740.00119 PW/9–1548
Overseas Consultants, Inc., to the Secretary of the Army ( Royall )1
Dear Sir: Supplementing our report, dated February 26th 1948,2 we have now reviewed the section on reparations of the Report on the Economic Position and Prospects of Japan and Korea made under date of April 26th, 1948 by a Committee of which Mr. Percy H. Johnston was the Chairman.3 In accordance with your request, we submit herewith the following comments on this report.
[Page 971]The philosophy expressed and the conclusions arrived at with the exceptions noted below, agree with those in Section B of our Report of February 26th, 1948. There are the following specific differences in recommendations as to facilities that should be made available for reparations:
- (1)
- We recommend that shipyards having a capacity of 385,000 gross tons be made available for reparations, while the Johnston Committee recommends that yards with a capacity of only 162,000 gross tons be made available. Our recommendation was based on our belief that steel could not be produced in Japan to permit the utilization of shipyards with more than 400,000 tons annual capacity and that, in view of the world shortage of steel, the probability of the Japanese being able to import steel for shipbuilding in the next several years was remote. We know of no reason to change this opinion, but, if steel can be provided to utilize additional shipyard capacity, we agree that additional shipping, if it could be produced, would be important to the economic recovery of Japan.
- (2)
- The Johnston Committee recommends that only about one-third in value of Primary War Facilities be made available for reparations. At the time of our study Primary War Facilities were designated for reparations in controlling directives. It now appears that certain of these facilities, which are suitable for general peacetime manufactures, are not considered by SCAP to constitute a dangerous war potential, and we therefore agree that such Primary War Facilities as can be effectively used in the peacetime economy of Japan should be retained. As we said in our Report, we believe that Japan will need more rather than less industrial equipment than she now has to achieve a self-sustaining economy.
- (3)
- The Johnston Committee recommends removal of nitric acid plants having an annual capacity of 83,000 metric tons, while our report recommended the removal of plants having an annual capacity of 107,000 tons. Our conclusion was based on our belief that the retention of more than 30,000 tons of nitric acid annual manufacturing capacity might constitute a dangerous war potential, although we stated in our Report that more nitric acid would be needed. If such additional capacity is not considered to be a dangerous war potential, we agree that additional capacity could be retained over that which we specifically recommended.
It is urgent that a final reparations policy be established without delay. The most practical and expeditious method to accomplish this would be for our Government to adopt as its policy the philosophy and conclusions expressed in both the Reparations Section of the Johnston Report and in Section B of our report.
By Order of the Board of Directors of Overseas Consultants, Inc.
President