19. Telegram From the Department of State to the Embassy in Burma1

361. Our 303.2 At meeting October 14,3 Burmese informed that all interested agencies US have considered Burma’s financial position, statement of requirements and official position Burmese Government [Page 26] re Battle Act. Burmese given copy US draft agreement4 which we believe meets US problems and Burma’s and which US can sign if meets Burmese approval. (Copies air pouched.)

Article II draft concerning uses Burmese kyat accruing US from sales commodities reads “(1) The two Governments agree that the local currency proceeds of sale under this agreement shall be available for use by the US for the purposes specified in subsections a, b, d, f, and h of Section 104 of the Act, but the US and Burma may agree to other uses as authorized under said Section 104 and in such event such uses shall be made of the proceeds. (2) The Burmese kyat accruing under this Agreement shall be expended by the Government of the US for purposes stated in Paragraph 1 of this Article in such manner and order of priority as the Government of the US shall determine.” During discussion Article II, US made oral statement which designed clarify meaning Article II as follows: “Although the US can and will make no commitments other than appear in the wording of the agreement, the US in view of its present needs and other factors has no present intention to utilize a major portion of the local currency proceeds of sales under the surplus agricultural products agreement for the purposes specified in Article II paragraph one of said agreement and envisages that there will be discussions pursuant to the last clause of Article II of the Agreement.” (Last clause refers economic development loans.) US side observed language incorporated Article II meets US requirements and is at least as advantageous to Burma as any of Burma’s previous proposals.

Burmese sought further clarification clause re US has no present intention utilize major portion local currency proceeds for its own purposes. US commented US does not believe it would likely wish utilize more than about twenty percent of the proceeds for its own needs through June 30, 1957. Burma sought further assurances re US uses of currency and was advised can be sure US would handle this account with due regard Burma’s position as friend and US would not suddenly spend funds for procurement Burmese materials in such large amounts as to injure further Burma’s foreign exchange position. US would use some of these proceeds over the next two years but amount would be small.

Commodity component agreement (all in millions dollars) is cotton 16; dairy products 3; edible fats and oils 1; tobacco .6; dry fruit .2; ocean transportation .9; total 21.7. Burma asked why we omitted wheat and informed that US has no wheat history in Burma and US does not wish to appear attempting displace Burma’s normal purchases of flour. Burma conceded US has real problem Australia.

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Assume Burmese will attempt obtain reaction Prime Minister before his departure. Main concern Burmese will probably be fear US may attempt large purchases hard currency earning strategic commodities. Our oral statement of intent is as far as we can go re this.

  1. Source: Department of State, Central Files, 460.509/10–355. Confidential; Priority.
  2. Telegram 303 to Rangoon, October 3, replied to telegram 267 (Supra), that the Burmese Government would find it “exceedingly difficult” to engage in arrangements that might invoke an obligation under the Battle Act, but was still interested in an arrangement for obtaining commodities under Public Law 480. Embassy representatives had suggested several alternative schemes that would defer the question of loans. (Department of State, Central Files, 460.509/10–355)
  3. The meeting is recorded in a memorandum of conversation by Francis G. Jarvis of the Office of Philippine and Southeast Asian Affairs. (Ibid., 411.90B41/10–1455)
  4. A copy is attached to the memorandum of conversation cited in footnote 3 above.