FUTURE U.S. ECONOMIC ASSISTANCE TO ASIA
Enclosed herewith, for consideration by the National Security Council at
its meeting on Thursday, February 3, 1955, is a proposed U.S. position
on future U.S. economic assistance to Asia. This report was prepared by
the NSC Ad Hoc Committee on Asian
Economic Policy established by NSC
Action No. 1233–a, and was referred to the Council on Foreign Economic
Policy prior to its submission to the [Page 17]
NSC. The Council on Foreign Economic
Policy, at its meeting on January 21, 1955, noted the resolution of
certain differences contained in the Ad Hoc Committee report, accepted
certain clarifying changes in language, and approved the report as
enclosed.
Attention is invited to the second paragraph of the enclosed transmittal
memorandum from the Chairman, CFEP,
which raises a question of the consistency of paragraphs 6, 15, 17, 18,
19, and 20 of the enclosed report with paragraph 6–c of NSC 5429/5, and states the view of CFEP that, if the enclosed report should
be construed as inconsistent with paragraph 6–c of NSC 5429/5, the latter should be modified
accordingly.
It is recommended that, if the Council adopts the enclosed policy, it be
submitted to the President with the recommendation that he approve it,
direct its implementation by all appropriate Executive departments and
agencies of the U.S. government, and designate the Operations
Coordinating Board as the coordinating agency.
[Enclosure]
FUTURE UNITED STATES ECONOMIC ASSISTANCE FOR ASIA6
I. The Problem
1. To provide basic principles and an official position to guide
United States operations in carrying out United States economic
policy for the free countries of Asia.
II. Objectives
2. To demonstrate through our actions the advantages of our free
society and thereby to minimize the danger of increased Communist
influence or domination of the free countries of Asia, including
Japan, the United States security interests require the achievement
of greater economic strength and growth in the region. This requires
the reassessment of the size and character of the United States
assistance programs in the area.
3. To convince the peoples of Asia that their economic aspirations
can be more surely and rapidly achieved as members of the free world
than by adherence to the Communist system.
III. Principles
The programs and actions adopted for the attainment of the above
objectives should be governed by the following principles:
[Page 19]
General Principles
4. The primary purpose of the program is to achieve the objectives
outlined above, and other considerations, where they arise, should
be regarded as secondary.
5. Future United States economic assistance to Asia should be
regarded as only one part of the development of an over-all world
program to strengthen the forces of freedom against Communist
advances. This program consists of five basic elements—political,
economic, military, psychological and counter-subversive, all of
which are interrelated.
6. 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 on a bilateral or selective natural group basis in
accordance with the circumstances, but subject to certain
generalized principles which are set forth herein.
7. Individual countries should be assisted wherever possible with a
view to achieving a maximum long-range effect on the area as a
whole. Short-range local programs or specific projects should be
minimized where they appear to run counter to the above stated
objectives.
8. Special consideration should be given to the problem of Japan and
the role its industrial and financial resources and knowhow enable
it to play.
9. Efforts to retain the Asian countries as a part of the free world
will be facilitated by the ability of their non-communist
governments to sustain a hope on the part of their peoples that
their economic and social condition will be progressively improved.
In stimulating these hopes, it should be clearly demonstrated: (a)
that the primary responsibility for success must continue to fall on
the effective efforts of each country individually, and (b) that the
United States cannot undertake primary responsibility for the
economic development of the region. Appropriate assistance from
other free world nations would, of course, be welcome. It should be
further recognized that such a program will require considerable
time, and that the building up of unattainable expectations could do
more harm than good.
10. The activities of the private agencies which are consistent with
U.S. objectives in the area should be encouraged.
11. Every reasonable effort should be made to encourage and support,
more vigorously and effectively, policies which will (a) increase
the utilization and application of domestic and external private
capital to the development needs of free Asian countries, and (b)
[Page 20] achieve the maximum
cooperative effort and contributions on the part of the benefiting
nations.
Principles with Respect to
Magnitude7
12. United States assistance should be applied selectively in the
countries and between the countries of the area and should not be
based on the concept of spreading a predetermined amount of money on
a prorata basis over the region as a whole.
13. In the development of policies and programs consideration should
be given to what can and will be done over a sustained period of
years rather than on a short range emergency basis. It is recognized
that specific critical situations may arise that will require
special treatment.
14. In determining the level of U.S. assistance, the magnitude and
effectiveness of Communist Bloc economic programs in Asia must be
considered.
Principles with Respect to
Administration of Aid
15. The United States should determine the uses to which U.S. aid
funds are put.
16. To the maximum extent feasible U.S. development aid should be
made available on a repayment basis, part of which may be received
in local currencies.
