295. Memorandum of a Conversation, Department of State, Washington, November 20, 19571
SUBJECT
- Economic Aid Program for GRC
PARTICIPANTS
- Dr. Hollington Tong, Chinese Ambassador
- Minister C.K. Yen
- Mr. Walter S. Robertson, Assistant Secretary, FE
- Mr. Gardner Palmer, Deputy Assistant Secretary, FE
- Mr. Ralph N. Clough, Director, CA
Minister Yen opened the conversation by presenting a table2 showing the increase in Taiwan national income from 1951 projected through 1958 and the declining ratio of economic aid to national income. He drew particular attention to the decline in this ratio from 13.4 in FY 1957 to 7.7 in FY 1958.
Mr. Robertson commented that these figures showed how successful the aid program had been in Taiwan. It had never been intended that United States aid should remain indefinitely at a constant ratio with national income. On the contrary, it was intended to make the recipient country more self-supporting so that aid could gradually be reduced. He also pointed out that the figure given for Defense Support for fiscal year 1957 took no account of the Development Loan Fund. Loans from this fund would not be made in accordance with usual banking criteria such as employed by the Export-Import Bank or the IBRD, but were intended to support projects of the type formerly financed from Defense Support funds. He emphasized that the reduction in the aid program was not limited to Taiwan. Congress had cut one billion dollars from the global figure requested. We were having a very difficult time allocating the funds available among the various countries, all of which needed aid.
Minister Yen replied that he realized the difficulties under which we were operating this year, and he had not come to request the impossible but primarily to enlist Mr. Robertson’s support in obtaining from the Development Loan Fund and the PL 480 program enough to satisfy normal requirements of the Taiwan economy. He indicated that although his Government was asking for $20 million of PL 480 commodities, they would be satisfied if they could get the 7.5 million dollars’ worth which would be necessary to supply normal consumption. This consisted of wheat 3.5 million, cotton 1.3 million, tallow 1 million, vegetable oil 1.7 million. Since the United States Department [Page 638] of Agriculture was not disposed to release PL 480 commodities to satisfy normal consumption abroad, it would be necessary for the Department of State and ICA to support strongly the GRC request in the PL 480 interdepartmental committee to obtain approval of the 7.5 million. ICA was cognizant of and sympathetic with the GRC’s desires.
Mr. Robertson mentioned that cotton supply was very tight and Mr. Palmer explained that there are two limitations: one, the monetary ceiling placed by Congress on the PL 480 program, and the other, the amount of surplus cotton available. The demand far exceeded the supply, which made allocation difficult.
Minister Yen explained that the reason he had come to Mr. Robertson and the reason his government was uneasy concerning the prospect for PL 480 commodities was that the matter had been under consideration for three months, but no decision had yet been reached. His government had sent a special representative here to work on this problem and the Embassy had just received a telegram asking that he and Ambassador Tong take the matter up with the Department of State. He said he understood the difficulty of supplying adequate amounts of surplus commodities and that the Department of Agriculture might prefer that his government first purchase for cash what it needed for normal consumption and then seek PL 480 commodities above that figure. This was impossible because of the GRC’s shortage of foreign exchange. He mentioned that he had heard that India had been granted 350 million dollars worth of PL 480 commodities and he was sure that at least part of this was for normal consumption purposes. He emphasized the importance of a broad interpretation of PL 480, in order to permit the supplying of Taiwan’s normal consumption needs.
Mr. Robertson said that the PL 480 program was limited to a billion dollars for the entire world at cost price which was considerably above the world market price and therefore there were smaller amounts of commodities than that figure indicated. He said he would look into the problem of the GRC’s request and see what he could do about it.
Minister Yen then raised the question of the Development Loan Fund and Mr. Robertson pointed out that four projects—the Shihmen Dam, the Tung-men Hydro project, the aluminum plant and the project of rubber tire manufacture—were receiving priority consideration in Washington. He urged that the GRC submit promptly any additional suitable projects.
Mr. Robertson said that the establishment of the Development Loan Fund represented a basic change in our method of extending aid. It had been placed on a multi-year basis so that it would be easier to plan ahead on long term projects rather than have to [Page 639] depend on year by year allocations. Minister Yen agreed that was an improvement over the previous method.
Mr. Robertson concluded the conversation by assuring Ambassador Tong and Minister Yen that we would do our utmost to see that the aid funds available were fairly apportioned among the recipient countries in the Far East, since these programs were very important ones.