893.50 Recovery/5–449: Telegram
The Consul at Taipei (Edgar) to the Secretary of State
[Received May 5—1:15 p. m.]
141. From Merchant. Since March I have recommended delay in committing US economic aid to present government based on timing considerations.
Today the rapid development of events on mainland necessitates reappraisal situation Formosa. I now believe revision of US policy as laid down in NSC 37 series is indicated rather than mere delay in its execution.
With collapse of peace talks, virtually unopposed crossing of Yangtze, fall of Nanking and imminent loss of Shanghai, any united Nationalist military resistance to Communists appears improbable. Any resistance seems almost certain to be provincial or regional regardless of outcome showdown between Li Tsung-jen and Generalissimo for clear title as President disintegrating Republic.
Insofar as Formosa is concerned there emerges from these following factors bearing directly upon US interests:
- 1.
- It is reasonable assumption that present Governor or any replacement whether appointed by Gimo or Li will elect to resist authority mainland Communist government and build up Island as military bastion.
- 2.
- Foreign exchange in future generated by exports and Nationalist gold pot on Island will become available to it.
- 3.
- Abrupt severance from Formosa’s mainland targets and supply sources, coupled with recent arrivals of economically nonproductive refugees, will further feed inflation which has gained headway in past month.
- 4.
- With transfer to Formosa still in process of considerable numbers of troops from Shanghai area, it can be assumed that Island’s defense will be weakened, not strengthened by added economic burden and by increased chance of sell-outs to Communists by individual commanders.
- 5.
- Despite encouragement mainland disintegration might be expected to provide, there is no new evidence that local independence groups are sufficiently numerous, well organized, well armed and well led to knock out garrison and successfully establish anti-Communist pro-US native Formosan government although general deterioration may soon result widespread unrest and isolated flareups.
Whereas month ago possibility existed Formosa might become autonomous and be run for benefit its people by enlightened governor, it is now almost certain that under either Generalissimo or Li control it will be developed as a fortress which is not compatible with rational economic [Page 325] development of Island nor application measures necessary to secure popular support and political development of Formosans.
Entirely apart from question its military security from without, Formosa cannot now be turned into welfare laboratory without far larger subsidy than US has so far considered. New and powerful forces of economic deterioration are at work. Even with massive aid there is little chance governing group with its attitudes and available technical brains could effectively and wisely use such aid. American advisers or a large ECA mission could not compensate for these deficiencies. The US would have to exercise direct authority commensurate with any responsibility it assumed for Formosa’s economic well being. That would be a large order and would have to be skillfully presented in order to avoid effective attack on US by Communist propaganda throughout Asia.
On other hand, Formosa can be run as a fortress on a siege basis for a considerable period. If it worked out, our strategic objective would be protected unless and until its governor generals sold out to the Communists. Against latter contingency I see little we can do.
I believe decision to hold out will rest on governing group’s estimate of (1) reliability of troops on Island and adequacy strength and supplies to repel any assault from mainland; (2) ability to suppress any native uprising; and (3) ability Formosa to continue economically to support regime’s establishment on Island.
US economic aid would not affect (1) above.
Re (2), it might reduce over period of time incentive of Formosans to revolt. It is more likely, however, that the marginal beneficiaries of US aid would be governing groups and military. Re (3), control of exchange and gold pot should enable Island to finance its needs out of capital for 1 or 2 years or possibly longer. Viewed in concept of Formosa’s total resources as aid would really amount to subsidy of military on Island.
The liabilities, however, which we would assume for economic aid of doubtful utility to either Formosan or our own interests are considerable. First, we would give Communists resounding irredentist tub to thump on mainland and throughout southeast Asia. This would not only be effective as attack on US but would embarrass any effort our part to hammer on Soviet steals from China. Second, if having given aid we fail and Island is lost to Communists, we have strengthened it for latter’s benefit. Finally, we use US resources with slight hope of strategic return.
The foregoing argument rests on the assumption that it remains US policy (1) not to provide military forces for defense of Formosa, and (2) not to assume governing responsibility over Formosa through [Page 326] unilateral occupation. Incidentally Amethyst39 incident suggests that show of force against Communists would prove futile unless backed up by presence overwhelming force and willingness to use it if challenged.
My conclusion is that US should abandon contemplated ECA reconstruction program on Formosa. I also recommend against substituting therefor any ECA commodity import program beyond one of modest size described below.
It is difficult to accept this negative conclusion. There are, however, certain actions which I believe we can and should take, among which are:
- 1.
- Maintenance strong CG40 staff to encourage Government in resistance and liberal rule.
- 2.
- Continued discreet contact independence leaders as long shot.
- 3.
- Vigorous JCRR program financed by fertilizer imports.
- 4.
- Persuade Government employ and immediately utilize J. G. White as industrial engineering adviser.
- 5.
- Extend Washington consultations with other nations concerned with view to place case before UN on short notice if need be. [Merchant.]