Executive Secretariat Files
Memorandum by the Under Secretary of State (Webb) to the Executive Secretary of the National Security Council (Souers)
Subject: Implementation of NSC 37/21 and NSC 37/5.2
Pursuant to NSC Action No. 123, October 6, 1948, as amended, the following progress report on the implementation of NSC 37/2, “The [Page 375] Current Position of the United States with Respect to Formosa”, and NSC 37/5, “Supplementary Measures with Respect to Formosa”, is submitted for the information of the Council:
The Department of State, in a letter of August 4, 1949,* requested the National Security Council to reconsider existing United States policy with respect to Formosa in the light of developments in the past two to three months. Specifically, the Department has requested that the Joint Chiefs of Staff furnish the National Security Council their present estimate of the strategic importance to the United States of Formosa, particularly in light of the very real possibility that it will ultimately pass under Chinese Communist control in the absence of active intervention on the part of the United States.
Following the return to Washington for consultation of Mr. Livingston T. Merchant, Counselor of Embassy on detail at Taipei (Formosa), the Department has assigned Mr. John J. Macdonald as Consul General at Taipei. Mr. Macdonald arrived at his post on July 19, 1949.
In the meantime, the Department has requested ECA to continue without interruption or major change its present activities on Formosa. These include the importation of fertilizer and general supervision of its distribution, utilization of the services of the J. G. White Engineering Corporation staff in providing technical assistance to certain Formosan industries, general advice with respect to the operation of the island’s economy, continued distribution of the Chinese Relief Mission medical supplies and moderate amounts of cotton and flour and the continuation of the rural reconstruction program on Formosa. The Department has indicated the desirability of ECA’s programming additional tonnages of fertilizer for delivery in time for the 1950 rice crops. ECA is also giving some assistance to the Formosan Provincial Government in negotiations with SCAP in connection with the barter of Formosan sugar and coal for Japanese manufactures and has agreed to the use of funds derived from the sale of cotton yarn made from ECA-financed cotton to complete a calcium cyanamide plant, which was aleady 90 percent complete, the operation of which will add 20,000 tons of fertilizer to existing local production. This work will be carried out under the supervision of the J. G. White Engineering Corporation. No steps have yet been taken to activate the industrial reconstruction program.