Foreign Relations of the United States, 1946, The Far East, Volume VIII

611.11B31/1–1046

The United States High Commissioner in the Philippines (McNutt) to Mr. Richard R. Ely, of the Office of United States High Commissioner, Washington

confidential

Manila, January 18, 1946.

PIW 101. Reference your HCW 45 January 15, I wish first to make following summary comment:

1. The purpose of the Bell⁴ Bill is the rehabilitation of Philippine export economy and not to grant preferences to the Philippines for an indefinite period.

2. Effect of bill will be to help restore Philippines to position it occupied before war in world sugar market. Fact of war should not be permitted to give producers who were not involved in war special advantage.

3. Question of abolishing sugar duties is not pertinent to Bell Bill.

4. Philippines have a claim on United States superior to claim of any country or any economic group.

5. Accident of independence coming on heels of war does not minimize United States responsibility to restore Philippine economy.

Please request Secretary Ickes⁵ to forward to the President and if the President agrees, to Chairman Doughton and Judge Bell the following letter:

January 18, 1946.

For the President

In reply to Secretary Anderson’s letter to you dated January 7 relating to HR 4676, I wish in the interests of Philippine American relations to offer the following comment:

It is accepted that the provisions for preferentials for the Philippines in HR 4676 are presently inconsistent with our general position with respect to trade preferences and with our preferences with Cuba (though apparently admissible under the latest revision of our treaty with Cuba). All reasons for administrative sponsorship of HR 4676 are of a nature that transcend the advantages of rigid adherence to normal policies. The more compelling reasons arise from the nature of our past Philippine policy and from the war.

Our Philippine commercial policy from 1909 to 1941 was one of reciprocal free trade with the preferentials available to Philippine products in the United States market increasing with each upward revision of our tariff.

This policy drove land utilization, labor technique, and capital investment in the Philippines into lines of production which could profit by the preferentials.

In 1933, Congress in the enactment of a measure for political independence (47 Stat. 761) provided a period of 5 years (1941 to 1946) for adjustment of Philippine economy to a position independent of trade differences. The measure required acceptance by the Philippine legislature. This was widely debated and rejected (Philippine concurrent resolution 46); again offered (48 Stat. 456) and accepted by Philippine concurrent resolution of May 1, 1934 (with the reservation that reliance was had on a statement of the President of the United States which gave some promise of a reconsideration of the drastic economic provisions). The President acting through the Department of State set up the Joint Preparatory Committee on Philippine Affairs. The Committee reported (1938) in favor of:

(a) Minor immediate remedies, and

(b) A lengthy post independence period of gradual withdrawal of the trade preferences.

At the time, in my comment to the President on the report, I took occasion to issue the warning that economic adjustment should precede rather than follow political independence and I pointed out the difficulties of the post independence gradual withdrawal of preferences.

The President endorsed the report to Congress for action. Congress enacted the immediate remedies (53 Stat. 1226 see also 55 Stat. 852) but left further consideration of post independence trade relations to be restudied by a joint trade conference to be called 2 years prior to independence (53 Stat. 1226 Sec. 13). By further amendment in June 1944 Congress created a Joint Rehabilitation Commission, and among other duties assigned to it the function of proposing measures for post independence trade relations. The Philippine members requested a post war post independence period of 20 years reciprocal free trade (the original Bell Bill), which was supported among executive departments only by Interior, with State in active opposition. Conferences between the President, Secretary Byrnes, Under Secretaries Clayton⁶ and Fortas,⁷ Senator Tydings,⁸ Judge Bell and myself resulted in an agreement for administrative support for the revised Bell Bill, now cited as HR 4676 which proposes a post war post independence plan of 8 years reciprocal free trade followed by 25 years of gradual withdrawal of trade preferences. President Osmeña was informed of the agreement and he has passed this information on to his people.

One is forced to conclude that the institution in 1909 of reciprocal free trade and its continuance virtually to 1941 over territory which was pledged from the first to advance to a position of self government and, after 1916, to a position of independence was unwise in that it embraced the mutually exclusive aims of political separatism and economic and financial dependence. It should be obvious that after over 30 years of forced development into almost complete economic dependence a sudden reversal of economy is impossible without courting disaster. The mistake was ours and we have an obligation to adopt remedial measures which will not destroy Philippine economy.

From the standpoint of the war and its after effects, the case for HR 4676 is strong. The Filipino people know that the principal duty of a sovereign toward its wards is to protect them from external aggression, and they know that we failed miserably in this. Nevertheless, they have taken it with unusual stoicism, loyalty, and good grace. During the lengthy and cruel occupation of the enemy, stalwart elements of the population conducted a widespread and effective resistance movement which greatly aided our armed forces and advanced the day of victory.

All transport and communications and most of the physical and financial facilities for the production of export goods and the conduct of trade were destroyed as a consequence of the selection of the Philippines as the principal battle field of the war in the Pacific.

The people of the Philippines were encouraged by executive pronouncement and in propaganda directed by official agencies during invasion and reoccupation to expect a generous and effective program of rehabilitation. Even if these pronouncements and propaganda had not been issued, they would have been justified in their hopes for restoration by reason of our long established reputation for magnanimity at home and abroad. Yet to date we have taken no substantial official action toward rehabilitation.

We have boasted long of our enlightened policy in the Philippines and we have assumed that the example of their independence will serve to destroy European imperialism in Asia. Every institution of freedom which we erected here—public schools, health service, good roads, democracy—has been impaired and I seriously doubt that they can be restored in an environment of the economic depression which will ensue upon adoption of a trade measure less favorable than HR 4676. A disastrous end to our experiment here means more than a loss of pride on our part, and misery for the Filipinos. It would mean disillusionment for all Asia and reinforcement of European imperialism.

The situation here is critical. It does not at this moment seem humanly possible for the Filipino people, ravaged and demoralized by the crudest and most destructive of wars, politically split between loyalists and enemy collaborators, with several sizeable well armed dissident groups still at large (Mohamedan elements, certain bands of ex guerrillas, the Agrarians usually known as the Hukbalajaps) to cope with the coincidence of political independence, sharp downward revision of economic standards, budgetary bankruptcy, and rehabilitation.

It is with extreme regret that I report my anticipation of a bitter Filipino reaction against the United States and Americans if we fail in rehabilitation of their destroyed cities, industries, trade, and finance. The loyalty and sacrifice of the Filipinos in the war which was more ours than theirs gave us the opportunity to create an era of good feeling and outpost of Americanism in the Far East. In the absence of effective rehabilitation, this opportunity is disappearing, and I look upon HR 4676 as a central feature in rehabilitation.⁹

Paul V. McNutt

4. Judge C. Jasper Bell, of Missouri, Chairman of the Committee on Insular Affairs, House of Representatives.
5. Harold L. Ickes, Secretary of the Interior.
6. William L. Clayton, Assistant Secretary of State for Economic Affairs.
7. Abe Fortas, Under Secretary of the Interior.
8. Millard E. Tydings, of Maryland, co-author of the Philippine Independence Act of 1934.
9. The Chief of the Division of Philippine Affairs (Lockhart) noted on January 23: “In my judgment it is a good letter and has some unanswerable argument.” (611.11B31/1–1046)