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239. Memorandum From John H. Holdridge and Robert Hormats of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Export-Import Bank Financing for the Republic of China

Alex Johnson (Tab A)2 comments that it is his understanding that some concerns have been expressed, especially by Treasury, at the additional Ex–Im Bank financing for the Republic of China that is now under consideration: $57.4 million for steel mill equipment, $300 million for equipment for two nuclear power plants on Taiwan. Johnson strongly feels that this financing should be approved for the following reasons:3

  • —Refusal of the USG to approve the loans—the application for which has already been approved by the Ex–Im Bank Board—would be interpreted as a dramatic expression of a lack of confidence in the economic future of Taiwan, thus undermining Taiwan’s economic [Page 1016]strength. It would also undermine our ability to maintain the position of Taiwan in international financial institutions.4
  • —The Republic of China has ample financial capability to service the loans.
  • —A reasonable degree of internal political stability for some time to come seems assured.
  • —It does not seem likely that Taiwan will be incorporated into the PRC by force during the 15-year period of the loans. If Taiwan were incorporated by agreement between the two entities, it is not a foregone conclusion that the Republic of China’s international obligations would not be honored.

Treasury’s earlier concern, since withdrawn, was that a steel mill will increase Taiwan’s steel capacity resulting in increased exports to the US to the detriment of US steel producers. (Comment: However, Austria will proceed with the project with or without US participation. In the latter case, the US would probably lose those exports which were to have been financed by the Ex–Im credits.)

We have two concerns:

  • —That the announcement of these loans not be handled in a way which would call undue attention to the issue of US financial support for the ROC and thereby cause us problems in keeping her in the IMF/World Bank.
  • —That we not jeopardize the Administration’s efforts to improve relations with the PRC. We believe that these dual concerns can be met by announcing the two atomic power loans individually, with an appropriate interval between the two announcements. The steel mill need not be announced at all. This would minimize the publicity given to these loans and lower our posture with regard to financial support for the ROC.5

Therefore, we share Johnson’s view that although these loans are not free of risk, failure at this stage to make the loans would present greater risks. Accordingly, if you approve, we plan to inform the agencies involved that we have no objection to these loans, but ensure that they are given minimum publicity and separately announced.

Recommendation

That the Ex–Im Bank loans to Taiwan be approved on the basis of the above scenario.6

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 523, Country Files, Far East, China, Vol. XI. Secret. Sent for action. The memorandum bears a handwritten comment: “Thru Haig” in unknown handwriting and “ASAP” in Kissinger’s handwriting.
  2. Attached but not printed is a July 7 memorandum to Kissinger from Acting Secretary of State U. Alexis Johnson.
  3. The following four points are taken from Johnson’s memorandum.
  4. See Documents 237 and 245.
  5. A handwritten correction changed the incorrect “PRC” to “ROC.”
  6. Kissinger initialed his approval. In an August 2 memorandum, Davis informed Eliot that the Ex–Im Bank financing had been approved. She noted: “However, if a public announcement is required, the two atomic power loans should be announced individually, in a low-key manner, with appropriate interval between the two announcements. We believe the steel mill loan need not be announced at all.” (National Archives. Nixon Presidential Materials, NSC Files, Box 523, Country Files, Far East, China, Vol. XI)