Executive Secretariat Files: NSC 37 Progress Report
Memorandum by the Secretary of State to the Executive Secretary of the National Security Council (Souers)
Subject: Implementation of NSC 37/219 and NSC 37/5.20
Pursuant to NSC Action No. 123, October 6, 1948, the following progress reports on the implementation of NSC 37/2, “Current Position of the United States with Repect to Formosa”, and NSC 37/5, “Supplementary Measures with Respect to Formosa”, are submitted for the information of the Council:
In accord with paragraph 5 of NSC 37/5, the Department has detailed Mr. Livingston T. Merchant, Counselor of Embassy at Nanking, to Taipei, where he arrived in late February. Shortly after his arrival the Department communicated to him the decisions reached in NSC 37/2 and NSC 37/5 with a request for his views regarding the timing of his approach to the Governor of Formosa, as set forth in paragraphs 1 and 2 of NSC 37/2. In reply to the Department’s request, Mr. Merchant reported that he did not consider the time ripe for an approach to the Governor of Formosa in view of the possibility that the incumbent might be supplanted by General Sun Li-jen, an American-educated officer considered to be more competent than the present Governor.
In the meantime discussions of the problem of economic aid for Formosa were held on March 1021 between the Secretary of State and the Administrator for Economic Cooperation and the following understanding was reached:
“Plans will be laid for a program of economic support to Formosa, including proposed capital expenditures for industrial replacement and reconstruction, which should be brought as near to the point of [Page 311] consummation as feasible without additional allocation of funds. The fertilizer distribution program now planned, together with some rural reconstruction activities, will be carried forward. No capital expenditures will be authorized unless and until the political circumstances are judged to be propitious for an all out economic program on the island. However, it is not considered that the time has yet come to institute such a program.”