be placed on a merit basis and civil service salaries raised to provide a decent standard of living; that the Philippine Government remove barriers to the employment of foreign technicians and take steps to improve training facilities for technicians in the Philippines; and that in accordance with the request of the Philippine Government, the United States send a Technical Mission to assist the Philippine Government in carrying out its agricultural and industrial development, fiscal controls, public administration, and labor and social welfare program.

7. That the United States Government provide financial assistance of 250 million dollars through loans and grants, to help in carrying out a 5-year program of economic development and technical assistance; that this aid be strictly conditioned on steps being taken by the Philippine Government to carry out the recommendations outlined above, including the immediate enactment of tax legislation and other urgent reforms; that expenditure of United States funds under this recommendation, including pesos derived from United States loans and grants, be subject to continued supervision and control of the Technical Mission; that the use of funds provided by the Philippine Government for economic and social development be co-ordinated with the expenditure of the United States funds made available for this purpose; and that an agreement be made for final settlement of outstanding financial claims between the United States and the Philippines, including funding of the Reconstruction Finance Corporation loan of 60 million dollars.1

13. PROGRESS REPORT ON DEVELOPMENTS IN THE PHILIPPINES: Statement to the Press by the American Ambassador to the Republic of the Philippines,2 June 15, 19513

I should like to give you a progress report on developments in the Philippines and our relations with that gallant ally of ours. As a result of 50 years of American tutelage and out of loyalty to and affection for the United States, the Philippines unfalteringly stood by us when Japan embarked on its program to conquer Asia. The surrender of Japan found the Philippines destroyed and laid waste to an extent which has happened to few countries in modern history, and of which few Americans can even begin to conceive.

Against this background of death and destruction, the United States, in compliance with its undertakings transferred sovereignty to the Philippines on July 4, 1946, and agreed to assist in its rehabilita

1 On Oct. 28, 1950, the American Ambassador at Manila delivered to the President of the Philippines a copy of the Bell Mission report and a letter from President Truman stating, among other things, that the report was being studied by the United States Government; Department of State Bulletin, Nov. 6, 1950, p. 723.

2 Myron M. Cowan.

Department of State Bulletin, June 25, 1951, pp. 1017-1018.

4 See treaty of July 4, 1946, and President Truman's proclamation of the same date; A Decade of American Foreign Policy, pp. 860-864.

tion. It was to be expected that the first 5 years of Philippine independence would encounter the most serious difficulties, particularly in view of the growing menace of the international Communist conspiracy.

Altogether too much is heard in this country of what is wrong in the Philippines, and I would be less than fair to our Filipino friends if I denied that there is much wrong. Far more important, however, is that there is much that is right and, in all honesty, I can tell you that I am supremely confident the Philippines is well on the way to justifying the confidence we have placed in it.

Because of misleading publicity, I suspect that the first and automatic reaction of the average American when he thinks of the Philippines is, "What happened to the 2 billion dollars the United States gave the Philippines?"

I believe this is as good a time as any to dispel once and for all the misconceptions about this 2 billion dollars worth of American aid. The best way to do it is to show what the United States has done and what this 2 billion dollars really consists of.

In the first place, the United States paid out 400 million dollars for private war damage claims, of which the majority were in amounts of less than 500 dollars each, and for the reconstruction of public buildings. At the same time, the United States spent roughly 118 million dollars in the reconstruction of such essential public services as roads and bridges, ports and harbors, public health, fisheries, weather services, coast surveys, interisland shipping, and civil air facilities.

Another category of American payments during the first 5 years of independence fell into a more strictly military category. An amount of 822 million dollars was paid out by the American armed forces as back pay for Philippine armed forces, civilian claims against the military, civil relief, redemption of the guerrilla currency, missing persons benefits, and other items for military pay and construction materials and services.

The Veterans Administration paid out 181 million dollars as compensation to Filipino veterans.

