The Development of Multilateral Relationship

The US Aid and Taiwan

By Man-houng Lin, I-min Chang, Wei-chen Lee

Presented at the XVIth World Economic History Congress, 9-13 July 2012, Stellenbosch University, South Africa

SUMMARY After the outbreak of the Korean War in June 1950, the US included Taiwan in its Asia-Pacific containment line and restored the military and economic aid to the Republic of China in Taiwan (Taiwan hereafter) for the regional security. Taiwan became the second largest U.S. foreign military aid recipient countries. Among the over 120 countries all over the world which received US aids, Taiwan is one of the few countries which had successfully moved from “dependence” to “independently sustained growth.” The U.S. aid to the countries along the Asia-Pacific defense line was not only supplying munitions but also linking these countries together in economic dimension. This article will firstly review the historical background of U.S. aid to Taiwan and related institutional development; secondly, illustrate how Taiwan used U.S. aid and on which economic sectors the U.S. aid affected; thirdly, trace the impact of U.S. aid on Taiwan’s foreign trade, and lastly, discuss the role of U.S. aid in building multilateral economic networks among the US, Japan, Korea, Southeast Asia countries, African countries and Taiwan.

KEYWORDS Foreign aid and development; multilateral economic networks; U.S. aid

CONTACT DETAILS Professor Man-houng Lin, Institute of Modern History, Academia Sinica and Department of History, National Taiwan Normal University, Taipei Email: [email protected] Assistant Professor I-min Chang, Department of Public Finance, China University of Technology, Taipei Email: [email protected] Assistant Professor Wei-chen Lee, Graduate Institute of Taiwan History, National Chengchi University, Taipei Email: [email protected] 1. Historical Background “The US aid " is abbreviation of "U.S. foreign assistance" which was part of U.S. foreign policy after World War II. As the American Foreign Policy Encyclopedia defined, under “the US aid, " the U.S. government established institutions to conduct military and economic aid to other government. 1 The United States aid to ROC government could be divided into four periods: the first period was from the China civil war to the Korean War, the second period was from military aids to economic aids, the third period was termination of economic aids, and the last period was continuous measures after the termination. After WWII, the United States passed the Economic Cooperation Act of 1948 in April. For this law, the USA organized Economic Cooperation Administration (ECA) under the President’s direct order, and ECA dispached missions in recipient countries to execute and supervise the US aid.1 The U.S. aid to Taiwan was traced back to this law. The US and ROC made “Economic Aid Agreement” in July 1948 at Nanjing. For assisting ROC to promote self-support scheme and strengthening self-defense ability, the US government agreed with providing ROC with a large 2 variety of economic resources by grants and loans. Then ECA established ECA Mission to China, and Executive Yuan ROC established the Council for US Aid (CUSA) as the corresponding institution. In the China aid fund of 1948, $10 million was supplied to Taiwan for economic construction.3Such first US aid to Taiwan was used for Taiwan Sugar Company, Taiwan Railway Administration, and Taiwan Power Company.4 However, shortly after the agreement, with the failure of the KMT in the civil war in Mainland China, the United States terminated the aid to ROC government, and published “United States Relations with China with Special Reference to the Period 1944-1949” (commonly known as “China White Paper”) on August 5, 1949 to indicate the reasons why the US stopped aid to China.5 Therefore, the first phase of US aid to China was not

1 Wen Xin-ying, Jingji qiji de beiho—Taiwan meiyuan jingyan de zhengjing fenxi[ Behind the economic miracle—a political and economic analysis of the US aid experience of Taiwan] (Taipei: Zili wanbao Press, 1990), p.46. 2 The Management Council of the Sino-America Fund for Economic and Social Development Executive Yuan( MCSAF), Zhongmei jingji shehui fazhan jijin zhi yunyong shilu [the operating record of the Sino-America Fund for Economic and Social Development ] (Taipei: CEPD Executive Yuan, 2007), p.2. （http://www.cepd.gov.tw/m1.aspx?sNo=0000277）） 3 Wen Xin-ying, behind the economic miracle—a political and economic analysis of the US aid experience of Taiwan, p.85. 4 Hsueh Hua-yuan ed., Taiwan maoyishi [Taiwan Trade History](Taipei: Taiwan External Trade Development Council, TAITRA, 2008), p.249. 5 In the China White Paper, the US indicated that the failure of KMT in the civil war is not because the US aid was not enough, but because the KMT was corrupt and lose popular sentiment ect. ( Lai Ya-shin, “Meiguo Fabiao “Zhongguo baipishu” zhi juece guocheng [The Decision making process of China Whit Paper] ,” Taipei: MA thesis, Graduate Institute of the Americans, Tamkang University, 2009.

1 completely appropriated. The central government of the ROC moved to Taiwan on December 1949, and the Korean War broke out on June 25, 1950. The US included Taiwan as one of the West Pacific containment line and restored the military and economic aid to the Republic of China on Taiwan.6 Thus, most studies on the US aid to Taiwan discussed from 1950—the year Taiwan formally started to receive the US aid. This article also mainly discuss the period of US aid on Taiwan from 1950. The extent of the US aid to Taiwan was very wide. It was basically classified into general economic assistance and military assistance. The military assistance shared more than economic assistance.7 However, as Wu Tsong-min (1988) pointed out, military assistance help Taiwan to maintain a stable society to pursue a stable economic growth, which helped the US to maintain its ‘global defense system’.8 The content, operation and administration of the US aid funds are very complex. The 'counterpart fund' was an important system designed. The system was derived from the experience of US aid to Greece and Turkey after WWII. At the beginning, money from Greek of equivalent amount as the outlay of selling relief materials should be saved into the special Greek currency deposit account as a fund, and then used this fund to achieve the revival plan. Then the USA set up similar accounts with local currencies in Austria, Italy, France and China and others as a revolving fund. The counterpart fund system had been refined in the Middle aid plan and Marshall Plan.9 Due to the Economic Aid Agreement of 1948, the ROC government should provide local currency equal to the amount of the US aid and save it in the 'counterpart fund.' This counterpart fund which used for economic development of Taiwan was mutually managed and operated by the US and the ROC. The counterpart fund not only contributed to restrain Taiwan's inflation during 1950s, after the US aid terminated, it was also one of the financial resources of the ROC government. US military and economic aid has influenced Taiwan in many field, including society, politics, culture, education, and international relationships, in addition to economic development and military security. In this article, we shall discuss these various effects. After introducing this historical background of the U.S. aid to Taiwan at the first section; this paper shall secondly illustrate how Taiwan used U.S. aid and on which sectors the U.S. aid effected. Thirdly, this paper shall study the general impact of U.S. aid on Taiwan. Fourthly, this paper shall illustrate the relationships between the US aid and the sovereign rights of the ROC

