Foreign Relations of the United States, 1951, European Security and the German Question, Volume III, Part 1

CFM files, lot M–88, box 158, Secretary’s briefing book

United States Delegation Minutes of the Second Meeting of the Foreign Ministers of the United States and United Kingdom Held at Washington, September 11, 1951, 10:30 a.m.

Washington, September 11, 1951, 10:30 a.m.

secret
U.S.–U.K. Min–2

	Members
	Mr. Acheson (U.S.)
	Mr. Morrison (U.K.)
	Also Present
U.S.		U.K.
Mr. Harriman		Sir Oliver Franks
Mr. Gifford		Sir Pierson Dixon
Mr. Jessup		Lt. Gen. Sir K. MacLean
[Mr. Linder]		Mr. R. H. Scott
		Mr. Gaitskell
		Sir Leslie Rowan

Alignment of US–UK in Far East

a) Korea¹

1. Mr. Acheson said the US side had been getting its ideas together regarding a course for UN action in Korea in case there is an armistice. The plan was to get on with political discussions keeping them confined to Korea and avoid discussing issues such as Formosa and China. The possibility of political agreement regarding Korea is not bright. We would not go back to where we were before hostilities began, and desire a united, free Korea. We recognize there is not much chance for agreement on this point, but we would not “sanctify” a division of the country at the 38th parallel, which line had been drawn solely for purposes of the Japanese surrender. Our policy called for a united Korea.

2. Mr. Morrison said he agreed that discussions should be kept to Korea, keeping in mind, however, the possibility of a comprehensive approach to settlement of problems in the area. He said the UK also desired a unified, democratic regime. In the back of his mind, however, were thoughts regarding UK public opinion on China, and also the point that Korea might not be ready for democracy immediately and if a democratic state were created and left to its own devices, it might easily be upset by a Fifth Column. This was a danger to be kept in mind. Regarding the nature of a cease fire conference and any armistice talks, he felt these should not be conducted in such a manner as to make it appear that it was the UN versus the Communist powers which were debating the issue. We should emphasize that the UN is a world organization—everyone is in it—and are working their problems out among themselves.

3. Mr. Acheson then read from a position paper setting forth a proposed US course of action in case of no armistice. In addition to general consideration of the problem by the UN nations we believed we must accelerate military preparations. The free nations must get themselves in a state of readiness for general war. He did not wish to alarm anyone, but he believed there was a clearly increased likelihood of general hostilities. We have evidence of a considerable build-up in the Chinese air force, and at least two armored divisions have appeared in North Korea. The Western Allies should increase the tempo of their production and carry out their defense plans as quickly as possible. The Joint Chiefs of Staff have developed a paper² which includes a number of recommendations.

If the fighting falls off, the UN Commander in Chief should be directed to increase immediately the scale of military operations in order to retain the initiative in battle and prevent deterioration of morale.

Restrictions on General Ridgway’s movements should be removed in order to give him tactical leeway to make advances into North Korea to the waist of the North Korean Peninsula.

Expedite the organization, training, and equipping of Japanese troops.

Develop and equip additional Republic of Korea military units, increasing their responsibility for the defense of Korea.

Mr. Acheson said forces of this type took a long time to develop. Two of the ROK divisions had turned out all right (the First and Capital Divisions), but there had been several disasters when ROK divisions had broken in battle allowing the enemy to come through and the UN Command had lost several months repairing the damage. The military policy now was not to place two ROK divisions side by side and to keep them on the Eastern side of the Peninsula where there was less chance of Communist pressure. Time is the important factor since there were few effective Korean officers and non-commissioned officers, and it would take time to train them.

Remove restrictions against attacks in North Korea, especially against the Yalu River Dams and the power installations on the Korean bank.

