894A.00/5–2449
Memorandum by Mr. Livingston T. Merchant to the Director of the Office of Far Eastern Affairs (Butterworth)
United States Government policy with respect to Formosa was established in NSC 37/2,60 approved by the President on February 3, 1949, and in NSC 37/5,61 approved by the President on March 3, 1949. In essence, this policy was designed to secure the denial of Formosa to any Communist or Communist-dominated government on the Mainland. The means available to secure this objective were stipulated to be diplomatic and economic support of the governing group on the Island. A show of force or the employment of U.S. military forces for the security or defense of Formosa was specifically ruled out at this time. The documents under reference took into account the JCS study of the strategic importance of Formosa and contemplated that, as soon as we knew with what group we must deal, there would be an immediate approach to the Governor for the purpose of securing from him certain assurances in return for which ECA would proceed with its suspended industrial reconstruction program on the Island.
In February the groundwork was being laid for peace negotiations, later to prove abortive, in Peiping between the Communists and representatives of Acting President Li Tsung-Jen. Despite the fact that Governor Chen had been appointed by and owed his primary loyalty [Page 338] to the Gimo, the risk was recognized that from the peace negotiations there might emerge a coalition government which could claim wide support and which could successfully extend its authority over Formosa. Despite the importance which this risk gave to reaching promptly an understanding with Governor Chen, the Department reached the conclusion that delay in committing to Chen full support through the ECA program originally envisaged was justified by the fact that he typified the unenlightened leadership of the most reactionary element in the KMT and by definition appeared incapable of providing Formosa with the sort of liberal government which alone could ameliorate the hatred of the Formosans for their Mainland rulers and in so doing build up political stability on the Island which would minimize, if not eliminate, its susceptibility to Communist infiltration and ultimate seizure of control from within.
The primary reason for delay was our knowledge that the Acting President desired to replace Chen Cheng with General Sun Li-jen, an American trained officer of integrity, competence and liberal philosophy. To date his efforts have been unsuccessful for reasons which are now clear from the open battle between Li and the Gimo for undisputed personal control of the remaining treasure, territory and armed forces not yet under Communist control. In this personal conflict for power, Formosa has become the key pawn and Chen Cheng’s exclusive loyalty to the Gimo is plain.
In this interval during which no direct discussions were held with Governor Chen, ECA continued to hold its projected industrial reconstruction program in suspense. ECA proceeded, however, with its scheduled importation of nearly fifty thousand tons of fertilizer for Formosa. Certain medical supplies and odds and ends of flour and cotton yarn were likewise brought in by ECA, in part for the purpose of financing its own local currency expenditures, thereby to avoid contributing in any way to the rampant inflation. JCRR likewise proceeded with its planning for a program on Formosa directed at the well-being of the farmers and comprehending such operations as seed improvement and hog cholera serum manufacture.
During this same period, Chen Cheng entrenched himself in power, traveled and talked freely around the Island, but accomplished little to improve either the material or the political lot of the Formosans.
In November 1948 and in successive waves thereafter, rich refugees and units of the armed forces streamed into Formosa from the mainland. The total of such immigrants is variously estimated to run between five hundred thousand and a million. The present troop strength on the Island is now estimated to exceed two hundred thousand. The economic impact of this migration has been tremendous. Many of the [Page 339] civilian refugees attempted to finance themselves by inward remittances while in the case of the Army, Navy and Air Force the National Government looked to the provincial treasury to feed and support them. The latter could do so only by printing additional currency.
On April 20 the civil war erupted again with the Communist crossing of the Yangtze, and with this development the immediate risk of a legal voluntary turnover of Formosa to a new government participated in or dominated by the Communists disappeared. The resumption of the war moreover sharpened the conflict between Li and the Gimo and accumulating evidence suggests, almost to the point of certainty, that the Gimo will raise his standard on Formosa—to sit it out there until the third World War breaks out, a war which he regards not only as inevitable but imminent. The Gimo no doubt regards Formosa as secure. The CAF headquarters is there as are certain naval units. The troops on the Island are still increasing as units are withdrawn by sea from the Shanghai area and landed on Formosa. Moreover, the Island is self-supporting in so far as food is concerned and in the vaults of the Bank of Taiwan is nearly US$90,000,000 in gold. Finally, Chen Cheng has provided a refuge for dozens of the Gimo’s oldest and most loyal subordinates.
