OFFICE OF REPORTS AND ESTIMATES, CIA FAR EAST/PACIFIC BRANCH INTELLIGENCE HIGHLIGHTS NO. 21 WEEK OF 28 SEPTEMBER - 5 OCTOBER 1948

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000500010012-3
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 12, 2016
• Document Release Date: November 16, 2000
• Sequence Number: 12
• Publication Date: October 5, 1948
• Content Type: PERRPT

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SEE-`-
PAR EAST/PACIFIC BUNCH
j' REPORTS AID ESTIMATES CIA DOCUMENT NO..
"C WVWG W, _nzq
t OF 28 SEMMR ? 5 OCTOBER 1948 A
INTELLIGENCE BIG ILIO1TI'8 NO. 21 N
SECTION I* 8Ifl ARY OF PAR EAST TRENDS AND DDVEL)PUENT$
The Kremlin may be prepared to forestall EGA reoogbition of the South
Korean regime by proposing a "federation' of the two competing "National"
goverrwtent a (pas a)* President Rhea. has undbrtaken drastic counter-
measures against forces opposing his goverur nt (page 6)0
Serious Japanese trade dtffioultd es are being oauaed by US interest
chix in Japanese legislative efforts to
s
jJQ0bW
a
tpageS)c A cl is appro
delimit trade union rights in the civil service (SECTION III, page 13)o
In China the military situation &: the National Oc er'Yanent has booos o
exceedingly critical as the result of. r+cerit defeats (paa 7) 4 The
Chinese Communist o are emphasising urtidn .s tnistrntioti t part of their
drive to take over large cities (pap 7). The.laxtg.sanding; deadlook In
Sinkiang between Chinese officials and pro-Soviet dissidents may soon be
resolved through sites-Soviet negotiations . (page 7).' 14s of the Railan
coal mines to the Communists would sharply curtail Nationalist ChinaD
dwindling industrial capacity (page 8)0
In Siam Prem3.er Phibul is demonstrating his ability tb strengthen his
position (page ]10)0
In Indochina the Prenah appear to be preparing for another fall military
offensive (page 1,0)0' Neaxlwhil.e in Paris Ambassador Caffery has reiterated
the US position. regarding speoifio ECA aid for* Indochina. (page 110)0.
NO x In eucceedins aerations of this -YeflLlya rho r6 o~3ng mar, neat
notations are used %
(1) Double editerieh (D*) --placed at beginning and and of
information based solexy on "8 diets-ibxatioan" seriemd
(2)
(3)
Single asterisk (') -to flag item containing "s/S
distribution" series.
"A", "B", or "C" --importance, in Owe opiniona of the
'stem,, with "A" representing the most important ones.
State Dept. declassification & release instructions on file
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The Rspublio of teia appears to have been suooeesL!t 1 in Its
Military drive aginet Cd iet (page iI). The aoeeptanoe of the US
plan by bbth the Dutch and ndonooiaas paves the way for reen aption of
coo negobtatriona.
In Burda tension between Bumne and teens Is i noreeain (papa U) q
An adverse react on is exteeeted in the Philippines to a US deaisie n
to disband the Philippine Scouts (pap 12).
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SECTXOW II. m VKLOPB EN!8 IN SPI CXFIKD AREAS
GE ERAL
Kremlin may propose earl i ee ozt Korea at UN "A"
?~~~y+~1??. ~-?Y? ~i}i~c1i i~Yiw~lilli~l~i
The Soviet UN delegation s*yt make a .oo notliatory proposali when the
Korean problem is presented to the current OVA eeseion, It is oonsidered
probable that t Kremlin is prepared toy brestall UlNGA recognition of the
South Korean regime an ostensible concession in tho form of a proposal for
the "federation" of the two competing Korean "national" govermnenteer
Kremlin doubtless has had no illusions that its elaborate efforts to match,
step-by-step, the development of a new goverrunint in the south could
succeed in securing US recognition ,for its puppet regime in the north, It
is more likely that these Soviet moves were no timed as to assure a good
bargaining position in the forthcomin U1A discussions of the Korean problem,
A Soviet "federation" proposal would be difficult to ignore and would appear
sufficiently conciliatory to incline many member nations toward delaying a
final UNGA decision on another delicate situation in which it cannot
effectively intervenes Should this point of view prevail, the Kremlin would
have succeeded in forcing the UN to' accord equal lrecognition to a govern-
ment created in defiance of its resolutions and to one created under its
auspices, This would have a severely damaging effect on the domestic
prestige of the infant "Republic of Korea" and would leave the Soviet
position unimpaired since there would be almost limitless opportunities for
Soviet obstructionist taotios in any subsequent negotiations on the principles
and procedures of "federation,"
China's relations with other Fat Nast countries.