Mr. Morrison asked why we had originally embargoed action against these objectives. Mr. Acheson explained that we thought such action might be provocative to the USSR. However, the Communists had now removed most of the equipment which generated power for North Korea so that the entire output is going into Manchuria. In addition, one of the Dams serves as a main highway into North Korea. With regard to air attacks on Rashin, these would be approved on an individual case basis, and the emphasis in this connection was to keep UN aircraft clear of the Soviet border.³ Mr. Morrison said he was not familiar with Rashin and Mr. Acheson explained its location and proximity to Manchuria and Soviet territory. We had bombed it approximately three weeks ago, destroying the railroad marshalling yards and large quantities of war material. Mr. Morrison asked if there had been any Soviet reaction, and the Secretary replied that there had not been any evidence of it but that there may well have been concern.

A complete economic blockade of China by the UN nations was also recommended.

4. In case of any large-scale air attacks against UN troops and installations in Korea, General Ridgway was to carry out his standing instruction of informing Washington, which would in turn carry out consultation with the UK and other participating nations to the extent permitted by the situation, after which Ridgway might be authorized to conduct pursuit and retaliation against Communist air bases. Mr. Morrison recalled the UK had agreed this point in the past in a communication with the Secretary. Mr. Acheson said that as far as action in the UN is concerned we plan to give a history of the Kaesong discussions,⁴ including full detail on the alleged violation of the neutral zone, emphasizing that any breakdown in talks was not the fault of the UN. We believe the UN should reaffirm its decision to carry on the struggle against aggression and that members should take diplomatic action to bring political pressure to bear. Additional economic measures should be considered looking toward a complete blockade of China and the US would seek to give effect to such a blockade either through the UN or bilaterally. The US would also seek to get increased military support and participation in the Korean operations.

6. Mr. Morrison said he agreed on a lot of points and had some questions about others. It was desirable to give the UK background and approach to the problem. The UK was anxious not to become involved in a mainland war with China. This was partly because of the general UK attitude toward China and partly because they must look at the world as a whole with all its potential for trouble elsewhere. One difficulty was that there were so many places where the Soviets might make trouble. The Middle East with its bad governments and restless peasant classes could be exploited quite easily by persons wishing to cause trouble. It would be the adoption of a policy of desperation by these people. They had no labor movements comparable to those in the US and UK to support their point of view and the potential for trouble always existed. He remarked, “If I were Stalin, I would have a go at it.” The UK didn’t want to become involved in a war with China. He agreed that if UN forces were heavily bombed, we would have to strike back, but the UK didn’t want to do things needlessly. As diplomats, it was our business to avoid World War III. Communist China need not necessarily be a slavish Communist satellite. Mr. Bevin had believed that Chinese history, character and sheer numbers gave some basis for the assumption that they would draw a line between themselves and the Soviets. He had also believed that the USSR purposely made it difficult for China to be admitted to the UN in order to force China to turn to the Soviets for understanding and assistance. The UK didn’t want to do anything to drive China to further cement its defensive union with the USSR. Another point was that if the UN became more heavily engaged in the Far East, the Soviets would likely start trouble elsewhere. These, he felt, were the basic UK points of view.

7. Mr. Morrison was not clear on whether the JCS was an entirely American military group; when this point was made clear to him, he said that his comments might be subject to those which General Mac-Lean might wish to make. As for Korea, he said the British were satisfied to depend on Ridgway’s discretion regarding tactical moves. He felt that it was necessary for a field commander to have such discretion, and he well understood the point regarding troop morale because London had experienced a similar problem when undergoing the terrific German bombings and a job to do was vital in maintaining morale.

8. With regard to training Japanese forces, Mr. Morrison said that he had not heard of this before and the question was being raised sooner than he expected it might be. He wanted to get advice from his colleagues before he commented. There was some apprehension among certain people in the UK regarding German rearmament which he personally did not share because he felt to leave Germany out of the picture would result in the North Atlantic Treaty nations being lined up on one side against the Soviet Union and its Satellites on the other. However, he felt the idea of arming Japanese would raise some excitement in Britain. As far as training South Korean troops went he felt this was perfectly all right. He remarked that the question of bombing the Yalu Dam was “apparently under control”, but that General MacLean might wish to comment further. As far as a blockade by the UN was concerned, he was not sure it would be effective. He also felt it might cause China to rely even more heavily on the USSR. The Ridgway report,⁵ he agreed, must make clear that it is not the UN’s fault that cease fire negotiations have been terminated. The UN should reaffirm its decision to resist aggression.

