Foreign Relations of the United States, 1964–1968, Volume XXVI, Indonesia; Malaysia-Singapore; Philippines

342. Memorandum From the President’s Special Assistant (Rostow) to President Johnson¹

Washington, September 14, 1966.

SUBJECT

• Marcos Visit

This is a revised briefing memorandum which replaces the one I sent to you on September 12.²

You will have seen State’s Briefing Book,³ especially the Scope Paper (Tab I B) and Secretary Rusk’s Memo (Tab I C).⁴

Background:

Marcos is strongly pro-American. But he is also fiercely pro-Philippines. He has backed our position in Viet-Nam at considerable political risk. His foremost goal here is going to be to secure tangible evidence of U.S. support for his leadership and domestic goals. He has been under the gun from domestic critics. He wants to take home:

(1) Concrete achievements in the matter of veterans’ benefits and claims;

(2) pledges of increased U.S. economic and military assistance.

He wants help; but he does not want to appear to be asking for our favors or as having been bought off by the U.S.

Main Items of Business

(1) Viet-Nam

Marcos is ready to give public support to the U.S. position. He will want a fairly full and frank review of the situation as seen from our vantage point.

He may ask: if we are likely to want increased operations from Philippine bases; whether we can increase military procurement in his country.

You could:

give him a completely frank appraisal of the situation;

in connection with peace efforts, express appreciation for his efforts through ASA to promote an Asian peace conference (he is sensitive about the publicity Thanat has had on this);

tell him we will do nothing about increased operations from the Philippines without consulting him;

note the recent opening of a Procurement Information Office in Manila which should be a help to Filipino businessmen.

(2) Regional Cooperation in Asia

Marcos is active in ASA, Asian and Pacific Council, Asian Development Bank (headquarters will be in Manila).

He may ask: status of your offer of $1 billion for Southeast Asia development.

You could tell him: Gene Black will be going out in October and will want to discuss details or regional development with Marcos.

(3) Military Assistance

Marcos wants equipment for 10 engineer battalions for use in civic action projects. Your compromise solution has been presented to him (by Ambassador Blair) and he welcomed it. That is: we are funding equipment for 3 now; we will fund two more immediately; we will consider funding additional 5 in Fiscal 1968.

On other MAP problems, Marcos thinks the Philippines are not getting their share and that much equipment has been out-of-date. Fact is, the Philippines have not made effective use of much they have received.

Talks on the Bases Agreement are moving forward smoothly.

He may ask: if we can renegotiate the Military Assistance Agreement of 1953; he may ask about increased MAP.

You could:

note the engineer battalion agreement, noting we will consider more next year;

recall we have met his request for 6 Swiftcraft for anti-smuggling and for M–14 rifles and other equipment. We gave him a squadron of F–5’s;

We will consider renegotiating the Assistance Agreement.

(4) Economic Assistance

Philippine economy is in bad shape—4% growth of GNP in past five years, 3.2% population growth.

Huk guerrillas are getting more active—taking advantage of local discontent.

Marcos has been moving—on anti-smuggling, tax collections, administrative improvements in Government. Remaining tasks are enormous.

The past Philippine record has been bad. They have not used much of the help offered—by World Bank, Ex-Im, AID, etc.

Marcos will probably ask for U.S. support for his rural development program, particularly in 10 major rice-producing areas.

For political reasons, he will want to be able to mention dollar amounts for loans we may be ready to consider.

You could:

recognize the problems he faces; admire the efforts he has made;

applaud his emphasis on rural development and tell him we are ready to support sound projects in the 10-Province Program;

we are ready to open talks immediately on PL–480 (Title IV) sale of cotton, feed grains and tobacco (will generate pesos for use in his programs);

note we are now working out details with his specialists on PL–480 as follows:

• Title IV—$20.0 million
• Title II—4.5 million
• Title III—10.0 million

we are expanding technical assistance;

we are ready to extend a feasibility study credit;

total AID package is going to be worth more than $50 million.

In short, we are backing his development plan. We want him to succeed. If the above projects and others go well, we will consider more.

If he wants, and will take initiative, we will support arrangements with World Bank and others for closer multilateral consultation and assistance to the Philippines.

(5) Veterans Benefits and Claims

You know the background on this. Legislation on benefits (orphans assistance and hospitalization) has passed the House; may pass the Senate in time for the visit.⁵ Estimated cost: $17 million for first year; may total up to $425 over next 30 years or so.

On claims, we are ready to pay two. Estimated cost: up to $42 million. We want Marcos to drop the other five claims. He will find this hard.

We have the money in hand (special fund in Defense). We have made offset arrangements to minimize balance of payments problem. This will be worked out with the Philippines.

Note: Marcos has been informed of the above and is delighted; he told Ambassador Blair it was “more than he expected.” So this should go smoothly. Roughest point for him will be dropping future claims.