6 Wen Xin-ying, behind the economic miracle—a political and economic analysis of the US aid experience of Taiwan, p.89. 7 During 1950-1965, the U.S. aid to Taiwan are roghly 1,585.8 million dollars on economic assistance and 2,384.2 million dollars on military one.( Ibid., p.91) 8 Wu Tsong-min, “Meiyuan Yu Taiwan de Jingji Fazhan [ the US aid and the economic development of Taiwan]’ Taiwan shehui yanjiu jikan[Taiwan: A Radical Quarterly in Social Studies], 1:1, Spring 1988, p.148. 9 Nichino Terutarō, Beikoku enjo, mikaeri shikin’ tokubetsu kanjō: sono keisei katei ni kansuru shiryō[ the special account of the “counterpart fund” of the US aid: data of its formatting process]( Tokyo: kokuritsu kokkai toshokan chōsa rippō kōsakyoku, 1949), pp.2-3.

2 government. Lastly, the paper shall discuss the role of U.S. aid in weaving the multilateral economic networks among the US, Japan, Korea, Southeast Asia countries and Taiwan.

2. Its content, amount, and use

2.1 content and amount

U.S. foreign economic assistance included direct grants, bilateral or multilateral development loans and technical cooperation to achieve the transfer and circulation of goods and services.11 The U.S. agricultural surplus consumption in the “Food-for-Peace Program” is based on the “Public Law 480,” which is also an important part of economic aid. Military assistance included providing military advisers and training, transferring and sales of weapons and equipment, and assisted recipient countries’ national defense construction. 10 During the period of 1951-1968, the achieved amount of U.S. economic assistance to Taiwan is shown in Figures 1&2. The aid was provided from the Development Loan Fund in 1959, 1960, and 1963, with the rest from the “financial assistance ” in the early years and from “Public Law 480” in the remaining periods. Overall, the general economic assistance projects accounted for nearly 70%, Public law 480 for 26%. Before 1961, the general economic assistance accounted for 55%, and in 1961, “Public Law 480” replaced and accounted for more than 50%. During 1966-1968, only the “Public Law 480” still supported. Among the aid, the general economic assistance consisted of three components: defense support or development loans (non-planned type and planned type), technical cooperation, and military assistance (non-planned type and planned type). the share of Sino-US defense support, development loan program, military was 82.73%, 14.35%, and 2.92%, respectively.Non-planned type and planned type respectively accounted for 70% and 30%, respectively of these two projects, defense support or development loans and military cooperation..11

10 Ian J.Bickerton ; John W. Sewell, The United States and World Development : Agenda1977(New York: Praeger Publishers,1977),134. 11 Hsueh Hua-yuan ed., Taiwan Trade History, p.256.

3 the achieved amount of U.S. economic assistance to Taiwan（1951-1968） 140

120

TOTAL 100

80 million "the general economic us$ 60 assistance projects"

40 "the development loan fund" "Public Law 480" 20

0 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968

year

"the general economic assistance projects" "the development loan fund" "Public Law 480" TOTAL

Source：Taiwan Statistical Data Book, 1977, p.219. Hsueh Hua-yuan ed., Taiwan Trade History, p.257. Figure 1 The achieved amount of U.S. economic assistance to Taiwan（1951-1968）

the percentage of U.S. economic assistance to Taiwan（1951-1968）

120%

100% "the general economic 90% assistance projects"%

80%

% 60%

40% "the development loan fund"% 20% "Public Law 480"%

0% 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 year

"the general economic assistance projects"% "the development loan fund"% "Public Law 480"%

Source：Taiwan Statistical Data Book, 1977, p.219. Hsueh Hua-yuan ed., Taiwan Trade History, p.257.

4 Figure 2 The percentage shares of U.S. economic assistance to Taiwan（1951-1968）

2.2 In the public utilities

From 1953 to 1976, there were six continuous four-year economic plans. US aid had played a substantially important role in the early two periods (1953-1960). Large-scale investments of this period were almost all public utilities, such as power, transportation, mining, and they were mostly invested by the US aid, among them, the public sector accounted for up to 80-90%. 12 More than 50% of the government's investment had depended on the US aid. 13 The proportion of US aid in industries invested by public utilitie, public and private mixture, and private enterprises were respectively 66.6%, 27.2%, and 6.1%.14 The ehabilitation or expansion of public utilities were mainly based upon US aid as their main funding source.15 The US aid loans in the fiscal year 1950-1963 were divided into the NT dollars loans and US dollars loans, totaled respectively NT$ 6.4 billion and US$ 0.3 billion. And, public enterprises accounted for 68.08% of the NT dollar loans and 91.87% of US dollar loans, and private enterprises shared 31.92% of the NT dollar loans and 8.13% of US dollar loans. 16

Table 1 The Amounts of US aid on NT and US loans by sectors Fiscal Years 1952-1963 1950-1963 sectors NT loans % US loans %

public 4,406,328,185.39 68.08％ 284,768,455.97 91.87％ private 2,065,888,267.65 31.92％ 25,201,882.32 8.13％

Total 6,472,216,453.04 100% 309,970,338.29 100%

Source：collected from Council for International Economic Cooperation and Development. Mei yuan dai kuan gai kuang (General (1964); Hsueh Hua-yuan ed., Taiwan Trade History, p. 262.

12 Liu Jinqing, Taiwan zhi jingji dianxing NIES zhi zhengjiu yu wenti (Taiwan as a typical NIES economy: Its achievement and problems)Taipei: renjian, 1993), p.362. 13 Yidong Hejiu, “jinrong tixi yu zijin choucuo(financial system and its fund-raising” in Guoji jiagong jidi de xingcheng (The formation of international basis for processing) (Taipei: rejian, 1992), p.61. 14 Zhou Zhihuai, “Lun Taiwan gongying shiye ji qi jiaose zhuanhuan” (On Taiwan’s public enterprises and their role shift), Taiwan yanjiu jikan, no.2, 1990, p.38. 15 Hsueh Hua-yuan ed., Taiwan Trade History, p.260. 16 Collected from Council for International Economic Cooperation and Development. (1964). 〝Mei yuan dai kuan gai kuang〞。Hsueh Hua-yuan ed., Taiwan Trade History, p.261。

As shown on Figures 3 and 4, in the public utilities, electricity, mining and industry, transport, and Shihmen Reservoir accounted respectively 58.81%, 15.72%, 12.71%, and 6.90% for US aid NT dollar loans, and electricity, mining and industry, transport, and Shihmen Reservoir accounted respectively 39.92%, 25.71%, 17.01%, and 6.14% for US aid US dollar loans.

