Foreign Relations of the United States, 1952–1954, East Asia and the Pacific, Volume XII, Part 2

S/P–NSC files, lot 61 D 167, NSC 5413 Series

No. 372
Memorandum by the Executive Officer of the Operations Coordinating Board (Staats) to the Executive Secretary of the National Security Council (Lay)¹

secret

Washington, August 12, 1954.

Subject:

• Progress Report on NSC 5413/1 (Philippines)²

Reference:

• NSC Action No. 1084³

On April 1, 1954 the President approved NSC 5413/1, “United States Policy Toward the Philippines,” and designated the Operations Coordinating Board as the coordinating agency.

Attached hereto is the first Progress Report on the implementation of NSC 5413/1 covering the period through June 30, 1954. The Report was approved by the Operations Coordinating Board on August 11, 1954.

Elmer B. Staats

[Attachment]

secret

[Washington,] August 11, 1954.

Progress Report On NSC 5413/1, United States Policy Toward The Philippines

(Policy approved by the President April 1, 1954)

a. summary of major actions

Limited progress has been made in implementing the courses of action set forth in NSC 5413/1, as follows (paragraph references are to Annex “A” attached)⁴

1. Agreement to establish a U.S.-Philippines Council with subordinate military representatives, similar to ANZUS, which will consult with a view to implementing the U.S.-Philippine Mutual Defense Treaty. (Paragraph 32)

2. Congress has passed and the President has signed an act to defer the imposition of the tariff provisions of the Trade Agreement for eighteen months. A United States negotiating team on revision of the Trade Agreement has been selected. (Paragraph 28)

3. An officer of the Philippine Armed Forces, accredited to the Chief of Staff of the Vietnam Armed Forces, is in Vietnam. This could constitute a step toward eventual recognition of the Associated States. (Paragraph 18b)

4. U.S. representatives have informally and privately consulted with representatives of both the Japanese and Philippine governments with a view to aiding them in reaching a solution of the reparations problem. (Paragraph 18c)

5. Preliminary discussions with respect to military bases have been initiated but are now in abeyance pending the return of the Philippine Secretary of Foreign Affairs from Geneva and Ambassador Spruance’s return to Manila in August. (Paragraph 31)

6. USIA continued to provide information to selected recipients and audiences through press and publications, films, radio, and loans or gifts of books, emphasizing themes designed to expose the evils and dangers of communism and to promote good citizenship and economic improvement. (Paragraph 22)

7. FOA has: (Paragraphs 25–27)

a. Continued aid in the form of technical assistance, essential equipment and supplies for important Philippine Government sponsored projects.

b. Strengthened Philippine Government activities directed toward improvement of rural conditions, land tenure, agricultural production, utilization of mineral and other natural resources, land development, transportation and important public services, including agricultural extension, rural health and sanitation, vocational education and tax and financial administration.

c. Continued to improve program and project planning.

d. Cooperated in obtaining appropriation of funds by the Philippine Congress for FY 1955 to continue and increase support for the program.

e. Assisted and encouraged the Philippine National Economic Council to move ahead with the preparation of a five-year program for economic development.

8. Under the guidance of JUSMAGPHIL the Philippine Army has developed into an effective fighting force which has been able to reduce the activities of the once powerful Hukbalahap (Huk) force and restore law and order to the country. A reorganization of the Philippine Army from 26 battalion combat teams (BCT’s) into four reduced strength divisions is currently under consideration. The purpose of this reorganization is to increase combat effectiveness, establish a basis for the rapid expansion of forces and to provide training for Philippine personnel in the functions of command and staff at division level. (Paragraph 30)

b. policy considerations

The courses of action set forth in NSC 5413/1 are appropriate to the current situation. In the light of operating experience, no changes are recommended at this time in courses of action or objectives. Developments in the Associated States of Indo-China may require review of the course of action set forth in Paragraph 18b in the near future.

c. emerging problems

1. The election of Magsaysay has not resulted in an area of wide agreement or mutual good feeling as had been anticipated by some observers. Intensification of ultra-nationalism, particularly on the part of Congressional leaders in the Nacionalista Party, has in some instances been characterized by an attempt to discredit Magsaysay on the basis that he enjoys much too close an official relationship with some representatives of the American Government. Magsaysay himself has lent credence to these charges by seeking aid and advice from American officials which he properly should obtain from leaders within his administration. It is essential to continue to avoid actions which would tend to substantiate charges of improper interference or influence.