Greater Chinese interest in promoting cordial relations with Fax
Eastot'n oountries and in closer alignment with the US vis-a-vis the USSR is
indicated in recent statements by two National Gbverium nt leaders, Foreign
Minister Wang Ship ohieh and formr,Premier Chang Chung. The Foreign
Minister at the UtNGA in Paris stressed the importance to the Par East of a
free and united Korea, and praised, the US and the Phi ppinaf for granting
do facto recognition to the southern Korean regimes warned outside
countries not to interfere with self-doterminat 6n of the peoples of Asia,
at the same time pointing out Asia's }allot.-representation in the Security
and Economic and Social Councils, Chang Chun, in a public statement oil his
return from Japan, approved SCAB'+s policy in Japan and assured the Chinese
that Japan was no longer a military or economic threat to Chime.. . He urged
the creation of an Asiatic economic bloc to include Japan and the early
convocation of the Japanese peace conference. Though speaking in no official
capacity, Chang has been considered an acting as Chiang Kai.sheken alter ego
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G8NI3R4 L (contin ed)
and his rscommendationa regarding Japan. represent a significant contrast
to the vehement anti-Japanese feeling so frequently manifest in China.
However f barring greatly increased iasediate 08 aid, continuing deteriora-
tion in Nationalist China increases the vulnerability of the National
Government to Soviet overtures to mediate the oivil war and t$nde to
neutralise any positive and independent efforts China may make in foreign
reletione3 e
New aismoee policy_ 1r'1s t-vas
French Indochina implomonted
The recent visit of a Siamese titilitary and friendship mission to
Saigon has apparently resulted in a new Siamese policy of cooperation with
France v$s-a-vin Indochina. Although support for Indoohinsse "fre*c move-
ments in Siam rase wi thdramn after the assumption of power by the Phibul
regim,s little is done to inhibit the activities of these refugea- groupso
Gino* the return, of the mission, hd ever, the Siamese polite have been
ordered to deny the right of re-entry to Indochinese refugees zwho leave
Siam and a14ompt to return. Moreover, the Indocahi e8e refu ;eea are oheoked
at several different places Afters crossing into Siam and now are expressly
prohibited from holding demonstrations or possessing arms. Since determin-
ing who are new and returnee'i aefug ees is difficult, the implementation of
.. those new orders, may result. irl..the exclusion of all new rofugeeas from
IndochiM. In addition, Siamese polio' have been crosaizig into Lao terri-
tory? a arently with French oOnaent, and are repotted to have stopped
several food shipments to Laotian guerrillas across the northeast border.
The genesis for this new Siamese policy probably cornea from Siam's
premier, Marshal Phibui,. who is reported to be emoting trances to return
part (LA=hang) of the areas rptrcaaded to Indochina by Siam in 1946+ In
May 1948, Premier Phibul- publicly ~ announced that Siam. had dropped the
question of ownership of, the four disputed provinces which Siam.+ook by
militewy action and Japta was assistance in 194.. This stateinen# was be-
lieved.to have been made in return for early French recognition. of Phibul's
new gofer nt. Newever, it would appear that Phibul has beet hble to
effect a now agreement.
eeera'"'`RET
"B"
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AM
has outliner the difficulties e`' cu
tailed export sales engendered by US interests whic=h have cur-
by Japan, These include such salient factors as: the
CCC cotton agreement which prohibited sales of Japanese cotton textiles in
the US during a period most favorable for such sales and dollar accruals
therefrom; opposition by US textile groups to sales of Japanese cotton
textiles to other areas capable of paying dollars; restrictions on areas
of Procurement of raw cotton resulting in incurring dollar costs for
textiles most of which are marketed in sterling areas; efforts by US ship.
building interests to relate US and Japanese selling prices of different
quality of construction and materials; urgent requests by the US Maritime
Commission that US shipping be specified In commercial deals in spite of
SGAP policy to sell FOB Japan and buy CIF Japan; vigorous protests by US
textile machinery manufacturers against the pricing of textile machinery
sold to India on the basis of undercutting US price levels; and opposi.
tion to the importation of Japanese processed fish into the US! inolualing
a formal resolution by a State legislature.
