. Robertson said that speaking unofficially he wished to point out that one way in which savings can be made is by reduction in the number of men in the Korean military forces. Mr. Robertson explained that he did not mean that we should reduce our combined military strength in Korea. However, we may be able to make a reduction in personnel and at the same time show President Rhee that we are not decreasing over-all military strength. Mr. Robertson emphasized that he was not saying this officially but merely commenting unofficially on the problem.
Minister Kim then asked if a reduction in funds allocated for military purposes meant that economic aid could be increased.
Mr. Robertson replied that the over-all cut means that there will be a reduction in both military and economic aid. However, we have not made a definite decision on the actual amounts that will be available for Korea. Minister Kim said that in 1957 Korea is receiving about $300 million. They know that in 1958 there will be a cut but if the cut is too large it will mean disaster for Korea.
Mr. Robertson commented that he understood there was a large pipeline of aid goods for Korea. Mr. Warne explained that there was approximately $320 million including unexpended funds in the pipeline on June 30, 1957. At the present time there is a total of about $200 million in the project sector. Mr. Robertson then said that the fact that there is a large pipeline will not effect our allocation of aid for the Korean program this year. However, it is a factor that may help in the present problem caused by reduced appropriations.
Minister Kim then turned to the P.L. 480 program. He said that Korea was asking for a total program of about $70 million but the figure now being discussed in Washington is about $50 million. The question of whether rice should be included in the program is now under discussion. His Government would like to have rice excluded this year. However, if the exclusion of rice would reduce the total amount of the P.L. 480 program they would agree to have rice included. Mr. Warne commented that Korea needs the maximum possible P.L. 480 program this year. If the decision is to eliminate rice the total program should not be reduced. The program can utilize rice but normally more barley than rice can be obtained for the same amount of money. Mr. Robertson asked about the rice crop in Korea. Minister Kim replied that they have a good rice crop this year and are not in need of additional rice.
Minister Kim then discussed briefly the uses of local currency arising from the P.L. 480 program. He pointed out that in the past 90% of such proceeds were allocated for support of the Korean [Page 515] armed forces. If the Cooley amendment3 were to be applied to Korea a deficit in the budget would result. The present budget has been calculated on the assumption that 90% of the proceeds from a new P.L. 480 program would be made available. Consequently, the Minister said, the Cooley amendment should not be applied to Korea at least for the present fiscal year.
Mr. Warne supported the position stated by Minister Kim. He stressed that Korea has been an exceptional case all along and that we have a precedent already set for treating Korea as a special case. Mr. Robertson indicated his agreement that Korea is unique.
Minister Kim then raised the subject of offshore procurement. He said that since aid will be cut offshore procurement in terms of dollars is needed for Korea. It is not possible for Korean suppliers to bid in terms of hwan because such prices are not competitive. Mr. Warne said that there is a possibility of up to $30 million being spent in Korea on offshore procurement. If this total were reached it would help to lessen the effect of a reduction in aid. In response to Mr. Robertson’s question as to whether he had discussed these matters in ICA, Mr. Warne said that he intended to do so on Monday, September 30. He had already discussed some of these questions with officials in the Pentagon.
Mr. Robertson commented that about 40% of the entire aid funds requested of Congress was for the Far Eastern area and about 75% of the 40% was for Korea, Taiwan and Vietnam. It is in these three places that the Communists pose the greatest threat. Our aid allocation indicates that we consider these three to be the most important. Consequently, he wanted to assure Minister Kim that what is finally allocated to Korea will represent our best efforts to take care of the Korean program. It is obvious, however, that we cannot cut other programs in order to assure that there will be no reduction in aid for Korea.
Minister Kim expressed his appreciation for the meeting and the party left at approximately 12 o’clock.
- Source: Department of State, FE Files: Lot 59 D 19, MC–Koreans 1957. Confidential. Drafted by Ockey on October 2.↩
- Dr. Kim Myun-chul was in Washington to attend the meetings of the International Monetary Fund and the International Bank for Reconstruction and Development.↩
- The Cooley amendment to the Agricultural Trade Development and Assistance Act of 1954 (P.L. 480) was introduced by Representative Harold D. Cooley of North Carolina and adopted by Congress on August 13, 1957. (71 Stat. 345) The amendment stipulated that up to 25 percent of the total sales proceeds of Title I programs should be made available for loans in local currency to foreign and U.S. private investors through the Export-Import Bank. The law prohibited loans for the manufacture of products to be exported to the United States in competition with American products.↩