Memorandum by Colonel Marshall S. Carter to the Secretary of State

At your direction, copies of the proposed recommendation for our policy toward China were forwarded to Mr. Forrestal21 and Mr. Patterson22 with the statement that you would like to discuss them at the Three-Secretary meeting this morning.

In addition to this, you will recall correspondence with Forrestal on the future activities of the Naval Advisory Group and the transfer of combatant vessels to the Chinese Navy.23 Also, there has been expressed some concern by the War Department as to the future of Army Advisory Group.

[Page 795]

I believe discussion at this morning’s meeting should be limited entirely to the Military Advisory Group as an entity without becoming involved in proposals peculiar to either the Army or the Navy. Such individual problems can best be handled by separate conferences as suggested by Mr. Forrestal and as agreed by you.

As regards the 159 ship program, this is not a matter of detailed concern to either the Army or Navy. I suggest discussions on this matter be limited to the overall economic effect on China of such programs. There is much concern right now in Foreign Liquidation Commission and the Maritime Commission because of an apparent indication by the Chinese that they intend to use the 159 ship program to nullify that portion of the Surplus Property deal24 requiring use of United States shipping. Also, there appears a Chinese tendency to divert surpluses to other countries, apparently for trade purposes.

I think the discussion this morning would best be limited to the overall security aspects as regards the United States from the War and Navy Departments’ view depending upon our future policy toward China.

M[arshall] S. C[arter]
  1. James Forrestal, Secretary of the Navy.
  2. Robert P. Patterson, Secretary of War.
  3. For correspondence on these subjects, see pp. 942 ff.
  4. For text of the Sino-American agreement signed at Shanghai, August 30, 1946, see Department of State publication No. 2655, Report to Congress on Foreign Surplus Disposal, October 1946, pp. 40–45; for documentation see Foreign Relations, 1946, vol. X, pp. 1033 ff.