Foreign Relations of the United States, 1958–1960, South and Southeast Asia, Volume XV

456. Telegram From the Embassy in the Philippines to the Department of State¹

Manila, December 24, 1960—1 p.m.

710. Reference: Circular 879, December 19.² At end 1955, Pres Magsaysay was completing second year in office; direct threat Communist dissidents had been eliminated; Philippines was engaged rapid economic development all sectors, including initial stages industrialization; fiscal stability had been achieved and Philippines was approaching favorable balance of payments for first time since war; and which most important, personal popularity of President and confidence which he inspired in his program rural reform had restored prestige of national govt. In sum, Filipino aspirations for domestic peace and prosperity promised to be fulfilled by govt which for first time inspired full confidence of masses.

At same time feeling that Magsaysay administration was sacrificing too much in terms Philippine sovereignty and national self-respect for what some considered inadequate economic and military support from United States was being exploited by frustrated politicians, extremists and pro-Communists. As result there had begun to be heard in sectors of press and in Congress considerable criticism US policies and actions in Philippines and of the Magsaysay administration’s close relationship with Washington.

Criticism US-Philippine economic relations only partially satisfied by revision basic trade agreement 1955. Equal rights provisions³ remained sensitive issue; and Philippine monetary claims had been presented with loud demands for early settlement. Nationalist dissatisfaction focused primarily, however, on system US bases in Philippines and 1947 agreement under which they operated. Demands revision of bases agreement resulted in unsuccessful 1956 panel negotiations.

Magsaysay’s death and Garcia’s coming into power March 1957 radically altered internal political situation. Political scramble to fill power vacuum resulted in weakened administration headed by man who lacked personal force or popular mandate necessary raise national government’s prestige to level set by Magsaysay; 1957 election campaign caused serious drain on public finances undermining stability government’s domestic and foreign accounts; finally, Magsaysay’s death and Garcia’s accession opened way for increased nationalist influence in administration.

Garcia administration sought immediate ways strengthen its position. Garcia’s State visit to United States in June 1958 promised both to raise his personal prestige and offer opportunity to negotiate increased financial assistance from US. Disillusionment that resulted when he failed return with financial aid he had promised undercut much of personal gain of his trip. Foreign Secretary Serrano in Oct 1958 also returned disappointed over unsuccessful efforts obtain increased military aid. Another setback was crop failure causing rice shortage and rapid rise food prices.

In this atmosphere US-Philippine relations fell to post-war low in early 1959. Garcia showed concern that his administration avoid giving impression of being influenced by U.S. policy, and set more nationalist foreign policy course which, within framework US-Philippine alliance, was aimed at achieving “respectable independence” in relations with US. Administration apparently saw in nationalist criticism of US scapegoat for own difficulties and opportunity draw public attention from domestic problems. Nationalist officials were permitted air publicly complaints against US, including number incidents involving US armed forces; bases issue; US military and economic aid; omnibus claims; provisions of US-Philippine trade agreement; and US-Philippine air agreement. Administration took no steps squelch nationalist propaganda and even abetted it by launching Filipino first campaign, as prelude 1959 election.

In past year, however, nationalist tide has ebbed and stresses and strains that characterized US-Philippine relations in early 1959 have gradually diminished. Administration’s poor showing in 1959 elections prompted deemphasis of Filipino first movement. Approach 1961 Presidential elections has resulted general tendency play politically safe theme of pro-Americanism. Never having evoked a broad popular response, the ultra-nationalist theme now appears to have lost vigor and appeal.

American policies have also undercut nationalist criticism. Progress has been made in bases talks. Concessions were made in settlement omnibus claims and accounts were closed.⁴ Pres Eisenhower’s visit last June impressed Filipinos with reservoir of good will for United States that had survived temporary differences. Recently, Philippine Government’s shift from hypercritical to more receptive attitude on US-Philippine issues has been accelerated by fears possible shift in US policy in Asia.

Economic circumstances have also changed. Generally sound fiscal policies have improved government’s financial position, and international balance of payments has been restored. Bumper food crops have further strengthened the economic situation, and economic growth has continued despite political uncertainties.

There is basic cause for optimism in Philippine situation. Economy is fundamentally strong and rate of economic growth, while having declined in last two years, has continued to surpass annual population increase. Country possesses material and human resources necessary meet demands for higher living standards from rapidly expanding population. Program of gradual decontrol promises to stabilize peso, stimulate investment, and reduce incentive and opportunities for government interference and exploitation. Democratic system of government enjoys basic loyalty of people. Difficulties which beset Philippines are those which plague most new nations. There is evidence, however, of growing political maturity and slowly increasing civic consciousness as Filipinos’ experience in self-government increases.

