Foreign Relations of the United States, 1955–1957, South Asia, Volume VIII

4. Memorandum of Discussion at the 308th Meeting of the National Security Council, Washington, January 3, 1957¹

Washington, January 3, 1957

Present at the 308th Council meeting were the President of the United States, presiding; Deputy Under Secretary of State Robert Murphy for the Secretary of State; the Deputy Secretary of Defense; and the Director, Office of Defense Mobilization. Also present were the Secretary of the Treasury; the Secretary of Commerce (for Items 2 and 3); the Special Assistant to the President for Disarmament; the Director, Bureau of the Budget; the Special Assistant to the President for Atomic Energy; the Director, International Cooperation Administration; the Acting Director, U.S. Information Agency; General Nathan F. Twining, Acting Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; Clarence B. Randall, Special Assistant to the President; the White House Staff Secretary; Assistant Secretary of State Bowie; Assistant Secretary of Defense Gray; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.

There follows a summary of the discussion at the meeting and the main points taken.

[Here follows discussion of agenda item 1, “Significant World Developments Affecting U.S. Security.”]

2. United States Policy Toward South Asia (NSC 5409; Progress Report, dated November 28, 1956,² by OCB on NSC 5409)

The National Security Council:

Noted the reference Progress Report on the subject by the Operations Coordinating Board.

3. US Policy Toward South Asia (NSC 5610);³ NSC 5611, Part 2;⁴ NSC 5409; NSC 5617;⁵ NSC Actions Nos. 1486, 1560 and 1624;⁶ Progress Report, dated November 28, 1956, by OCB on NSC 5409; Memos for NSC from Executive Secretary, subject: “Report by the Interdepartmental Committee on Certain U.S. Aid Programs”, dated November 21 and December 5, 1956;⁷ Memo for NSC from Executive Secretary, subject: “U. S. Policy Toward South Asia”, dated December 13, 1956;⁸ Memo for All Holders of NSC 5617, dated December 21, 1956⁹)

The Executive Secretary briefed the Council on both the Progress Report on NSC 5409 and the contents of the newly revised policy statement on South Asia drafted by the NSC Planning Board (NSC 5617). At the conclusion of his briefing he called the Council’s attention to the various splits, and suggested that the Council resolve these splits in the order that they occurred. The first split appeared in paragraph 29, on page 14, and Mr. Lay suggested that the substance of the split could be dealt with more effectively when the Council came to a similar split in the courses of action in paragraph 69. Mr. Lay then went on to the second split, which appeared in paragraph 46, on page 18. As drafted by the Planning Board, paragraph 46 should read as follows:

“46. Should overt Communist aggression occur against a South Asian state, other than Pakistan, and should such state resist the aggression and make a timely appeal to the UN for assistance, support UN action to counter the aggression, including the use of force if a vital U.S. interest is involved: Provided, that the taking of military action shall be subject to prior submission to and approval by the Congress.”

The Joint Chiefs of Staff, however, had suggested the addition, at the end of the last sentence of the paragraph, of the following language: “unless the emergency is deemed by the President to be so great that immediate action is necessary.”

After Mr. Lay explained why the Joint Chiefs proposed this additional language, the President stated that he believed we were talking about something which was highly academic. He said any President who was contemplating action of the sort envisaged by the Joint Chiefs without resort to Congress would simply have to pray over the wisdom of his action. Essentially this would have to be the President’s own decision, and he could see no reason why it was necessary to put the JCS proviso into a statement of policy.

Governor Stassen was of the opinion that the question raised by the President was one of great constitutional import. For example, if the Supreme Court were ever to make a decision as to the constitutionality of military intervention by the President without the consent of Congress, they might be strongly influenced by a policy statement such as was proposed by the Joint Chiefs as an addition to paragraph 46. In reply to this, the President pointed out to Governor Stassen that, after all, the National Security [Council] was nothing but an advisory body to the President. It made no decisions of its own. It merely recommended decisions which the President might take. Governor Stassen answered by expressing fear that a doctrine might grow up that the President could never act in emergencies of this sort without the prior consent of Congress. This might be dangerous for the power of the Presidency. The President responded by stating that, on the contrary, he believed that the omission of the proposed JCS language would actually strengthen the hand of the President, who would make his emergency decision without the benefit of any preconceived policy guidance.

Still not satisfied, Governor Stassen suggested amendment of the Joint Chiefs’ language by the insertion of the phrase “and vitally affects U.S. security” after the words “so great” in the Joint Chiefs’ language. The President, however, was unwilling to accept the JCS proposal as amended by Governor Stassen ….