US military constrcution projects mining & industry water supply project 0.00% others 4.46% 1.00% electricity

agriculture, forestry and Shihmen Reservoir fisheries, 0.40% transport mining & industry 15.72% agriculture, forestry and transport fisheries, 12.71% water supply project

US military constrcution Shihmen Reservoir projects 6.90% others

electricity 58.81%

Source: Council for International Economic Cooperation and Development 〝Mei yuan dai kuan gai kuang (1964);”Hsueh Hua-yuan ed., Taiwan Trade History, 2008.

Figure 3 US aid on NTD loans－The proportion of public sectors by industry(1950-1963)

6 mining & industry US military constrcution projects electricity 0.53% water supply project Shihmen Reservoir 0.68% others transport 7.66% agriculture, forestry and mining & industry agriculture, forestry and fisheries, fisheries, 25.71% water supply project 2.36% US military constrcution projects transport 17.01% others

Shihmen Reservoir 6.14% electricity 39.92%

Source:Council for International Economic Cooperation and Development. (1964). Mei yuan dai kuan gai kuang.〝Taiwan Trade History〞,2008. US aid onUSD loans--The proportion of public sectors by industry(1950-1963)

Source: Council for International Economic Cooperation and Development, Mei yuan dai kuan gai kuang (1964); Hsueh Hua-yuan ed., Taiwan Trade History, 2008.

Figure 4 US aid on USD loans--The proportion of public sectors by industry (1950-1963)

In the US aid NT dollar loans to public utilities in mining and industry, fertilizer, sugar, aluminum, and coal, accounted for 33.93%, 27.94%, 10.39 percent, and 7.48; and fertilizer, sugar, oil, and sulfuric acid argon accounted respectively 53.07 %, 19.98%, 6.45%, and 5.97% for US aid US dollar loans to public utilities in mining and industry. That is, in mining and industry, fertilizer and sugar industries were the main recipients.

2.3 Fostering private enterprises – the ideological shift As shown in the figures 5 and 6, for the part of US aid on NT dollar loans to private enterprises were the agriculture, forestry and fisheries, small and medium-sized business, mining and industry, and private industrial bills discounted loans, accounted for 57.25%, 23.67%, 8.31%, and 6.78%, respectively; for the part of US aid on US dollar loans to private enterprises were mining and industry, small and medium sized-business, and industrial agriculture, forestry and fishery, accounted for 58.01%, 30.05%, and, 11.82%, respectively. It was noted that the major private enterprises receiving US aid NT loans accounted for up to 57.25% in the agriculture, forestry and fisheries. And the Rural Reconstruction

7 committee will be awarded 90.94 percent of the loan. In other words, for the part of the US aid NT loans to private enterprises, the Rural Reconstruction committee represented 52.06% (57.25% * 90.94% ). The industries of private enterprises, which accepted US aid US loan, were the mining and industry, cement industry, pulp and paper industry, wood and plywood industry, iron and steel industry, and coal industry accounted for 58.01%, 25.75%, 19.16%, 12.33%, 10.98%,and 10.68% respectively. 17

mining and industry, transportation agriculture, forestry and fisheries, small and medium-sized business Mortgage private industrial bills discounted loans others private industrial bills 3% mining and industry, 0% Mortgage discounted loans 8% 7% others transportation small and medium-sized 1% business 24%

agriculture, forestry and fisheries, 57%

Source:Council for International Economic Cooperation and Development. (1964). Mei yuan dai kuan gai kuang.〝Taiwan Trade History〞,2008. US aid on NTD loans－The proportion of private sectors by industry Source: Council for International Economic Cooperation and Development, Mei yuan dai kuan gai kuang (1964); Hsueh Hua-yuan ed., Taiwan Trade History, 2008.

Figure 5 US aid on NTD loans－The proportion of private sectors by industry

17Hsueh Hua-yuan ed., Taiwan Trade History,〞

8 mining and industry,

agriculture, forestry and others fisheries, small and medium-sized 0.12% business small and medium-sized business 30.05% others

mining and industry, 58.01%

agriculture, forestry and fisheries, Source:Council for International Economic Cooperation and Development. (1964). Mei yuan dai kuan gai kuang.〝Taiwan 11.82% Trade History〞,2008. US aid onUSD loans－The proportion of private sectors by industry

Source: Council for International Economic Cooperation and Development, Mei yuan dai kuan gai kuang(1964); Hsueh Hua-yuan ed., Taiwan Trade History,2008. Figure 6 US aid on USD loans－The proportion of private sectors by industry

3. The Sino-American Fund

The US aid terminated in 1965, but the NTD fund which was derived from the US aid in that period had transformed into another type of fund and continued operation in Taiwan. After the termination of the US aid, both the ROC and the USA government concluded “Exchange of Notes between the Republic of China and the United States of America concerning the Establishment of the Sino-American Fund for Economic and Social Development" in April 9 1965; the Sino-American Fund for Economic and Social Development (briefly, Sino-American Fund) was set up on July 1 the same year. The financial resources of the Fund include the surplus of Counterpart fund and reclaimable amount in the future. At the beginning period, the total financial resources of the Fund were 16.44 billion NTD (about US$409.98 million), included 7.41 billion NTD (45.1%) for the loan of the US aid (principal) and 9.03 billion NTD (54.9%) for net value of Fund. The aim of the Fund was to continue to assist Taiwan to engage in various economic and social development plans according to the Exchange Note mentioned above.18 About the use of the Sino-American Funds, according to the agreement between the ROC and the USA, to repay the principal and interest of the US aid loan is priority, to support the program of

18 The exchange rate of NTD per dollar of 1966 is about 40:1 (by Directorate-general of budget, accounting and statistics, Excutive yuan, ROC, Statistical Yearbook of the Republic of China 1993, p.280.

9 economic and social development with “loan and investment" and " subsidies" is second. Figure 7(a),(b),(c) show the use of the Sino-American Fund form 1966 to 2005, the accumulative amount was about 95.2 billion NTD (about $2,972 million)19, loan and investment was 78.45% and subsidies was 21.55%.（Figure 8）20 About the responsible institutions, the amount which transacted by Council for Economic Planning and Development, Executive Yuan, Republic of China (CEPD) is 80.2 billion NTD, about 84% and by Council of Agriculture, Executive Yuan, Republic of China (COA) is 15 billion NTD, 16%.21

19 Here converted NTD to dollar by the yearly exchange rate. The exchange rate data of 1966-1978 is Directorate-general of budget, accounting and statistics excutive yuan ROC，Statistical Yearbook of the Republic of China 1993, p280；data of 1979-2005 is Central Bank of the Republic of China( Taiwan), (http://www.cbc.gov.tw/content.asp?CuItem=27029 ). 20 MCSAF, the operating record of the Sino-America Fund for Economic and Social Development, p29. 21 Ibid., p.28.