This is not to say there are no immediate economic and political problems. Philippines must continue find sources of external financing. Investment capital has often been used unwisely, resources have been squandered, and development opportunities have been missed. Unemployment and underemployment remain serious problem; and increases in national income have not been distributed evenly throughout population.

Weak leadership has resulted in drift in public affairs and fostered inefficiency and corruption in government. Needs of growing population are placing greater demands on governmental services disrupted by constant political interference. Absorption with partisan politics has delayed passage of much needed legislation. There is growing need to decentralize governmental powers to give full scope to political and economic aspirations of provincial populace and to provide adequate government services at local level.

Filipinos share aspiration common to most new nations with underdeveloped economies. Future Filipino goals include higher levels of employment, increased living standards, maintenance of domestic law and order as well as national security, improved educational standards, opportunity themselves to develop national resources, and more effective governmental performance and efficiency. In foreign policy area, Filipinos generally aspire to increased international recognition, especially among nations of Asia. They desire maintenance of close and “special” relations with United States, and continued national security assurances from United States.

There are certain factors, however, that could affect Filipino aspirations over next five years. Philippines as small nation inevitably affected by any alteration in balance of power, or shift in policy by any of principal powers in area, particularly the US. Any indication US taking Philippines for granted or suggestion US might abandon them could lead to rapid and widespread disillusionment and rise in nationalist extremism.

While Philippine economy undergoing steady diversification, US remains major trading partner and currency based on dollar; therefore, any major change in US economic situation or policy would affect Philippines. Domestically, improvement in quality of Philippine leadership could raise internal expectations. Also, while there is genuine and deep loyalty to US-Philippine alliance, younger generation of leaders less devoted than elders to “special” relationship with US.

Recommended courses of action for US:

1. US should recognize that Filipinos expect special attention and consideration because of historical relationship between two countries. US should, in its actions and policies, respect this attitude insofar as feasible. At the same time, US should encourage Filipino self-respect and self-reliance.

2. Any changes in US attitude toward Communist China will have profound repercussions in Philippines. US should continue to assert publicly its vital stake in security and defense of area. Should policy changes become necessary, every effort should be made prepare Filipino people for shift and to keep Philippine government informed in order foster sense of participation in events which vitally affect Philippine security.

3. US should attempt in its programs and actions to encourage civic pride and responsibility on the part of Filipinos.

4. US should discreetly encourage passage of constructive legislation in Philippine Congress.

5. US should discreetly encourage steps toward greater decentralization of government powers in Philippines.

6. Operation of US bases and US programs of military assistance should be conducted in a manner aimed at maximizing continuity of US-Philippine alliance. All efforts should continue to be to foster sense of mutuality in bases system and aid program.

7. US should continue strive for mutually satisfactory adjustments in bases agreement.

8. Training Filipinos for more effective appraisal of Communist Bloc policies and actions should play larger role in US educational programs and leader exchanges

9. US should continue to encourage more effective Philippine participation in SEATO.

10. US should be prepared to assist Philippines in sound programs for economic development, while avoiding actions which will encourage perpetuation of Filipinos’ traditional attitude of dependence upon US.

11. US should encourage greater Filipino participation in economic enterprise, and at same time help Philippines avoid dangers of narrow economic nationalism.

12. US should be prepared standardize its economic and commercial relationships with Philippines, including replacement of present trade agreement with FCN treaty, should its political disadvantages begin outweigh its present economic advantages, and negotiation new air agreement.

13. United States should encourage and support Philippine participation in regional economic programs which would contribute to collective security independent countries of Southeast Asia.

Mein

1. Source: Department of State, Central Files, 611.96/12–2460. Secret.
2. Circular airgram 879 requested U.S. diplomatic representatives abroad to make a year-end review and to propose recommendations. (Ibid., 120.201/12–1960)
3. Reference is to Articles VI and VII of the revised U.S.-Philippine Trade Agreement (Laurel-Langley Agreement). These articles provided U.S. and Philippine citizens equal rights in the disposition, exploitation, and development and utilization of natural resources; as well as in the operation of public utilities and business corporations in the Philippines.
4. One of the claims, the dollar devaluation claim, was settled in the Philippines’ favor in August 1959. The Philippine Government, however, was prepared to reopen negotiations for the other claims. See footnote 2, Document 399, and Document 417.