Foreign Relations of the United States, 1952–1954, East Asia and the Pacific, Volume XII, Part 2

Eisenhower Library, Eisenhower papers, Whitman file

No. 257
Memorandum of Discussion at the 181st Meeting of the National Security Council, Washington, January 21, 1954¹

top secret
eyes only

Washington, January 21, 1954

[Extracts]

Present at the 181st Meeting of the National Security Council were the President of the United States, presiding; the Secretary of State; the Acting Secretary of Defense; the Director, Foreign Operations Administration; the Director, Office of Defense Mobilization. The Vice President did not attend the meeting because of his absence from the city. Also present were the Secretary of the Treasury; the Attorney General (for Item 6); Mr. Morrison for the Director, Bureau of the Budget; the U.S. Representative to the United Nations; the Under Secretary of State; the Acting Secretary of the Army and Adm. Duncan for the Secretary of the Navy (for Item 4); the Chairman, Joint Chiefs of Staff; Gen. Bolte for the Chief of Staff, U.S. Army, the Chief of Staff, U.S. Air Force, and the Commandant, U.S. Marine Corps (for Item 4); Judge Barnes, Assistant Attorney General, and Mr. Herbert Hoover, Jr., Department of State (for Item 6); the Director of Central Intelligence; the Assistant to the President; Robert Cutler and C. D. Jackson, Special Assistants to the President; the Deputy Assistant to the President; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.

There follows a summary of the discussion at the meeting and the main points taken.

. . . . . . .

5. United States Objectives and Courses of Action With Respect to Indonesia (NSC 171/1, paragraph 20;² Memo for NSC from Executive Secretary, same subject, dated January 20, 1954)³ Mr. Cutler explained to the members of the Council that it was urgently necessary for the Council to determine whether the United States was under obligation, in its three-year contract with the Indonesian Government, to make a fair offer for some 18 to 20 thousand tons of tin, the amount projected for the third and last year of the contract. The period of negotiation between the RFC and the Indonesian Government would expire on January 31, 1954.⁴ OCB had sent a memorandum to the National Security Council indicating its view that the obligations of the United States under the existing tin contracts require that the RFC make a reasonable offer to the Indonesian Government in order to reach agreement on a mutually satisfactory price for delivery in the third year of the contract. Accordingly, OCB had suggested the insertion of a new paragraph 20–a in NSC 171/1 to read as follows:

“Recognize the obligation of the U.S. Government by making a reasonable offer to Indonesia with the intent of reaching agreement on a mutually satisfactory price for deliveries in the third year of the existing contracts. In reaching such agreement recognize the likelihood of resale and assure to the U.S. a reasonable opportunity to avoid loss on resale, at the same time assure to Indonesia that disposal will be handled in such a manner as to avoid undue disturbance to world markets.”

Secretary Humphrey said that he certainly did not know, nor did he believe anyone else knew, how any resale plan could be worked out to achieve both of the objectives of the OCB paragraph.

Secretary Smith⁵ commented that when he first read the proposed new paragraph it seemed to him so optimistic as to be laughable, but the experts had all assured him that it was possible to resell the tin in such a way as to injure neither the United States nor Indonesia. If, continued Secretary Smith, this proposal was OK with Secretary Humphrey, it was OK with him.

The President reminded the Council of the conviction he had expressed often in the past, that a nation is not poor when it owns “things”; that there were a number of metals and other materials that this country would need over the years and which it should buy when good opportunity presented over this same period of years.

The President replied that the point to him seemed to be whether we could get this Indonesian tin at a reasonable price. Secretary Humphrey said that we did not yet know the answer to the President’s question, but that in any case we may have to recommend an increase in the stockpile requirements for this metal.

Secretary Humphrey repeated his statement that the Council was not really in a position to discuss this problem at the present time. People were trying at the moment to work out a tin cartel for the whole world, and no one could predict what would come of the effort. We were, however, confronting certain hard and simple facts. This country now has on hand a five-year supply of tin, close to 60,000 tons.⁶ Something more than another year’s supply is now coming up. We obviously had more tin than we could hope to use.

