Foreign Relations of the United States, 1950, East Asia and the Pacific, Volume VI

493.94/1–1350: Telegram

The Department of the Army to the Supreme Commander, Allied Powers in Japan (MacArthur)

top secret

Washington, January 13, 1950—7:52 p. m.

War 98471. From SAOUS cite OUSEU. Reurmsg May C 50099 Nov C 53666.² Subj is Trade With China and Adjacent Communist Areas.³ This cable in 3 parts.

Part 1. After urgent and prolonged consideration problem trade Japan with Commie China and adjacent areas Depts State and Army have accepted your views contained in Paras 1A thru 1E urad C 53666. 30 Dec President apd NSC 48/2⁴ dealing with trade US and occupied Japan with China and adjacent areas, thus making possible State and Army acpt, in principle, recms 2(1) and 2(2) urad C 53666. Further, in view of SCAPS concurrence as expressed in C 50099 to close coordination between SCAP and US on US Export Control Program for Far East, it is our op that you will wish to control the export by Japan of strategic items to the USSR, Communist China and other Sov satellites. Your gen views now supported by US policy concerning trade with Communist China as stated in Para 3F(4) of NSC 48/2. This para is quoted below for your info:

“The US should, as a security meas, seek to prevent the USSR, its European satellites, and North Korea from obtaining fr abroad thru China supplies of strategic materials and equip which are currently denied them by the US and its European allies thru direct channels. The US should also use every effort to prevent the Chinese Communists fr obtaining fr non-Sov sources supplies of materials and equip of direct mil utility (1 A items).⁵ The US should, on the other hand, permit exports to China of 1 B items⁶ within quantitative limits of normal civilian use and under controls which can be applied restrictively if it becomes nec to do so in natl interest and should place no obstacle in the way of trade with China in non-strategic commodities. The US should seek the support and concurrence of its principal European allies in these policies. The US should not extend governmental economic assistance to Communist China or encourage private investment in Communist China.”

Part 2. Fol for your info and guidance is US pos re treatment of Japanese trade with USSR, its eastern European satellites, China, including Taiwan and Manchuria, and adjacent areas:

A. Jap exports of 1 A items to USSR and eastern European satellites should be denied.

B. Jap exports to Commie China, including Manchuria, and North Korea of items appearing on the 1 A list should be presumptively denied. Exceptions should be made only fol reference particular cases Wash where such cases may be made subj consultation UK, Neth, France, Belgium.

C. Orders for Jap exports of 1 A and 1 B list goods to Jugoslavia and Finland should be referred to Wash for advice.

D. Orders for Jap exports of 1 A list goods to Taiwan should be referred to Wash for advice.

E. Jap exports to North Korea, USSR, and eastern European satellites of 1 B items should be permitted only when, in your judgment, the advantage fr a particular transaction to Jap economy is sufficiently important to justify whatever contribution to North Korea or Sov and European satellite industrial potential might result.

F. Jap exports of 1 B items, to China, including Manchuria and Taiwan, should be permitted on basis usual commercial considerations provd:

(1) Such exports are denied when, in your judgment, they would be used for direct mil purposes or would be transshipped via China, particularly Manchuria, or adjacent non-Commie areas to USSR, eastern European satellites or North Korea.

(2) Controls are imposed at least as restrictive as may hereafter be imposed by the UK or western Europe. Although no multilateral agreement on limitative controls to China over 1 B list items of the R Program now exists, US hopes to develop comparable action by certain European countries. In this connection we will advise you restrictive actions other govts and any gen restrictive agreement if obtained.

G. Trade transaction now pending Tokyo should be acted upon in accordance with principles stated above.

Part 3. Request monthly reports re Jap trade transactions pending or completed with China, Korea and Hong Kong involving any 1 B exports. Also interested trade proposals for 1 A and 1 B items denied. This info desired prov a comprehensive basis for overall consideration (both here and with certain European countries) of effective limitation by the individual countries including the US. For your info, UK, Denmark and Italy now prov such info on a reciprocal basis.

2. Neither printed.
3. For previous documentation on United States interest in Chinese Communist efforts to revive trade with Japan, see Foreign Relations, 1949, vol. ix, pp. 973 ff
4. For text see ibid., vol. vii, Part 2, p. 1215.
5. I–A items were those usually considered to be of direct military utility, licenses for the export of which were required from the Department of Commerce under the so-called R procedure designed to control trade in strategic materials with the Communist countries.
6. I–B items generally consisted of capital goods of multipurpose character which might be of military or strategic value; licenses for the export of I–B items were required from the Department of Commerce under the R procedure.