10 30,000 40% 36% 26,616 loan and investment 35% 25,000 loan and investment% 30% 20,000 14,232 25% NTD: million NTD: 13,844 15,000 19% 20% 10,671 19% 10,000 14% 15% 3,238 2,363 10% 5,000 2,810 627 280 4% 3% 5% 4% 1% 0% 0 0% others distinctions of transportation project industry development industry development human resource development resource human important construction and plan and construction important

agriculture and agricultural resources agricultural and agriculture (a) loan and investment (1966-2005) guidance for freshmen to start business to start freshmen for guidance promotion of investment and industrial area industrial and investment of promotion land development and resources conversation resources and development land Sources：The Management Council of the Sino-American Fund for Economic and Social Development, The operating record of the Sino-American Fund for Economic and Social Development, Taipei: CEPD, 2007, p.31. Figure 7(a) The Sino-American Fund—the amount of distinctions of project and its weight (1966-2005)

9,000 8,464 45% 8,000 41% 40% 6,368

NTD: million NTD: 7,000 35% 6,000 31% subsidy 30% 5,000 subsidy% 25% 4,000 2,122 20% 3,000 1,198 15% 684 10%857 2,000 6% 277 550 10% 3% 3% 4% 1,000 0 1% 5% 0 0% 0%

others

transportation distinctions of project industry development

human resource development important construction and plan agriculture and agricultural resources guidance for freshmen to start business(b) subsidy (1966-2005) land development and resources conversationpromotion of investment and industrial are...

11 Figure 7(b) The Sino-American Fund—the amount of distinctions of project and its weight (1966-2005)

30,000 35% 28.68% 25,000 30% 25% 20,000 loan and investment 17.89% subsidy 20% 15.80% 14.95% 15,000 26,616 dinctions/total 15% 10,671 11.84%

NTD:Million 10,000 2,810 10% 13,844 14,232 5,000 3.69% 3.13% 2.89% 5% 3,238 2,363 627 1.19% 0 280 0% others

dinctions of project transportation business industry development conversation area development area human resource development guidance freshmen start to for land development and resources important construction important and plan agriculture and resources agricultural promotion of investment of andpromotion industrial 圖中美經濟社會發展基金－各計畫類別金額與比重（1966-2005）

Sources：The Management Council of the Sino-American Fund for Economic and Social Development, The operating record of the Sino-American Fund for Economic and Social Development, Taipei: CEPD, 2007, p.31. Figure 7(c) The Sino-American Fund—the amount of distinctions of project and its weight (1966-2005)

12 subsidy 20,520 loan and investment (21.55%) 74,681 (78.45%)

unit：NTD Million,％

Source：The Management Council of the Sino-American Fund for Economic and Social Development, The operating record of the Sino-American Fund for Economic and Social Development, Taipei: CEPD, 2007,p. 31. Figure 8 The Sino-American Fund—the amount of use and its weight (1966-2005)

The uses of the Sino-American Fund are various and the main purpose is to assist the strategical industries or financial demand when the concerning institutions need funds to make pioneering program, and also to support the urgent program, for adjusting the overall national economic construction and social development demand. Generally speaking, the Sino-American Fund financed the initial capital demand to government in many programs such as the nine-year compulsory education, family birth control plan, setting up the medical equipment, updating the equipment of the practical training factory, promoting tap water construction and others.22 The top 5 granted projects in the order from big to small are showed as below (ratio of total; ratio of loan and investment, ratio of subsidy): industry development (28.68%；97.49%, 2.51%), agriculture and agricultural resources (17.89%；62.63%, 37.37%), land development and resources conversation (15.80%；87.39%, 7.56%), guidance for freshmen to start business(14.95%；100%, 0%), important construction and plan(11.84%；24.93%, 75.1%). For example, Industrial development: investment to the China Steel Cooperation, integrated iron and steel plant, nuclear power plants belonged to the Ten Major Construction, water-powered plants, thermal power plant and others. Agriculture and agricultural resources: to build Tseng-wen Reservoir, pelagic fishery ship, and to promote mechanization of agriculture, tourism and leisure fishery, guidance of peasant or

22 MCSAF, the operating record of the Sino-America Fund for Economic and Social Development, p.25.

13 fishermen job-change and others. Land development and resources conversation: construction or improvement of waterworks, garbage cremating planning, water supply planning and others. Guidance for freshmen to start business: guidance of freshman to start business, assist SME and others. Important construction and plan: research and plan of economic policies such as privatization of public enterprises and others.23

Incidentally, the proportion of the 'human resource development' is the smallest, and the use way of the Sino-American Fund is mainly subsidies, such as promoting 9-year compulsory education, guiding over junior college graduates to get job and others. The amount of public finance by the Sino-American fund was more important in the early period than in the later. The ratio of the Sino-American fund to the central government annual expense was over 10% by 1968, but due to the economic development, the ratio had getting small with the expansion of the budget, and became under 2% in the later of 1970s (please see figure 9).24 Worthy attention is, because the Sino-American Fund was not as enormous as the US aid in the past, and the way of use was mainly to supply the “seed capital" or the mid-term capital to the project which mentioned above, and the government would prepare the formal budget to continue the project when it had a good performance.25 Thus, because of the use with a flexibility and mobility, in terms of the relatively conservative government budget of Taiwan, the Sino-American Fund provided a risk diversified fund without affecting the budget. The principal and interest of the U.S aid loan has been paid completely by the Sino-American Fund in January 2004. This can be said the Sino-American Fund has accomplished its term tasks. And then the Fund has been incorporated into the National Development Fund of the Executive Yuan in 2005. Thus, the case of the U.S. aid to Taiwan is a very complete experience: from receiving the aid and achieving self-support development and to repay the U.S. aid loan. In this process, Taiwan economy has been developing multilateral relations with neighboring countries in the meanwhile.

23 Lai Hong-wen, “Zhong-Mei Jijin zhi yunyong yu chengguo [the operating and performance of the Sino-American Fund] ,” Taiwan Economic Forum, 6:2 (Taipei: CEPD, Feb. 2008), pp.7-10. 24 MCSAF, the operating record of the Sino-America Fund for Economic and Social Development, p.27. 25 Ibid., p25.