9. General MacLean said that the British Chiefs’ view was that they accepted the idea of UN tactical advances as far as the waist of Korea. They really didn’t know enough about the situation and were satisfied to leave it up to Ridgway. They did feel, however, that the UN forces were in a good position at the present time and that if they went to the waist, it would add to their line of communication and internal security problems, at the same time shortening the Chinese lines which were vulnerable to air attack. Their consensus was that it was best for the UN to stay where it was. Mr. Acheson said that these same factors had been considered by the JCS and the general idea of maintaining our present position was considered sound. General MacLean interjected that the British forces held the view that pursuit beyond the waist was considered a problem requiring governmental decision.

10. Ambassador Franks asked if he might pose a question regarding Mr. Acheson’s earlier statement that if fighting were resumed the general danger had markedly increased. He wondered what the background for this assumption was. If fighting was resumed, the Chinese would require additional men and equipment both on the ground and in the air. He supposed that it might be that the Chinese felt they could not withdraw. At the same time the USSR did not want to push the fighting further or give up larger amounts of material to the Chinese, but their commitment to the latter made them take a larger risk, and it is not clear where the fighting will stop.

11. Mr. Acheson said that is the underlying thought. In speculating on the situation it was possible to reach the conclusion that the Malik suggestion was based on an analysis by the Russians which foresaw that the fighting would proceed on a larger scale which might easily spread and endanger the Soviet position. The Chinese may desire to press on in an attempt to gain a victory. This posed for the Russians the problem of providing equipment and building a strong China or of attempting to conclude hostilities and waiting until the general situation was more favorable to the Soviets. For some reason this idea was not working out. The Kaesong protests were continuing and apparently were designed to continue until someone loses patience and feels there is no use in attempting to come to terms with the Communists. Ridgway was being very careful in this connection. However, we had reports which indicated that considerably more equipment was arriving for the Chinese Communists, including the armored divisions and large numbers of aircraft. A new attack on the UN forces might be very serious. If large-scale fighting does resume, the world situation is markedly worse. In this connection he doubted that there was much value in worrying about Chinese reactions to such things as additional restrictions placed on them by the UN. He felt that these could not irritate them a great deal as compared with the larger situation.

12. Mr. Acheson said that to go back to the Japanese troop point, he desired to make it plain that there was no intent to use Japanese forces in Korea. What we were proposing was to expand the Japanese police reserve. They could easily be made a military body by increasing their training and armament. The purpose was to increase the defenses of Japan. Our Defense Department had been disturbed last autumn when Japan was denuded by transferring all available United States troops and supplies to Korea. A situation had existed where it would have been easy to take Japan and if that ever happened the position of our forces in Korea would be untenable. It was difficult for the US to meet the security requirements of Japan and also to send troops to Europe under NATO commitments.

13. Mr. Morrison said this explanation improved the situation greatly from his point of view. He understood the problem in Japan. He thought it was agreed between us that we must do everything we could not to “go over the line.” It was not inconceivable that the Soviets might be forced in their own thinking to “preventive war.” On the question of additional troops for Korea he felt that he must state now that this would not be easy for the UK. They were having trouble in Malaya and elsewhere and unless there was partial mobilization or the possibility of obtaining troops from Australia was looked into he could not foresee any availability. He wanted to consider this question with his colleagues in London.

14. On the question of a blockade, Mr. Morrison wondered if this implied that UN naval units might actually stop Russian ships attempting to proceed to China.