The difficulties as to procurement of cotton and sales of cotton
textiles outlined by SCAP are being overcome in large part by such actions
as US banking syndicate loans, the revolving fund set up by the US Congress
occupied Japan a export-import
xp import revolving fund, and the recently concludedd
sterling area agreements providing for sales for sterling. On the other
hands, the pressure of US private shipping and fish products interests,
enhanced by lingering wartime hostility will-be major obstacles which can
be expected to continue for some time.
In addition, SCAP states that other influences preventing the full
utilization of Japanese resources for application to Japanese economic
recovery or for maximizing foreign exchange income are: the continuous
contributions to the Korean economy without re _bur_sement; initial open
account sales to China of products badly needed in Japan for which there
is still outstanding an indebtedness of approximately 7,U0O,QOO; and
utilization of Japanese resources in implementation of the program of
reparations removals,
Efforts are being made currently to stimulate Chinese exports of iron
ore and salt so as to cut down its trade deficit with Japan. The other
cost items are short-term which will be eliminated within the next couple
of years.
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EM
- ree t and tia_ ttro~na eME a. n orris
c~a t. It is probable that no real revolutionary
threat ex eta but that Mae is motivated by a desire to stifle growing
popular apposition,, In any event, his actions will serve to make the
brewing political crisis more acute and may precipitate a showdown
%stween the opposing political formes before Korea's came is disposed
rte' by the UN, Rhee*s Minister of Home Affairs claims, by the arrest
of the reputed ringleaders in Seoul, to have frustrated an alleged
rightist plot to overthrow the government. Three leftist newspapoiz
have been closed, end twenty editors and newspaper staff members of
-various Seoul papers have been charged with fomenting revolution by
the publication of "misleading" news.
Widespread opposition to Rheecs policies, evident both in the
National Assembly and in the Seoul press, has been spawned by his
unpopular stand in favor of an effective rice collection bill, his
controversial Cabinet appointments, and general apprehension over his
broad constitutional powers.
Rhee 0 s ! ,lice action against rightist and moderate political
opponents, suppression of the critical Seoul press, and veto of the
Assemblya a rice collection bill will only serve to unite the opposition
groups in the Assembly who have been planning eta anti-Rhoe coalition to
effect constitutional changes reducing the President's power,
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CHINA
The National Government?e military position is "exceedingly critical" 'jl
as a result o severe military reverses suffered during the past snook. **
Successive Communist attacks outting through the Chinhsien-hulutao area
of the Jehol-Liaoning corridor against the troops of Iii Too-yt and PAN
)tan-ohieh have isolated Nationalist units, thereby setting the stage
for their annihilation. Concurrently Communists are attacking the kweisui-
Tatung sector forcing FU Taoi-yi to move his troops west to protect the
vital ieioing-Suiyuan Railroad thereby weakening the Peiping-Tientsin
sector, Pollo vin the fall of Tsinan nine Red columns were released
for further operationse Four of these columns are now teported moving
south, possibly toward lisuchou4 This force constitutes for the Communists
a large strategic reserve which the Government is totally lacking in
arty sector. In Manchuria the Generalissimo ordered the Nationalist
commander WEI I.i,Qhuang to air-lift one army from bukden to Chinhaiern
but the air-lift was not completed due to Communist capture of the air-
strip. till has also been ordered to move 15 of the remaining 20
divisions defending Yukden southwest to assist FA !time=ohich in his
attempt to hold the corridors 1dUI Li-huang has so far failed to carry
out the Generalissimo's orders. Throughout all operational areas the
Communists retain the initiative and capability of concentrating decisive
strength in any area vdthout sacrificing any of their present positions
Some US military observers believe cessation of large-scale Nationalist
military resistance may only be a "matter of time."
