Foreign Relations of the United States, 1955–1957, East Asian Security; Cambodia; Laos, Volume XXI

157. Memorandum of Discussion at the 324th Meeting of the National Security Council, Washington, May 23, 1957¹

May 23, 1957

[Here follow a paragraph listing the participants at the meeting and agenda items 1–3.]

4. Development of a Defense Production Base in Australia and New Zealand (NSC 5713;² Annex to NSC 5713)

Mr. Cutler briefed the Council on the highlights of the policy recommendations in NSC 5713, and explained the split in view in paragraph 2, reading as follows:

[Here follows paragraph 2 of NSC 5713 as read by Cutler.]

After explaining that the majority proposal was designed clearly to prevent any grant assistance to Australia and New Zealand for the development of a logistic and production base, Mr. Cutler indicated the State proposal was somewhat less stringent and designed to be more pleasing to the Australians. Thereafter, he called on Secretary Dulles to comment on the Planning Board recommendations.

Secretary Dulles stated that he had two or three observations to make with respect to NSC 5713. The first one concerned the matter of timing. The Australian Mission was going to reach Washington on Monday.³ The plain desire of the Australians for more intimate association with the United States in the future represented a major political decision on the part of Australia. Accordingly, it seemed very unfortunate to slam the door in the face of the Australians at this point.

Secondly, and in the political realm, Secretary Dulles said he could not agree with all the reasoning in paragraph 2 on which was based the recommendation that we should not assist Australia or New Zealand at this time to create a logistic or limited defense production base. In particular, the reasoning in subparagraph 2–b seemed to Secretary Dulles to be faulty. The fact that Australia and New Zealand were further away from likely theatres of conflict in the Far East than Japan, was not a valid argument. Indeed, if Japan were knocked out in a war, a defense production base in Australia might be extremely valuable to the United States.

Mr. Cutler pointed out that if Japan were attacked, there would be no question of a limited war, and subparagraph 2–b was concerned with theatres of limited conflict.

Secretary Dulles did not reply to Mr. Cutler’s point, but went on to state that he likewise disagreed with the reasoning in subpararaph 2–c. On the contrary, it might be very helpful for us with respect to Japan if the Japanese were made to realize that we had an alternative base in Australia. Furthermore, Secretary Dulles did not believe that the establishment of a base in Australia and New Zealand would create the impression that we were abandoning our present forward-base concept. Over and above these criticisms, Secretary Dulles stated that he did not, of course, advocate any “crash” program to build up a base in Australia. Instead, he was thinking of it as a 20 to 25-year development. He believed that it would be of immense help to the United States if a production base could be developed in Australia over this longer period. Our policy should favor such a development as this, and should not concern itself with any crash program, to which NSC 5713 directed itself.

Mr. Cutler undertook to explain the views of the Planning Board as to the danger of possible large expenditures of U.S. funds to assist in the development of a production base in Australia at the very moment when the demands of the several North African countries for U.S. assistance were very heavy indeed.

Secretary Humphrey turned to Secretary Dulles and pointed out that we have normal and growing trade relations with Australia. There were times when it would be useful to have offshore purchases by the United States in Australia. But any program for building a production base in Australia which covered a long period of time, would be bound to have adverse economic repercussions in the United States. It was for this reason that we are curtailing our offshore procurement programs throughout the world. Accordingly, Secretary Humphrey said that he would hesitate to start building up any long-range offshore procurement programs in Australia or anywhere else.

In response to Secretary Humphrey, Mr. Cutler invited the Council’s attention to paragraph 3 of NSC 5713, dealing with the subject of offshore procurement and reading as follows:

[Here follows paragraph 3 of NSC 5713 as read by Cutler.]

Secretary Dulles stated with warmth that he was not advocating any kind of offshore procurement program in Australia, or any other specific program. He was merely insisting that Australia represented a very good anchor to windward in the part of the world in which it was situated. Mr. Cutler replied that the Planning Board had not been unmindful of this point, as was indicated by paragraph 4 of NSC 5713, which read as follows:

[Here follows paragraph 4 of NSC 5713 as read by Cutler.]

