Foreign Relations of the United States, 1955–1957, Vietnam, Volume I

406. Telegram From the Secretary of State to the Embassy in Vietnam¹

Washington, November 19, 1957—9:03 p.m.

935. Joint ICA–State. Ref Toica 584,² Embtel 902.³

1. Dept. and ICA have reviewed FY 1958 proposed Defense Support aid level of $175 million in light of comparative need of claimants against curtailed appropriations, considering pipelines and availability local resources, and believe this figure provides Viet-Nam equitable allocation on such basis. Vietnamese arguments against more than prorated global cutback 20 percent and for maintenance of aid level suggested reftels not convincing since they preclude consideration need. This connection such global Defense Support cutback from amounts requested (excluding Spain whose level was fixed by Congress) is actually over 21 percent.

2. Prior to determination Viet-Nam DS aid level careful consideration was given to increasing it to $185 million from meager global reserves. FYI if strong case can be made later this fiscal year, however, possibility increase not precluded. End FYI. While we fully recognize difficulty involved in gaining ready acceptance by Vietnamese of more than pro rata cuts Dept does not consider that reftels make strong enough case to justify increase at this time on political grounds.

3. Pertinent to lower aid level is availability Development Loan Fund financing for which it hoped Viet-Nam can qualify by early presentation satisfactory projects. Also PL 480 if approved should provide additional assistance. Another relevant factor is proposed currency devaluation which if agreed upon soon enough might make FY 1958 aid level more adequately cover local currency budget support and other requirements.

4. We appreciate points in reftel but you will understand that our three biggest programs—Korea, Viet-Nam and Taiwan—are all in countries which are staunch friends of free world and since cut must be absorbed unfortunately these programs must bear their share.

5. Vietnamese last week presented “talking papers”⁴ being pouched which sought (1) at least maintenance of 1957 levels of military aid (2) aid for Self Defense Corps of 60,000 (3) annual economic aid of $100 million. In responding to these and other overtures to maintain or increase aid levels it would seem timely for Embassy and USOM to endeavor again impress on GVN necessity of considering totality of VN resources including foreign aid in relation to total requirements rather than presenting series of additive aid requests to US. Point should be made that such approach should help protect value VN currency by curtailing budget deficit and other sources inflation and at same time provide basis for rational approach to Viet-Nam’s sustained economic growth and eventual economic independence.

Dulles

1. Source: Department of State, Central Files, 751G.5–MSP/10–2857. Secret. Drafted by Corcoran and Whittington and cleared by SEA, FE, U/MSA, and ICA.
2. See footnote 2, Document 402.
3. Document 402.
4. None printed.