48. National Policy Paper1


[Here follow a preface and table of contents.]


[Here follows an introduction comprising 9 pages.]


A. General


Desired Course of Free China’s Evolution

An understanding of what progress should be made in Taiwan in the next five years can best be obtained by looking beyond this period and considering what situation we would like to see there in the mid-1970’s. The following outline of the hoped-for Taiwan of 1975 necessarily reflects judgments on what is possible as well as on what is desirable. It must be emphasized, however, that it is not an intelligence estimate.

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The assumptions used below are those stated in Section I. E., above, which imply the further assumption that Taiwan in 1975 would still be cut off from significant contact with mainland China.


Social. By 1975, one might hope that the line between Taiwanese and mainlanders would have become somewhat blurred through increased inter-marriage, expanded cooperation in a wide range of common enterprises, and the unifying effect of a common educational system. Knowledge of Mandarin would have become widespread, and communication between Taiwanese and mainlanders would no longer be a problem. A substantial Taiwanese-mainlander middle class and a Taiwanese-mainlander intellectual elite would have appeared, thus promoting a greater sense of communal unity.

A significant increase in educational standards would have occurred and the body of technically skilled workers greatly expanded. The present nearly stagnant academic life on Taiwan’s university campuses would have been replaced by an upsurge of intellectual activity, although some inhibitions would persist in sensitive political areas. Something approaching a cultural renaissance would be underway in literature and the fine arts.


Economic. By 1975, Taiwan would have experienced a generation of continuous economic growth. The island would have been free for a number of years from dependence on all forms of concessional economic aid. Growth would be concentrated in a thriving private sector of the economy, operating with little government interference and under rationalized systems of commercial law and taxation.

The rate of population growth would have leveled off to between one and two percent annually, thereby easing the problem of maintaining an adequate rate of investment.

Price levels would have been reasonably stable for at least a decade and interest rates would have fallen to levels only moderately above those prevailing in advanced countries. An efficient money market would have been created

The government would have adopted a liberal trade policy based on the improved competitive strength of the export industries. The new Taiwan Dollar would have become fully convertible.


Security. The armed forces would have been reduced in size, but some improvements in fire power and mobility would have avoided a proportionate decrease in combat effectiveness. Taiwanese would form perhaps one-fifth of the officer corps and a few Taiwanese would have risen to general or flag rank.

MAP grant aid would have been significantly reduced in the early 1970’s and procurement of military goods and services from the United [Page 88] States shifted in part to a Military Assistance Sales basis, including liberal loan and credit arrangements.

The military situation in the Taiwan Strait would have been stabilized and a cease-fire tacitly established.

No serious threat to internal security would have arisen.


Political. Political stability would have been maintained, in part as a consequence of a timely Kuomintang decision to permit greater freedom of political action within the framework of the party itself and to give Taiwanese a growing role in party councils and in government. A non-vocal, but independent, opposition party would have been permitted to organize and function. This party, however, would not be purely Taiwanese in its membership or outlook.

Communications media would be operating more freely and with a greater sense of responsibility.

The Taiwan Provincial Government would have been granted considerably greater autonomy, but the central government would still make the basic decisions, at least in the fields of foreign relations, internal and external security and fiscal and monetary policy. The governor of Taiwan would be popularly elected.

The GRC would not have abandoned its claim to be the government of all China and recovery of the mainland would still be proclaimed to be its primary national objective. However, actual preparations for action aimed at recovery of the mainland would have fallen to a low level and major attention would be focused on development of Taiwan and the maintenance of the GRC’s international position. The credibility of the mainland recovery policy would have been seriously eroded by the passage of actionless decades, the deaths of many party elders and the emigration of many others to the United States and elsewhere, as well as by the introduction of a significant Taiwanese element into the KMT leadership.

As a consequence of its economic, educational and cultural achievements, the GRC would have won increasing international recognition as a progressive force in the Far East and would continue to be recognized by a large number of non-Communist nations.