2,500,000 16%% 14.92% the use of amount of the Sino-American Fund (A) 14% 2,000,000 the central government annual expense (B) 12.19% 12%

(A)/(B)*100% NTD Million 10.95% 10% 1,500,000

8% 6.57% 1,000,000 6% 4.74%

3.90% 4% 3.79% 500,000 2.59% 3.46% 2% 0.38% 0.19%

0 0%

1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2002 2004 year the second half of 1999 & 2000 1999 & of Sources：The Management Council of the Sino-American Fund for Economic and Social Development, The operating record of the Sino-American Fund for Economic and Social Development, Taipei: CEPD, 2007, p .27. Figure 9 The Sino-American Fund and central government budget, amount and ratio(1966-2005)

4. Impact on Taiwan’s economic and trade development

4 .1 To help curbing inflation

After WWII, Taiwan faced the pressure of inflation as did most countries after the war. Other than other reasons, the most important reason for the outbreak of hyper-inflation in Taiwan in 1948-9 is the civil war between KMT and CPC and the economic chaos in Mainland China. In order to restrain the hyper-inflation, Taiwan provincial government carried out the Currency Reform policy and issued New Taiwan Dollars on June 15, 1949. The exchange rate between New Taiwan Dollar (NTD) and Old Taiwan Dollar (OTD) was settled on 1NTD= 40,000 OTD. In order to rebuild people's confidence in the NTD, the government established NTD system very cautiously, including 100% reserve system, issue limit set at 200 million NTD, severing the connection with Legal Currency on Mainland China, and pegging the evaluation of NTD to US dollar, etc.26 The monthly average of wholesale price index from January to June 1949 was as high as

26 Lee Wei-chen, “New Taiwan Dollar ,” Encyclopedia of Taiwan, http://taiwanpedia.culture.tw/web/content?ID=3913&Keyword=%E5%B9%A3%E5%88%B6%E6%94%B9%E9%9 D%A9 .

15 57.25%, but after the Currency Reform, the monthly average index has dropped to 9.03% from July to December 1949.27 Although the price index had been reduced drastically, cthe hyper-inflation had still not been controlled completely. After the NTD issued a month and a half later, the US published the China White Paper in August, and the ROC moved central government to Taiwan in the end of 1949. The financial deficit of 1950 was 409.6 million NTD which shared 31.6% of the central government's expenditure (1,296.25 million NTD).28 That is, at the beginning of the government’s moving to Taiwan, the budget deficit caused from huge defense spending was still the unresolved origin of inflation. In addition, the USA took the 'handoff' policy on both sides of the Taiwan Strait; Taiwan's international situation was extremely isolated.29 Recently, many studies have pointed out that currency reform was not enough to ease this hyper-inflation; recovery of production and the coming of the US aid after the 1950s are more important. Wu Tsong-min (1988) pointed out that the mechanism of the ‘Counterpart Fund’ of the U.S. aid helped to restrain inflation. The Counterpart Funds diverted consumption into production. And, the government could withdraw the amount of NTD from the market by selling the U.S. aid materials. 30With the support of the U.S. aid and the counterpart Fund in the early 1950s, even though the government fiscal deficit was high, it still did not need to issue too much currency.31The U.S. aid compensates the lack of foreign exchange in Taiwan. During the period of receiving the U.S. aid, the annual average import value was approximately one hundred million dollars, the U.S. aid balanced the trade balance of Taiwan.32 As shown in Figure 10, in the period of 1951 to 1970, Taiwan had the trade deficit almost every year, and turned into black after 1970. The current account (CA)-GDP ratio in 1951-1965 was significantly greater than net export (NX)-GDP ratio. This fact shows that in the same period Taiwan's income from abroad is significantly greater than 0, which reflects the contributes of the U.S. aid.33 In general, the U.S. aid maintained the defense forces and social stability of Taiwan, and kept Taiwan's public finance stable to promote the expansion of production steady, and then to restrain hyper-inflation.

27 Wu Tsong-min, “Taiwan’s Hyperinflation: 1945-1950,” Bulletin of Academia Historica, No.10 (Taipei: Acdemia Historica, 2006), p.150. 28 Ibid., p.151. 29 Wen Xin-ying, “Behind the economic miracle—a political and economic analysis of the US aid experience of Taiwan,” pp.86-87. 30 Wu Tsong-min, “the US aid and the economic development of Taiwan ,” pp.148-149. 31 Wu Tsong-min, “Taiwan’s Hyperinflation: 1945-1950 ,” p.153-154. 32 Yu Wei-zhen, “An Analysis of Hyperinflation in Taiwan, 1945-1952 ,” doctoral dissertation of Graduate Institute of History, Chinese Culture University, 2006. 33 Due to the current account is equal to the sum of net export, net income from abroad and current transfers, and net income from abroad and current transfers are usually very small, so the current account can be considered as net export; the trade deficit is equal to net outflow of capital, and the trade surplus is equal to net inflow of capital. See: Wu Tsong-min, Economic Theory II (Taipei: Hanlu, 2011), pp.262-263.

20.93 20

17.36 NX/GDP 15 14.57 CA/GDP

11.45 11.36 10 8.36 9.23 8.44 6.42 6.01 7.53 6.63 6.67 5.22 5 4.73 4.22 3.89 3.79 1.20 2.56 1.54 1.19 0.94 1.28 0 0.49 -1.53 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 -2.60 -2.67-3.14 -3.74 -5

-5.98 -7.60 -8.18 -10 出處：本文根據吳聰敏『經濟學原理（下）』，翰廬，2011，頁262之圖27.1予以重新繪製。圖臺灣經常帳(CA)與淨出口(NX)占國內生產毛額(GDP)比重(1951-2009)

Sources： Redraw from Wu Tsong-min, Economic Theory II, Taipei: Hanlu, 2011, pp.262. Figure 10 The ratio of current account (CA) and the net export (NX) to GDP in Taiwan (1951-2009)

4.2 Influence on the trade structure and balance of payments

Figure 11 shows that Taiwan government was actively encouraged to import producing materials, including agricultural and industrial raw materials and capital goods, and was urged to take regulatory measures on consuming goods for the sake of combating inflation, during the US aid period. In 1950, the proportion of importing consuming goods was 46 percent and plummeted to 12.6 percent in 1954, and subsequently, on average, was less than 10%, except for being 10.1% in 1961. The proportion of importing agricultural and industrial raw materials was 40.7% in 1950, and dramatically increased to 65.9% in 1952, and followed by an annual average maintained at between 60 to 70 percent. The proportion of importing capital goods was 13.3% in 1950, and afterward rose precipitously up to 29.3% in 1965, which was due to the government facilitating the industrial development programs over the period, and resulting in the demand of importing machineries and equipments. In terms of the last settlement of exchange (1970) for the deadline, Taiwan's trade deficit from 1950 to 1970 totaled $ 1.7 billion USD, and US aid financing imports cumulated to $ 1.3 billion; in other words, US aid compensated for the trade deficit of the total number of 78.5% for the 21 years, from 1950 to 1970.34