It was accordingly agreed not to include the language proposed by the Joint Chiefs of Staff.

Mr. Lay then directed the Council’s attention to the next split, which occurred in paragraph 51, on pages 19, 20 and 21 of NSC 5617. Mr. Lay pointed out that while the Majority Proposal of the Planning Board called for fostering conditions and government policies favorable to greater participation by private enterprise in the economic development of South Asian countries, the proposal by the Department of Commerce called for us to direct our action in favor of private enterprise at the governments of the South Asian countries. Moreover, the Commerce Proposal with respect to fostering free enterprise in the countries of this area was considerably more detailed than the majority of the Planning Board considered appropriate. Mr. Lay suggested that Secretary Weeks might wish to speak to this issue.

Secretary Weeks commented that the difference of opinion between the Majority Proposal and the Commerce Proposal was not serious. He agreed that it was something of a matter of semantics, but that the Commerce Department had been motivated by a desire to make the courses of action in support of private enterprise more specific and more in line with NSC economic policies applying to other parts of the world, such as, for example, Latin America. He could, however, perceive no basic difference of opinion between the two texts.

The President stated firmly that if in our dealings with other nations the United States tries to impose its own economic system, the result would shortly be self-defeating. It was obvious that we must fight one enemy at a time. Our great enemy was Soviet Communism, and we cannot argue with friendly nations about the wisdom of their form of government without missing our chief objective, which is to counter Soviet Communism. Moreover, every single country in the world, not excluding the United States itself, has certain elements of Socialism in its government and in its economy. In the case of India, where the average annual income of the Indian citizen was less than $200, it seemed obvious to the President that only government credit could do much to achieve the economic benefits that the country required. In point of fact, it was fatuous to imagine that private enterprise alone could achieve India’s economic objectives.

Secretary Weeks replied that if this NSC document was to be made public he would agree with the President; but after all, we were here dealing with a secret directive. Secondly, he wished to point out that if we would approach this problem from the angle suggested by the Commerce Department, the result would be to encourage greater investment of private U.S. capital in India.

Secretary Humphrey said that he believed there were three more points to which the Council should direct its attention. The first of these was the issue of encouraging private enterprise, about which we had just been talking. Secondly, there were in existence at the present time no less than three commissions or committees engaged in the study of our foreign assistance programs world-wide. In view of this fact, Secretary Humphrey believed it was foolish to engage in a change of our policy with respect to South Asia or any other country until these commissions had made their final reports. Secretary Humphrey said that his third point related to the problem of the outflowing of our money. As the Council knew, he said, he was terribly concerned with our imbalance of U.S. payments. This was a very serious situation, and one that called for radical action by the United States. He did not believe that the United States was sufficiently rich to continue to see its dollars flowing out in such profusion to foreign countries. We would therefore have to be more selective in the matter of our payments abroad. Indeed, such payments abroad might well run up to as much as $2 billion this year if the imbalance of payments continued. In any event, no single country policy paper should have money appropriated or earmarked for payment independently of consideration of U.S. payments to all other foreign countries.

Secretary Humphrey then returned to his first point—the question of free enterprise. He stated that India was an extremely good illustration of why you cannot take money which is developed from free enterprise in the United States and give it to a foreign government with the expectation that that foreign government will put this U.S. money into the development of private enterprise in the country in question. As an illustration of the point he was making, Secretary Humphrey cited the unfair competition by the government-owned with privately-owned steel plants in India, and predicted that the situation he was citing would get worse for free enterprise rather than better. He concluded his statement by asserting that the difference between Socialism and Communism was mighty thin. The results were the same and, in point of fact, we are making use of our own capitalist system to promote Socialism abroad.

The President replied that he simply could not agree with Secretary Humphrey’s argument, and insisted that we had quite a lot of Socialism right here in the United States. Secretary Humphrey agreed with this latter statement, but pointed out that the Administration was getting government out of business just as fast as it could, and that to do so was the policy of this Administration.

The President asked Secretary Humphrey if he had ever read the new Indian Five-Year Plan. Secretary Humphrey replied that he had not read the Plan, although he had seen copies of it. The President proceeded to comment on certain highlights of the Five-Year Plan, which was followed by a repetition by Secretary Humphrey of his arguments against Socialism, with particular reference to the steel industry in India. The President replied by noting the belief in India that some 17 large and vital industries would have to be run by the Indian Government; whereas the remainder could safely be left to development through private enterprise. Secretary Humphrey believed that all 17 of these industries could be easily developed by private resources if only the right kind of climate prevailed in India. We should look at what we are doing with respect to investment in our own country. It had never been at such high levels, and Secretary Humphrey said he just did not think it was right to take money away from competitive industry in the United States and hand it over to government enterprise in foreign countries.

