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TOP SECRET :considerable significance to Japan and India, all important areas of Free Asia. Furthermore, this area has an important potential as a market for the industrialized countries of the free world.


 * . The loss of Southeast Asia, especially of Malaya and Indonesia, could result in such economic and political pressures in Japan as to make it extremely difficult to prevent Japan's eventual accommodation to communism.

2. The danger of an overt military attack against Southeast Asia is inherent in the existence of a hostile and aggressive Communist China. The use of U. S. forces to oppose such an attack would require diversion of military strength from other areas, thus reducing our military capability in those areas, as well as over-all, with the recognized military risks involved therein, or an increase in our military forces in being, or both. Toward deterring the U. S. Government has engaged in consultations with France and the United Kingdom on the desirability of issuing to Communist China a joint warning as to the consequences to Communist China of aggression in Southeast Asia. Although these consultations have not achieved a full measure of agreement a warning to Communist China has in fact been issued, particularly as to Indochina, in a number of public statements. (See Annex A for texts.) The U. S. has also participated with France, the United Rh