893.50 Recovery/6–2949
Memorandum of Conversation, by the Secretary of State
Subject: Formosa
| Participants: | The Secretary |
| Mr. Butterworth, FE | |
| Mr. Merchant, FE | |
| Mr. Hoffman, ECA | |
| Mr. Lapham, ECA | |
| Mr. Griffin, ECA | |
| Mr. Cleveland, ECA |
Mr. Hoffman this morning brought in Mr. Roger Lapham and Mr. Allen Griffin, retiring chief and deputy chief, respectively, of the ECA mission to China.
Mr. Griffin, who had just returned from Canton via Tokyo, discussed at some length the situation on Formosa, particularly in connection with ECA’s efforts to increase trade between Formosa and Japan. He emphasized the lack of interest displayed by SCAP officials in his efforts to arrange for acquisition on a barter basis by SCAP of a substantial quantity of Formosa’s surplus sugar. Mr. Butterworth reported his action yesterday with the Department of the Army and it was agreed that Mr. Cleveland of ECA would follow this matter up with the Pentagon.
Mr. Lapham then gave a brief report on the liquidation of the ECA mission in China, pointing out that from 100 American members it had now dwindled to less than 20, including small “wind-up” missions located in Hong Kong and Tokyo. He reported that supply activities would cease in Canton within a matter of weeks leaving only Taipei where any continuing ECA work is contemplated, apart from JCRR activities on that island and in certain non-Communist areas in the interior of the mainland.
Mr. Hoffman then raised the question of Formosa, stating his belief that a policy decision by the Department was required. He added that naturally ECA would be happy to proceed in such fashion as this decision required. Mr. Hoffman said that in his view three alternatives were before us. First would be an all-out ECA economic program supported and protected by U.S. military forces, or at least our willingness to commit them if needed; second, for ECA to close down its activities on the island as soon as the current shipments of fertilizer have been distributed and then withdraw all ECA personnel; third, to continue with a modest commodity import and JCRR program, supplemented by active efforts to increase Formosa’s export trade and thereby increase the island’s ability to help itself. Mr. Hoffman indicated that the second course appealed most to him and noted the difficulty that he would have in supporting before Congress the use of ECA funds to rehabilitate the island, since it is a matter of common knowledge that [Page 356] the Generalissimo disposes on the island of up to 275 millions in gold and foreign exchange.
I pointed out that under the outstanding NSC Series 37 directive we are instructed to support “vigorously” the economy of Formosa. I said, however, that in the light of developments since that policy was determined upon, a reexamination of the situation by the NSC was indicated. I concluded by saying that the Department would undertake to secure this reexamination and keep Mr. Hoffman informed of the result. Meanwhile, efforts to increase the export trade of Formosa should be continued together with the existing ECA program on the island.