Dimensions of U.S. Influence During the Next Five Years

As in the past, the GRC’s dependence on the U.S. for its very existence will continue, in the final analysis, to provide the principal basis for U.S. influence. We face, however, the problem of adjusting to the declining importance of two of the specific instruments—our economic and military aid programs—through which we have made our influence felt. We must make the best possible use of these instruments while we still have them. We must also learn to work more effectively through international organizations and private U.S institutions.

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During the next few years, direct U.S. influence will probably be most effective in influencing specific GRC economic development tactics, diplomatic activities and defensive military policy. We shall have less influence on fiscal policy, military force levels, the missions and tasks of the armed forces, propaganda and clandestine operations. We shall probably be least effective in the field of political reform.

Fortunately, our direct means of exercising influence are reinforced by indirect influence flowing from the continued pervasive penetration of U.S. standards and methods throughout society and from the delayed social and political repercussions of the economic progress which we have supported.


General Description of U.S. Strategy

The next five years should see as much progress as possible toward the kind of Taiwan described in section II.A.1, above. The U.S. strategy to bring about this kind of progress will be more fully developed in subsequent sections, but its key ingredients should be:

A carefully planned, step-by-step effort to gain broad acceptance of our view of the desirable long-term future of Taiwan among GRC leaders and private leaders of opinion.
Continued observance of and reiteration of our commitment to the defense of Taiwan and the Penghus.
Continued economic and military aid in amounts and for periods of time needed to ensure: (1) sustained economic growth without concessional aid, (2) maintenance of armed forces needed to support U.S. security objectives, and (3) preservation of the necessary degree of U.S. influence in key elements of Government and society.
Reduction and eventual elimination of concessional economic aid as a means of encouraging the GRC to stand on its own feet and adopt self-help measures essential to realization of the economy’s full potential for growth.
Attachment of explicit or implicit conditions on aid designed to induce adoption of: (1) rational economic policies, including appropriate economic development policies and (2) levels and composition of armed forces consistent with the U.S. view of the missions and tasks of those forces.
Encouragement of the GRC—largely through private persuasion—to: (1) relax its political controls, permitting development of more effective opposition activity, (2) bring more Taiwanese into positions of responsibility, (3) promote joint Taiwanese-mainlander enterprises, (4) adopt a rational population policy and a comprehensive manpower program and (5) promote cultural and intellectual activities in a free atmosphere.
Identification and appropriate cultivation of future leaders.
Continued diplomatic support of the GRC in the UN and elsewhere.


Principal Contingencies

Any of the following contingencies would probably require a major change in one or more aspects of the US strategy:

Major hostilities in the Far East involving the U.S., the GRC or Communist China; especially: hostilities between the U.S. and Communist China, the U.S. and the USSR; hostilities caused by a Chinese Communist attack on Taiwan, the Penghus or one of the major offshore islands; or hostilities precipitated by a GRC invasion of the mainland.
A drastic increase in the vulnerability of the Chinese Communist regime to GRC military or paramilitary operations resulting from economic disaster, internal revolt, a split in the regime or involvement of the regime in major hostilities on another front.
A deal between the GRC and the Chinese Communists.
The rise to power on Taiwan of a more repressive militaristic regime as a consequence of a succession crisis, suppression of a Taiwanese uprising, military defeat or economic stagnation.
Loss by the GRC of its UN seat either through expulsion or through voluntary withdrawal in protest over a UN decision to offer membership to the Chinese Communists.

These contingencies will not be treated explicitly in this paper, but are properly the subject of separate contingency plans.

B. US Political Strategy


Political Stability and Political Reform

For the past decade, the U.S. has operated on the assumption that the GRC could maintain political stability on Taiwan if it were protected from Communist military pressures and assisted in the development of the island’s economy. This assumption has proved correct, but something more is likely to be required in the years ahead. The stability that has prevailed on Taiwan rests on a balance of opposing forces that cannot easily be maintained. Unless change comes gradually and peacefully, there is a danger that it will come with a disorderly rush, threatening all that the US, the GRC and the people of Taiwan have achieved since the loss of the mainland.

