893.50 Recovery/6–2448: Telegram
The Secretary of State to the Ambassador in China (Stuart)
Washington, June 24, 1948—11
p.m.
920. Comments have been deferred re Embtels 1082 June 14 and 1084, June 15 pending revisions certain standard Articles being negotiated UK, France, Denmark and Sweden on behalf OEEC countries. Changes have now been made and Dept believes most of them should be applied China Agreement. Many provisions have been recast and condensed so as to improve appearance from viewpoint of other Govts. Please transmit immediately to Fonmin revised text which will follow separate telegram.18 Comments below offered in explanation application to China Agreement of revisions in standard articles as well as responsive reftels.
- 1.
- Preamble. Dept agreeable Fonoff suggestion Embtel 1010 June 5 but proposes drafting change in second paragraph as indicated accompanying text. Emb may wish relate this concession of form to negotiation more difficult points of substance.
- 2.
- Article I (Assistance). Redrafted to make unnecessary original paragraph 2 which should be deleted. European draft, second sentence reads in part “and subject to all of the terms, conditions and termination provisions of, et cetera”. Since Title IV contains “termination provisions” only by interpretation applicable provisions Title I, last sentence this Article has been retained from previous draft to avoid ambiguity, although this sentence is no longer employed European Agreements.
- 3.
- Article II (General Undertakings). Paragraph 1 (a) expanded to include essence of previous Article IV paragraph 1, and Article VI. New paragraph 2 represents previous paragraph 2 of Article V. Intended that minutes of negotiations to be appended as Annex to signed Agreement, indicate that requirements paragraph 1 (a) (i) of new Article II include effective measures for safeguarding aid goods and for preventing their diversion to illegal or irregular markets or channels of trade. Word “undertakes” at end of introductory sentence para 1 has been replaced by “will use its best endeavors” in European agreements. ECA feels “undertakes” should be retained China agreement and Dept does not object. Emb should explain to Fonmin this change in European agreements but should emphasize that retention “undertakes” China agreement reflects belief this agreement should stand on its own feet and that there should be no question regarding Chinese intentions points specified this Article.
- 4.
- Article III (Improvement of Commercial Relations). Will be forwarded promptly.19
- 5.
- Article IV (Principles of Distribution). Paragraph 1 deleted and rephrased under Article II paragraph 1 (a) (i) as indicated above. Dept interested learn exact text presented Chinese and their reaction thereto (Deptel 892 June 17). In line with telephone conversation Lapham–Gilpatric–Cleveland,20 22 June, ECA agrees use word “prices” instead of “price policies” in para 4. Dept does not object.
- 6.
- Article V. Previous para 1 re MFN treatment deleted on understanding MFN for occupied areas will be handled through exchange notes, draft of which being sent separate telegram.21 Former para 1 (a) considered unnecessary in view unconditional MFN treatment already obtained GATT and Treaty. This procedure should meet ChiGovt’s objections in part. Fonmin’s point that neither Japan nor southern Korea included “participating countries” irrelevant since China is not participating country of OEEC either. Dept suggests Emb explain that US attaches great importance in its foreign economic policy to principle of MFN treatment; that since occupied areas represent economic burden on U. S. and U. S. aid will help Chinese economy, it is only fair to require that equitable treatment be accorded commerce occupied areas. Previous para 2 on restrictive business practices shifted to new Article II, para 2. New Article V deals with local currency Special Account. Dept and ECA awaiting Lapham comments NAC change paragraph 5 reference Deptel 900 June 19 and Embtel 1103 June 21. Note that if NAC change introductory sentence para 5 adopted, subparagraph 5(a) re sterilization should be [Page 565] deleted and remaining subparagraphs relettered accordingly. Dept assumes that Fonmin’s proposal adopt exchange provisions USEF22 agreement in Article VIII (Embtel 1082 June 14) intended apply previous Article VII. Unable understand why Fonmin reverted this proposal after alternative proposal exchange rate (Embtel 1010 June 5 Section 7) had been accepted (Deptel 861 June 9). Latter proposal should be retained.
- 8.
- [sic] Article VI. Previous text re assets in US deleted and this undertaking appears present Article II paragraph 1 (a) (ii). Article VI now deals with access to materials and has been subject only minor drafting changes.
- 9.
- Article VII previously local currency Special Account; now relates relief supplies previously dealt with under Article X. Only minor drafting changes made this Article.
- 10.
- Article VIII. Text relating consultation exchange rate policy (Deptel 900 June 19 erroneously referred to as Article VII) has been deleted in consultation NAC as result European objections. Deletion this Article in European agreements justified partly by retention undertaking in Article II paragraph 1 (c) to maintain valid rate of exchange, and general consultation Article. Although Article II para 1 (c) in China draft is weaker, question of exchange rate policy can probably be subsumed under it should the US desire consult with Chigovt on this matter. Fonmin should understand this possible alternative approach, although it is probably entirely unnecessary and undesirable make strenuous effort elicit Chinese interest re exchange rate consultation which could place responsibility on U. S. Govt.
- 11.
- Present Articles VIII and IX represent redrafting of previous Article XI and are self-explanatory. Article VIII conforms new European draft and Article IX paragraph 1 remains unique for China.
- 12.
- Article X (Missions) represents minor revision of previous Article XII. Concluding phrase paragraph 2 first sentence “of comparable rank” should meet Fonmin’s objection previous language (Deptel 873, June 11 and Embtels 1106 and 1109, June 21). Present draft standard all agreements.
- 13.
- Article XI (Settlement of Claim of Nationals), previous Article XIII, being redrafted and will be forwarded promptly.23
- 14.
- Article XII (Entry into Force, Amendment, Duration) previous Article XIV, has been revised European draft to include special reciprocal termination provision which takes account possibility change in basic assumptions underlying agreement, life of which extends considerably beyond period of present appropriation. Since [Page 566] this not the case for China, Dept believes previous Article XIV should be retained as Article XII with addition indicated separate telegram.
Marshall