893.50 Recovery/4–649: Telegram
The Consul at Taipei (Edgar) to the Secretary of State
[Received April 6—5:10 a. m.]
97. From Merchant. Grateful Deptel 51, March 30. Interviews last week of Griffin-headed ECA group11 with Governor Chen, coupled with contents Taipei’s 93 of April 112 and Embtel 680 to Department March 31, unhappily strong urge Chen will remain. Apparently Chen did not obtain in Nanking specific confirmation sweeping powers delegated him by Sun Fo as latter resigned office. In any event he gives impression confidence his tenure. While Li may only have deferred action on his expressed intention to replace Chen with Sun, I reluctantly conclude Chen meets description paragraph 1, section 37/2,13 and particularly in light note of urgency implicit in Deptel 389, March 24 to Nanking, I believe we must deal with him.
Accordingly I recommend my opening negotiation with Governor Chen along following lines:
- (1)
- General statement in sense paragraph 2, section 37/2 and obtaining maximum related assurances but giving no hint any aid beyond 17,000,000 JCRR and fertilizer already scheduled;
- (2)
- Further pave way for detailed specification by ECA of coordinate self-help measures and facilities ECA will require for effective reconstruction and JCRR programs. Self-help measures would be stated by ECA to include inter alia emphasis on exports with vigorous efforts secure control foreign exchange earned and certain anti-inflationary monetary actions by Bank of Taiwan along lines Paul Parker’s14 survey (reference Shanghai’s Toeca 1255 of March 2512).
I believe Chen will subscribe enthusiastically but act within limits dictated by his loyalty to Gimo and friends. Accordingly he may not push too hard for use Nationalist Government gold stocks in Formosa, reliably reported about 2,000,000 ounces. Presumably he will protect C-C clique in sinecures and easy pickings and otherwise govern in traditional Chinese style. Best estimate Chen will refuse to accept as applicable to Formosa the authority of any Communist-dominated coalition on mainland which may emerge from peace talks. My doubts remain nevertheless regarding his ability to provide sufficiently enlightened government to satisfy Formosan aspirations and provide popular native base necessary for effective resistance.
If authorized proceed as recommended part 2 above, I will concert in advance with Griffin who returns from Japan mid-week. ECA follow-up should be prompt, specific and in accustomed role tough talk regarding performance.
Meanwhile Parker and I have worked out with ECA and Tarring of J. G. White tentative program for best use 17,000,000 plus JCRR activities and oncoming fertilizer. Admittedly sum is insufficient for enduring substantial improvements particularly in absence any assurance continuity. However, if Japanese equipment prices for reconstruction projects afford hoped for savings program, coupled with vigorous provincial monetary and economic actions, should retard inflation and provide stopgap enabling later examination of justification for continuing US economic support. But there will be no margin for error or contingencies.
Dimensions and nature overall program (requested in paragraph 5, section 37/515) are contained in Shanghai’s ToECA 1255 of March 25, supplemented by Parker’s memo sent Washington from Shanghai April 3 or 4.16 However, Parker now estimates and I concur cost such effective program somewhat less than ToECA 1255 calculates. [Merchant.]