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

Executive Secretariat Files: NSC 92 Series

Memorandum by the Assistant Secretary of the Treasury (Martin) to the National Security Council Senior Staff ¹

top secret

Washington, December 12, 1950.

Subject: The Position of the United States Regarding a Blockade of Trade With China

References:	A. NSC 92
	B. Memorandum for NSC from Secretary of the Treasury, dated December 6, 1950
	C. Memorandum from Dr. Jessup to Mr. James S. Lay, dated December 8, 1950

1. Dr. Jessup’s memorandum of December 8 does not address itself to the central problem raised in the memorandum of the Secretary of the Treasury, namely, that this Government is now in a position of having inconsistent trade and financial policies with respect to China. We have placed a de facto embargo upon exports to China and have made this position clear to the public, although nominally exports are subject to individual licensing. At the same time we are permitting China to utilize existing dollar assets and current dollar earnings for purchases in third areas of commodities whose export from the United States to China is prohibited by our trade policy and for other purposes which are likely to be inimical to United States interests. Chinese dollar earnings from exports to the United States were at an annual rate of $154 million in the third quarter of 1950.

2. Dr. Jessup’s memorandum gives no justification for continuing with inconsistent trade and financial policies; nor does it comment on the possibility of early action to bring the policies of our allies in line with existing United States policy.

3. A further point which should be noted with respect to the problem of instituting parallel trade and financial controls vis-à-vis China. As stated above, our present trade policy with respect to China is to place all exports on a licensing basis, but de facto the effect is one of an embargo on United States exports to China. If it is desired, financial controls with respect to China might take a similar from, i.e., all financial transactions with China could be placed under individual licensing.

4. There would appear to be no reasonable basis on economic or financial grounds for justifying our inconsistent trade and financial policies with respect to China. If our failure to act in the financial field is questioned, the defense must be based entirely on considerations of foreign policy.

Wm. McC. Martin, Jr.

1. The source text bears the designation: “Draft for NSC Staff Consideration Only.”