The Chinese Communists are now emphasising urban administration as "Sys
part of their drive to capture and hold citf.eao They are intensifying
an effort which has been developing for several months and which contrasts
with their former program aimed at rural administrations In capturing
cities they hope to assume control of the Nationalist urban political
and economic machinery unimpaired by offering protection to practically
all elements of the populations Including foreigners, providing they
cooperate with the conquerors. Their own political cadres are being
trained to go in with the army and keep the municipal organs operating
effectively. In connection with their policy toward cities the Communists
are also stressing industrial development and are appealing to private
capital and skilled technicians whose assistance they undoubtedly need4,
Their emphasis on cities is an indication of the progress the Communists
are making in carrying out a coordinated military, economic and political
programs
A Sino-Soviet agreement concerning Sinki and may be forthcoming.
There are signs that the long-standing, deadlock between Chinese officials
and pro-Soviet Ili dissidents in Sinkiang may soon be resolved by an
fAa
~~ii
'
E'Tr "
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understanding between the USSR and representatives of Gen. VHANG Chih-
ohung, top Chinese official for Northwest Chinao The replacement of
Sinkiang Garrison Commander ten. SUAG Uzi-liens stror}gly anti-Soviet
and an advocate of rule by force, by Gen. TAO Shih-.yueh, a conciliatory
"politioLan-general" like (i AUG Chihachung, suggests that the latter
may be laying the groundwork for an agreement with the USSR, Recent
reports of a relaxation of the Soviet grip on.the Ili area of Sinkiang
suggest that arrangements for Soviet mediation in Sinkiang may be underway*
Renegotiation of the SinopSoviet Aviation Agreement may well be included
in such an .arrangement. LIU Tee-yang, Foreign Office Commissioner for
Sinkiang who is said to be on excellent terms with the Russians, went
to alma Ata five weeks ago with authority to negotiate a new airline **
azireement. He may also be discussing the overall Sinkiang problem with **
the USSR.
Although there is precedent for a purely local Zino-Soviet under-
standing in Sinkiang, it is possible that Soviet mediation there at
this time could: 1) broaden into discussions of all outstanding; Sino?
Soviet ieauea, including the question of coalition vA th the Chinese
Comrunietsa should the National Government accept a formal offer of
Soviet mediation; or could 2) be one of a series of local a treementso
should Nationalist China drift into regional vearlordismo
eiangorous low. No coal ship-
Shanghaips coal supply has reached
mertts from the important Ilan mines have been made since 13 September
-wi."ih the result that Shanghai's stockpile is already well below the
emergency level of 50a0OO tons, furthermore,. no coal is expected to
be shipped from the Kailan mines for three or four more weeks as the
Communists continue to block the railroad to the port of Chinhuangtaoa
The possibility of Communist capture of the mines is increased by they
diversion elsewhere of Nationalist troops from eastern Hopei and, in any
case, the Nationalists are incapable of preventing Communist interruption
of the railroads Since Nationalist industries and power plants depend
an hailan coal for 70;& of their requirements, the lose of the mines
will sharply curtail China's dwindling industrial capacity,
Shanghai economic control area expanded. Gen. CliIA1 G Ching-kuo2e
jurisdiction has been extended to cover the provinces of Chekiang,
Anhwei and Riangeu (including Nanking), an area comprising, in terms of
the Chinese veonoray, the richest section of the country in agricultural
and industrial production. This extension would permit supervision of
the source of Shanghai's food and raw material supplies which recently
have failed to reach the city in sufficient volumes Also the flight of
local hoardings to surrounding areas will now come under CiIARGas purview,,
In spite of this enlarged spheres price stabilization is expected to
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fail in view of the small segment of the total economy in which control
measures are even remotely possible.
Our Prices. IYa siPiPieaat economic developments attributable
to the _)1 ofsinan to the Communists have yet been observaed, ho-weverg
repercussions are expected when the lose of this strategic city is fully
realized. The Shanghai foreign exchange black market is still confined
to undercover dealings; meanwhile, the tuturca stability of the gold
Yuan rests almost entirely on the Governmentts ability to hold the line
militarily. Shanghai prides changed little during the past week due
to police measures which have resulted in coapressin; an already= tight
commodity market. The price freeze has retarded the flow of consumer
goods and raw materials to the metropolitan area while inflationary
idle funds are be,inning to accumulated Farn.ore are generally unwilling
to sell their ;roods at the low ceiling prices. However, prices in
uncontrolled cities continue to risen
non
.,?..&E- .
