446E.119/11–652
Memorandum by J. Robert Fluker, Officer in Charge of Economic Affairs, Office of South Asian Affairs
[Subject:]
- OC Document 950, October 22, 1952 (OIT’s Proposal to Expand Program Determination 810)1
It is our understanding that the Operating Committee plans to consider the above matter on November 10. From our review of the document under reference we judge that there are a number of points of considerable interest to several offices in the Department. There are certain points of special concern to this office, and SOA is submitting herewith its views and comments, with the request that they be taken [Page 1558] into full account in the presentation before the Committee of State’s position. (We are informed that you will act for Mr. Thorp as State’s representative on the Operating Committee.)
Discussion Section of OC 950
The discussion section of OC Document 950 could be improved considerably with changes in certain of the statements which, as they now appear, are not sufficiently accurate. One point of particular significance for SOA is the statement made in paragraph 2, page 1 that the U.S. negotiated with the GOC to “impose destinational controls”. Actually, the objective in these negotiations was for the GOC to effect a stoppage of shipments to Communist China, by whatever method the GOC would find most suitable.
In the last sentence of the paragraph the word “terminated” should read “suspended”. There was no official United States Government decision to terminate aid. Since there was no request for an exception for Ceylon under the Kem Amendment or the Battle Act, no aid is being extended to Ceylon.
Another point of particular concern to SOA is the wording of paragraph 1, page 2. There was no question, strictly speaking, of a quid pro quo, instead, there was the GOC’s repeated insistence that means must be found to forestall damaging internal criticism by some dramatic counter-development, such as the announced intention of U.S. aid over a period of years. Divergencies of interpretation of the GOC position are understandable, but it should be made clear that the Ceylonese themselves were most anxious that their suggestions not be characterized as “quid pro quo” proposals.
In the next-to-last sentence, same paragraph, “could” is far more adequate than “did”, because the caretaker government did not have the authority to continue the negotiations.
On page 3, the second sentence of the second paragraph is seriously inadequate and confusing. Since July and before the 80,000 ton rice purchase from Communist China, the GOC placed contracts from about 30,000 tons of U.S. rice against its allocation of about 50,000 tons (which was not announced until September 10). Earlier in 1952 the GOC had bought about 35,000 tons of rice here. Furthermore, the rice purchase arrangement with the Chinese Commies is not a barter deal (the GOC doesn’t undertake to supply rubber or other goods)and was not negotiated “simultaneously” with any procurement or non-procurement of U.S. rice in July–August (the GOC mission to China left Ceylon around September 11 and the agreement was concluded in early October).
It is an exaggeration to say (first sentence, p. 4) that “imposition of destinational controls [by GOC]2 was imminent” until Ceylon received sulphur from the U.K.
[Page 1559]We note one question which is for EDS to decide, as to whether sentence 3, para. 3, p. 1 reflects an accurate and adequate interpretation of the Battle Act.
Discussion Section of OC 950
SOA considers that several of the recommendations call for discussion and/or rebuttal. First among those primarily affecting SOA is I (b). I find it hard to believe that OIT intends such an embargo to be so broad as to interfere with processing and shipments of rubber, particularly pale crepe, purchased by the U.S. and other non-Soviet Bloc countries. SOA thinks that the blacklisting proposed in I (c) would be ineffective because of constant evasions and would not help to accomplish the immediate U.S. objective. It would tend to further alienate the GOC and public opinion in Ceylon.
SOA would insist that in paragraph 2 of III, “consultation” be changed to “concurrence”.
As to recommendations of general interest, we understand that “E” has definite views with respect to the bilateral and multilateral approach suggested in II. Subject to those views, SOA does not look with favor on further bilateral or multilateral control measures at this time. We would comment, as regards II(a), that the proposal to up-rate rubber, if adopted, should be contingent upon results of a thorough re-appraisal (by our best intelligence services) of rubber’s importance to Communist China and the Soviet Bloc; this evaluation is badly needed in any event. The other recommendations, if acceptable to OMP and EDS, appear satisfactory to SOA.
One final thought, applicable to all the recommendations is that since this problem of trade with Communist China is such a tangled one and the situation at present is so extremely fluid, the U.S. position needs to be reasonably flexible.