The President called Secretary Humphrey’s attention to the fundamental objectives of the United States in its foreign assistance programs—namely, to provide assistance to non-Communist governments to save them from Soviet domination. If we ourselves did not aid countries like India, we could be sure that Soviet Russia would do so. Secretary Humphrey answered that if this was the way the Indians wanted to get their assistance, that was the way they ought to get it. The President again said that he could not possibly agree with Secretary Humphrey. Nehru had on his hands a population of some 350 million people, many of whom were living on the verge of starvation. No government in India could stand aside and ignore such a situation, any more than the United States Government could have opposed the development of social security for Americans.

Secretary Humphrey was not impressed with this argument, and stated that if Prime Minister Nehru had a couple of good managers running a private steel business in India, he would get good results and would attract plenty of private capital from a variety of sources, including the United States. The President admitted that this was a possibility, but pointed out that if it were to happen, Secretary Humphrey would still be face to face with the problem of the imbalance of U.S. payments. After all, it made no difference whether the outflow of American funds was in the form of private investment or of government grants or loans. To this, in turn, Secretary Humphrey agreed, but said that even if private U.S. dollars were to flow out to India, we should at least have the assurance that our funds were being effectively used to develop private enterprise. The President then mentioned that Sweden, with a semi-Socialist economy, must be reckoned one of the most prosperous states in Northern Europe. Secretary Humphrey said he nevertheless believed that our economic system was the best system. If the Swedish system were the best one, we had better adopt theirs. The President answered that of course he too believed that our system was the best system for us; but he was not talking about us, he was talking about other countries such as India. The President then suggested to Mr. Lay that he move on to the next split. Secretary Weeks, however, said he had a suggestion for a change in subparagraph d of paragraph 51, on page 21 of NSC 5617. As originally written, this subparagraph read as follows:

“d. Encouraging and assisting South Asian states to expand their trade with each other and with other countries of the free world, particularly with other Asian countries and the United States, in conformity with NSC 5602/1.”¹⁰

With respect to this proposed course of action, Secretary Weeks reminded the Council that this Government had been trying to get Japan to work out a proposed restriction on the importation of Japanese textiles into the United States. The above statement in paragraph 51–d seemed quite contrary to the proposal on textiles. Accordingly, Secretary Weeks recommended that the whole subparagraph be deleted or that, in any case, those words in the subparagraph beginning with the adverb “particularly”.

The President said that he was rather inclined to agree on the wisdom of Secretary Weeks’ proposal, though he also believed that in the long run only a general increase in world trade, with the United States participating, would provide countries such as India with what they require and wish. The President added that he also was inclined to agree with Secretary Humphrey that it was foolish for the Council now to be making decisions on the shape of our foreign aid programs prior to having the findings of the several commissions and committees who had been asked to undertake long-range studies of these assistance programs. Why, in fact, were we required to make such decisions at the present time?

Mr. Lay explained the necessity of developing at this time our mutual security program for Fiscal Year 1958. At the conclusion of Mr. Lay’s explanation, Secretary Humphrey said he was still opposed to any decision at this time on our aid programs for the South Asian area. Mr. Brundage also stated that it was already too late for the present policy statement to have any effect on the FY 1958 budget. Mr. Brundage also complained that the present policy statement bore no relation to the findings of the Prochnow report (NSC 5610).

The President ordered the portions of subparagraph 51–d to which Secretary Weeks had objected, to be deleted. Secretary Murphy said that it was germane to notice that Japan was buying twice as much in the United States as the United States was buying in Japan, and that the policy in paragraph 51–d contained precisely the doctrine which we were now preaching to Tokyo. He said that the State Department could probably live with the subparagraph as changed by Secretary Weeks, but it would represent something of a problem.

The President observed that he believed it to be a fact that in the long run the United States would never succeed in straightening out its own problems until the people of other countries managed to achieve higher wages. There was, he said, also another view of his with which many members of the National Security Council would not agree—namely, his conviction of the folly of a U.S. policy which prevented the United States from trading with Communist countries. But, said the President, no one seemed to pay very much attention to his well-known view on this subject. Secretary Humphrey stated that he would have to admit that he was on the President’s side with respect to this issue (laughter).

After further discussion of the problem of private enterprise in foreign countries, the President summarized his own position with a statement that if the United States waits for private enterprise to flourish and to solve all the problems which confront states such as India, we might just as well tear up all these policy papers on Asia. Governor Stassen supported the President with a statement that our own U.S. success in the sphere of private enterprise depended in very large part on the creation and development of successful economies in foreign countries.

