693.119/5–549: Telegram
The Consul General at Shanghai (Cabot) to the Secretary of State
[Received May 5—3:49 p. m.]
1522. Under circumstances set forth Deptel 841, May 3, we in entire accord Department’s position which closely parallels our own thinking here. We appreciate that no effective economic controls can be established without at least British concurrence, and British, because of heavy investments and commercial interests in China, for present do not want make any commitment take any drastic action even in event serious injury foreign commercial interests.
Consulate General fully agrees we should make no threat or any action unless we are prepared to carry it out and believe it will be effective. Consulate General appreciates Department must make decisions re any action taken and that field can only recommend (see ConGen telegram 1388, April 27, 10 a. m.66). As Consulate General previously indicated, it hopes moderate trade policy will relax present tension and favors conciliatory approach. We do feel, however, Communists’ immediate needs on taking Shanghai will augment their apprehensions possible adverse action on our part and therefore force of any representations we may make. Institution R procedure in conjunction similar move by British coupled with willingness trade with Communists as long as they act in any reasonable manner should, we believe, produce results.
[Page 939]Assuming British cooperation in R procedure, method public presentation and timing both important. If R procedure imposed without explanation we believe Communists might interpret as initiation economic warfare by “imperialist capitalism” and so treat in propaganda. If explanations deemed appropriate, we might explain mere desire obtain information re nature trade and identity traders during period political uncertainty. We realized Department might have no effective means controlling oil exports from Middle East and appreciate this weakens our position. We feel nevertheless mere fact Communist dependence foreign oil imports will be sobering factor, especially since maximum 30–day stock they will find here provides dangerously thin margin. As for pressure achieve our objectives, we feel it would be impossible now determine at what precise point it should be used, if ever.
Sent Department 1522, repeated OffEmb Canton 404 (for Clark), Taipei as 91 (for Merchant).