S/SNSC files, lot 63 D 351, NSC 5429 Series

No. 436
Draft Statement of Policy, Prepared by the NSC Planning Board1

[Extracts]

top secret
NSC 5429/4

Current U.S. Policy in the Far East

. . . . . . .

courses of action

5. In order to preserve the territorial and political integrity of the area, the United States should:

. . . . . . .

**c. Ratify the Mutual Defense Treaty with the Republic of China covering Formosa and the Pescadores, and jointly agree upon safeguards against Chinese Nationalist offensive action. Pending the ratification of such a Treaty, continue the existing unilateral arrangement to defend Formosa and the Pescadores (excluding the Nationalist-held off-shore islands). For the present, seek to preserve, through United Nations action, the status quo of the Nationalist-held off-shore islands; and, without committing U.S. forces except as militarily desirable in the event of Chinese Communist attack on Formosa and the Pescadores, provide to the Chinese Nationalist forces military equipment and training to assist them to defend such off-shore islands, using Formosa as a base. However, refrain from assisting or encouraging offensive actions against Communist China or seaborne commerce with Communist China, and restrain the Chinese Nationalists from such actions, except in response to Chinese Communist provocation judged adequate in each case by the President.

. . . . . . .

*7. In order to weaken or retard the growth of the power and influence of the Asian Communist regimes, especially Communist China, the United States should:

. . . . . . .

[Page 1010] [Page 1011]
Majority Proposal State Proposal
*c. (1) For the immediate future and pending completion of and U.S. action on the study referred to in (2) below, maintain the current U.S. export, import and financial controls on trade with Communist China, and strongly urge other free world countries to maintain their current controls on trade with Communist China and to refrain from such actions as sending trade missions to Communist China. **c. (1) Maintain the current level of United States export, import, and financial controls on trade with Communist China and administer these controls in such manner as to minimize friction with other Free World countries which might tend to lessen their active cooperation in the multilateral control program.
(2) An appropriate agency or agencies should study on an urgent basis, all aspects of U.S. economic defense policy applicable to trade with the Communist bloc (including Communist China), taking into account in such study, among other things, the matters set forth in Annex B, and should submit to the National Security Council at the earliest practicable date comprehensive and detailed recommendations for such revisions in such policy as may be required by national security interests, both long and short range. [Any future change in U.S. over-all economic defense policy should be premised on the concept that it is part of an over all negotiating position which seeks to obtain an appropriate quid pro quo from any friendly, neutral, or communist country profiting from any such change.] (2) Urge other Free World countries to maintain the current level of export controls on trade with Communist China. In aid of this effort, the U.S. should be prepared to exercise a greater degree of flexibility in handling problems of minor exceptions to the multilateral embargo.
(3) At a time determined by the Secretary of State, if feasible after the study referred to in (2) above is completed, begin consultations, particularly with the U.K. and France, looking toward agreement with the other cooperating industrialized countries of the free world on the extent, nature, and method of controls on trade with Communist China. (3) Whenever it may be determined by the Secretary of State that further effort to maintain the current multilaterally agreed level of export controls would be seriously divisive among our allies or lead nations needing trade with Communist China toward an accommodation with the Soviet bloc, the Secretary should report this determination to the Council together with his recommendations, including guiding principles for any negotiation relating to revision of the multilaterally agreed controls.

*/**d. Utilize all feasible overt and covert means, consistent with a policy of not being provocative of war, (*) to create discontent and internal divisions within each of the Communist-dominated areas of the Far East, and to impair their relations with the Soviet Union and with each other, particularly by stimulating Sino-Soviet estrangement, (*) but refrain from assisting or encouraging offensive actions against Communist China or seaborne commerce with Communist China, (**) and restrain the Chinese Nationalists from such actions, except in response to Chinese Communist provocation judged adequate in each case by the President.

. . . . . . .

Annex B

Matters to be Taken Into Account in a Study of Economic Defense Policy Applicable to Trade With the Communist Bloc

This Annex states suggestions, points of view, and other matters to which attention was called during Council and Planning Board discussion of NSC 5429/3, and which, pursuant to the majority proposal for par. 7–c (p. 11) of the foregoing statement of policy, would be taken into account in a study of economic defense policy applicable to trade with the Communist bloc.