The discussion then switched to the area of Pakistan, with particular reference at the outset to the very large proportion of U.S. assistance allocated to the military assistance program for Pakistan. The President observed that we had decided some time ago that we wanted Pakistan as a military ally. Obviously it had been proved costly to achieve this objective. In point of fact we were doing practically nothing for Pakistan except in the form of military aid. The President said that this was perhaps the worst kind of a plan and decision we could have made. It was a terrible error, but we now seem hopelessly involved in it.

Mr. Lay interposed to point out to the President that the issue he had just raised with respect to Pakistan was the subject of the next split in NSC 5617, which occurred in paragraphs 68 and 69, on pages 23 and 24. These paragraphs read as follows:

• “68. For the present continue to support, by providing U.S. military assistance in accordance with paragraph 29, Pakistan forces capable of maintaining internal security, of offering limited resistance to external aggression,¹¹ and of contributing to collective security by these means and by the provision of token forces for collective military operations outside Pakistan.
• “69. [Initiate at the earliest practicable time conversations with the Government of Pakistan designed to achieve agreements as to U.S. aid programs which will be more moderate in their demands on U.S. resources and on the Pakistan economy.]¹²

After Mr. Lay’s explanation of the Budget proposals in paragraphs 68 and 69, the President commented that we had the same damned problem with Turkey. Mr. Brundage complained that while we had had all the benefits of Mr. Prochnow’s studies of the economies of these underdeveloped countries, we seem to have paid no attention to his findings in so far as they applied to Pakistan. Another objection, continued Mr. Brundage, was that the more military assistance we give to Pakistan, the more assistance India in turn will expect from us. Mr. Brundage said he could not understand why we did not take a complete new look at our military assistance program for Pakistan.

Mr. Lay pointed out that the Planning Board itself had expressed some anxiety over the force levels which were to be maintained in Pakistan, but that the Planning Board had felt that we had made a commitment to Pakistan with respect to this program, and that from a political point of view we were obliged to live up to the commitment. The President replied that he understood the feeling of the Planning Board, but that he nevertheless felt that our tendency to rush out and seek allies was not very sensible. Suppose, for example, we undertook to make India a positive ally of the United States. In such a circumstance, said the President, there wouldn’t be enough money in the United States to provide the support that India would require as an ally of the United States. The President reiterated his belief that in some instances the neutrality of a foreign nation was to the direct advantage of the United States. The President confessed that he did not quite know what to do about the military program for Pakistan. If we accepted the proposal of the Bureau of the Budget for paragraph 69, it might have severe repercussions on our relations with Pakistan, and might even destroy the Baghdad Pact. On the other hand, the President expressed the opinion that some skillful negotiator ought to try to induce the Pakistani themselves to suggest changes in this military assistance program over a period of time.

Secretary Murphy said that the President’s last suggestion was exactly what the State Department would like to do–namely, to work toward some reduction of our military assistance program in Pakistan while avoiding serious political repercussions. He felt that this course of action could be carried out if we were given sufficient time to do it. Moreover, the State Department could accept the Budget language in paragraph 69 if this were the interpretation to be placed upon it.

Secretary Gray spoke briefly on the nature of our earlier commitment to Pakistan with respect to force levels and costs. He pointed out that the costs in practice had been much higher than the original calculation. Nevertheless, we seem to be stuck with it, for the Pakistani feel that we have made a certain commitment to them, a view which is shared by the State Department. About the only possible course of action left open to us in resolving this dilemma was at least to avoid any further build-up of the Pakistani armed forces.

The President suggested that it would do no harm to try a little education to these people. A little good common sense might ultimately appeal to the Pakistani.

Secretary Robertson then suggested a possible substitution for the language proposed by the Bureau of the Budget for paragraph 69. He suggested that instead of this language the Council agree to adopt the language applied in a similar circumstance to our assistance programs for Southeast Asia. This language read as follows:

“Noted the President’s request that the Department of State, in consultation with the Department of Defense, explore the possibility, based upon a study of the rising trends of U.S. aid programs in the entire SEATO area, of arranging conferences with the nations in that area in an endeavor to achieve agreements as to future U.S. aid programs in that area which will be more moderate in their demands upon U.S. resources and the local economies.” (NSC Action No. 1599–e)¹³

The President did not immediately grasp the import of Secretary Robertson’s suggestion, and suggested language which would have the President direct the State Department to review with Pakistan at an appropriate time a minimum level of desired military assistance. Mr. Lay, however, reverted to Secretary Robertson’s suggestion, and proposed the wording which had been used in the NSC action on the Southeast Asia policy paper. The President then agreed on the desirability of similar language to meet the problem set forth in paragraph 69 of NSC 5617.

