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 7. The rice, tin, rubber, and oil of Southeast Asia and the industrial capacity of Japan are the essential elements which Red China needs to build a monolithic military structure far more formidable than that of Japan prior to World War II. If this complex of military power is permitted to develop to its full potential, it would ultimately control the entire Western and Southwestern Pacific region and would threaten South Asia and the Middle East.

8. Both the United States and France have invested heavily of their resources toward the winning of the struggle in Indochina. Since 1950 the United States has contributed in excess of 1.6 billion dollars in providing logistic support. France is reported to have expanded, during the period 1946-1953, the equivalent of some 4.2 billion dollars. This investment, in addition to the heavy casualties sustained by the French and Vietnamese, will have been fruitless for the anti-Communist cause, and indeed may redound in part to the immediate benefit of the enemy, if control of a portion of Indochina should now be ceded to the Communists. While the additional commitment of resources required to achieve decisive results in Indochina might be considerable, nevertheless this additional effort would b e far less than that which would be required to stem the tide of Communist advance once it had gained momentum in its progress into Southeast Asia.

9. If, despite all United States efforts to the contrary, the French Government elects to accept a negotiated settlement which, in the opinion of the United States, would fail to provide reasonably adequate assurance of the future political and territorial integrity of Indochina, it is considered that the United States should decline to associate itself with such a settlement, thereby preserving freedom of action to pursue directly with the governments of the Associated States and with other allies (notably the United Kingdom) ways and means of continuing the struggle against the Viet Minh in Indochina without participation of the French. The advantages of so doing would, from the military point of view, outweigh the advantage of maintaining political unity of action with the French in regard to Indochina.

10. It is recommended that the foregoing views be conveyed to the Department of State for consideration in connection with the formulation of a United States position on the Indochine problem for the forthcoming Conference and for any Rh