693.119/4–2549: Telegram
The Secretary of State to the Consul General at Shanghai (Cabot)
841. [For] Cabot, Merchant and Clark. Following responsive urtels 1153 Apr 11,56 1182 Apr 13, 1338 Apr 25, 138857 and 1389 Apr 27:58 Dept and Commerce prepared announce R procedure59 China, Hong Kong, Macao and Korea but Dept reluctant take action prior Brit assurances cooperation for which we have been pressing.60 Realize announcement controls might have salutary effect Chi Commie actions, but consider this wld backfire if they became aware US controls could be subverted via Brit channels. Having approached Brit re joint policy, possibility their full cooperation might be jeopardized if US were take unilateral action.
Short of R procedure in force with full Brit cooperation, US Govt has no strong economic weapons that cld be placed ConGen’s hands. Withholding positive list licenses wld have only marginal effect. No legal basis obstruct imports other than by refusal ConGens (including ConGen Hong Kong) certify invoices. This already considered and rejected. US customs will require full value bond for entry China imports without consular invoices but this normal procedure. Dept considering with Treas feasibility and desirability various measures control Chi funds in US.61 Tentative Dept view, however, is that only practicable measure consistent present policy is protection US accts ChiGovt agencies by SecState certification under Fed Reserve Act Sec 25 (b)62 of reps ChiGovt authorized operate such accts.
Re export controls, Dept believes it wld be tactically unwise threaten severe econ restrictions ordinary Chi trade unless we were in position to create serious econ difficulties Chi Commies by concerted internatl [Page 937] action and fully intended to carry through. Basic decisions such action are of foreign policy character to be made by Dept and cannot be delegated field although Dept does and will consider fully recommendations from field. Present policy outlined NSC 4163 specifies resort econ warfare only if alternative course has clearly failed, and envisages consequences moderate trade policy wld, in any case, be discernible only over time. Abandonment this policy to be justified only on grounds overriding strategic considerations which by clear inference exclude consequences to private foreign interests of Chi Commie trade monopolies and other econ policies within Commie prerogative which circumscribe foreign business.
Despite foregoing there are important indirect leverages that can be brought to bear within context this policy in support private interests and consular functions. Knowledge R procedure per se shld have desirable conditioning effect provided its announcement and initial administration properly handled so as not to indicate immediate economic warfare. End-use controls under R procedure shld be exercised in large degree thru consulates and may bring Commies to respect their status. Licenses for exports subject to quantitative restrictions can be granted with first priority to applicants dealing with established and more reliable importers. (This procedure shld not be explicitly conveyed Commies, but might be implied directly and wld become apparent to them in due course.) Most important commodity to Commies is petroleum, most Chi imports of which not subj US export controls. Petroleum import limitation64 therefore dependent voluntary action foreign companies which have indicated desire cooperate restricting stocks minimum civilian requirements. However, they feel understandable apprehension re consequences their interests extreme curtailment deliveries and Dept could not expect them agree invoke sanctions for benefit all American official and private interests until US Govt prepared curtail entire scope diverse US exports to same end. Companies shld, of course, be encouraged attempt maintain distributing position China by continuing sales on restricted basis sufficient to keep Commies coming back for more, and might be expected voluntarily withhold deliveries if Commies were to violate their interests. In view unknown capacity USSR supply bed rock Chi requirements POL65 and other imports, together with possibility necessary China imports other non-US sources, oil companies and US Govt shld proceed cautiously in penalizing ordinary trade, short of overriding strategic justification therefor.
[Page 938]It can be expected that political hostility, attempt monopolize trade, calculated indirect pressure foreign business and uncertainty economic policies and procedures will characterize Chi Commie actions for immediate future. Assumption responsibility administration large portion China including more modern sectors economy shld result some adjustment reality, as in recently reported modification treatment intended Kailan mines. Such adjustments cannot be forced by open foreign pressure without grave risk extreme retaliation. We can afford await developments on basis present policy lines, reserving extreme measures to combat serious derogation vital US interest. Mukden is only instance bordering such contingency thus far, but for time being believe this shld be dealt with as special case and on other grounds.
- Not printed.↩
- Post, p. 1008.↩
- Post, p. 1251.↩
- Required licenses for all exports to Europe. The 1A and 1B lists were the core of the procedure.↩
- For correspondence on this subject, see pp. 817 ff., passim.↩
- For correspondence on this subject, see pp. 729 ff., passim.↩
- Federal Reserve Act approved December 23, 1913; 38 Stat. 251. Sec. 25 (b); procedure was established under P.L. 31, approved April 7, 1941; 55 Stat. 131.↩
- For this National Security Council document of February 28, see p. 826.↩
- For correspondence on this subject, see pp. 1002 ff., passim.↩
- Petroleum, oil, lubricants.↩