Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

136. Progress Report Prepared in the Department of State¹

Washington, September 27, 1956.

SUBJECT

• Multilateral Export Controls on Trade with Communist China

REFERENCES

• A. NSC Action No. 1540²
• B. Memo for NSC from Executive Secretary, subject: “Multilateral Export Controls on Trade with Communist China”, dated August 17, 1956³

Trade Controls Towards Communist China

1. The Department was unsuccessful in discussions with the UK and Japan in obtaining their support for the policy authorized in NSC Action No. 1540. For this reason additional negotiating authority was requested for further discussions with the other Participating Countries (PC’s)—CFEP 501/12 of August 7, 1956. The CFEP approved the Department’s recommendations which in turn were approved by the President.

2. In accordance with the agreed interim policy, discussions were resumed with the Japanese Embassy on August 20 to seek agreement on a specific list of items for liberalized exceptions treatment. Japanese consideration of this new proposal took a longer time than had been anticipated. Informal advice to our Embassy in Tokyo was that the situation had changed since May when Japan had submitted its counter-proposal (on which the new US proposal made a compromise offer) and that our proposal probably would not be acceptable to Japan. In addition, during the last few weeks the situation in CHINCOM has continued to deteriorate further as a result of several large exceptions cases under the Doc. 471 procedure (prior consultation, quid pro quo justification). Late in July the British licensed shipments of heavy tractors and Land Rovers over our objections and in the face of the informal unanimity “rule” under which PC’s have refrained from making exceptional Doc. 471 shipments to Communist China which one or more of the PC’s have opposed. Germany and Italy have since been using the UK cases as precedents for similar action.

3. In view of the status of the situation as outlined above, the Department considered it important that bilateral discussions regarding the interim policy be initiated with the other PC’s at the earliest possible date. Since we had been unable to reach agreement with the Japanese on the first alternative within a reasonable time and since events were quickly overtaking the US position, the Department determined, consistent with its negotiating authority, that its discussions with the other PC’s should be along the lines of the more general formula outlined in paragraphs 2(d) and (e) of Mr. Randall’s memorandum of August 16(Reference B). These discussions were held on September 8 with the Japanese Embassy and on September 12 with the Embassies of the other PC’s. All of the Embassies agreed to inform us of their views as soon as received.

4. To date we have been advised that our proposal is acceptable to Japan on the understanding that it will be accepted by the other PC’s as well. In connection with our discussions with the UK We have requested the American Ambassador in London to make additional representations to the British Foreign Minister. (Copies of communications with the field and memoranda of conversation have been made available to the interested agencies through established channels.)

5. As a further point, there has been some indication (still difficult to evaluate) from our Embassy in Paris that the French Government, for the time being, will not follow the UK and German lead in licensing prior-consultation items to Communist China and even had stopped licensing Doc. 782 and certain unlisted items. This position did not represent a change in the basic French attitude toward the China differential but rather the Foreign Minister’s desire to follow a policy of “absolute cooperation” with the US during the Suez crisis. An earlier report stated that the British had agreed with the French that, because of the Suez problem, this was not the proper time to press the US for action on China controls. It is not clear whether either France or the UK will request or expect some special assistance from the US on Suez in return for what they consider unusual restraint in the China trade controls area.

6. The Department will keep the Council advised of the status of the discussions with the other PC’s concerning China trade controls.

Other Negotiating Objectives

7. The course of action approved August 17 noted that the additional negotiating objectives whose achievement was designated in NSC Action No. 1540 as a sine qua non for any relaxation in the US position in China trade controls should no longer be so regarded, but should be pursued on their merits at the most propitious time. The objective for copper wire specifically was changed from embargo to quantitative control. Progress on the most specific of these objectives may be briefly summarized.

8. With respect to the objective of working toward a closer coordination of the Consultative Group and the North Atlantic Treaty Organization in the field of East-West trade controls and related matter, this aspect has been noted in the US responses to the NATO Questionnaire which was circulated by the three Foreign Ministers who were asked by the North Atlantic Council to look into the appropriate role for NATO in non-military fields and to report to the Ministerial Meeting in December. The US response specifically states that “…⁴ NATO should give continuing attention to concentrating economic strategy vis-à-vis the Soviet bloc and, in particular to the maintenance of common policies on the COCOM–CHINCOM strategic trade controls.” This objective is also being included as an element in the review of economic defense policy by the EDAC pursuant to the CFEP decision of July 31, 1956.

9. With respect to the embargo of boron materials, the US proposal has been submitted to COCOM and supporting bilateral negotiations have been undertaken preparatory to consideration by the Committee. We have received a large measure of acceptance for our proposals from most PC’s. Methods of relieving the dependence by Turkey upon sales of such materials to the Soviet bloc are being pursued.

10. With respect to copper wire, as soon as inter-agency agreement can be reached upon the quantitative control objective to be sought for copper wire, such a proposal will be made to the UK and subsequently to the other PC’s.

1. Source: Department of State, Central Files, 493.009/9–2756. Secret. Forwarded to the National Security Council under cover of a memorandum from Dulles to Lay, September 27. Another copy of this progress report is ibid., S/S–NSC Files: Lot 62 D 1, Communist China: Multilateral Export Controls on Trade with.
2. See footnote 14, Document 113.
3. See footnote 3, Document 132.
4. Ellipsis in the source text.