[Page 1012]

I. Draft prepared by Special Assistant to the President for National Security Affairs of certain principles which the President desired to have studied, based on his comments at the NSC Meeting on December 1, 1954 during the discussion of par. 8–c of NSC 5429/3.

1.
In trading with Communist China or the European Soviet bloc, the United States and its major allies should operate under the same system of controls; except that the United States may also deny or limit, as appropriate, export of:
a.
Such strategic commodities as would contribute significantly to the war potential of the Communist country or Communist bloc, the U.S. unilateral control of which can reasonably be expected, because of U.S. production, supply, or technology, to be effective, in depriving such Communist country or Communist bloc of a significant contribution to the latter’s war potential.
b.
Other commodities, whether strategic or not, which raise such special political problems as to warrant U.S. export control in the absence of international controls.
2.
Whereas the trade controls exercised by the United States and its major allies with respect to Communist China need not at the present time be the same as the trade controls exercised by the United States and its major allies with respect to the European Soviet bloc, the United States and its major allies should move toward a common level of controls on trade with all countries of the Soviet bloc which would take into account the differing needs of the USSR and Communist China in further developing the war potential of each.
3.
The United States and its major allies should continue to embargo the export to all countries of the Soviet bloc of munitions, scarce metals, heavy fabricating machinery, items representing technological advances, and other items which contribute significantly to the war potential of the country to which exported.

II. Department of Commerce draft proposal for revision of par. 8–c of NSC 5429/3.

1.
At a time determined by the Secretary of State, with due regard to the issues then pending between Communist China and the free world (such as the unlawful detention of American military personnel), seek agreement with other free world countries to the principle that trade controls (export, import and financial) should be generally uniform for the entire Soviet dominated bloc both in Europe and Asia.
2.
In accordance with this principle develop a control program which would include: [Page 1013]
a.
A common export control list of commodities, services and technical data—less extensive and restrictive than the present CHINCOM lists but more extensive than the present COCOM lists—which would be applicable to the entire Soviet dominated bloc and which would reflect consideration of factors such as:
(1)
The objective of retarding the growth of war potential, including the war mobilization base, of the entire Soviet bloc including Communist China.
(2)
The relative ease of movement or transshipment of goods between the European and Asian Communist areas.
(3)
The extent to which Communist China’s military and economic development is dependent upon supplies and technical assistance from, and markets in, the USSR.
(4)
The probability that failure of the USSR or of China to meet its current and future commitments to the other for goods or services could become a significant cause of Sino-Soviet friction.
b.
An agreement from our allies that in trade with the Soviet dominated Bloc in nonembargoed commodities there should be no extension of long term credits by the free world to the Soviet dominated Bloc.
c.
An agreement that, prior to making effective any modification of free world trade controls towards China, the U.S. and other governments would explore the possibility of obtaining in return some concessions from Communist China on issues then pending between Communist China and the free world.
3.
In order to achieve this program the United States should:
a.
Undertake a major diplomatic effort and in that diplomatic effort use such leverage and bargaining power as is available in U.S. economic assistance programs, offshore procurement, adjustments in the Buy American Act, etc.
b.
Make clear to our allies, that U.S. concurrence in an adjustment of trade controls towards Communist China is conditioned upon their acceptance of the general approach set forth in paragraphs 1 and 2 above.
4.
Upon the adoption of this program, the United States embargo on imports and exports to Communist China should be lifted and controls should be adjusted in accordance with the principle that in trading with Communist China or the European Soviet bloc, the United States and its major allies should operate under the same system of controls; except that the United States may also deny or limit, as appropriate, export of:
a.
Such strategic commodities as would contribute significantly to the war potential of the Communist country or Communist bloc, the U.S. unilateral control of which can reasonably be expected, because of U.S. production, supply, or technology, to be effective in depriving such Communist country or Communist bloc of a significant contribution to the latter’s war potential.
b.
Other commodities, whether strategic or not, which raise such special political problems as to warrant U.S. export control in the absence of international controls.