34 Hsueh Hua-yuan ed., Taiwan Trade History, p. 275.

The importing trends and structural changes in Taiwan(1950-1965)

% 40

0 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 year

capital goods agricultural and industrial raw materials consuming goods

Source：Hsueh Hua-yuan ed., Taiwan Trade History, p.270 Figure 11 The importing trends and structural changes in Taiwan(1950-1965)

5. Non-economic effects

5.1 The impact of dietary habits

In response to the long-term agricultural overproduction, U.S. actively market their surplus agricultural products in 1960s. Liu Chi-wei (2011) pointed out that as the hegemony of the postwar world, the US took the advantage of powerful economic strength to stabilize the international food supply chain and under the Public law 480 framework, other countries were induced to participate in the International Food Regimes and exchange the agricultural goods and trade with the US. In the meantime, Taiwan as one of the largest U.S. aid beneficiary countries, also consumed the U.S. surplus agricultural products. The Joint Commission on Rural Reconstruction (JCRR), Council for United States (CUSA) Council for International Economic Cooperation and Development (CIECD) actively launched campaigns on the promotion of pasta, the technology of pasta production, the education and training of pasta, school lunch program and the construction of knowledge of nutrition strategies, and gradually changed the Taiwanese dietary habits from considering pasta as a snack into main meal food. 35

35 Liu Chi-wei“ International Food Regimes and National Diet: The Political Economy of Taiwan’s Wheaten

18 Flour industry was encouraged, the wheaten food cooking class was offered. Particularly with the influx of northern Chinese after 1949 who had been used to the wheaten food, Taiwanese diet had been changed. The flour bags with the symbol of the cooperation of the Republic of China and the United States have often been made into clothes for the Taiwanese during the 1950s-1960s (see illustration).

Taiwan's flour industry once tried to get rid of excessive dependence on the U.S. wheat, and resorted to import from Canada and Australia. But, half of the capital of Taiwan Association for Promotion of Pasta (TAPP) was supported by the US aid mutual fund, and the US Wheat Association assisted its expenditures and technology. Hence,. Taiwan’s technology was based on the U.S. wheat and flour from the starting point, the flour industry in Taiwan were not used to the Australian wheat. On the other hand, the Canadian wheat which was similar to US wheat, was more expensive than the US wheat. The impact of US aid on Taiwan were hence persistent. Taiwan Association for Promotion of Pasta (TAPP) was later transformed as China Cereals Industrial Technology Research Institute, which offered Western-style pastry baking class . In addition to pasta promotion, Western-style bak ed goods and fast-food culture had all influenced Taiwan. McDonald's, KFC, Burger King and other Western-style fast food were all over Taiwan. MR. Mark BAKERY and Mister Donut had their own market. Other than economic growth and other reasons,

Foods, ”Journal of Chinese Dietary Culture 7.1 (2011): 1-60. Copyrightc Foundation of Chinese Dietary Culture. ernational Food Regime

19 US aid has been one background for this popularity of Western food in Taiwan. 36 5.2 The impact on public health

Yang Tsui-hua (2008) argued that the US aid funded approximately 1/3 of Taiwan health budget. Compared with the form of gift to improve health care system and health care education, US aid took the form of grant-in-aid to promote environmental health, which had been used primarily in the area of sanitary facilities and water supply project under a strict audit and thereby prevailed American management model in Taiwan. American consultants played a vital role in strategy and technology, rural environment experimental demonstration area, regional public health network planning, complemented them with Taipei public health demonstration centers. Correspondently, the US training and practice of public health philosophy transplanted in Taiwan. From the countryside to factories, from the township health to industrial hygiene, US-China Security sub-division of public health recommended, and guided the direction of the work of the Taiwan Health authorities, and also urged to establish the Environmental Health Laboratory. 37 Taiwan’s postwar anti-leprosy policy transformed in the US aid period. It started from a US aid-based health programs and assisted by an international church organization. During the Japanese colonial era, the Japanese adopted a policy of forced segregation for people suffering from Hansen’s disease. Such policy was continued until 1952. US aid began to be involved with leprosy treatment in the 1950s, and the Lo Sheng Leprosarium was expanded in 1952 to accept a gradually increasing number of military patients under the support of US aid. It is not only more humane, but also support KMT government to stabilize their military. 38In the 1950s, the National Defense Medical School brought in the American health care system introduced by Peking Union Medical College . Assistance form ABMAC, CUM, US aid, and others, whether by selecting personnel to study abroad or sending visiting professors to Taiwan for lecturing had changed Taiwan’s medical school teaching system. Group teaching and discussion had gradually replaced auditorium teaching introduced in Japanese colonial times. Nursing elites were also taught in this new way. 39

36 Wei-chuan Chen,“The Promotion of Wheaten Food in Taiwan,1945-1980,”National Taiwan Chung Cheng University, MA thesis, 2009, pp.1-190. 37 Yang Tsui-hua, “ US Aid in the Formation of Health Planning and the Medical System in Taiwan, ” The Bulletin of the Institute of Modern History, Academia Sinica, no.62 (2008), pp.91-139. 38 Fan Yen-chiou, ’US Aid Medicine, Hansen’s Disease Control Policy, and Patients’ Rights in Taiwan (1945-1960s), Taiwan Historical Research, vol. 16, no. 4(Taipei: Institute of Taiwan History Academia Sinica, Dec. 2009 ), pp. 115-160. 39 Chang Shu-ching,“American-style Nursing in Taiwan: International Aid and the Origins of Nursing Colleges,” Studies on Women of Modern China, no.18（Dec. 2010）