An arrangement was also made to transfer surplus property estimated at a fair value of 100 million dollars. Other kinds of equipment and material and technical assistance to the amount of 200 million dollars were also made available.

The foregoing adds up to a dollar value of less than 1.9 billion but it should be noted that it was all in the form of goods and services and payments to individuals. Not a single centavo of this total was paid to the Philippine Government in cash. The only direct financial aid has been an RFC budgetary loan of 60 million dollars and 89.5 million dollars of processing and excise taxes which the United States had collected on behalf of the Philippine Commonwealth.

Two billion dollars can be made to sound like a lot of aid if you interpret it to suit your own purposes. Honest analysis makes it look like something else. It is true that what the United States has done

1 See Act of Apr. 30, 1946; 60 Stat. 128.

for the Philippines did make available to it substantial amounts of United States dollar exchange, much of which could undoubtedly have been spent more wisely than it was. We should remember, however, that the end of hostilities found the Philippines stripped of all consumer goods. It will still take many long years to replace what was destroyed.

The Philippine Government itself realized the danger of its position when its dollar reserves, during 1949, decreased from 400 million dollars to 248 million dollars. To remedy this situation the Philippine Government imposed the most stringent import regulations with the result that its reserves are now back to the 400 million dollars level. In addition, improved collection of taxes and the imposition of new taxes in the face of serious political opposition give us confidence that the Philippine budget will be balanced this year.

And lastly, Philippine production, particularly of such strategic and important commodities as copra, abaca, sugar, lumber, and minerals is now encouragingly close to the prewar level. I maintain that in view of the obstacles which had to be overcome and those which still remain, the record of Philippine self-help and American assistance is a good one. The purpose of the United States now is to extend the assistance necessary to preserve and extend the gains which have been made.

Last year the Bell Mission made a most excellent survey and made recommendations for the improvement of the Philippine economy. Pursuant to the Quirino-Foster agreement,' recommendations of the Bell Mission are now in process of implementation, both by the Philippines and by the United States.

2

With American military assistance, the rejuvenated Philippine armed forces are now making significant inroads on the strength and capabilities of the Communist-dominated Huk movement. The presence of the Seventh Fleet in Philippine waters has contributed. significantly to Philippine morale. American naval and air bases are being expanded. These specific measures are giving the Philippine people confidence that President Truman and the Secretary of State have meant exactly what they said when they categorically stated publicly that the United States would never tolerate aggression against the Philippines.

Philippine efforts at self-improvement and of cooperation with the free world (for example, the splendid showing of Filipino troops in Korea) persuade me that the Philippines is convinced the United States, as in the past, will keep its pledged faith. In return we can know that in Asia we have no more devoted or staunch friend and ally.

1 Agreement of Nov. 14, 1950, between the President of the Philippine Republic, Elpidio Quirino, and the Administrator of the Economic Cooperation Administration, William C. Foster; see the preamble to the Economic and Technical Cooperation Agreement of Apr. 27, 1951 (TIAS 2498; 3 UST 3707).

2 See Report to the President of the United States by the Economic Survey Mission to the Philippines (Department of State publication 4010; 1950). Summary and Recommendations printed supra.

14. ESTABLISHMENT OF THE COUNCIL UNDER THE UNITED STATES-PHILIPPINE MUTUAL DEFENSE TREATY: Note From the Secretary of State to the Philippine Chargé d'Affaires at Washington,' June 23, 1954 2

SIR: I refer to my conversation with General Carlos P. Romulo, Personal and Special Representative of the President of the Philippines, on June 15, 1954, in regard to implementation of the Mutual Defense Treaty between the United States of America and the Republic of the Philippines, and to an aide-memoire handed to the Acting Secretary of State by the Personal and Special Representative of the President of the Philippines on June 3, 1954.

