493. Letter From the Assistant Secretary of State for Far Eastern Affairs (Robertson) to the Ambassador in Thailand (Bishop)1

Dear Max: Thank you for your letter of March 272 on sales of United States surplus rice in Asian markets. Most of the points you raised were, I believe, covered by our Telegram No. 3126.3 As we stated in this telegram, the disposal of United States surplus crops in world markets is one of the most difficult problems we have to face today. I feel quite strongly, at least in so far as sales of United States rice in Asia are concerned, that this program is on balance detrimental to United States national interests and I so informed the House Foreign Affairs Committee last week. I did so while testifying before the Committee during the course of the hearings on next year’s Mutual Security Program appropriation.

As you point out, there is a conflict of interest between the United States domestic agricultural policy and our foreign policy. There is also, of course, the additional conflict in our foreign policy objectives when our interests can be furthered in one Asian country by accommodating a request for PL 480 rice but jeopardized in another by meeting such a request. All of these factors came into play in the Indonesian and Pakistan cases.

As you are aware, I am sure, from the beginning of the PL 480 program, we in FE have been consistently against sales of surplus rice in Asia. Even after it was decided to sell substantial amounts of rice in Asia, we felt so strongly that no sales should be made without consultation with the Asian rice exporting countries that we sent a special mission to Southeast Asia about a year ago, under Chuck Baldwin, to explain our program. While, in effect, gently breaking the news that it was United States policy to try to dispose of substantial quantities of United States rice in Asia, the Baldwin Mission stressed that in doing so we would try to protect normal Asian marketings.

When the Indonesian request first came in for 250,000 tons, we originally took a dim view of it. As you surmised, there was considerable [Page 872] pressure within the United States Government, however, to go ahead with this, particularly since the justification which the Indonesians presented seemed to fall within the criteria of the Dodge Council; i.e. the rice was presumably to be used for stockpiling, to increase consumption, would not result in material injury to Thailand or Burma, and would not decrease purchases of rice which Indonesia would otherwise procure in Asia. Nevertheless, we promptly informed both the Thai and Burmese Embassies here in Washington that a substantial tonnage of rice was being considered for Indonesia. You will understand that we could not then tell them the quantity since it was still being negotiated.

It is noteworthy that at no time did either the Burmese or the Thais ever follow-up on our conversations by any representations to us on the proposed rice sale. In addition, we advised the Indonesians during the course of the negotiations that we could not even consider their request for 250,000 tons until and unless they themselves had talked to both the Burmese and Thais and could assure us that they had no objections. At the same time we also required the Indonesians to give us assurances that they would buy at least the usual amount of rice from Burma and Thailand, their normal suppliers. The Indonesians did consult with the Thais and Burmese and informed us that neither of these two Governments had any objections and indeed showed sympathetic understanding of the Indonesian plight. Still not satisfied with this, you will recall that we instructed both Embassies Rangoon and Bangkok to verify these Indonesian assurances.4 Even after Embassy Rangoon confirmed the Indonesian assurances as far as Burma was concerned, we still held out. When, however, Telegram 20425 arrived from Embassy Bangkok confirming, in effect, that the Thais had raised no objection to the Indonesian sale and that they were “sympathetic to Indonesia’s attempts to solve its foreign exchange and rice deficit problems through purchases of some United States rice under PL 480”, we could no longer stand against the position which others in the United States Government were taking. This was strengthened by the fact that on the same day, in response to our request of January 136 (that Embassy Djakarta advise us of the precise nature of Indonesian assurances to the Burmese and the Thais and whether the Indonesians had agreed to purchase 400,000 tons of rice from Burma and Thailand) Embassy Djakarta replied that Indonesia had already contracted to purchase [Page 873] 200,000 tons of rice from Burma and Thailand and was negotiating for an additional amount.7 The Indonesian Government had also advised Embassy Djakarta that it preferred not to give the Burmese and Thais definite assurances that it would purchase a total of 400,000 tons without knowing conditions, price, delivery dates, etc., since, in its opinion, to do so would give the Burmese and Thais negotiating advantages. Finally, just before the Agreement itself was signed, we again informed the Thai and Burmese Embassies.

The fact that the Indonesians were acting in good faith is borne out by a Government purchase of 100,000 tons of rice so far in 1956 from Thailand plus a 10,000 ton private purchase, and by its decision, announced in Djakarta’s Telegram No. 2459 of April 11, repeated to Bangkok No. 46,8 that it was importing an additional 90,000 tons of rice from Thailand. As a footnote, it should be borne in mind that the PL 480 sale to Indonesia was itself highly desirable from the standpoint of our relations with Indonesia, particularly since we wished to have the Agreement signed by the relatively pro-Western Harahap government.