Marcos may: note political difficulty in committing any future Philippine Government to drop all claims.

You could:

express appreciation for his willingness to drop; leave the rest to the future;

explain to him that our panel found the other five claims do not merit further study;

tell him we don’t know exactly how much the claims will come to, but our present estimate is more than $30 million and as much as $40 million.

(6) Bases and Defense Relations

We have been working with the Phils on revision of the 1947 bases agreement; things are moving ahead.

Rusk and Ramos will exchange notes formalizing the 1959 Understanding which will: (a) cut our base tenure to 25 years (from 99); commit us to consult the Phils on any non-Philippine or non-SEATO use of our bases, and on setting up long-range missiles there.⁶

We will reaffirm our mutual security policy.

Marcos may: ask if we are interested in any new bases; say he would want to call them “SEATO Bases.”

You could:

tell him we will talk with him if we need any new installations;

hope that our bases talks will proceed smoothly and will eliminate any irritants caused by the presence of bases; note the Rusk-Ramos agreement with approval.

(7) Trade and Investment Problems

Economic nationalism is rising in the Philippines. Main problem is the Retail Trade Nationalization Law. But it is not now being enforced against American companies.

There is much agitation to abrogate the “parity clause” in Laurel-Langley Trade Agreement (gives U.S. investors equal rights with Filipinos in natural resources and public utilities until 1974). We do not seek renewal of this clause after 1974.

We favor negotiation of a new Treaty of Friendship, Commerce and Navigation to go into effect in 1974.

Marcos may ask:

would we agree to joint committee beginning work now to develop a new trade treaty?

would we accept abrogation of “parity?”

You could:

tell him we want to work together to maintain and expand trade;

an increased flow of legitimate and worthwhile investment would help his development program;

we are ready to start informal talks aimed at later formal negotiations of a new trade treaty;

we expect Laurel-Langley to run to 1974; on “parity,” our concern is proper safeguards for the rights of Americans who invested in the Philippines in good faith in the past.

(8) Special Fund for Education

This is a $28 million war damage fund. We reached agreement with the Marcos Government in April on disbursement procedures. We are limited by the terms of the original legislation. So far, the Philippines have advanced no official project proposals. We want to use the fund in the next three years.

Marcos may ask:

can we use the fund to support the new National Cultural Center (a pet project of Mrs. Marcos)? They need $3 million for this (of $9 million total cost).

can we release the fund—or a large part of it—for a permanent trust fund with the interest used for educational projects?

You could state:

we will be happy to support use of the fund for the Cultural Center;

we would like to disburse the fund in two or three years, but we will give his proposal further study.

(9) Civil Air

They are unwilling to accept a Bermuda-type agreement. We have refused a Manila-Tokyo-San Francisco route for PAL.

If Marcos asks about civil air, you might tell him if they will accept a Bermuda agreement (unlimited frequencies for U.S. carriers), we will give on the route problem. Informal talks could begin immediately, if he is interested.

The items above are the main problems we see coming up during the visit.

There will be a good deal of hard bargaining, back and forth.

But in my judgement, there are two key factors which provide the backdrop for the Marcos visit.

One, it is clear from reports from Manila that Marcos has really put his political neck on the block in backing our Viet-Nam position and in sending military forces there. But he did it.

The least we can do is recognize this fact and take actions that will make his position at home as strong as possible.

Second, Marcos is a sensitive, patriotic and sentimental man. He is also strongly pro-American. A private and personal expression of interest and support from the President of the United States will outweigh many other things. If he feels your personal concern with his problems, those problems are going to be easier to face.

In short, he should leave Washington knowing he has a true friend, a loyal friend in the White House.

I am sure he will.

Walt

1. Source: Johnson Library, National Security File, Country File, Marcos Visit Papers, Memos, 9/14–16/66. Secret.
2. Not printed. (Ibid., Memos to the President, Walt Rostow, Vol. 12, 9/1/66–9/14/66)
3. Undated. (National Archives and Records Administration, RG 59, Visit Files: Lot 67 D 587, V. 10)
4. Dated September 10. (Ibid., Central Files 1964–66, POL 7 PHIL)
5. On September 30 President Johnson signed H.R. 16330 and H.R. 17367, the two bills dealing with Philippines’ veterans benefits. On October 11 he signed H.R. 16557, a bill relating to refunds of insurance benefits collected in error during World War II, which restored the value of the benefits to the full amount as intended in 1946. For Johnson’s statements upon signing these bills, see Department of State Bulletin, October 31, 1996, pp. 684–685.
6. For text of the notes exchanged, see ibid., October 10, 1966, pp. 547–548. The summary minutes of the meetings of June 9, July 13, and August 29, leading up to this exchange of notes are in airgram A–180 from Manila, September 9. (National Archives and Records Administration, RG 59, Central Files 1964–66, DEF 15–4 PHIL–US)