894.50/12–1448
The Acting Secretary of State to the Acting Secretary of the Army (Draper)
Dear Mr. Draper: This is in reply to your letter of December 14, 1948, requesting the Department of State’s views concerning the first [Page 1074] two assumptions underlying the SCAP program for a self-supporting economy:
“(1) that there will be an integrated and expanding program of American aid for Asia;
“(2) that political and economic conditions in the Far East will permit the necessary expansion of trade.”
In so far as the first assumption is concerned: no basis presently exists for SCAP’s assumption in regard to “an integrated and expanding program for American aid.” In fact, to avoid any possibility of conveying a misleading impression concerning this Government’s present policy in the Far East to the Congress, I would suggest the following language as an appropriate re-statement of this assumption: “That a considerable increase in the export productivity of other Asiatic countries will permit an expanding exchange of goods between Japan and these countries.” The assumption stated by SCAP is only a specification of the means to be employed in realizing this desired increase in Asiatic productivity; if the objective is clearly stated, as in the proposed redraft, it would not seem necessary, or possibly appropriate, for SCAP to specify whether its attainment will require U.S. aid. This is an issue which is presently being studied, but has not yet been resolved, within the Department of State, in connection with a general review of the economic and political measures that might be taken by the U.S. Government in support of its objectives in the Far East.
In so far as the second assumption is concerned: The Department of State shares SCAP’s hopes for increased political and economic stability in the Far East, but cannot, of course, predict whether developing conditions in this regard will, in fact, be such as to permit the necessary future expansion of Japanese trade.
The uncertain validity of these two assumptions does not, in the view of this Department, necessarily render inaccurate SCAP’s relatively modest export projections for FY 1950. It does, however, raise a question as to whether it will be possible for Japan to attain the more ambitious goals projected by SCAP for FY 1951–53. For this reason, I believe that special care should be taken to indicate to the Congress that this SCAP program has been reviewed and approved by the U.S. Government only in so far as it relates to the fiscal year 1950. The Congress should be informed that, for the fiscal years following 1950, this program represents only SCAP’s estimates of possible Japanese economic performance under certain stated assumptions. I do not believe that the U.S. Government can support these estimates until a more adequate basis exists for appraising the validity of the assumptions upon which they are based.
[Page 1075]Under the circumstances, it would seem necessary to justify the FY 1950 Japanese rehabilitation appropriation to the Congress as an expenditure designed to bring Japan nearer to self-support rather than on the basis of any firm commitment that it is one of three annual expenditures that will surely lead to a state of Japanese self-support by FY 1953.
I will, of course, inform you promptly if decisions are reached within the Department of State that would provide a basis for a further appraisal of the validity of the assumptions underlying SCAP’s program concerning which you wrote me.
Sincerely yours,