60. Telegram From the Department of State to the Embassy in Korea 1

797. Pass CINCREP. Tokyo pass CINCUNC. First meeting Korean talks today.2 Robertson extended warm welcome indicated talks originated Stassen’s conversation Rhee 3 be oriented toward exchange rate and related matters. Explained unable discuss volume aid FY 1956 since appropriations which on world-wide basis still to come. If appropriations less than request real possibility amount aid available Korea less than illustrative figures submitted Congress and informally conveyed Koreans.4 Once appropriations received and executive branch allocations made problem be determination most efficient utilization. This best done in Seoul where both governments have technicians. Indicated need only amend Agreed Minute cover [Page 117] items obsolete due passage time. Pointed out progress production, investment and military capability under Agreed Minute. But pricing aid goods resulted in figure too low thus bringing unnecessary inflationary financing Korean budget.

Discussions will divide into two subcommittees. One headed Moyer deal with exchange rate and related issues. Other headed by Defense review military program, discuss problems that have arisen, look ahead next fiscal year extent possible.5

Paik expressed knowledge United States appropriation mechanism. Indicated need more aid Korea for military and economic purposes, might warrant raising question whether could request funds larger than original Mutual Security Bill. Expressed real economic problem Korea need achieve self-sufficiency shortest possible time enable reduce burden United States tax payer. To accomplish this need establish several more factories. Had hoped could reach understanding volume aid required accomplish economic objectives and then discuss exchange rate. Indicated thought situation FY 1956 required $100 to 200 million more aid than illustrative figure furnished Congress.

Robertson indicated United States fiscal problems causing sufficient concern Congress that not possible obtain additional aid for Korea regardless our desires. Pointed tremendous burden United States has assumed during and following World War II with $80 million assistance furnished other countries.

Sohn indicated Korean position basically different United States position since former really front line. Korea would not have time mobilize case attack but United States sufficiently distant permit mobilization. He too pointed need give sufficient aid now enable improvement economic situation decrease aid future.

In conclusion Minister Han who chaired Korean delegation since Ambassador out town expressed hope subcommittees could complete deliberation within 10 days.

Hoover
  1. Source: Department of State, Central Files, 795B.5–MSP/6–2155. Official Use Only. Drafted by Howard L. Parsons, Officer in Charge of Economic Affairs in the Office of Northeast Asian Affairs, and approved by McClurkin. Repeated to Tokyo.
  2. The talks took place in the Department of State between a U.S. Delegation headed by Assistant Secretary Robertson including representatives of the Foreign Operations Administration, the Department of Commerce, and the Departments of Defense and the Treasury; and a Korean Delegation headed by Economic Coordinator Paik Tu-chin and including Minister of Defense Admiral Sohn Won-il and Vice Minister of Finance Kim Yong Chan.
  3. See Document 28.
  4. The illustrative aid figures for fiscal year 1956 which were submitted to Congress and conveyed informally to South Korean officials included $220 million for the Mutual Defense Assistance Program, $180 million for Direct Forces support, and $280 million for Defense support. The figure for Defense support remained at the level approved in fiscal year 1955, while the figure for Direct Forces support was reduced by $45 million from the approved 1955 level. The figure for MDAP was increased by $25 million over what it had been for 1955. The net effect was a proposed aid program for the Republic of Korea for fiscal year 1956 of $680 million as compared with 1955 totals of $700 million. (Memorandum from McClurkin to Robertson, June 21; Department of State, FE Files: Lot 56 D 679, Korean Econ)
  5. The discussions of these two subcommittees continued until agreement was reached in August to amend the Agreed Minute of November 17, 1954. Documentation on the meetings of the subcommittees is ibid., Central Files 795B.5–MSP and 895B.00; FE Files: Lot 56 D 679; and Seoul Embassy Files: Lot 59 F 180, 320.1 Washington Discussions 1955, and 500 Economic Sub Committee 1955. For text of the amendment signed on August 12, see Document 78.