17. The United States shall retain title to any repayments in local
currencies, shall negotiate with the country concerned the broad
principles and framework of the uses thereof and shall consult with
the country concerned with respect to the specific uses thereof.
IV. Courses of Action
The following courses of action are designed to implement the
principles and objectives set forth above:
18. The Consultative Committee under the Colombo Plan should be
strengthened. This might be done through the establishment of a
permanent secretariat whose function would be to assist the
Committee in the development of means for the expansion of healthy
intraregional cooperation, trade, investment and development. The
United States should contribute a reasonable amount to help defray
the expenses of this organization if it should become appropriate to
do so.
[Page 21]
19. The initiative for any fuller utilization of the Colombo Plan
should come from the Asian countries which constitute the bulk of
the membership in the organization.
20. The United States should not participate in the creation of any
new multilateral banking or credit institution within this region
without first clearance with the National Advisory Council on
International Monetary and Financial Problems.
21. The United States should lend its support to the increase of
opportunities of countries in this area to trade with each other and
with other free world countries including (a) by appropriate
measures for memberships in the GATT organization, and (b) by bilateral approaches to
countries which maintain restrictions that hamper such trade.
22. The U.S. should encourage the countries in the area to adopt
investment laws and policies which will invite the influx of private
investment.
23. The United States markets for the products of these countries
should be expanded and the existing restrictions reduced in
accordance with the President’s Foreign Economic Program.
24. Japan. In order to obtain the maximum
economic contribution from Japan and thus reduce the financial
burden on the United States every effort should be made to increase
the financial capabilities of that country and her trading
capabilities with other free nations of Asia. To this end the United
States should:
- a.
- Proceed to consummate the contemplated trade agreement
with Japan.
- b.
- Consider the appropriate extension of public credit, the
improvement of conditions within Japan for private capital,
the use of technical assistance, the use of local currency
proceeds of agricultural surpluses and the widening of
opportunities for the investment of Japanese capital.
- c.
- Continue to use its good offices to restore as rapidly as
possible better relationships between Japan and the other
non-Communist countries of the area.
25. The United States should extend the following types of assistance
and should consider the interrelationship among these types:
- a.
- Assistance for direct forces
support, and in some instances for defense support and budgetary
purposes will have to be extended on a grant basis
to those countries which are maintaining armed forces, in
cooperation with the United States, beyond their economic
capabilities.
- b.
- Assistance which is extended to such countries for developmental purposes should be
clearly distinguished from the military assistance referred
to above, and such assistance should, where practical, be
placed on a repayable basis which in some cases must be in
local currencies.
- c.
- Technical assistance programs
should be continued and expanded when appropriate after a
review of their effectiveness in each instance [Page 22] , and wherever
possible they should be placed on a matching funds
basis.
26. With respect to those countries pursuing “neutral” policies the
United States should review its developmental or technical
assistance to such countries to the end that such assistance as may
be extended shall support the objectives set forth in Section II
above.
27. In formulating policies and programs hereunder the U.S. must give
consideration to their effect on our domestic economic and financial
strength as well as on our relations with the other less developed
areas of the world.
28. Magnitude. United States overall
assistance, with respect to both new obligational authority and
expenditures, in the Asian area for the fiscal year 1956 shall be in
accordance with the President’s budget message and as tentatively
outlined in Table I.
V. Precautions
29. In undertaking discussions with respect to any new arrangements
certain precautions should be observed.
- a.
- Political and fiscal considerations which limit the dimensions
of programs practical under present conditions and the limited
capacity of the Asian states to utilize increased amounts of
assistance make clear that U.S. financial contributions to Asian
development should be in realistic and reasonable
amounts.
- b.
- The U.S. should not give the impression that its efforts are
in substitution for what other countries are doing or should do
to assist the economic development of the region.
- c.
- Although our continuing interest in the economic development
of the area should be made clear, the U.S. should make it
equally clear that it can make no promises of continuing
financial contributions, which must be dependent upon
appropriations by the U.S. Congress.
- d.
- Public pronouncements on the United States program should be
consistent with anticipated results and should be carefully
framed in order to avoid leading the free peoples of Asia to
expect more than can be accomplished by a given program and to
avoid stimulating adverse comparisons in other less developed
areas of the world.
[Here follow Table I, “U.S. Aid to the Far East and South Asia;”
Table I–A, “U.S. Programs of Aid to the Far East and South Asia;”
Table II, “Surplus Agricultural Commodity Programs Under P.L. 480
Proposed for FY ’55 in South Asia and
Far East;” and Table III, “Loans to the Far East and South Asia by
Export-Import Bank and International Bank for Reconstruction and
Development.”]
