38. National Intelligence Analytical Memorandum1

NIAM 43–1–77


[Omitted here are the title page, table of contents, a map, and a statement of the NIAM’s scope.]

Key Judgments

The following key judgments are based on the assumptions that the US will take the steps necessary to retain a full range of economic and cultural ties with Taiwan and that Washington will normalize rela[Page 117]tions with Peking in a manner that will enable Taipei to provide for its own security.2

A. Taipei should be able to control the shock and decline in morale that would accompany the normalization of PRC–US relations. Premier Chiang Ching-kuo has a number of assets and mechanisms that could be employed to reduce the expected trauma of normalization. The Nationalists also can be expected to take steps to ensure the maintenance of economic viability and confidence in Taiwan’s prospects.

B. Taiwan’s economic status, government, and institutions are all strong. Taiwan’s economy, however, is heavily dependent on certain benefits under US laws that probably would have to be modified to take account of Taiwan’s new legal status. So long as Washington’s postnormalization trade and financial arrangements with Taiwan are close, Taiwan’s medium-term credit standing and foreign trade opportunities should remain good.

C. The PRC can be expected to continue tactics designed to erode Taiwan’s stability and confidence in the postnormalization period as it seeks to further isolate Taiwan, to increase its own influence over Taiwan’s future, and to interest Taiwan’s people in reuniting with the mainland. For example, the PRC might attempt to increase economic pressures on third countries or to expand further its air and naval activities in the Taiwan Strait area. Such moves will not significantly affect Taiwan’s security and prosperity, however, so long as its economy remains strong and its access to necessary defense equipment remains unimpaired.

D. The PRC is not likely to attempt a direct military attack on Taiwan during the next five years, primarily because of the international political and economic risks involved, but also because of the personnel and materiel losses it would be likely to suffer.

E. The Nationalists will be able to sustain a limited military deterrent against Peking if the US continues to supply military hardware and technology. Spare parts from the US also will be necessary after [Page 118] normalization. Taipei would find it quite difficult to purchase from third countries military equipment that would supplement or replace US systems. The Nationalists also cannot, at least in the short term, develop their indigenous weapons industry to a self-sufficient level.

F. The Nationalists believe that retaining a close association with the US will be the key to their survival in a postnormalization period. The Nationalists will continue to prefer these close ties to other options that might endanger ties with the US, such as a turn to the USSR, a declaration of Taiwan’s independence from the mainland, or the accelerated development of a nuclear weapons capability. The Nationalists are likely to resist negotiating with the PRC because of their relative weakness and their view that such negotiations would undermine confidence on Taiwan.

G. Taipei’s ability to absorb the effects of normalization will not necessarily improve with the passage of time, and could weaken. A long period of uncertainty about its future could erode Taiwan’s confidence as well as its acceptance of normalization.

H. Premier Chiang’s death or incapacitation would be likely to result in a coalition leadership and a government less able to deal with postnormalization problems. A new government probably would survive, however, if the economy remained strong. Taiwan’s security organizations should be able to handle subversion.

I. Taipei apparently has made no comprehensive plans to prepare the population for the postnormalization period. The leadership probably believes that knowledge of such planning could encourage the US to move ahead with the normalization process and that it would have a damaging effect on Taiwan’s morale. Once the US gives notice of its decision to complete normalization, however, Taipei can be expected to move to bolster confidence and to minimize any anti-US reactions.

J. [1 paragraph (6 lines) not declassified]

K. The Nationalists recognize that their leverage over the normalization process is limited. [5 lines not declassified].3

L. [1 paragraph (10 lines) not declassified]

[Omitted here is the discussion section.]

  1. Source: Carter Library, National Security Affairs, Staff Material, Far East, Oksenberg Subject File, Box 56, Policy Process: 7/77. Secret. The CIA and the intelligence organizations of the Departments of State, Defense, Treasury, and the CIA prepared this memorandum, which was issued by the Director of Central Intelligence. On the title page, Carter wrote, “Good report. J.” An unidentified person extensively underlined the topic sentences and other passages in many of the key judgments, especially judgments A, B, C, D, E, F, H, J, K, and L. Arrows of emphasis in the left margins were placed next to judgments D, F, and K.
  2. In response to this NIAM, Blumenthal sent an undated memorandum to Brzezinski that expressed his concern with “the fact that the paper gives no evidence that there has been any study of the legal and political aspects of how, and even if, the U.S. can in fact retain its current economic ties with Taiwan.” Blumenthal added that he felt it “imperative that careful thought and planning be given as soon as possible by the concerned agencies to establishing a legal basis for continuing U.S. economic relations with Taiwan, which would be politically acceptable to the PRC and to the United States.” (Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 11, China (Republic of China): 1/77–5/78) Brzezinski’s reply indicated that he was sending a copy of Blumenthal’s memorandum to Vance and encouraging the Department of State to work closely with the Treasury Department on this issue. (Memorandum from Brzezinski to Blumenthal, August 31; Carter Library, National Security Affairs, Brzezinski Material, Agency File, Box 21, Treasury Department: 2/77–3/78)
  3. At the end of this paragraph, an unidentified person wrote, “(re: the Taiwan lobby).”