Foreign Relations of the United States, 1952–1954, Indochina, Volume XIII, Part 1

851G.131/2–2653: Telegram

The Ambassador in France ( Dunn ) to the Department of State

secret

Paris , February 26, 1953—7 p.m.

4798. Repeated information Saigon 185. Limit distribution. This is joint Embassy/MSA Mission telegram. Regarding Deptel 4534, February 20, repeated Saigon 1719.¹

1. Evidence is conclusive that present 17 franc rate considerably overvalues piaster and that, to an extent which it is hard to express in quantitative terms, this overvaluation results in inflation franc costs Indochinese war. Nevertheless, Embassy finds it difficult, because of extremely complex political and psychological aspects this problem, to arrive at firm judgment as to what policy United States ought to adopt without fuller idea of viewpoints French and Associated States. Accordingly, our recommendations as requested reference telegram regarding course United States action piaster rate problem in immediate future are as follows:

2. One of principal topics discussion during forthcoming Mayer visit Washington certain to be burden Indochinese war represents for France and ways in which she might be relieved of a greater part that burden than at present, in order enable her play her full role European defense build-up. We recommend that consideration be given to using framework these discussions to obtain insight into current French thinking regarding piaster rate problem. In view of extremely delicate nature this entire subject and importance not giving French excuse to tell Associated States that any eventual change due to United States pressure, United States spokesmen should of course exercise utmost care pose our questions in most matter of fact way possible. We should seek to avoid creating impression United States proposing either rate adjustment in general, or any set of measures in particular (e.g., specific rate change either with or without export and/or remittance taxes). This is especially important during initial stages discussion before we have had chance gauge French reactions. Question might be posed in following terms: “regarding magnitude Indochinese burden, United States Government has noted recent allegations in French Parliament and press to the effect that present exchange rate considerably overvalues piaster and that if rate were adjusted to level more nearly commensurate with its actual value, substantial economies would be effected in outlays of French treasury for Indochinese war. Since these allegations, if true, would have important bearing on question under discussion, could French delegation furnish indication point of view French Government on this matter?”

3. In our view, Mayer talks would provide most suitable forum for broaching piaster problem with French since it could be introduced without fanfare into general Indochinese discussion which French themselves will have opened. Such an approach should minimize dangers that French might take exception to our initiative and, for opening gun, would certainly be less risky than series of discussions in Paris and/or Saigon focused exclusively on this topic.

4. Further consideration piaster rate problem and formulation United States policy thereon could then proceed in light of information developed during Mayer talks.

Dunn

1. The reference telegram, not printed, solicited the views of the Embassies in Paris and Saigon on the question of devaluation of the piaster. (851G.13/2–1953)