132. Memorandum From the Counselor (MacArthur) to the Secretary of State2

Mr. Secretary: As Coordinator for the SEATO Meeting in Karachi in March and your subsequent visits to other countries in South and Southeast Asia, I am very much concerned with respect to the situation which is developing in Ceylon. The present Government of Ceylon is one of the staunchest in the entire area in terms of support of fundamental western objectives and purposes. This has been demonstrated on a number of occasions in the past two years—notably with respect to the position Ceylon has taken in meetings of the Colombo Powers and particularly with reference to the solid and staunch position the Ceylonese Prime Minister, Sir John Kotelawala, took at the Bandung Conference when he vigorously opposed Chou En-Lai’s various maneuvers. To summarize, the present government is vigorously anti-Communist and in general shares basic western objectives and purposes and is less susceptible to anti-Western and “neutralist” Communist propaganda than many of the other countries in the Middle East and South and Southeast Asia.

The present situation, as I understand it, is that because of the economic facts of Ceylonese life, and the fact that they are obliged to dispose of their rubber production and have been doing so by triangular deals involving Communist countries, we are barred under the provisions of the Battle Act3 from extending to them economic aid and assistance. This, despite the fact that we are giving economic aid to neutralist India and Indonesia and are planning to help finance the Aswan Dam for Egypt which has just concluded the [Page 260] well-known Soviet Arms deal. I, in no sense, wish to imply that we should not go ahead with aid to India, Indonesia, Egypt, etc., because I think we most definitely should. The point I would make is that if our policy is so inflexible that we must penalize a staunch Asian friend because of the economic facts of its life, I fear greatly that over a period of not too much time we risk seeing the present Ceylonese leadership replaced by a leadership which may lead Ceylon progressively into the India-Burma way of thinking. This, I think, we can ill afford, having in mind our paucity of Asian friends who are staunch and dependable. If Ceylon should follow such a course, it would further complicate our efforts with respect to making SEATO, which we launched, a successful enterprise, since the Ceylonese Government is among the few Asian non-members who, while not wishing at this juncture to join, have not been critical of SEATO and, on the contrary, privately have tended to welcome it.

We have had recently some extremely interesting telegrams from our Embassy in Ceylon supporting the above thesis and noting growing resentment that Ceylon is barred from U.S. aid. Also, the location of the Nuclear Research Center in Manila instead of Colombo (which had hoped and expected to get it), will have an adverse affect in terms of U.S. purposes and objectives with respect to Ceylon.

I would hope very much that we could take a thorough new look at the Ceylonese problem, even if it required amendments to existing legislation, so that we would be in a position not of discriminating against a staunch friend while at the same time we are giving extensive economic assistance to Governments which are either neutralist in tendency or trying to play both sides off against each other. If we could do something constructive for Ceylon in the economic field, I think it would not only be in our enlightened self-interest with respect to both Ceylon and the general area, but also create a situation where your visit there would be most successful and pay substantial future dividends.

  1. Source: Department of State, Central Files, 890.00/12–2355. Secret. Copies sent to S/S, U, E, NEA, FE, and S/P.
  2. The Mutual Defense Assistance Control Act, or Battle Act (named after Representative Laurie C. Battle of Alabama), was approved on October 26, 1951, as P. L. 213, 82d Congress. For text, see 65 Stat. 644. Under the Battle Act, which forbade aid to countries exporting primary strategic goods to the Soviet bloc, the United States had suspended its aid to Ceylon in September 1951.