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44O++
Phibui consolidates EM-ition. It is believed that Premier Phibul, by "B"
impl a program of cooperation with France, is endeavar to strength-
en his political positions by appealing to Siamese irredentiam. (See General
item), If Pbibul successfully engineers the return to Siam of the Lanehang
area and is able to utilise effectively the recent weakening of his apposi-
tion in Parliament, he can be considered firmly entrenched. Furthermore, the
efficient suppression of an attempted coup d e etat on 1 October is evidence
of Phibul' s ability to further consolidate his position.
TWMITTMA
French ma launch fall offensive. Despite less favorable circumstances "A"
the French appear to be preparing or another military operation in Indochina
similar to the ill-fated offensive of last Oetaber. Although replacements
and reinforcements from France numbering in the "low thousands" are scheduled
to arrive during the month, serious equipment deterioration and tho low morale
of French military personnel argue against any large scale or successfuul opera-
tion. It is expected that the Viet M nh forces in the Tonkin area, will be the
main objective. The French consider the Viet '!inh lack of. medical supplies
and ammunition as Vulnerable weaknesses. Hower, the French recently have
had serious supply and communication difficulties of their ovn., including the
inability to supply a French garrison only ninety miles north of Hanoi, which
has been at half strength because of casualties and tropical illnesses. Lack
of success in this expected operation may result in a French decision to with-
draw their forces to Cochinchina and Cambodia.
ZS ositi on PICA aid for Indochina reiterated. In response to repeated "B"
French requests for. direct and specific FZW a for Indochina, ITS Ambassador.
Caffery in Paris has recently reiterated the TTS position to French Foreign
Office .officials. The ITS considers that substantial progress in the direction
of eneoura,ng nationalists in Vietnam to change their allegiance from the
Viet `?inh to a non-Commuiistt side could be made through Assembly legislation
or some other action which will permit a change in the status of C ochinchina
and by negotiation of supplementary agreements envisaged in the-5 June Franco-
Vietnamese accord. The Ambassador again indicated the willingness of the TTS
to approve publicly such, stops after Which asaiatanc6 would be given to the
Tench t'.overnment through MA aid. In view of the unsettled domestic political
situation in France, however, it is doubtful that any positive action will bs
taken in the near future which could solve the Indochina problem.
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P9IHW-M
0a2'Msbl4A ll tesefu1 in military drive of C-
d
I
d
o
n
ri
By 2? Bap er jLt appear that the Republic been amts
eu coesafu, . In coping with the C omrnis3t insurrection (see ) . ' towaver,
on 30 Septe*er troops of the Ret t i0an Amer (TNI) tetook T:'iadioert wh'e
12 days before Cammcnlets led by Soviet-trained L Oeso had annoont ed the
formation of a Communiet government. Poltoving the fall of Madioen and
several aWler cities in its vicinity the main Communist forces, conaiet--
ing of about three battalions, are reported to have withdrawn to the rearm-
-tai" southeast of Tsadioen.. Republican officials estimatelt that remnants is Hof
Communiet forces will be eliminated in about two months.
however, that extremtete in the Republic will continue to take advantage of
the serious Internal blockade difficulties
the lack ofcoommunicatio s between the
Netherlands economic bRepublican areas.
Aces tame of ITS aver vay for res tion of negotiations. Accept- "A"
anee of the U9 Delegation, a draft agreement on a. %- both e Nothu.
erlenda and Republican Governments paves the way for resumption of negotia .
tione under the UN Good Offices Cod.ttee (GOC). The Republic qualified its
acceptance by stating that it reserved the right to take any position in the
courise of discussions on the US paper which It may find desirable. The Repub--
lie also maintained that the aotua~ resumption of negotiations depends upon
the settlement of three problems: 1) return of a Republican shrine in Batavia
which the Dutch confiscated in August; (2) immunity of members and peroonnel
of the Republican Delegation when in Nethc rllinda-contil-c+ led territory; (3) re-
consideration of an order by Netherlands Indies authorities that Republican
officials acid their fd.ies leave Batavia. The Netherlands Government has
announced that it will accept the ITS proposals with the sane reservations
attached by the Republic to its acceptance. "fl.th regard to the above three
cohditioris stipulated by the Republic, the Netherlands has intimated that it
will adopt as conciliatory an attitude as possible in return for which the
Netherlands wpects the Republic to assure fall Implementation of the Jsmar r
1918 trace agreement, including suppression of infiltration, sabotage, goer-
rilla activities, and opium saigg .ing.