6. The Asia-Pacific and the Global Link

The US aid to Taiwan which started from the outbreak of the Korean War, 1950-53 has oriented this international aid not only a bilateral aid, but also a multilateral aid. This multilateral dimension of the US aid to Taiwan links Taiwan closely with the Asia-Pacific Area or with the whole larger world. Liao (2005) and Lin (2009) pinpoint the US policy to take Taiwan as an entrepot to link Japan and the overseas Chinese in the Southeast Asia as Japan did in the prewar period. US aid to Taiwan was used to buy Japan’s fertilizer to increase the rice production in Taiwan to be sold to Japan. Japan’s companies were encouraged to open factories in Taiwan to have the Sony radios, Sanyo electric cookers turn into being manufactured in Taiwan to facilitate its 40 sale to the anti-Japanese overseas Chinese market in the Southeast Asia. The US aid certainly promotes cooperation between Taiwan and the US. Nevertheless, it still reveals sometimes competition within the Asia-Pacific league. Chen (2005) shows the aid touches upon the cultivation of pineapple in Taiwan. But, when the canned pineapple in Taiwan competes with that of Okinawa, Japan gave Okinawa more favorable clause for import as Japan was so eager to turn its residual sovereignty over Okinawa offered by the treaty of San Francisco to full sovereignty. When Taiwan’s pineapple can rivals with Dore’s which had moved from Hawaii to the Philippines, the US still offered Dore more market. 41 Chen Yongzhi (1999) points out that the profitable market offered by Japan for Taiwan’s timber ruled out the sound forestry protection in Taiwan. With more concern in the military defense, US merely provided advice rather than enforcing using its money for forestry protection.42 Different countries in the Asia-Pacific league used the US aid differently. With the Japan fertilizer-Taiwan rice links, Taiwan develops less fertilizer industry with the US aid and leaves more aid for the textile industry, while South Korea used more US aid for fertilizer industry

40 Liao Hongqi, Maoyi yu zhengzhi: Tai-Ri jian de maoyi waijiao, 1950-1961－yi Taiwan suocang Waijiaobu dangan deng wei zhongxin zhi tantao (Trade and Politics: Trade Diplomacy between Taiwan and Japan, 1950-1965) (Taipei: Daoxiang Press, 2005), p. 9; Man-houng Lin, “The Survival of Economic Elites during Regime Transition: Government-Merchant Cooperation in Taiwan’s Trade with Japan, 1950-1961,” in Shigeru Akita and Nicholas J. White eds., International Order of Asia in the 1930s and 1950s: Contexts, Hypotheses and Scope (London and New York: Ashgate, 2009). 41Chen Yiwen, Yatai zhengzhi jingji jiegouxia de Tai-Ri fengguan maoyi（1945-1972）(Taiwan-Japan pineapple can trade under the Asia-Pacific political-economic structure, 1945-1972) (Taipei: Daoxiang Press,2005). 42 Chen Yongzhi, Meiyuan yu Taiwan zhi senlin baoyu (minguo sanshijiu zhi wushisi nian): Meiguo yu guofu guanxi zhi gean yanjiu (The U.S. aid and Taiwan’s forestry protection, 1950-1966) (Taipei: Daoxiang Press, 1999).

21 which crowded the development of textile industry 43. Liu Zhi-wei(2009) attributes the increase of pork use because of US surplus maize and soybean production after Marshall Plan in Europe has recovered its agricultural production. US aid provided not only these new animal feed but also encouraged its industry in Taiwan. In Taiwan’s food ideology, to eat more meat to get more animal protein so as to grow as strongly as the Euro-American was hence promoted. Hog feed changed from left-over food and the sweet potato into these new modernized feed. In the Japanese colonial period, Taiwan’s hogs were used domestically, in the 1950s-1960s, Taiwan’s pork had also been exported to Japan. Even after the end of the US aid, Taiwan still depended on US maize and soybeans for the animal feed up to now.44 The US inclusion of wheat in the aid package made it turn from Taiwanese auxiliary food material into a staple. When the granted wheat was not sufficient, Taiwan used its own money to purchase US wheat as wheat was about US$100 less expensive than rice for each ton, and the surplus rice could be exported to Japan for earning the much needed foreign exchange.45 The US aid not only linked Taiwan with the Asia-Pacific region, but also with Africa. In the early 1960s, President John Kennedy had indicated its move to accept the People’s Republic of China into the United Nations and upset Generalissimo Chiang Kai-shek. Then, following the pattern of US aid to Taiwan for its aid to the South Vietnam, US had some confidential support of Taiwan’s agricultural technical aid to Africa to pacify this ally on the one hand, to add some US influence in Africa which was weak relative to other continents in the early Cold War period as the US not intend to meddle into the sphere of the old colonizers in Africa. Taiwan’s technical aid turned out a success at the international mass media at that time and gained Taiwan much support in UN for a while before its final failure due to the strong competition of the PRC. After that Taiwan still uses its own money to develop some sustainable agriculture in Africa.46 Figure 12 shows the “Happy Harvest” painting presented by Burkina Faso to Taiwan in 2008.

43 Chen Jinman, Taiwan feiliao de zhengfu guanli yu peixiao, 1945-1953－guojia yu shehui guanxi zhi yi tantao (The government management and distribution of fertilizer, 1945-1953) (Taipei: Daoxiang press, 1999) 44 Chi-wei Liu, “International Food Regime and Food Dependency: The Development of Hog Industry in Postwar Taiwan,” Taiwan Historical Research (Academia Sinica), vol., 16, no.2 (June 2009), pp. 105-160. 45 Chen Wei-chuan, “The Promotion of Wheaten in Taiwan, 1945-1980,” National Taiwan Chung Cheng University, MA thesis, 2009, pp.1-190. 46 Philip Hsiao-pong Liu, “Maintaining US-Republic of China Alliance via Africa: A Review of the Vanguard Project,” Taiwan Historical Research (Academia Sinica), vol., 14, no.2 (June 2007), pp. 161-181.

Figure 12 Happy Harvest A gift Presented by President Blaise Compaoré, Burkina Faso to the president of the Republic of China, Ma Yin-jeou in May 2008

7. Conclusion

According to the Report of World Bank, Taiwan achieved a continuous growth with equity till the end of 1980s.47 The development of Taiwan did not fall into the so-called ' underdevelopment trap' --the uneven distribution and economic stagnation. Many studies show that the U.S. aid played a very important role on Taiwan's such development. 48 Wen Xin-ying (1990) pointed out, " the US aid consolidated the rule of the ROC government in Taiwan, and strengthened USA control"(p.269). The US aid-dependent mechanism cultivated and strengthened the dependency relationship of Taiwan to the USA. After the terminating of economic aid, because of the continuous military aid, the influence of American capital and market, and a large number of commercial procurement of agricultural products which replaced the U.S. aid, Taiwan continued to rely on the USA. The new mechanism of foreign trade and foreign investment has replaced the U.S. aid and continued to promote dependent development of Taiwan.”(p.275) Chen yong-zhi (2000) used the case study on forest conservation to demonstrated that when there existed differences, such as economic interests priority on the Taiwan side vis-a-vis forest conservation priority on USA side, between the ROC government and the USA, Taiwan could base on its own conditions to accept selectively the techniques and concepts

47 World Bank, The East Asian miracle: economic growth and public policy, New York; Tokyo: Published for the World Bank (by) Oxford University Press, 1993. 48 Chen Yu-hsi, “Dependent Development and Its Sociopolitical Consequences: A Case Study of Taiwan,” (Ann Arbor, Mich.: UMI Dissertation services, 1981, A Bell & Howell Co., 1988 printing).