The developing situation described above requires a reconsideration of US policy with respect to Formosa, with a view to recalculating the chances of success for the policy as now laid down and for the purpose of exploring alternative courses of action. The following factors are important in any such reexamination:
- (1)
- It is the firm resolution of the present Government of Formosa to defend the Island against any Communist military assault and to seek out and suppress any Communist internal activity. The United States does not need to say or do anything to support or reinforce this resolution since it is based on the strongest of all instincts, personal self-preservation.
- (2)
- An immediate military assault on the Island by the Communists seems improbable (i.e., within the next six months). The preparation of the necessary military expedition would seem to require at least that length of time and there is no evidence yet at hand that the Communists are directing their primary attention to Formosa.
- (3)
- The Formosan population is restless and deeply resentful of their Chinese rulers. They do not appear, however, to possess a revolutionary organization, leadership or the arms to produce more than a futile uprising which it would be within the means and purpose of the Government quickly and bloodily to suppress. The Formosans yearn for independence as children yearn for candy. They have a child-like faith in the United States and its relative disinterestedness which overt support of Chen Cheng would go far toward destroying.
- (4)
- In the past six months the economy of Formosa has deteriorated seriously and rapidly primarily because the population has suddenly been increased by between ten and twenty percent and the new arrivals [Page 340] have been economically non-productive. In these changed circumstances a total ECA program at the annual rate of, say, twenty-five million dollars U.S. could not positively and constructively affect the Island’s economy and thereby, as originally hoped, bring political stability in the wake of a net advance of the people’s livelihood.
To summarize and over-simplify, we find ourselves faced on Formosa with a situation very similar to that which confronted us on the Mainland a year ago. The Government in power is corrupt and incompetent. Self preservation dictates that it advance our national interest in the process of attempting to preserve its own collective personal neck. The people which it rules hate not only the Government but will hate any foreign country which morally and materially gives its support to that Government. Yet there is no possibility, short of the dangerous and risky effort to finance and promote a coup d’etat, that the present Government will be replaced or alter its character in the direction of liberal political rule and wise economic action.
It would seem practically that we are confronted by three possible lines of action.
First would be to pursue and execute the policy laid down in NSC 37/2 and 37/5. Admittedly, this would have the advantage of action. The implicit expression of support to the present Government would presumably encourage them spiritually. The economic assistance if properly formulated and directed would slow down, though not cure, the current economic decay. We would, however, see the reservoir of Formosan goodwill to America drop sharply and we would hand the Mainland Communists a ready-made irredentist weapon for their propaganda. We would increase, rather than reduce the vulnerability of many Chinese on the Island as well as the Formosans themselves to Communist agitation.
The second course is briefly outlined in Taipei’s telegram no. 142 of May 4. Essentially this would entail forthright action by the United States on a bolder, more costly scale. The irredentist issue thereby created would of course be far more serious than in the case of course one above. It would involve acceptance of the fact that we would place ourselves on the psycshological defensive and even more important, it would implicitly commit United States Armed Forces to defend the Island if it came under assault.
The third course available is substantially that envisaged in the closing paragraph of Taipei’s telegram no. 141 of May 4. It means relying on the present Government’s personal interest in resistance, providing some economic aid of a character designed to reach and directly affect the little men of Formosa, particularly the farmers. It is admittedly a policy of calculated inaction colored with opportunism [Page 341] and it should be accompanied by vigorous secret spadework with those friendly governments which, like ourselves, are concerned with the strategic importance of Formosa. This spadework should be directed to the ultimate raising of the issue of Formosa in the UN, preferably as a result of an appeal by the native population, supported, if such can be encouraged or arranged, by Mainland elements on the Island.
No one can have had very high hopes that economic and diplomatic steps alone could guarantee the denial of Formosa to a government unfriendly to us. When they choose to put their minds on it, the Communists should be able to take over the Island either by assault or more likely by an infiltration which would include getting at not only the troops but very possibly individual leaders of military units on the Island. The JCS has made clear its unwillingness to contemplate at this time the commitment of U.S. Armed Forces to the defense of Formosa, the only action which could guarantee the security of Formosa from our point of view. If this is a reasonable assessment of the situation and the possibilities of achieving our ends, then it should behoove the United States to guard its moral position not only on Formosa and in China but throughout all Southeast Asia by minimizing its association with a governing group which has already in a larger theater demonstrated its incompetence and unpopularity.
Accordingly, I recommend adoption of course three described above. This will entail the Department reopening the matter in the National Security Council. This should be done promptly. Assuming NSC agrees, then the Department should issue an official public statement along the lines of the statement which was to have been made to Governor Chen under NSC 37/2. This should be accompanied by an active effort to explain to key members of the Congress and responsible newspapermen the underlying elements and difficulties in the Formosan situation.