It is believed that. each side has the ability to make the relatdveb? ile
c encesatons required by the other in Order to res> : the negotiations. The
major teat will come in the actual negotiations whore both the iepubliid
and the Dutch will be forced, if a compromise settlement is to be achieved
under the (C, to alter substantially the position taken by than for the
past three years.
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UNION
*KUALA WMPUR
96 98 100
JAVA AND SUMATRA
Military Preparation and Activity
6
27 September 1948
CE
TERS OF ACTIVITY
N
RPT EII STATUS QUO LINE ACCEPTED BY THE NETHERLANDS AND
~EFUNIC REPUBLIC, 17 JANUARY 1948
N
CONFIDENTIAL
SCALE 1:10,000,000
0 RO zI _ ,ao
MILES
KILOMETERS
J 4 V A- Z E E
Republic moderately successful
in confining Communist strength
to Madioen area
11086 M.P Ranch, CIA. 9-08
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WMA
Th msn-Karen tension increases. greasing tension between Karena "B"
and Burmsns s developed 7 8' result of the recant def eeiion of Karen
military police elements in eastern Burma. Karon leaders and. elders,
with a vier towards a peaceful and democratic settlement of the Karen
autonomy question, are reported attempting to restrain the more radical
Karen elements but so far have not been entirely succesrful. Although no
clashes between I9arens and government forces have yet been reporteci, o
Dun, the Karen commander of the Burmese Ar+g9. is reported to be leab optirnia--
tid over the situation. A delicate political balanoo obtains at pree'nt in
which Premier Thakin fu cannot do r hthout Smith n and the Karens. This
prevents Thakin Nu from ! Sit any. compromise with the Comrunietc to whom
the Karena are unalterably opposed. Should a Barman-Karen showdown cecur,
It is likely that Smith purr and other Karate in the army would resign and
side with their own people*
PPI!'?F,S
PH
Adverse reaction a e;ted to ITS decision on Phili ine^i Scouts. Con- "B"
eidera a adverse reaction can be erxpee a the Philipp nec when a US
decision affecting the Philippine Scouts beeames public knowiedgeo Embassy
?anila has recently been instructed to deliver an aide memoire to President
nuirino stating that the ITS has decided., as a general rule, not to re-enlist
alien members of the Philippine Scouts. (The Philippine Scouts are a unit
of the It$ Army formed early in the century and consisting of 'Filipino en-
listed men largely under ITS. officers.) This decision was based on traditional
ITS policy not to utilize alien troops and became necessary bedause of the
independent status of the Philippines. Homer, Scexits who enlisted in the
Disbandment citizens
prewar period and those who to enlist in the Pegular ITS are American
of thel Scouts given
on a phased basis
is expected to be completed by 30 September 1949.
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SECTION III. DIGEST Cr IMPORTANT STUDIES -AND BUINAM
.~; A'PH ` UXNQ SUM
Japanese government efforts to amend existing civil service logislaa
tion to implement the limitation of trade union rights for government
employees suggested in General Maah-thur'e letter to Premier Ashida of
22 Jule are approaching a climax. Gvernment-G EQ, SOAP negotiations
have elicited general cabinet uAderstanding on the terms of the measure
end an agreement fbr the convoeatiob of the extraordinary Diet session
to consider the proposed legislation commencing 11 October. Passage of
the bill in its present form is assured unless (1) modifications are
forced on SOAP and the Japanesss Go t rare ent by the US Government under
pressure from other members of the 'ar Eastern Commission or (2) Diet
deliberations produce changes acceptable to SCAM,
SCAPae interest in the passage of this legislation stems from his
responsibility for the maintenance of peace and order in Japan and from
his desire to prevent stoppages.ih critical government services, particu-
2ary those of transportation and communication i Aich have in the past
and may in the future threaten Japan?e economic recovery. Strike ,bans
have twice in the past been used to avert specific dangers. #n sponsor.,
ing legislative rather than executive action SCAP concedes the chronic
character of .the threat of labor unrest in Japan which can be expected
to continue until the conditions of economic stability are assured.
