Foreign Relations of the United States, 1952–1954, China and Japan, Volume XIV, Part 2

S/S–NSC files, lot 63 D 351, NSC 125 Series

No. 587
Memorandum by the Deputy Assistant Secretary of State for Economic Affairs (Linder) to the Acting Secretary of State

top secret

[Washington,] August 6, 1952.

Subject:

• Japanese Export Controls on Trade With China—NSC 125/1

An issue has developed with Defense over the wording in NSC 125/1 setting forth United States policy objectives with respect to Japanese export controls on trade with communist China. Split versions have accordingly been submitted to the NSC.¹

The substantive difference between the two Departments is this: Defense wants us to continue to put pressure on Japan to maintain substantially intact the complete embargo on all exports to communist China, including exports of non-strategic goods, which was instituted during the period of the Occupation. The Department believed our policy aim should be to limit the embargo to strategic items and that the Japanese should be permitted to relax controls on the export to China of non-strategic goods. There are several reasons why we feel the Defense version should be strongly opposed:

1. We have within the last two weeks reached an understanding with the Japanese, which has been set out in an exchange of notes,² that they will embargo all items on the United States security lists plus such other items as we and Japan agree should be embargoed on strategic grounds. This is a higher level of control than that exercised by any country other than the United States. This understanding implicitly provides leeway for the export of non-strategic goods. If we now put pressure on Japan to embargo all items (using as a sanction for this purpose our own controls on exports to Japan) American good faith in entering into this agreement will be brought into question.

2. Defense and Commerce recognize through familiarity with recent negotiations that with Japan’s present sovereignty there is no practical hope of obtaining agreement on embargo of items of other than strategic value. This is substantially more than the Japanese expected to give—having arrived here with the notion that they would not accept more than the level of controls agreed multilaterally.

3. Some degree of trade between Japan and China is essential to the economic viability of Japan, which is set forth as an objective of United States policy elsewhere in NSC 125/1. JCS recognizes the economic well-being of Japan will greatly influence her military capabilities.

4. A rigid embargo on all Japanese exports to China will intensify Japanese competition in free-world markets and make more difficult our efforts to bring Japan back into the free-world trade community. Fear of vigorous Japanese competition has led the British, the Australians, the Canadians and others to oppose our policy of promoting fair and equitable treatment of Japanese trade. If we cannot develop reasonable trading outlets for Japanese exports, both in communist China and elsewhere, we may well be faced with demands from Japan for some kind of foreign aid for which Congress is not prepared.

5. The Defense policy objective would get us into a situation of constant haggling with the Japanese Government over the embargo of particular items, with the United States threatening at each stage to clamp down on United States exports to Japan. We know from past experience that this sort of relationship would become a source of serious irritation and would adversely affect the achievement of other objectives in our relations with the Japanese. In the case of Japan this kind of pressure would produce a special political hostility to the United States because it would be claimed by many Japanese that the United States was attempting to continue its dominance over Japan in the period of independence.

6. There is no substantial security objective to be served by maintaining an embargo on exports to China of non-strategic items. The sole purpose of a complete embargo, such as the United States applies, is one of moral condemnation. In the case of Japan the importance of this end is far outweighed by the other economic and political factors mentioned above.

Recommendation:

That you support the State version of the policy objectives limiting Japanese export controls to strategic goods.

1. See Document 579.
2. See Young’s memorandum to Johnson, Document 584.