Foreign Relations of the United States, 1955–1957, Korea, Volume XXIII, Part 2

95. Memorandum From the Assistant Secretary of State for Far Eastern Affairs (Robertson) to the Under Secretary of State (Hoover)¹

Washington, October 18, 1955.

SUBJECT

• Korean Tax Controversy

After your visit to Seoul President Rhee asked Mr. Strom to come in for a discussion of the tax problem (Seoul’s 492, Tab B).² The President declined to listen to an explanation of the tax problem and said that the only feature that concerned him was the public attack by the Chamber of Commerce which had shamed Korea before the world. The President said, and several times repeated, that the businessmen responsible should be sent out of Korea at least for a time, and asked the Embassy to assist in identifying the persons responsible.

Ambassador Lacy’s resignation was announced after this interview.³ He thinks (Seoul’s 497, Tab C)⁴ that a strong statement is required to dissipate the impression that his resignation implies a change of U.S. policy. He has drafted, and requests authority to send and to make public, a lengthy note to President Rhee reviewing the U.S. position on the tax controversy.

I think that Ambassador Lacy’s concern is justified, but I also think his draft note would not help solve the tax controversy and that there may be better means of making the point that President Rhee cannot dictate U.S. policies. I recommended to the Secretary on October 15 (Tab D)⁵ that before Lacy departs he should on instructions of the Department return the offensive letter of September 24 from the Acting Foreign Minister.⁶ The Secretary was reluctant to approve this recommendation because he did not like to stir things up, but he said that he was willing to consider the question further. The return of that letter seems to me to be the best way to make our point.

Recommendations:

1. That you approve the attached telegram to Embassy Seoul (Tab A)⁷ instructing the Deputy Chief of Mission to reject orally the President’s proposal and ask that negotiations quietly continue, rather than send the proposed note.

2. That you recommend to the Secretary that Lacy be instructed before his departure to return the offensive Korean letter of September 24 (Tab D).⁸

1. Source: Department of State, Central Files, 895B.11/10–1855. Secret. Drafted by Hemmendinger.
2. Not found attached. Telegram 492 from Seoul, October 16, is ibid., 895B.11/10–1655.
3. Ambassador Lacy left Seoul on October 20. Walter C. Dowling was appointed Ambassador to the Republic of Korea on May 29, 1956; he presented his credentials on July 14.
4. Not found attached. Telegram 497 from Seoul, October 17, is in Department of State, Central Files, 895B.11/10–1755.
5. This memorandum, not found attached, was apparently the memorandum from Sebald rather than Robertson to Secretary Dulles, October 15, which described the campaign mounted by the South Korean Government against Ambassador Lacy. (Ibid., 611.95B/10–1555)
6. In telegram 402 from Seoul, September 25, the Embassy transmitted the text of a September 24 letter to Ambassador Lacy from Acting Foreign Minister Cho. The letter concerned the dispute over the proposed taxation of American businessmen in Korea and contained language that the Embassy and the Department considered unacceptable. The letter was also released to the Korean press. (Ibid., 895B.11/9–2555)
7. Not found attached. In telegram 289 to Seoul, which Hoover approved, the Embassy was informed that the Department felt that the solution to the tax controversy should be sought in negotiation rather than public statements and exchanges of letters. Consequently the Department did not approve the note that Lacy proposed in telegram 497 from Seoul. The problem of countering the impression that Ambassador Lacy had been forced from his post was met by returning Cho’s September 24 letter. (Ibid., 895B.11/10–1755)
8. Hoover initialed his approval of the recommendations on October 19.