127. Memorandum From the Deputy Assistant Secretary of State for Economic
Affairs (Kalijarvi) to
the Deputy Under Secretary of State (Murphy)1
Washington, July 18,
1956.
SUBJECT
- China Trade Controls Problem
In response to your request for a background summary on the history and
status of the China trade control problem, there are attached the following
tabs:2
- Tab A: Summary
- Tab B: Possible courses of action
- Tab C: Chronology of developments
- Tab D: Composition of embargo lists
- Tab E: Trade by members of CHINCOM with Communist China including CHINCOM exceptions
The urgency of the problem is brought into clear focus by the recent UK exceptions for Land Rovers and tractors
coupled with the UK statement of July 13
criticizing US inflexibility and formally raising the question in CHINCOM of the desirability of modifying
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the China controls. (See Paris
Polto 104 Tab F)3 It is probable that most of
the other PC’s are in substantial agreement
with the UK. In the Land Rover and tractor
cases concerning which the US was the only opposing country, several
important PC’s stated that they view these
cases as precedents to justify similar future cases of their own.
The present situation poses a difficult dilemma for the US Government. On the
one hand there is a growing determination on the part of most leading CHINCOM countries to effect drastic
modifications of CHINCOM controls and
further reduction of COCOM controls. On
the other hand the US has been opposed to any significant relaxation of the
China differential controls. In the face of this unresolved difference of
views, it is apparent that we are losing an effective multilateral China
trade control program. The general attitude of other CHINCOM countries, together with recent
unilateral actions by the UK in particular,
have created a situation where continued opposition by the US to any
significant weakening of the controls is now being used by the UK and others as an excuse for possible
abandonment of the entire multilateral control system on the ground that
constant US opposition “to the views of the majority” makes the system
increasingly unworkable. This places us in an untenable position in CHINCOM. A differential level of controls
over trade with Communist China has been, and continues to be, a basic
element in our overall Far Eastern policy strongly supported by Congress and
the American public. To salvage as substantial a differential as possible at
this juncture, serious consideration should be given to the possibility of
modifying China trade controls in the very near future on a basis which
would restrain CHINCOM members from
unilateral actions which have adverse effects on overall US policy in the
Far East. It is our judgment that, unless the US is prepared to concede,
however reluctantly, an immediate and significant readjustment of China
trade controls, we shall by the end of the year, if not sooner, find
ourselves unable either to preserve any CHINCOM differential at all or to forestall proposals already
voiced for a new relaxation of COCOM
controls.
Tab B
CHINA TRADE CONTROLS PROBLEM
Possible Courses of Action
The following courses of action are available for consideration:
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- a)
- The U.S. might take no further initiative at
this time in discussions with other PC’s on this problem. The other PC’s would assume that the U.S.
would not wish a CG meeting until
after the November elections. On the further assumption that the
U.S. inaction means “non-objection” each PC would probably approve shipments of embargoed
items as required by commercial pressures. Since exceptions
might be made over the entire range of the differential a
complete frustration of the differential could result, the only
limiting factor being U.S. or possible other PC opposition to cases submitted for
prior consultation.
- b)
- The U.S. might seek to identify through
consultations with other PC’s
as limited a list of items as possible which could be
exported under exceptions procedures without U.S.
objection. Such a list, to have any chance of
acceptance by other PC’s, would
have to include many items not on the list of 81 previously
approved by the NSC. It seems
questionable that it would be possible to reach
inter-departmental agreement on such a list within a short
period. If, in addition, the various negotiating objectives were
to be sought it is doubtful that negotiations could successfully
be concluded given the current attitudes of the UK and certain other PC’s.
- c)
- The U.S. might agree to negotiate a list of
CHINCOM items, based
on the Japanese counter proposal plus a limited number of
additional items of special significance to other CHINCOM countries, as to
which exceptions procedure could be applied without U.S.
objection for an interim period, assuming no worsening of
the Far East situation, and pending a CG review at a later date. This
alternative might meet with opposition within the U.S.
Government because of the strategic importance of some of the
items which would have to be included for exception treatment if
multilateral agreement is to be obtained; however, if negotiable
with the majority of CHINCOM
countries, it would deprive the rest of the majority support
they now have for a complete dismantling of the differential,
and would preserve in substantial measure the political and
psychological benefit of differential treatment of Communist
China in line with our Far East policy.
- d)
- The U.S. might seek an interim agreement
that the PC’s will limit
their exceptions cases now subject to Doc 782 … procedure in
return for which the U.S. would agree not to object to cases
meeting such standards and to participate in a CG meeting in late November or
early December to seek a definitive settlement of the
problem. In view of the recent UK proposal to extend the Doc 782 to the entire
differential there is some question whether this alternative
would be negotiable even as an interim measure.
- e)
- The U.S. might acquiesce in an extension of
the Doc 782 exceptions procedure to the entire
differential. This would have the effect of retaining
the form and letter of the controls but removing all substance,
thereby leaving only a meaningless control.
- f)
- The U.S. might agree to negotiate a
substantial reduction in the embargo list to be accomplished
in two or three stages over a specified period of time and,
assuming no worsening of the Far East situation, might agree
to a further review at a later date. This alternative
would probably meet with opposition within the U.S. Government
because of the strategic importance which Defense attaches to
practically all of the items on the China embargo list; however,
if negotiable with our Allies, it would permit an orderly
relaxation of the control level and at the same time allow the
preservation of at least part of the differential (i.e., a hard
core which might have political and psychological benefit). The
U.S. might hope to accomplish at the same time the addition to
the COCOM lists of copper
wire, boron, merchant vessels, and possibly one or two other
items.
- g)
- The U.S. might agree to acquiesce in the
removal of the differential by stages. As in the case
of the previous course of action, the U.S. might hope to
accomplish at the same time the addition to the COCOM lists of certain priority
items. This alternative would be inconsistent with our current
overall Far Eastern policy and, accordingly, negotiations along
these lines could not be considered without a full reappraisal
of this policy.
- h)
- The U.S. might agree to a complete
relaxation of the China trade controls to the COCOM level as favored by a
large number of other PC’s. This alternative is completely
inconsistent with our current overall Far Eastern policy and,
accordingly, negotiations along these lines could not be
considered without a full reappraisal of this policy.