15. Mr. Acheson said that we did not at present believe it was reasonable to have a naval inspection of vessels in the area but rather our thought was that UN member countries should agree to order ships under their registry not to go to China. Mr. Morrison said he appreciated having our many points with regard to the Far Eastern situation and would report fully to his colleagues in London.

East-West Trade⁶

16. Mr. Morrison introduced Mr. Gaitskell, Chancellor of the Exchequer, in order that Mr. Gaitskell might discuss a number of economic problems related to the agenda item on East-West trade.

17. Mr. Gaitskell said he had had discussions with a number of people in the US Government⁷ and he thought it appropriate for him to describe the situation now existing in the UK within the context of the meetings between the Foreign Ministers. The UK imported two vital commodities from the USSR, timber and grain. Every year negotiations between the two countries reached a critical point when the British wondered whether they would get a trade agreement for the ensuing year. These commodities were vital to the economy of the UK yet, if the items which the Soviets could buy for sterling were severely limited there was always the possibility that they would not wish to accumulate additional sterling, and terminate the agreements. The British were now in debt under the current agreement for a considerable amount because restrictions had been placed on the export of rubber to the USSR, but that quantities of timber and grain had been imported at the very high prices now prevailing in the world market. This deficit was continuing to grow. He felt that he might just as well say plainly that the UK is now in the beginning of a very serious dollar crisis. On October 4 he would have to report to Parliament on the sterling-dollar situation. He would have to say that a deficit of nearly $500 million in the dollar account was projected for the years 1951–52; the over-all deficit including the sterling area would be approximately $1.2 billion. This was approximately the amount which the UK had gained as surplus in the previous year. By the end of fiscal year 1952 British reserves would be reduced to the equivalent of approximately $2 billion which was almost the same as the low point reached prior to the devaluation of the pound. The reasons for this situation were that there was more purchasing by sterling area countries from the dollar area. Defense production, and the high prices of raw materials were contributing factors. In 1950 the British Treasury thought it had solved the dollar deficit problem and were able to dominate the situation. This they now found was not so. The situation held a potential of very serious political consequences if the Government was unable to cope with it.

18. Mr. Gaitskell thought this was a European problem and not entirely one for the UK. Europe was now getting back to the pre-Marshall aid situation as a result of the new factor—world rearmament—which had been introduced into the total picture. With regard to East-West trade within the context of NATO he believed that other members would feel the same way as the UK. The USSR and satellite areas would have goods available which the US might not be able to supply and which some of the European countries would not have the dollars to buy even if available. Serious repercussions were apt to occur in the defense programs. However, the defense program was not the major cause of the situation but most people in Europe will think so. The pressure within the UK will be particularly noticeable since the balance of payments figures will be unfavorable yet exports will have been sacrificed to defense. This in fact has been British treasury policy up to now; the UK cannot continue to do it. With regard to military requirements as scheduled under the NATO he felt that there would be confusion and unpleasantness unless the economic realities of the European economic versus military situation were met squarely. There had never been in NATO a bringing together of these two. As things are going, Europe would have to adopt a war economy to go on. He felt it was highly desirable to discuss this problem among the Big Three before the question was taken to the full Council.

19. Mr. Morrison said that he felt he must explain the difference in approach of the UK as contrasted to the US. Exports and imports were vital to the livelihood of the UK. Now the UK had to live and carry out a rearmament program. The US was self-contained and only a small part of its production was related to overseas trade. It was much harder for the UK to say “no” to the Soviet Bloc on trading questions. As a matter of policy the UK also felt that “the Soviets may change their tune”. The UK was principally interested in exchanging with the USSR not war materials but economic goods. They had found the Soviets very business-like to deal with and that they generally stuck with their bargains. It was not bad to have contact with them through this channel from a foreign policy point of view. The UK could not carry out a control policy to the point where it was not harming USSR but was really hurting the UK—i.e., the UK would be cutting off its nose to spite its face. It was good to make these general observations because he thought it made the UK position better understood.