2. Due in part to the Philippine reaction to the Attorney General’s opinion that we continue to have whatever title we had on July 4, 1946, to our bases in the Philippines, no progress has been made toward resolving outstanding problems with respect to the bases. Proposed negotiations have been in abeyance. When Ambassador Spruance returns to the Philippines in August, it is hoped that the atmosphere will be conducive to reopening these consultations.

3. Negotiations, looking to the revision of the U.S.-Philippine Trade Agreement, are expected to begin in August in Washington. It is unlikely that we will be able to offer changes that will prove wholly satisfactory to the Philippines. It is probable that the signing of a new agreement will result in further attacks on the United States by the ultra-Nationalists.

Failure to reach agreement on a reparations settlement with Japan hinders the normal development of Philippine-Japanese political and commercial relations. The popular opposition to acceptance of the Japanese offer of four hundred million dollars ($400,000,000) is in part emotional; the more impetuous Nacionalista leaders have created a climate of opinion in which it has become exceedingly difficult to reach an agreement on a figure which the Japanese economy can bear. The U.S. has not openly played a part in attempting to reach an agreement but representatives of our Embassy have been instructed to continue to take advantage of opportunities to help, through the exercise of good offices, in the achievement of a solution to this problem.⁵

5. Following establishment of a Philippine-United States Council the Philippine Government proposed that the United States arm, equip and support sufficient troops to raise the Philippine Army to four full divisions. They have also indicated a desire to obtain jet powered aircraft and additional naval vessels, particularly destroyers.

6. The principal emerging problem with respect to the economic development program is to obtain sufficient local currency support in FY 1956 and thereafter to assure satisfactory progress under the NEC’s development program including FOA-assisted technical and development projects. The level of investment envisioned might preclude adequate progress in the improvement of economic and social conditions.

7. In the months ahead all U.S. agencies should urge the Philippine Government to: (a) improve planning of the NEC program, particularly with regard to financing investment, and (b) take the steps necessary to finance the program while maintaining adequate internal financial stability.

8. The Mutual Security authorizing bill passed by the House provides that during FY 1955 part of FOA assistance will be provided on a loan basis. No decision has yet been reached whether any part of the assistance to the Philippines will be on a loan basis. If assistance is provided as a loan two problems will be encountered. First, counterpart will not be deposited against the loan component of the program and, hence, will not be available as a means of financing the local currency costs of technical cooperation and development projects. Alternative sources of peso financing will have to be found for these projects. Second, loan repayment will reduce the resources which the Philippines will be able to devote to carrying out the NEC development problem. Both of these problems and the effect they will have on the attainment of U.S. policy objectives as set forth in NSC 5413/1 should be considered before a final determination is made to provide funds on a loan basis.

1. The Operations Coordinating Board was established on Sept. 2, 1953, to provide for the integrated implementation of national security policies by the agencies represented; it reported to the National Security Council. Its membership consisted of the Under Secretary of State, the Deputy Secretary of Defense, the Director of the Foreign Operations Administration, the Director of Central Intelligence, a representative of the President, and, as needed, representatives of other agencies. It was advised by the Director of the U.S. Information Agency.
2. Document 359.
3. See footnote 2, ibid.
4. Annex A is not printed.
5. Documentation on the question of Japanese reparations to the Philippines is in file 294.9641.