Peaceful change is everywhere a matter of timing, pace and style. This is particularly true of Taiwan where ill-considered, precipitate reform would be as dangerous as blind reaction. In this complex and delicate situation, we must move with caution and deliberation, constantly keeping in mind the limits on both our understanding and our capabilities.

The weight of our influence should be thrown behind the general proposition that a gradual relaxation of political controls, greater observance [Page 91] of civil rights (including giving trade unions freedom of activity and functions usual in democratic countries) and increased Taiwanese participation in responsible levels of government are essential conditions of political stability. We should make our views to the GRC clear whenever appropriate opportunities arise in connection with specific instances in which we feel GRC observance of political or civil rights has been dangerously deficient.

Use should be made of the good offices of prominent Americans outside the government who are known to be sympathetic to the GRC. On occasion, the ILO, the ICFTU and other international organizations might be encouraged to call violations of political or civil rights to the attention of the GRC. Public information media could lend indirect support to the campaign by publicizing advances in popular government in other countries and by applauding constructive steps taken by the GRC. In the field of labor rights, public and private American employers on Taiwan could set a good example by recognizing and dealing with unions of their Chinese employees.

Our campaign for political and civil reforms should be conducted in a low key and largely behind the scenes. Great care should be taken to avoid either unduly whetting Taiwanese and other oppositionist political appetites or frightening GRC leaders into more repressive policies.

The layering of the national and provincial government lends itself to a gradualist approach to the problem of political reform. Increasing the autonomy of the provincial government and the authority of both its legislative and executive branches would automatically lead to more effective popular participation in government and to a more influential role for Taiwanese. At the same time, the mainlander leadership could retain control over defense and international relations and a share in the making of domestic policy that might be adequate for their purposes. U.S. agencies on Taiwan should seek to promote this development by gradually increasing their dealings with the provincial government and seizing appropriate opportunities to build up its prestige and influence.


The Possibility of a Presidential Succession

An orderly, constitutional transfer of power upon the death or incapacity of Chiang Kai-shek is strongly in our interest. During the period before Chiang’s departure, we should do what we can in all fields—political, psychological, economic and military—to create favorable conditions for a smooth transition at the time of the succession.


Return to the Mainland

We should continue to discourage the GRC from military or para-military operations against the China mainland which might provoke a dangerous Chinese Communist reaction or damage our prestige and that of the GRC. We should encourage the GRC to rely more on political [Page 92] and psychological efforts in seeking to undermine Communist control of the mainland.

When appropriate and necessary, we should remind GRC leaders of their obligation under the exchange of notes of December 10, 1954, to obtain our prior agreement to any offensive actions by their armed forces. If the GRC appears intent on taking such actions without our prior agreement, we should make clear that we would be under no obligation to help contain any Communist military counteraction and that our continued economic and military aid to the GRC would be placed in jeopardy. At the same time, we should not foreclose the option of assisting the GRC in playing an effective role on the mainland in the event of a drastic increase in Chinese Communist vulnerability to GRC pressures.

A sharp and damaging confrontation with the GRC, on the return to the mainland issue can probably be avoided, if we maintain our present intimate knowledge of GRC’s plans and thinking, and if we continue to be successful in persuading the GRC of our view that, under present circumstances, operations on a scale larger than those we have accepted to date would almost certainly fail with seriously adverse consequences for GRC interests.


The International Status of the GRC

We should continue to oppose the admission of the Chinese Communists to the UN and other international organizations by using the abundant evidence disqualifying the Peiping regime from admission to the society of peace-loving nations. We should continue to support the resolution of the 16th General Assembly declaring Chinese representation an important question requiring a two-thirds vote. We should not abandon the possible option of using the veto as the final defense against admission of the Chinese Communists to the Security Council.