20. Mr. Acheson asked Mr. Gaitskell if the UK could live with its present trading agreement and did not desire to go further. Mr. Gaitskell said that they could live with the present agreement; however, the Soviets can cut it off at any time if they can’t spend their sterling and that if this happened it would cause a large additional dollar liability for the UK.

21. Mr. Morrison remarked that conditions placed by the US Congress on aid in relation to the East-West trade problem were extremely annoying. He recognized that this did not reflect a State Department point of view and remarked that the Executive Branch could not control the Congress the way the Cabinet controlled the Parliament. He said that such conditions make the British people angry.

22. Mr. Acheson said that we disliked the procedure and that the President had stated his dislike to the Congress. One problem which we face is our inability to tell the Congress and the people what has been done in the field of controlling strategic exports to the Soviet area because this information is classified. Congress has the feeling that nothing has been done and actually we know that a great deal has been accomplished. The Kem Amendment could not be vetoed by the President because it was a rider on an important military appropriation. However, we feel the situation is somewhat improved—we feel that we have prevented even stronger legislation. In reply to a question by Mr. Gaitskell as to whether the Battle Bill was all right Mr. Linder said that we regarded it in a favorable light and hoped to get together on the remaining twenty items of the controls list. He said that if a good administrator was appointed and if the US and UK could reach an agreement regarding some further items the situation would not be too bad. He pointed out, however, that we would be faced with the problem the matter becoming alive from time to time because we would be required to make periodic reports to Congress. He hoped that we could make our primary strategic lists coincide and that this would be extremely helpful. Mr. Gaitskell said that he thought we could not avoid the fact that there would be continuing difficulties. For instance, he understood that public opinion in the US was very sensitive regarding the question of rubber which was one of the primary products which the UK had available for export and which the Soviets desired to purchase. Mr. Linder said that we desired to have further bilateral discussions on such questions; that we have given some education to the public and are hopeful that we can reach an agreed position. Mr. Gaitskell said he hoped we were not too optimistic regarding the twenty items. Mr. Morrison interjected that the UK had gone “a devil of a long way.” Mr. Linder said it was highly desirable to get a few more items included.

23. Mr. Acheson inquired whether the proposed administrator is to be a full-time man or someone who has other responsibilities elsewhere in the defense production set-up. Mr. Linder said that the House and Senate bills differ on this point and the matter will have to be resolved in conference. Mr. Morrison inquired if the responsibility might rest in the State Department. Mr. Acheson replied that that would be the last place they would consider placing it. Mr. Gaitskell said he wanted to state that the UK appreciated very much the assistance which had been provided by the US and that he understood some of our present problems in regard to this matter of trading with the communists. However, he felt that he must make it clear that the UK “was up against it.”

24. Mr. Acheson said that he would like to return to Mr. Gaitskell’s remark that defense expenditure was not the major cause of the present British imbalance and deficit situation. Mr. Gaitskell said that the UK had very low postwar reserves and that it could not afford balance of payments deficits even in sterling for very long. There had been a change in world prices—an increase which cost British more in imports, and upset the balance of payments. In order to hold the balance relatively equal the British have to sell more. The material which must go into defense items and the industries which must build defense material are the same ones as those which provide fifty percent of British exports. The burden of the defense program plus the world rearmament with the resultant increase in raw materials prices forced the UK to face a double burden. Rising prices in the US had caused higher import prices which directly affected the dollar situation and in addition prices were rising on the Continent and in the sterling area. The loss of revenue from Persian oil also was a factor. The UK’s own part in the defense effort had had its effect but the UK was really more vulnerable to world changes resulting from the total rearmament effort. Repercussions of a defense program would not cause any particular political reaction if a deficit were confined to increased cost in the sterling area, but that if these costs were coupled with a dollar drain this is a real danger signal in the eyes of the public and opinion, particularly that supporting the left-wing portion of the labor party, would declare that the Nation was going bankrupt and that this was a vindication of their statement that the country could not carry out such a program. He was almost certain to face these charges on October 4 when he reported to the Parliament. The point now reached was what can Britain do? It must produce enough exports to bring the balance of payments situation into line since the deterioration could not be allowed to continue. Materials shortages limited expansion and the existing plant could not take defense orders at the same time it was meeting the need for export goods. Britain must slow down its expenditure dollars and earn currencies which were useful in place of dollars. If it were not for the deterioration in the terms of trade resulting from the price changes in the world picture he had no doubt Britain could do the program without chancing bankruptcy.