During the discussions on June 15, between the Personal and Special Representative of the President of the Philippines and me, we were in agreement that, pursuant to the provisions of the United States-Philippine Mutual Defense Treaty, and in the light of international developments, it would be useful to establish a Council consisting of the Secretary of State, or his Deputy, and the Secretary of Foreign Affairs of the Republic of the Philippines, or his Deputy; that each member of the Council would designate a military representative; that consultations will be held upon the request of either party; and that the time and place of such meetings will be determined by mutual agreement.*

I should be glad to know whether the foregoing is acceptable to the Government of the Philippines." If so, we shall promptly proceed accordingly.

Accept, Sir, the renewed assurances of my high consideration.

15. REVISED UNITED STATES-PHILIPPINE TRADE AGREEMENT: Statement by the Department of State, September 6, 1955 6

The Department of State announced on September 6 (press release 529) that a revised agreement between the Republic of the Philippines and the United States regarding trade arrangements and related matters was signed on that date at the Department. The agree

1 Dr. Melquiades J. Gamboa.

2 Department of State Bulletin, July 5, 1954, p. 14. Treaty of Aug. 30, 1951; supra, pp. 873-875.

The first meeting of the Council took place in Manila, Sept. 4, 1954, just prior to the Manila Conference of the prospective SEATO powers.

The Ambassador of the Philippine Republic, by a note of this date (Department of State Bulletin, July 5, 1954, p. 14), indicated his Government's acceptance. Department of State Bulletin, Sept. 19, 1955, pp. 463-464. The text of the first sentence of the first paragraph differs slightly from press release 529. The press release does not contain the last paragraph preceding the summary of negotiations. See also statements of Sept. 6, 1955, by Mr. Langley and General Romulo; ibid., pp. 464-466.

ment was signed on behalf of the Philippines by Gen. Carlos P. Romulo, Special and Personal Envoy of the President of the Philippines; James M. Langley, Special Representative of the President of the United States of America, signed on behalf of the United States. It will enter into force on January 1, 1956.

The title of the agreement is "Agreement between the United States of America and the Republic of the Philippines concerning Trade and Related Matters during a Transitional Period following the Institution of Philippine Independence, signed at Manila on July 4, 1946, as revised." The authorizing legislation of the U. S. Congress is Public Law 196, 84th Congress, the Philippine Trade Agreement Revision Act of 1955 2

3

The 1946 trade agreement was entered into at the time the Philippines gained its independence. At that time there were no precedents to indicate exactly how the problems of the new relationship which was to exist between the Philippines and the United States might best be met. During the 9 years of operation of this agreement, problems arose on both sides suggesting the need for revisions. These revisions, affecting every article of the agreement, provide for adjustments which better accommodate the current and future economic interests of both nations and effect changes in their relationships which were mutually felt desirable as a result of the experiences of the Philippines in handling its political and economic problems since the Philippines became independent in 1946. The modification of transitional tariff schedules coupled with the elimination of an exchange tax in the Philippines is an important element of the revised agreement. The further economic development of the Philippines is one of the objectives of the new agreement. Such development, in addition to enhancing the importance of the Philippines as a trading partner of the United States, serves to strengthen a staunch friend and close ally.

At the same time an additional agreement, relating to the status of U.S. and Philippine traders and investors entering the territories of the parties, was effected by an exchange of notes. This agreement entered into force immediately.

SUMMARY OF MODIFICATIONS CONTAINED IN THE REVISED TRADE AGREEMENT

(effective January 1, 1956)

Article I: The revised agreement replaces the schedules for the gradual disappearance of tariff preferences for Philippine articles imported into the United States and for U.S. articles imported into

1 TIAS 3348; 6 UST 2981.

3,

p.

Act of Aug. 1, 1955; 69 Stat. 413.

Agreement of July 4, 1946, amended Oct. 22, 1946 (TIAS 1588; 61 Stat., pt. 2611). Agreement of Sept. 6, 1955; TIAS 3349, 6 UST 3030.