23 provided by the US aid.49 Chen Jin-man (2000) demonstrated that the US aid played a 'facilitator' rather than 'dominator' in the fertilizer industry of Taiwan. The public-owned Taiwan Fertilizer Company got the second large scale US aid among the enterprises which received the US aid (Taiwan power company got the most large scale aid). The ROC government indeed made some concessions to the USA, such as raising the fertilizer price. But on the issues such as privatization of the Taiwan Fertilizer Company and abolition of the fertilizer-rice barter system, it can be seen that Taiwan government refused the USA's request to continue its own basic policy. In other words, Chen Jin-man also proved the aspect in which Taiwan can defend its own sovereignty when the US request conflicted with Taiwan's basic national policies.50 An Hou-wei (2010) pointed out that the US aid had a significant influence and outcome on the expansion and teacher-training institution of vocational education system in Taiwan, such as the fields of agriculture, industry, and home economics. But on the other hand, he also inspected the fact that the American vocational education system hardly transplanted to Taiwan and further proved that the vocational education was still controlled by the concept of traditional society in Taiwan. Thus, he also demonstrated the aspect that Taiwan government can defend its domestic educational system, when there were differences in educational policies between the USA and Taiwan.51 R. Wade (1990) enumerated the importance of the US aid to Taiwan, which stated that the US aid facilitated the land reform policy, four-year economic construction program and transformation to export-oriented development strategy in the early 1960s. However, he also pointed out that the US aid can hardly be taken as a sufficient condition for Taiwan's superior economic performance. He would rather say that the ROC government used the US aid efficiently.52Hirakawa Hitoshi (1992) pointed out that the governments in the Asia NIEs has more self-supporting ability and were more capable to make the industrializing process adjust flexibly to the domestic and foreign situation. This is the reason why the Latin American NIEs hardly transformed the industry policy from import-substitution to export-orientation, but the Asia NIEs can .53 The experience of the U.S. aid to Taiwan provides a positive example to understand the role of international economic development assistance to recipient countries and the process

49 Chen yong-zhi, Meiyuan Yu Taiwan Zhi Senlin Baoyu (Minguo Sanshijiu Zhi Wushisi nian)): Meiguo yu guofu guanxi zhi gean yanjiu[The U.S. aid and Taiwan’s forestry protection, 1950-1966)], Teipei: Daoxiang, 2000. 50 Chen Jin-man, Taiwan Feiliao de Zhengfu Guanli yu Peixiao,1945-1953—Guojia yu Shehui Guanxi zhi yi Tantao[The government management and distribution of fertilizer, 1945-1953], Teipei: Daoxiang, 2000. 51 An Houwei, Meiyuan yu Taiwan de zhiye jiaoyu (The U.S. aid and Taiwan’s vocational education)(Taipei: Academia Historica, 2010). 52 Robert Wade, Economic Theory and the Role OF Government in East Asian Industrialization (New Jersey: Princeton University Press, 1990), pp.82-84. 53 Hirakawa Hitoshi, NIEs―Seikai sistemu to kaihatsu―[NIEs—World system and development―](Tokyo: Dōbunkan, 1992), p.206.

24 for the recipient countries to turn from dependence on aid toward self-supporting growth. In comparison with other Asian and Southeast Asian countries in 1946-1959, Taiwan shared the most US aid on the per capita basis. It was about twice that of South Korea, about six times that of the Philippines, and about 10 times of that of Japan. In terms of total aid, Taiwan’s aid was 68% that of Japan, and 61% of Korea, and 1.06 times of that of India and more than other countries. Within Taiwan’s US aid in this period, per capita military aid was US$206, which was higher than the US$181 economic aid. (See Figure 13)

450 3.0

2.8 Per capita military aid/ US＄ billion 400 387 2.5 Per capita economic aid/ US＄ 2.5 billion 350 Per capita aid /US＄

300 Total aid/billion US＄ 2.0 206

250 1.7 US$ 1.6 billion billion 1.5 billion US$ 200 186 1.2 1.2 58 158 150 1.0 42 0.9 119 100 28 181 0.5 128 66 116 10 56 0.4 50 91 15 37 0.2 56 0.2 9 0.2 41 23 28 12 6 18 0.1 0.1 0 11 12 60 6 50 5 50 5 50 5 30 30.02 20 20.02 0.0

Laos India Korea Japan Burma Nepal Pakistan Malaya country Thailand Sri Lanka Indonesia Philippines Cambodia South Vietnam Republic of China Sources: Sanseido henshujo, Sekaishi Nenpyo (Tokyo：Kabushikikaisha Sanseido, first printed in 1962, 14th print published in 1989), p.173.

Figure13 US aid to various Asian and Southeast Asian countries (1946-1959)

This Figure carries much the essence of the 1944 map of Taiwan as Asahi Shinbun shows in Figure 14.

Sources: Asahi Shimbunsha, ‘Nanp¯o no kyoten, Taiwan (The bastion at the south)’ (Tokyo: Asahi Shimbunsha, 1944). Quoted in Got¯o Ken’ichi, ‘Taiwan yu Dongnanya: 1930–45 (Taiwan and the Southeast Asia, 1930–1945)’, in Taiwanshi yanjiu yibainian (A study of the history of Taiwan in the last 100 years) (Taipei: Zhongyang Yanjiuyuan Taiwanshi Yanjiusuo, 1997), 343–358. Figure 14 Taiwan as a center of Japan’s Great Co-prosperity Sphere

The studies have demonstrated Taiwan was not entirely constrained by the USA and still has autonomy to make policy under the US aid. In other words, when making policy, Taiwan kept autonomy flexibly to choose the beneficial policy for herself. The reason is that the US-Taiwan ties are not only important for Taiwan, but also important for the US government. Different from the other developing countries which were colonies of European countries, Taiwan has not only connections to the USA but also has very good connections to Japan which was the largest and the fastest-growing markets in the world at this time.54 Tu zhao-yan(1992) also asserted that the successful link of Taiwan with the "growing triangle" of "USA-Japan-NIEs" was crucial for the continuous growth of Taiwan after the 1960s.55 The continuity of prewar and postwar Taiwan’s position in the Asia-Pacific world has actually made possible the particular success of US aid and Taiwan.

54 Robert Wade, Economic Theory and the Role of Government in East Asian Industrialization, p.84. 55 Sumitani Mikio, Liu Jin-qing, Tu Zhao-yan, Taiwan no Keizai—Tenkei NIEs no Hikari to Kage—[Economic of Taiwan—light and shadow of typical NIEs—](Tokyo: Tokyo University press, 1992), p.269.