In forwarding the revised 'National. Public Service Law draft which
has his approval, the Supreme Gander, notes that following the Soviet
attack on the principles embo4ied in hid letter of J'vlyy 22, idealogiesl
conflict his increased in Japan with manifest encouragement to local
Communists. General MacArthur believes t r public show of lack of
support by the American Government would gravely c*ahen the Ella position
in Japsf and throughout the Far East and render his position extremely
difficult if not untenable.
In view of its promise to scrutinize Japanese legislation on this
abbJdct for -oomformoe with occupation objeativees, the US Government ih
confronted with issue of accepting the draft and defending It against
attudk in the FEC by nee of the veto if necessary or of stipulating that
changes be made wiUk the risk of lops of face by SOAP.
The draft billea terms with regard to the trade union rights of
government employees represent an easing of the restrictions which have
obtained under the cabinet order. In contract with the interim ordinance
which 'blanketed all government employees with a prohibition of the right
to strike and to bargain collectively, the draft bill recognizes the
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distinction, suggested in General itacArthures letter, between emplc went
in government agencies (civil. service) and in government-operated enter-
prises. In pursuance of this distinction the draft revision provides for
the establishment of public corporations for the government-operated rail"
ways and for the tobacco and other monopolies. The bill would permit
employees of these corporations to bargain oolleotively, and although main-
taining the ban on the right to strike vould provide arbitration machinery
to hear disputes not settled by existing conciliation and mediation facil-
itiea,
Nevertheless the draft revisions in the form approved by General
MacArthur comprise a relatively conservative resolution of the points of
issue in the original SCAP letter and the Cabinet order raised by the
Soviet and British Commonwealth representatives in Tokyo and Washington
and by opponents of the restriction in the Japanese Government. This
draft is not likely to satisfy the demands of the Soviet Union which has
demanded an FED directive recalling SCAPas letter. As long as the pre-
eminent position of the US in carrying out occupation aims in Japan is
recognized Soviet disapproval need not compel revision of specific policy
measures such as this. It remains to be seen, however, whether British
Commonwealth representatives win consider that the bill's provisions
provide adequate guarantees of trade union rights. UK, Australiay and
New Zealand have no objection to the general, denial of the right to
strike on the part of civil servants. The draft provisions) however,
fail to accord the following rights, to which the British Common-
wealth countries have become accustomed by years of experience: the -
right of collective bargaining coupled with the right of appeal to arbi-
tration for all regular civil servants and the exception of the employees
of government-operated enterprises from no-strike legislation. Provision
in the bill of arbitrala proc edure of the settlement of disputes arising
with employees of this latter category,, however, may be considered by the
)tit, at least, as an acceptable substitute in recognition of a pecularity
(i .e. immaturity) In the trade union situation in Japan.
Vbether the Japanese Socialist Party will accept the present draft
depends on left-wing calculations of the political benefit of opposition
status, The limitations embodied in the interim ordinance were a serious
blow to their trade union supporters and greatly embarrased the Socialists,
Nevertheless, the Socialists have concentrated their efforts towards affect-
ing modifio:ations through democratic processes before the passage of perman-
ent legislation, During the period of drafting Socialist m.nisters obtained
Government agreement on the inclusion of principles similar to those raised
in British Commonwealth representations, These principles were not included
in the drafts eminating from final conferences between the Japanese Govern-
ment and SCAP.
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It io reported that only consideration of the penal provisions is delay-
ing the full Cabinet agreement expected before the measure is placed before
the Diet, Socialist criticism of those provisions providing for criminal
rather than administrative punishment for violations related to the present
law partakes in part the nature of a delaying action, Socialist ministers
in order avoid the onus of precipitating the fall of the cabinet by opposing
the government's endorsement of the SCAP'approved draft National Public
Service law are awaiting (1) the outcome of the Shona Denko scandal which is
threatening the life of the Cabinet; and (2) the development of US and l'EC
reaction to the draft, On the other hand.. the Socialists because they (1)
fear the levying of further restrictions on labor by conservative forces
should the Sociali3Ls withdraw from the coalition; and (2) desire continued
administrative power, are inclined to compromise. On the other hard., they
stand to gain additional prestige in Japan if they succeed through inter-
national pressure on SCA in preserving for government employees the vAdest
possible sphere of trade union rights0
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