The President then stated that it seemed to him that this entire study in NSC 5713 had gone off the rails. He said he thought that the initial question to be studied in this report was whether or not it was in the long-run interest of the United States to get Australia and New Zealand built up industrially. Secretary Dulles said that this was precisely his view of the original purpose of this report; and he added that he did not wish to discuss military programs or offshore procurement programs or anything of that sort. Furthermore, he had never entertained the faintest idea of using mutual security funds in assistance to Australia.

In reply, Mr. Cutler warned Secretary Dulles that these very questions were likely specifically to be brought up by the Australian Mission, according to the terms of the Australian Aide-Mémoire,⁴ of which Mr. Cutler read the relevant portions to prove his point.

Secretary Dulles stated, in response, that it was not appropriate to have detailed NSC papers written on subjects that our friends come over here to negotiate with us. What he had hoped for from NSC 5713 was a study of the broad situation of Australia in the defense picture of the United States, in order to help us to decide whether to put all our eggs in the Japanese basket or whether, instead, to build up Australia as second string to our bow in the Far Eastern area. Certainly all these details, such as an offshore procurement program, had never entered his mind.

Mr. Cutler reminded the Council that if we did not have very clear guidance on such matters prior to the arrival of the Australian Mission, we would be very likely to end up being committed to provide financial assistance for which no money is available.

Secretary Quarles⁵ pointed out that the Defense Department had already had some discussion with the Australians, and that certain elements in their proposed program were of great interest to us. For example, they were proposing to standardize on U.S. aviation equipment, and what worried them in this connection was the matter of foreign exchange. The Australians, said Secretary Quarles, were not seeking grant aid from the United States, and we should certainly be clear in our minds that we are not entering upon a give-away program in our negotiations with the Australians. Moreover, we should be equally clear that we are not intending to provide a large program of offshore procurement for Australia.

Secretary Humphrey observed that the whole matter boiled down to what the United States can afford to do and where we want to do it. All these approaches, whether they are nice or otherwise, ultimately lead to demands for money and veer away from the ordinary channels of international trade. If Secretary Dulles thought that U.S. public funds should be used in Australia, that was OK with Secretary Humphrey. But the expenditure there must be compensated for by reductions elsewhere.

With reference to the comments on zinc and wool with reference to Australia, the President pointed out that the morning papers contained strong indications of the desire of many of our people to maintain very high tariff barriers on imports of zinc into the United States. How can you possibly maintain such high tariffs, he asked Secretary Humphrey, and then talk about ordinary channels of international trade? Secretary Humphrey replied that the question that the President must settle was whether he wanted our zinc to come from Australia or whether he wanted to assure some production of zinc in the United States. The same reasoning applied to oil and to many other commodities. If we wished these commodities to be produced in the United States, some degree of tariff protection would be necessary.

The President clarified his meaning by stating that if we believe that we ought to find some way of working out with the Australians the development we sought there over a period of years, he thought that a very good idea; but we certainly could not achieve our objective by depending wholly on normal trade to do the job. Secretary Humphrey was unconvinced, and said that we have already achieved part of our objective by normal trading methods, so the question really boiled down to how much further we wanted to go to assist Australia with grants, loans, or offshore procurement.

Secretary Dulles warmly reiterated his earlier statement that he had no idea that the present NSC paper would be concerned with any specific programs at all. Mr. Cutler indicated that he would withdraw NSC 5713 and write in its place a long-run policy paper on the subject. He felt, however, that he must add that in this paper the Planning Board had had its first chance to write in a warning against the expenditure of public money before the negotiations with a foreign power actually commenced. He felt that this was a desirable course of action.

The President appeared to sympathize with the views of Secretary Dulles that the paper on Australia should be much more general in character than NSC 5713, although he had no objection to NSC papers which dealt with specific assistance programs.

The National Security Council:⁶

a. Noted and discussed the draft statement of policy on the subject contained in NSC 5713, submitted by the NSC Planning Board in advance of the forthcoming negotiations with the Australian Mission in the light of the views of the Joint Chiefs of Staff as presented at the meeting.

b. Referred NSC 5713 to the NSC Planning Board to prepare recommendations on long-range policy as to U.S. security relations with Australia and New Zealand.

[Here follow the remaining agenda items.]

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret; Eyes Only. Drafted by Gleason on May 24.
2. Document 155.
3. May 27.
4. Dated April 18; see Document 153.
5. Donald A. Quarles, Deputy Secretary of Defense.
6. Paragraphs a and b that follow constitute NSC Action No. 1725. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council)