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7. The program presents substantial risks. Under it, the French build-up in Europe would be slowed down in some degree, both by the limited troop diversion and the cut in the French military budget. Moreover, in the best of circumstances, the Indo-Chinese war cannot be successfully closed out before the 1954-55 fighting season. Consequently, in addition to any supplemental aid furnished now. we would have to contemplate a comparable further contribution a year from now to assure a satisfactory conclusion. Furthermore, there is the risk that the French Union forces in Indo-China might suffer reverses before the projected additional effort can be brought to bear.

8. Despite these risks and uncertainties it is believed that the U. S. should agree, in its own security interests, to furnish the additional $400 million of aid to France. Various factors lead to this conclusion:


 * . The Laniel government is almost certainly the French government which would undertake to continue the war in Indo-China. If it fails, it will almost certainly be succeeded by a government committed to seek a settlement on terms dangerous to the security of the U. S. and the Free World. The negotiation of a truce in Korea, added to the frustrations and weariness of the seven years' war, has markedly increased the sentiment in France for some kind of negotiated peace in Indo-China, In the recent protracted French governmental crisis, every leading candidate bid for popular support with some kind of promise to reduce the Indo-China commitment in some way. For the first time in seven years, latent defeatist impulses emerged into real efforts by political and parliamentary leaders to "pull out".


 * . Under present conditions any negotiated settlement would mean the eventual loss to Communism not only of Indo-China but of the whole of Southeast Asia.


 * . The loss of Indo-China would be critical to the security of the U, S. Communist control of Indo-China would endanger vital raw material-sources; it would weaken the confidence of other Southeast Asian states in Western leadership; it would make more difficult and more expensive the defense of Japan, Formosa and the Philippines; and complicate the creation of viable Japanese economy. If the French actually decided to withdraw, the U. S. would have to consider most seriously whether to take over in this area.


 * . On the other hand, if the proposed program does succeed, and the French are able to achieve victory in

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