The National Security Council:

a. Noted and discussed the draft statement of policy on the subject contained in NSC 5617, prepared by the NSC Planning Board pursuant to NSC Action No. 1624–c; in the light of the Report by the Interdepartmental Committee on Certain U.S. Aid Programs (NSC 5610), the views of the Joint Chiefs of Staff with respect to force levels in Pakistan (transmitted by the reference memoranda of November 21 and December 5, 1956), and the views of the Joint Chiefs of Staff on NSC 5617 (transmitted by the reference memorandum of December 13, 1956).

b. Adopted the statement of policy in NSC 5617, subject to the following amendments:

(1) Page 14, paragraph 29: Include the bracketed wording and delete the footnote relating thereto.

(2) Page 20, paragraph 51–b: Include the “Majority Proposal” in the left-hand column, and delete the “Commerce Proposal” in the right-hand column.

(3) Page 21, paragraph 51–d: Place a period after the words “free world”, and delete the remainder of the paragraph.

(4) Page 24, paragraph 68: Delete the asterisk and the footnote relating thereto.

(5) Page 24, paragraph 69: Delete the paragraph as written and the footnote relating thereto, and substitute therefor the following:

“69. Explore the possibility, in light of the rising trend of the U.S. aid programs for Pakistan, of achieving agreements as to future U.S. aid programs for that country which will be more moderate in their demands upon U.S. resources and the Pakistan economy.”

c. Noted the request of the President that the Department of State, in carrying out paragraph 69 of NSC 5617 as amended and in consultation with the Department of Defense, should seek suitable opportunities, compatible with the political situation, of inducing Pakistan, in pursuit of its own interests, to propose revisions of the planned military programs to reduce the future burden on its economy.

Note: NSC 5617, as amended, subsequently approved by the President and circulated as NSC 5701 for implementation by all appropriate Executive departments and agencies of the U.S. Government, and referred to the Operations Coordinating Board as the coordinating agency designated by the President.

The action in c above, as approved by the President, subsequently transmitted to the Secretary of State for appropriate implementation in consultation with the Secretary of Defense.

[Here follows discussion of agenda items 4—7: “Definition of the Term ‘Limited Initial Resistance’,” “Antarctica,” “U.S. Policy Toward Turkey,” and “U.S. Policy Toward Formosa and the Government of the Republic of China.”]

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret. Drafted by Gleason on January 4.
2. Supra.
3. See footnote 3, supra.
4. “Status of Military Assistance Programs as of 30 June 1956,” Report by the Department of Defense to the NSC, September 15, 1956.
5. This draft statement of policy toward South Asia, prepared by the NSC Planning Board and circulated to the Council on December 7, was considered by the NSC at this meeting. The differences between this draft and the official statement approved by President Eisenhower as NSC 5701 on January 10 are fully explained below.
6. NSC Action No. 1486, taken by the NSC at its 269th meeting on December 8, 1955, authorized the review of U.S. military assistance and supporting programs. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the NSC, 1955)

   NSC Action No. 1560, taken by the NSC at its 285th meeting on May 17, supplemented NSC Action No. 1486 by instructing the Prochnow Committee to take into account several additional factors in preparing its report, such as the limited nature of available U.S. resources and the possibility that U.S. aid might place burdens upon the recipient countries which their resources would be unable to bear for a sustained period. (Ibid.)

   Regarding NSC Action No. 1624, see footnote 7, supra.

7. Neither printed. (Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5610 Series)
8. This memorandum enclosed the views of the Joint Chiefs of Staff on NSC 5617 which were discussed at this meeting. (Ibid., NSC 5617–Memoranda)
9. This memorandum transmitted certain changes in paragraph 44 of NSC 5617 agreed upon by the NSC Planning Board. (Ibid.)
10. NSC 5602/1, “Basic National Security Policy,” was approved March 15, 1956.
11. “Budget proposes that any modification of current programs based on this statement of missions be deferred pending presentation to the National Security Council of a report by the Department of Defense on its definition, particularly as to the period of time involved, of the term ‘limited initial resistance’. (See NSC Action No. 1599–c)” [Footnote in the source text. NSC Action No. 1599–c was taken by the NSC at its 295th meeting on August 30. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the NSC 1956)]
12. “Budget Proposal.” [Footnote and brackets in the source text.]
13. This action was taken by the NSC at its 295th meeting on August 30. (Department of State, S/S—NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the NSC, 1956)