795.00/5–954: Telegram
The Ambassador in Korea (Briggs) to the Department of State
1212. Repeated information Tokyo 720, Geneva 102. Tokyo pass CINCUNC. Re Embtel 1191, May 17.1
Rhee’s lengthy denunciation of our economic aid program poses problem which I believe we must face at earliest possible date. Although much of his criticism was as unfair as his facts were distorted, [Page 1794] fundamentally his attitude toward American aid program is conditioned by fact that notwithstanding publicity and fanfare with which plans announced last August, it is unfortunate there is nothing yet physically visible in Seoul as solid tangible evidence that program exists, and secondly Rhee is profoundly embittered by what he interprets as our efforts force procurement from Japan. He also recalls with irritation efforts last autumn to include ROK assets along with aid funds in joint US–ROK administration through Combined Economic Board, and he is particularly sensitive on subject of hwan exchange rate. Rhee is once again highly critical of Economic Coordinator Wood.
President declared repeatedly to Dean and me if this is way US Government trying to operate program Korean Government would prefer to have no aid and to forego American assistance entirely.
Department reminded that as of June 1 new military conversion rate due and both Wood and CINCUNC have recommended new rate approximately 300 hwan to one instead of 180 to one as at present. (See CINCUNC C 68056, May 15 to Department Army,2 which message concludes that recommendations “do not reflect present political considerations which may be overriding.”) In our opinion, in which Wood concurs, attempt to negotiate 300 rate will probably provoke major explosion from Rhee. Latter, as Department aware, has little understanding economic production and consumption factors involved. President asserts inflation primarily caused by US Army hwan drawings and by changes in exchange rate and declares way to meet inflation is to declare “permanent rate” and stick to it. Considers importation consumption goods from Japan entirely detrimental to Korean economy.
In foregoing connection reference made Embtel 1155, May ll,3 which recommended inter alia, as I have done several times since armistice signing last July, that urgent examination be made of entire field US–ROK relations with view to adopting coordinated program and of making US–ROK cooperation a two-way street.
For example, we cannot expect to stabilize Korean economy unless civilian economic assistance program is integral part of over-all including military program. This presupposes early decision on size and composition ROK armed forces, amount annual US contribution required to maintain such forces as well as decision whether to merge military and nonmilitary programs or keep them separate, if necessary with provision for two major US appropriations.
An important factor in aid program and one which sooner or later must engage attention of Congress is degree of collaboration in international and bilateral relations Rhee’s Government extends. His attitude has hardened perceptibly since fall of Dien-Bien-Phu and attitude of [Page 1795] British toward Southeast Asia pact. In other words he apparently now feels we cannot do without him or that he is favoring us by accepting aid. Furthermore, there is danger that by permitting Rhee to peck away piecemeal at current issues he finds distasteful or displeasing, whole program of economic aid may well be undermined and tone current political relations affected. This seems now to be occurring.
- As reported in this telegram, Rhee launched into a long criticism of the U.S. economic aid program in Korea. For text, see vol. xvi, p. 275.↩
- Not printed. (FE files, lot 55 D 480, “Korean Black Book, May 1954”)↩
- See vol. xvi, p. 244.↩