895.50 Recovery/8–1248
The Secretary of State to the Administrator of the Economic Cooperation Administration (Hoffman)
Dear Mr. Hoffman: I understand that following the decision reached August 19 that the Economic Cooperation Administration [Page 1304] should take over between January 1 and March 15, 1949 responsibility for the administration of the economic assistance program to Korea, you stated that ECA would assume responsibility for preparing an aid plan for Korea, including the budget request for Fiscal Year 1950. I understand that you also asked Mr. Lovett for the views of the Department of State on the policy which should underlie the preparation of such a program and budget request.
It has been and continues to be the purpose of the United States to aid in the establishment of a united and democratic Korea which will be independent of foreign control and eligible to membership in the United Nations. It is also the purpose of the United States to assist the Korean people in establishing a sound economy and educational system as essential bases of an independent and democratic state. It is recognized that the accomplishment of these purposes will require substantial economic aid to the newly established Republic. It is therefore the policy of the United States to provide Korea with the aid which in the long run will be most effective for the fulfillment of these purposes and which will require the least drain on the economy of the United States.
I am attaching a copy of a study which has been made in the Department of State of several alternative courses of action to accomplish United States policy objectives with respect to Korea.1 After careful consideration of the advantages and disadvantages of these alternative courses, it is the conclusion of the Department of State that the interests of the United States will, in the long run, be best served by planning for a program of relief and economic development of several years’ duration, including immediate expenditures for the most essential capital equipment calculated to place the Republic of Korea as rapidly and as nearly as possible on a self-supporting basis. In order to reduce the cost to the United States to the minimum this program should be planned to commence with the second half of Fiscal Year 1949 and to extend over the life of the Economic Cooperation Administration to June 30, 1952.
The existing authority for aid to Korea extends only to funds appropriated to the Department of the Army and not expended upon the termination of the occupation. It will therefore be necessary to prepare and to present to the Congress authorizing legislation for the new program.
In presenting this program to the Congress it should be made clear that it has been prepared for planning purposes only. The Congress should be requested to authorize and appropriate funds for only the first year of this program which should be able to stand on its own feet as a one-year program. In order to avoid the implication of any [Page 1305] commitment to Korea, the full plan should not be made public but should be discussed with the appropriate committees in Executive session. They should be assured that additional requests will be made after further review in the light of any changes of basic assumptions, as in the event of communist seizure of south Korea or union of north and south Korea, and that the Aid Agreement to be signed with Korea places the U. S. under no obligation to continue aid and authorizes the U. S. to terminate aid upon its own volition. Discussion with the Koreans should be in terms of the first year’s appropriation only and with the understanding that future aid, if any, is a matter for further determination in the light of developments, including their effective use of the first year’s aid.
I understand that you are in agreement with the view of this Department that it will be responsible for presenting to the President and the Congress the proposed policy on aid to Korea while the Economic Cooperation Administration will be responsible, with such assistance from the Departments of State and Army as it may desire, for presenting proposals as to the authorizing legislation and the appropriations necessary to carry out this basic policy.
The Department of State is anxious to assist your agency with this entire problem in every way possible. Staff officers who are fully acquainted with the matter will be available for this purpose at your request.2
Faithfully yours,