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1. . The basic decision confronting the United States in Southeast Asia is whether to cut our losses in that area and to gradually withdraw our commitments with the least possible loss of prestige or to implement fully the provisions of a policy calculated to guarantee the retention of the area in the free world provided the U.S. is willing to take the full range of measures which are necessary to make its stated policy effective. If the U.S. is not willing to do the latter it may consider two possible alternatives to Communist control.

2. . Recognizing the lack of decisive U.S. military objectives in Southeast Asia, the apathy of the indigenous people toward Communist encroachment, the improbability of any realistic Indian reaction to responsibility for Southeast Asia, to this end:

a. assure the Japanese Government of U.S. willingness to acquiesce in a Japanese sphere of influence in Southeast Asia provided they will cooperate in preventing Communist control of the remainder of Southeast Asia by accelerating their rearmament program sufficiently to assume responsibilities there;

b. divert a considerable proportion of MDAP funds programmed for Indochina to an offshore procurement program for Japan for the production of ground force weapons for Japanese and other free Asian forces;

c. encourage maximum Japanese participation in organizations and programs designed to stimulate the economic growth of Southeast Asia.

3. Recognizing the proximity of the Colombo powers in this region, stimulate, with U.S. support, Indian interest in and responsibility toward Southeast Asia, to this end:

a. assure the Indian Government of U.S. willingness to support an Indian area of moral influence in Southeast Asia, provided they will act to prevent Communist control of the remainder of Indochina;

b. utilize the Colombo economic development organization to stimulate the economic growth of Southeast Asia;

c. utilize to the maximum Indian officials in assisting and advising the indigenous governments. Rh