The Pakistan PL 480 program was the result of a serious food shortage and was consummated on a crash basis. Pertinent telegrams from Karachi and the Department relating to the Pakistani request were repeated to you on February 10 and 16.9 Because of heavy flooding and insect damage in East Pakistan, famine of such severity threatened that the Pakistan Government wished to keep the details from its people. Since it was asserted that the Pakistani had no history of rice purchases from Thailand and, for that matter, from Burma, and since the Pakistani foreign exchange situation was so poor that Pakistan could not have covered its needs out of its own earnings, this case again seemed to fall clearly within the criteria of the Dodge Council. You are aware that the United States Government, through its aid program, is already subsidizing a very large part of the Pakistani foreign exchange and budget position. Another factor was that Pakistan is a member of both SEATO and the Baghdad Pact. In view of the speed with which the PL 480 agreement had to be concluded, we could not give the Burmese and Thais much advance notice, particularly since it would have been most difficult for us if either had raised any strenuous objection. As it happened, neither did at the time we advised their Embassies here.

Furthermore, in connection with the Pakistan deal, we were able to acquire from Agriculture approval to go ahead with the Burma [Page 874] program calling for the exchange of 10,000 tons of rice for United States technicians. We had been earnestly trying to put across this arrangement ever since U Nu requested such a plan last year when he was in Washington. Conclusion of this type of arrangement was regarded both by Embassy Rangoon and by the Department as of the highest importance in terms of relations with Burma. In so far as advance notice of the 10,000 ton arrangement with Burma was concerned, we could scarcely have informed the Thais even before we could the Burmese. Unfortunately, the news of the forthcoming United States offer to the Burmese leaked to the press from Karachi even before the offer was made to the Burmese. In any event, it would have been quite impossible to have obtained agriculture’s agreement to an additional purchase of 10,000 tons of rice from Thailand.

In view of the fact that there appear to be several gaps in your files on these PL 480 agreements, I am having others on my staff assemble a chronological record of the negotiations to complete your records. It will be forwarded under separate cover.10

You will be interested in knowing that Agriculture has advised us that it now has on hand approximately 785,000 metric tons of surplus rice which it wishes to market. Two proposals have been made to dispose of this surplus: a 400,000 ton “rice for titanium” deal with Japan and a four-year 500,000-ton PL 480 sale to India. For the time being at least, the Department has adopted the position of FE not to sell any United States surplus rice either to Japan or India, but whether this will become a United States Government position is up to the Dodge Council. In addition to these proposals, the Philippine Government is now requesting 70,000 tons of rice under a PL 480 agreement. We are, of course, doing our best to hold the line but pressures within the Government are great.

I always appreciate having your personal comments on the problem you face in Thailand and on policy matters which you wish to bring to my attention. In the meantime you can be certain that in trying to attain our goals we are bearing very much in mind the importance of Thailand and Burma.

With best personal regards,

Sincerely yours,

Walter S. Robertson11

P.S. An additional bit of evidence that PL 480 is double-bladed is the fact that the Secretary of the Burmese Ministry of Finance, who is now in Washington, told us the other day that our PL 480 [Page 875] agreement with Burma will be a very important factor in implementing their development program this coming year. He volunteered the observation that it would be helpful if Burma could count on another such PL 480 transaction next year.

  1. Source: Department of State, SEA Files: Lot 58 D 209, Thailand 1955 and 1956. Confidential; Official–Informal. Drafted by Leonard S. Tyson and Arthur C. Lillig of SEA.
  2. In this letter to Robertson, Bishop reiterated the concerns expressed in telegram 2749 from Bangkok, supra. Bishop called upon Robertson to “prevent recurrence” of what he saw as a failure to consult adequately with the Thai Government before authorizing competing rice sales in the Asian market. (Department of State, Central Files, 411.56D41/3–2756)
  3. See footnote 7, supra.
  4. Telegram 1027 to Djakarta, December 16, 1955, repeated to Bangkok and Rangoon; see footnote 5, supra.
  5. Telegram 2042 from Bangkok, January 18, not printed. (Department of State, Central Files, 411.56D41/1–1856)
  6. Telegram 1145 to Djakarta, January 13, also sent to Bangkok and Rangoon, not printed. (Ibid., 411.56D41/1–1356)
  7. Telegram 1667 from Djakarta, January 18. not printed. (Ibid., 411.56D41/1–1756)
  8. Not printed. (Ibid., 892.2317/4–1156)
  9. Telegram 1490 from Karachi, February 7, and Icato 954 to Karachi, February 14, were repeated to Bangkok on February 10 and 16, respectively, neither printed. (Ibid., 411.90D41/2–756 and 411.90D41/2–1656)
  10. No such chronology has been found in Department of State files.
  11. Printed from a copy that bears this typed signature.