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248. Memorandum From the Under Secretary of State (Irwin) to the Assistant Secretary of State for East Asian and Pacific Affairs (Green)1

SUBJECT

  • PARA Review—Philippines2

Pursuant to the review of February 10, 1972, following is a summary of our conclusions with respect to US policy toward the Philippines for the FY 72 review period.

I. Action Items

1.
There was agreement that to require the Philippines to deposit 10 percent of the value of US military assistance could endanger the successful conclusion of our military base negotiations. The Department, therefore, will seek to exempt the Philippines from this requirement. The Bureau of Politico-Military Affairs will be the action bureau.
2.
EA will amend the background statement on the situation in the Philippines (Annex I of country PARA document)3 to highlight factors which work for and against peaceful evolutionary change and reform of Philippine society.

On the assumption that the next five years may be a transition period which will determine the future direction of change in the Philippines, this revised statement, updated annually as part of EA’s PARA procedures, will be given further consideration in future PARA reviews.

II. Policy Program Guidance

A. Overall Policy Posture (Issue 1)

The challenge for the US over the next five years—and so long as the bases remain of fundamental importance to us—will be:

  • —to retain a satisfactory relationship with the Philippine Government that will ensure continued availability of the bases; but
  • —to avoid giving the appearance in the Philippines that we are wedded to a particular administration or are unsympathetic to the required basic reforms.

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We have had some success in recent years in reducing Philippine dependence on the United States. These efforts should be continued.

Accordingly, we should:

  • —Seek to reduce and eliminate the remaining elements of the “special relationship” we have with the Philippines, emphasizing that excessive dependence on the United States is neither in the US nor Philippine interest and that a policy based on mutuality of interest will contribute to a healthier relationship.
  • —Continue to move as far as practicable from a bilateral to a multilateral framework in our dealings with the GOP.
  • —Keep our official presence to the minimum, consistent with our basing requirements, eliminating operations that are not essential or serve only marginal purposes.

B. Relations with Marcos (Issue 2)

Our relationship with Marcos should take into account his increasingly controversial role in Philippine politics.

While continuing to work closely with Marcos as the elected President, we will have to avoid identification as partisans of Marcos, particularly with respect to a possible move by Marcos to extend his incumbency beyond the present constitutional limit. (See III B below.)

C. Military Bases (Issue 3)

We should continue to avoid specific and public quid pro quo arrangements because these would be more costly and difficult than the present relatively modest military assistance program.

A tacit understanding has, in fact, long existed between the United States and the Philippines that US military assistance is a quid pro quo for otherwise rent free use of our bases. Neither country has wished, however, to formalize this relationship into a specific agreement that would formally tie MAP levels to US base rights.

To put the US-Philippine military relationship on a quid pro quo basis would undermine the concept of mutual US-Philippine defense interests in the area. Moreover, the Philippines would presumably seek a substantial increase in military aid if they were to regard the defense relationship in such stark terms, shorn of the long standing perception of the bases as serving mutual security interests.

D. Military Assistance (Issue 4)

The United States should continue to concentrate its security assistance on improving Philippine internal security capabilities.

The demands on the Philippine security forces are likely to increase over the next several years, reflecting mounting unrest both in the cities and countryside. There is no evidence at this time that we incur any serious political liabilities from our rule in support of this Philippine program.

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This issue should be kept under review in the annual PARA cycle.

E. Development Assistance (Issue 5)

The US should continue to coordinate its development assistance through the IBRD-led Consultative Group and look to the IMF as Philippines’ principal financial advisor.

Concentration of US aid efforts on rural development and population problems seems appropriate to our desired posture in the Philippines and to available resources. Short-term balance of payments support is also warranted.

F. Trade and Investment (Issue 6)

The review reaffirmed the position adopted in 1965 that we should not seek an extension of the Laurel–Langley Agreement.

Accordingly, beyond 1974, the US should neither extend special bilateral tariff preferences nor request parity (or equivalent) rights for US business. At the same time, the US should try to persuade the GOP that it is in the Philippines’ own interest to maintain a favorable climate for foreign investment.

In this connection, the review noted that those American firms that will clearly be affected by the termination of the Laurel–Langley Agreement have by and large accepted this fact and have made or are making appropriate adjustments in the arrangements under which they operate. Most US firms will probably be affected to some degree by the termination, but the full impact on individual firms will not be known until the courts have ruled on a number of legal questions. Estimates of how much disinvestment may be required of US firms therefore vary. According to a 1970 Embassy assessment, disinvestment (outright sale, moving to minority equity position, sale of land in return for long-term leases, etc.) might be somewhere around $160 million (out of a total US direct investment of about $1 billion). Most American firms believe that they will be able to make sufficiently satisfactory adjustments and will probably continue to do business in the Philippines.

III. Policy Assumptions and Background (Issues 1 and 2)

A. The Policy Problem

Two assumptions set the framework for US policy in the Philippines:

  • —First, our military bases are of fundamental importance to the United States, at least for the foreseeable future. In fact, the bases are likely to become more valuable if US base rights are curtailed or restricted elsewhere in the Western Pacific.
  • —Second, if basic political, economic and social reforms are not soon forthcoming, internal unrest is likely to mount. While it is generally agreed that reasonable stability will probably be maintained over [Page 534]the next four or five years, there is considerable doubt whether the Marcos administration and its successor (most likely again controlled by the oligarchy) will institute the extensive reforms that are necessary to forestall rising internal unrest over the longer term.

At present the situation in the Philippines is mixed: forces of reform are gaining strength but are blocked by strong vested interests. On balance, there is probably little the US can do directly to induce the GOP to institute the required reforms.

B. The Problem of Marcos

Marcos is the first Philippine President ever elected to a second term. Although it is charged that the Marcos machine committed extensive fraud and applied considerable pressure tactics, particularly in the second term election, it is clear that in completely fraud-free elections Marcos would have been elected both times. Furthermore, Marcos’ opponents are not entirely innocent of such practices.

Marcos has been one of the best Presidents the Philippines has had in terms of constructive accomplishments; and he has been friendly to the United States. Now, however, he has become a highly controversial figure, partly because of his presumed (but publicly denied) desire to continue as President despite the constitutional prohibition against a third term.

Appropriate portions of this memorandum are intended as policy guidance for the Bureau of EA.

Should the views of other agencies represented in the IG/EA result in conclusions by the Interdepartmental Group that depart substantially from this guidance, your Bureau is requested to bring these to the attention of S/PC for a possible review by the NSC Under Secretaries Committee.4

John N. Irwin II
  1. Source: National Archives, RG 59, Central Files 1970–73, POL 1 PHIL–US. Secret.
  2. The Policy Analysis Resource Allocation (PARA) study for the Philippines was prepared in the Office of Philippine Affairs of the Bureau of East Asian and Pacific Affairs in coordination with the American Embassy in Manila for consideration by and at the request of the East Asian Interdepartmental Group (NSC: IGEA).
  3. See Document 246 and footnote 1 thereto.
  4. Annex A, Indicator Resource Guidance, is attached but not printed.