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

846. Pass CINCREP. Tokyo pass CINCUNC. Joint State–Defense message. Progress report Korean talks. Economic Committee had four meetings. Discussed basic objectives, complaints, responsibilities and budget.

Paik indicated joint objective reconstruction requires large investments and necessitates constant exchange rate as inducement invest. Korean foreign exchange said to be $34 million of little assistance reconstruction particularly since unable earn foreign exchange result inability sell rice Japan and tungsten United States. Reconstruction job more difficult because heavy drain ROK military establishment. Consequently need more foreign aid.

Paik unable estimate size military force viable Korean economy able support. Indicated best course expeditious development production potential in Korea. Korean delegation pointed ROK responsibilities include austerity, heavy taxes, efficient utilization Korean foreign exchange and maximum utilization available hwan resources. Quickly pointed out however their conclusion these responsibilities completely fulfilled by ROK making additional aid essential.

Chief complaints mentioned Paik include failure United States implement Tasca recommendations.2 This failure includes insufficient aid, insufficient investment and slow delivery. Paik cited examples critical and unfair treatment ROK by United States press. Emphatically indicated central core all difficulties since 1945 has been “realistic pricing”.

Have repeatedly impressed upon ROK delegation improbability any aid above illustrative figures submitted Congress if that much. [Page 119] Have expressed problem in terms obtaining maximum benefits available resources rather than obtaining additional aid.

Future meetings will discuss specific problems. Exchange rate first item. Will follow position and strategy included position papers forwarded Embassy.3 Initial position maintenance present system except for higher value aid goods pricing.

The Military Subcommittee has been organized on a Joint Services Group basis with all Services and staffs represented as appropriate. Acting for Department Defense, Major General Marquat4 chairs both the United States Joint Services Group and the ROK/United States Military Subcommittee. The procedure has been agreed as follows:

1.
Consideration items proposed discussion by ROK.
2.
Consideration items proposed discussion by UNC representative and Department Defense, including ROK adjustment to possibility aid less than anticipated.
3.
Determination from above items of (a) matters which are within the area of responsibility CINCUNC, and (b) matters which are appropriate for Washington discussions.
4.
Notification to ROK representatives of areas which can be discussed here and areas which ROK should take up with responsible local agency.
5.
Military subcommittee decisions and conclusions where possible.
6.
Reference to plenary session of ROK/United States conference of Military Subcommittee findings and policy recommendations.

Discussion still going on. ROK initial subjects are:

1.
Equipment of ROK Reserve Divisions.
2.
Review of Implementation of FY 1955 Programs.
3.
Cross-servicing ROK Forces.
4.
Reductions proposed by CINCUNC in ROK Military Budget.

First indication had been that subcommittee discussions would be concluded in ten days. It now appears this target will not be met.

Dulles
  1. Source: Department of State, Central Files, 795B.5–MSP/6–3055. Limited Official Use. Drafted by Parsons and Lieutenant Colonel Jack P. Napier, Deputy Chief of the Economic Division in the Office of the Chief of Civil Affairs and Military Government, Office of the Chief of Staff of the Army; cleared with FOA; and approved by McClurkin. Repeated to Tokyo.
  2. In April 1953, a Presidential mission headed by Dr. Henry J. Tasca went to Korea to survey the economy and make recommendations as to the amount of external aid necessary for Korea to achieve self-support. The mission included representatives of the Departments of State, Defense, and the Treasury, and FOA. The report of the Tasca Mission, submitted in June 1953, stated that U.S. assistance of $1 billion over a 3–5 year period would enable the Republic of Korea to become self-supporting, except for military end-item assistance, assuming reduced force levels on the part of the Korean armed services. With minor revisions, the Tasca Mission report was adopted by the National Security Council as NSC 156/1, “Strengthening the Korean Economy,” on July 17, 1953. For text, see Foreign Relations, 1952–1954, vol. XV, Part 2, pp. 13841394.
  3. Not found in Department of State files.
  4. General William F. Marquat, Chief of the Office of Civil Affairs and Military Government, Office of the Chief of Staff of the Army.