After the President had once again repeated his view on the value of the stockpile, Mr. Flemming pointed out that the issue raised by Indonesian tin was simply part of a much more basic and ramified problem. It seemed to him that the Council must make a decision whether or not to take an over-run of certain materials and put them in the stockpile.

The President again argued for stockpiling as a measure of prudence, and while Secretary Humphrey said that he could understand the President’s argument, we could not afford to overlook the fact that our own lead and zinc miners in this country were in “tough shape”. This made it awkward to envisage foreign purchases of these metals. Secretary Humphrey also stated that he was heartily in favor of trading American butter for Soviet manganese.

Secretary Smith reminded the Council that whatever its members thought of Mr. Flemming’s suggestion for a study of basic stockpile problems, the deadline for meeting our obligations to Indonesia with respect to the tin was February 1, and that action was accordingly required at this meeting.

Secretary Humphrey admitted that, thanks to the conduct of the RFC under the previous Administration, Mr. Symington⁷ had got himself hooked, so that we were now morally obligated to make a fair offer to Indonesia for the tin to be purchased in the third year of the contract. Great difficulty, he predicted, would be encountered by the United States when it tried to resell the tin in a fashion which would not bust the world market for tin and do irreparable damage to the Indonesian tin market.

Governor Stassen agreed that the important sentence in the proposed OCB paragraph was the first sentence, requiring a reasonable offer to Indonesia for the purchase of the tin. He believed that the Council should accept the course of action outlined in this sentence. We could not afford to let Indonesia go down the drain.

Secretary Smith replied that the only urgency was in the matter of our purchase of the Indonesian tin. We could take our time in determining how to get rid of it by resale in ways which would not be damaging to the world market.

Mr. Cutler suggested that Council action take the form of accepting the first sentence in the new paragraph proposed by OCB.

Mr. Flemming expressed agreement with this proposal, but emphasized his view that we need a new policy to deal with the issues raised by Indonesian tin but involving basic policy to cover resale and over-runs of a variety of stockpile items.

After further discussion, the President said that in his view the decision should be to make a fair offer to the Indonesian Government for the purchase of the tin, prior to February 1. We could purchase this tin not with a view to resale but to hold the tin until such time as it could be disposed of without unduly disrupting the tin market. Furthermore, said the President, it should be made absolutely clear that the offer to the Indonesian Government was for a single year.

The National Security Council:⁸

a. Agreed that paragraph 20 of NSC 171/1 should be amended by the addition of the following as a new subparagraph 20–b, renumbering paragraph 20 as 20–a:

“b. Recognize the obligation of the U.S. Government, under existing contracts for the purchase of tin, by making a reasonable offer to Indonesia with the intent of reaching agreement on a mutually satisfactory price for deliveries in the third year of these contracts.”

b. Noted the President’s statement that:

(1) Any tin purchased under the above-mentioned contracts should be held by the United States as long as determined by the President to be necessary to avoid undue disturbance to world markets by its resale.

(2) It should be made clear to Indonesia that any agreement reached pursuant to a above was valid for one year only.

Note: The amendment to NSC 171/1, as adopted in a above and approved by the President, subsequently circulated for insertion in NSC 171/1.

. . . . . . .

S. Everett Gleason

1. Drafted by Gleason on Jan. 22.
2. Document 255.
3. Not printed; it forwarded the memorandum referred to in this memorandum from the Operations Coordinating Board. (S/S–NSC files, lot 63 D 351, NSC 171 Series)
4. The OCB memorandum indicated that the extension of the negotiation period to Jan. 31, 1954, represented the third extension by the RFC since October 1953.
5. Under Secretary Walter B. Smith was Chairman of the Operations Coordinating Board.
6. On this point, the language of the OCB memorandum reads as follows: “Present stocks, plus expected deliveries within the next few months, exceed the stockpile objective by about 40,000 tons. The stockpile objective is 245,000 tons. Total U.S. consumption of tin is approximately 60,000 tons per year.”
7. W. Stuart Symington, former Chairman of the National Security Resources Board.
8. This constitutes NSC Action No. 1020.