In the immediate future, our main task will be to dampen down the repercussions of the recent French recognition of Peiping. Over the longer-run—assuming that the French action does not lead to rapid erosion of the GRC’s international position—the main threat to our ability to protect the status of the GRC as the representative of China in international organizations will come from the existence of sentiment in many governments for seating both GRC and Chinese Communist representatives. This sentiment might eventually result in the passage of a “two Chinas” resolution in the UN which would seriously undermine the GRC’s status as the legitimate representative of China and would probably lead many countries to recognize Communist China and officially proclaim a “two Chinas” policy. This threat would become even more serious if the Chinese Communists reversed their present position and indicated their willingness to sit in international organizations with representatives of the GRC, or if the GRC were to react to a mere invitation to the Chinese [Page 93] Communists to join an international organization by themselves withdrawing. The first of these possibilities is fortunately remote. We should guard against the second by continuing to urge on the GRC the merits of a pragmatic, as opposed to a rigidly doctrinaire, approach to the Chinese representation problem.

We should continue to support GRC efforts to maintain its relations with governments now recognizing it and to establish relations with newly independent governments. We should also continue to encourage the GRC to use its small technical assistance program as a valuable adjunct of its diplomacy, particularly in Africa.

We should view sympathetically the GRC tendency to tighten its ties with other strongly anti-Communist Asian governments, in part to compensate for diplomatic reverses received or feared in other areas. But at the same time we should not now support GRC proposals for new regional alliances. To do so under existing circumstances would add little or nothing to our strength in the Far East and would complicate our efforts to cope with several major problems, notably those in Vietnam and Laos.


Two Chinas

Since both the GRC and the Chinese Communists strongly oppose the separation of Taiwan from China, it is most unlikely that an independent state could be created on Taiwan during the next five years—or indeed for a considerably longer period of time. Under present circumstances, adoption by the U.S. of a “two Chinas” policy (i.e., recognition of the Chinese Communist regime as the government of China and the GRC as the government of Taiwan) would be futile and would involve serious losses and risks. The value of the GRC as a diplomatic counter to the Chinese Communists would of course be largely, if not entirely, lost. But beyond this, U.S. adoption of a “two Chinas” policy would have a deeply unsettling effect on political stability on Taiwan, conceivably including opening the door to a deal between KMT leaders and the Chinese Communists. We would also risk arousing the bitter and lasting enmity of many patriotic Chinese who would interpret our action as an effort to separate off part of the national territory.

In the absence of any diminution of the Chinese Communist threat, the governments of South Korea, South Vietnam and Thailand would regard any U.S. moves toward a “two Chinas” posture with considerable apprehension. This feeling would probably be shared by leaders in the Philippines and Malaysia and to some extent even in Burma, Indonesia and India. Pressures for accommodation with the Chinese Communists would increase throughout the area.

We should, therefore, not adopt a “two Chinas” policy. At the same time, we should pursue economic, political, and security policies which will in fact facilitate the survival of Taiwan as an independent national [Page 94] entity if, as now seems possible, this proves to be the ultimate consequence of further prolonged isolation of the island from the mainland of China.

[Here follow the remainder of section II, which concerns U.S. economic and military policy, section III, Courses of Action, and Part Two, Factors Bearing on U.S. Policy.]

  1. Source: Department of State, S/P Files: Lot 70 D 199, National Policy Paper, Republic of China. Secret. Portions of the paper, entitled “Future U.S. Role in External Defense” and “Present U.S. Role in External Defense,” are filed ibid. under a cover sheet dated June 1964. Drafted by Joseph A. Yager of the Policy Planning Council and approved by Rusk on September 11. The preface states: “All agencies with major responsibilities affecting U.S. relations with the Republic of China participated in drafting the paper and concur in the Strategy and Courses of Action which it sets forth.”