III. Related Intelligence Estimates.

A.
NIE 100–5–54, “Consequences of Various Possible Courses of Action with Respect to Non-Communist Controls over Trade with Communist China”, in process.2 This report will include the Intelligence Estimate called for by NSC Action No. 1283–b, 228th NSC Meeting, December 9, 1954:

“b. Noted the President’s desire that a Special National Intelligence Estimate be prepared, as a matter of urgency, analyzing the net effect on Japan and on North China and Manchuria of an increased flow of consumer goods from Japan to Communist China in return for products from Communist China required by the Japanese economy.”

B.
SNIE 100–6–54, “World Reactions to Certain Possible U.S. Courses of Actions Against Communist China”, November 28, 1954.3
C.
NIE 13–54, “Communist China’s Power Potential Through 1957,” June 3, 1954.4
D.
NIE 10–7–54, “Communist Courses of Action in Asia Through 1957,” November 23, 1954.5

IV. MDAC [EDAC?] Comment on Intelligence Support.

Any attempt to apply COCOM controls to additional commodities will require extensive intelligence support. This support is prepared on an ad hoc basis, and is far more detailed than the material included in the national intelligence estimates. Specifically, in each case where we try to get back on the COCOM lists a commodity which has been dropped, the intelligence community will have to take the argument used earlier this year and attempt to strengthen our basis for negotiation.

V. FOA draft proposal for revision of par. 8–c of NSC 5429/3.

1.
At a time determined by the Secretary of State, if feasible after a study is completed, begin consultations, particularly with the UK and France, looking toward agreement with the other cooperating industrialized countries of the free world on the extent, nature, and method of controls on trade with Communist China.
2.
The United States objective in these negotiations is: [Page 1015]
a.
To establish a similar level of controls vis-à-vis the entire Communist dominated bloc including Communist China, the Soviet Union, and Eastern European satellites, with only such variations as may reflect peculiar circumstances in individual countries which could not easily be met by transshipment within the Communist area.
b.
To bring United States levels of controls to the same level as the controls maintained by other cooperating free world countries with only such variations of greater U.S. controls in those cases where U.S. sources alone can be effective in denying strategic matériel or technology to the Communist area.
3.
In the negotiations for the adjusted level of controls on trade with Communist China, seek at the same time to obtain agreement with other free world countries to increase the control on the Soviet Union and European Communist bloc on those items for which further intelligence information or further review indicate a net advantage in free world denial, particularly where such denial might achieve a divisive effect between Communist China and the Soviet Union.
4.
Place particularly high priority on the maintenance of controls on those items which affect the mass production of modern arms and weapons, such as aircraft, guided missiles, nuclear weapons and on communication and radar devices for conducting and countering atomic warfare at long range.

VI. Views of the Joint Chiefs of Staff. (Memo for NSC from Executive Secretary, “Current U.S. Policy Toward the Far East”, November 29, 1954).6

From a strictly military point of view, a trade control program which would impose maximum restrictions on trade with the Soviet Bloc and particularly with Communist China, would be most desirable. The Joint Chiefs of Staff recognize that the feasibility of certain courses of action designed to impose such maximum restrictions is uncertain in view of existing free world trade agreements and other economic and political considerations. However, more positive measures are necessary in the implementation of basic national security policy, because the timely achievement of the broad objective of such policy cannot be brought about if the U.S. is required to defer to the counsel of the most cautious among our Allies or if it is unwilling to undertake certain risks inherent in the adoption of dynamic and positive security measures.

  1. This draft policy statement included the revisions in NSC 5429/3 made by the National Security Council on Dec. 1 (indicated on the source text by an asterisk) and further revisions recommended by the Planning Board (indicated on the source text by a double asterisk). Only those portions which include revisions recommended by the Planning Board and which specifically pertain to China are printed here. NSC 5429/4 was circulated to the Council with a covering note of Dec. 10 by Gleason. For additional portions of NSC 5429/4 and further related documentation, see vol. xii, Part 1, pp. 1035 ff.
  2. Proposed by the Commerce and ODM representatives. [Footnote in the source text. The bracketed sentence appears in the source text.]
  3. NIE–100–55, “Controls on Trade with Communist China,” dated Jan. 11, 1955.
  4. Document 411.
  5. Document 209.
  6. Document 404.
  7. See footnote 4, Document 419.