25. Mr. Harriman said that he had discussed this question the previous evening with Mr. Gaitskell and that while he felt that no early conclusions could be expected there certainly was a major problem which had to be discussed further while the Chancellor was in this country.

26. Mr. Acheson asked how the question should be brought up for discussion between the Governments. Mr. Gaitskell said he felt that at the beginning the question had to be taken out of the NATO program. It was necessary to have a frank discussion and make up our minds what we think the solution might be. He hoped that a meeting could be held before the end of the week with the Secretary’s colleagues, including the Secretary of the Treasury. As far as staff work went he said that while the figures he would submit might be subject to official check by our government there was no other additional evidence necessary to begin the discussion and “as things are happening now it is a dangerous situation.” The UK was going to reduce dollar expenditures by the sterling area. Additional stiff internal measures on consumption were already contemplated. However, he was convinced that the problem could not be solved without US cooperation and it was necessary to immediately get down “to where we are.” He was not conscious of any treasury policy weakness and was convinced that the problem is outside British fiscal and budgetary control. Mr. Acheson said that he presumed that such a meeting should include the Secretary of the Treasury, Mr. Lovett, and Mr. Harriman, and that he would request that arrangements be made for an early meeting, possibly on Friday.

27. Mr. Harriman said that while he felt no decisions would be reached this week end it was very important to avoid another run on sterling. Mr. Gaitskell said that if he returned to the UK and had nothing to say after three weeks in this country there would be violent reaction. He must give information to the British people that we are cooperating with them in this situation. His staff would have a paper ready for discussion this week end. In answer to a question by Mr. Acheson, Mr. Gaitskell said that he definitely preferred bilateral discussions rather than a meeting including the French. The French were friendly but would not be of assistance in these discussions. The British contribution in terms of equipment for NATO under the present interim program might not be carried out unless this problem were met and some method for settling it brought forth. We must have a sharing exercise worked out on this program. That this question was bound to come out at the NATO meetings in Ottawa. The ECA agreed with him that we must have this exercise as an early item of business. In any discussion this week he would propose not to go over the whole sterling area problem but rather to confine our first attention to this immediate problem.

28. Mr. Acheson said that we would attempt to arrange a meeting for Friday, although he was committed to a very full schedule including a Cabinet meeting. He was leaving for Ottawa Saturday morning. However, he would talk to Mr. Harriman and see what could be done.

29. Mr. Gaitskell said he also thought it essential to have Mr. Wilson attend the meeting. Mr. Harriman said that his thought generally was that we must give attention to the procurement of end items including the possibility of helping the program through dollar purchases on the Continent. He also thought a consideration of steel and raw materials would enter into the discussion; as well as UK deficit in EPU and the question of German occupation costs.

1. For further documentation on the Korean conflict and the question of an armistice, see volume vii .
2. Memorandum dated July 13, 1951, volume vii .
3. In an addendum to these minutes, not printed, it was noted that the JCS standing directive did not require approval from Washington on individual cases. The British were informed of this by the Department of State following the second meeting.
4. For documentation on the Kaesong armistice negotiations, see volume vii .
5. For General Ridgway’s report on the failure of the cease-fire negotiations at Kaesong, see volume vii .
6. For further documentation on U.S. policy with regard to East-West trade, see vol. i, pp. 993 ff.
7. For documentation on Gaitskell’s conversations with U.S. officials in Washington on September 6 and 7, see volume iv .