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

5. Memorandum of a Conversation, Department of State, Washington, January 18, 1955¹

Washington , January 18, 1955

PARTICIPANTS

• The Secretary
• Under Secretary
• Governor Stassen
• Frederick E. Nolting, Jr.

SUBJECT

• Aid Problems for FY 1956

Governor Stassen outlined three areas where there was difference of opinion in the Ad Hoc Committee on the Asian Economic Aid paper,² as follows:

1. Should the United States do more than it is presently doing in the economic development field in the arc of countries from Pakistan to Korea? Stassen stated that he felt there is a clear directive from the President embodied in NSC 5429/5³ to intensify our efforts in this field as one means of combating further Communist successes in the area.

2. Should we concentrate solely on bilateral programs or should we leave the way open to multilateral approaches in planning our economic aid activities? On this point he felt that we should not go as far as the Ad Hoc Committee paper goes in closing the door on the multilateral approach.

3. Should we or should we not reserve a “swing fund” of the magnitude of approximately $250 million to be used by the President for either bilateral or multilateral aid programs in this area subject to the fulfilling of certain conditions by the countries concerned? On this point he felt that the reservation of a fund of this size would be preferable to programming such funds at this stage on a country-by-country basis.

In a general comment, the Secretary said that we should work within the context of the Colombo Plan, but this did not mean that aid should be channeled through a multilateral organization. He felt that we should work towards stimulating regional economic development and a sense of regional interdependence but that for the time being the differences between countries were so great as to probably make a regional approach unsound. He said that certain “natural groupings” might be developed and encouraged by means of our aid program. Turning to the Ad Hoc Committee paper, agreement was reached on several of the split passages as per the attached paper.

[Here follows discussion of aid projects in the Middle East and in Italy.]

There was no clear resolution of the problem concerning a “swing fund” for the Asian area—i.e., whether such a fund should be set aside from country programming, and if so, how much. Mr. Hoover expressed the view that if such a fund were sought as a discretionary fund for the area, it should be clear that it would be available for the area covered by the Asian aid paper and not regarded solely as a Far East fund. After the meeting, Mr. Nolting advised Governor Stassen of the present FE position on this—namely, that the $83 million reduction in FY [1956] funds should come out of the proposed “swing fund” and that in addition the augmented programs for Thailand and the Philippines should come out of this fund, thus reducing the fund to approximately $125 million. Mr. Stassen indicated his contrary opinion, expressing the view that a substantial portion of the $83 million reduction might well come out of the Korean program, which he felt to be somewhat over-stuffed. (It is suggested that Mr. Robertson make his views known on this question to Governor Stassen and/or Mr. Nolting in order that programming can move forward.)

[Attachment]

The following changes in the numbered paragraphs of the paper entitled “Memorandum for the Ad Hoc Committee of the NSC on an Asian Economic Grouping”,⁴ dated January 7, 1955, were agreed upon. The paragraph numbers are the same as in the subject paper.⁵

III. Paragraph 6. (Majority Proposal). “Each Asian country in fact constitutes a separate and unique economic, political, and social problem. In view of the vast differences which exist, the economic policy of the United States will be directed toward an individual treatment of each country or group of countries principally on a bilateral or a selective natural group basis in accordance with the circumstances, but subject to certain generalized principles which are set forth herein.”

III. Paragraph 17. “The United States shall retain title to any repayment in local currencies but shall consult with the country concerned with respect to the uses thereof, and shall negotiate the broad principles and framework of such uses.”

IV. Paragraph 20. (Majority Proposal). “The United States should not directly participate in the creation of any new multilateral banking or credit institution within this region at the present time.”

IV. Paragraph 28. “Magnitude. United States overall assistance in the Asian area for the fiscal year 1956 shall be in accordance with the President’s Budget Message.”

1. Source: Department of State, Secretary’s Memoranda of Conversation: Lot 64 D 199. Secret. Drafted by Nolting on January 19.
2. Reference is to the paper cited in footnote 2, Document 3.
3. “Current U.S. Policy Toward the Far East”, December 22, 1954. For text, see Foreign Relations, 1952–1954, vol. XII, Part 1, p. 1062.
4. The title quoted is that of a covering note to the paper itself, “Proposed U.S. Position on Future United States Economic Assistance for Asia”.
5. The numbers also correspond to those of the equivalent paragraphs in NSC 5506, the language of which is not identical.