Foreign Relations of the United States: Diplomatic Papers, 1942, China

893.24/1366

Memorandum by the Assistant Chief of the Division of Commercial Policy and Agreements (Ross)

[Washington,] April 7, 1942.

Reference is made to TA’s memorandum of March 16 (copy attached)⁶ and to a meeting held subsequently in Mr. Hamilton’s office last week to discuss the proposed negotiation of a master lend-lease agreement with China along the lines of the British lend-lease agreement. In addition to Mr. Hamilton, the meeting was attended by Mr. Lauchlin Currie,⁷ Mr. Hornbeck, Mr. Adams⁸ of FE, Mr. Bunn and Mr. Thomas of DE,⁹ Mr. Johnson¹⁰ of DM and Mr. Ross of TA.

It was generally agreed that a lend-lease agreement with China on the British model would be desirable and that TA should collaborate with DE in preparing a draft of such an agreement. This draft is attached.¹¹

Mr. Johnson raised the question whether payments to China for strategic materials exported to this country might be precluded by the proposed agreement, thereby interfering with the procurement of such materials. He was assured that such payments would not be precluded.

It will be noted that the second paragraph of the preamble of the attached draft agreement with China does not appear in the British lend-lease agreement. This paragraph appears in the attached draft as it was recommended for inclusion in the master lend-lease agreement with Australia and reads as follows:

“And whereas the Governments of the United States of America and the Commonwealth of Australia, as signatories of the Declaration by the United Nations of January 1, 1942,¹² have subscribed to a common program of purposes and principles embodied in the Joint Declaration of the President of the United States of America and the Prime Minister of the United Kingdom of Great Britain and Northern Ireland, known as the Atlantic Charter;”¹³

However, the question was raised in Mr. Hamilton’s office whether the specific reference to the Atlantic Charter in this paragraph would be appropriate in a lend-lease agreement with China, since China is not an Atlantic power and since there has been some talk of a “Pacific Charter”. It was suggested that this question might be avoided by dropping the last part of the paragraph, beginning with the words “embodied in the Joint Declaration …”

From the point of view of this Government the question of the scope of the Atlantic Charter was raised, and answered by the President, on January 2, the day following signature of the United Nations Declaration. The President replied to a question at his press conference that day, in regard to a possible pact relating to the Pacific, to the effect that the Atlantic Charter covered the whole world (Department’s Radio Bulletin No. 1, January 2). The President is also reported to have said that the Charter got its name only from the place of its signature. The language of the Charter itself, of course, indicates that it is world-wide rather than regional in scope.

From the Chinese point of view there would seem to be no reason to believe that any serious question would be raised by that Government in regard to the specific reference to the Atlantic Charter in the preamble of the proposed lend-lease agreement. The language of the entire last part of the proposed paragraph, beginning with the words “subscribed to a common program …”, is identical to the language of the preamble of the United Nations Declaration which was signed for China by her Foreign Minister.¹⁴

It seems highly desirable that this paragraph be included in the lend-lease agreement with China, and in all lend-lease agreements with signatories of the United Nations Declaration, in order to emphasize by reiteration the importance which our Government and “other governments of like mind” attach to the principles of the Charter, and in order to reemphasize that the principles of the Charter are not in any sense limited in geographic scope. It may be added that the addition of this paragraph does not represent a difference of substance as compared with the British agreement; the British Prime Minister was one of the two original signers of the Atlantic Charter and there was therefore no need to include such a reference in the preamble of our agreement with the United Kingdom.

A question was raised by Mr. Currie in Mr. Hamilton’s office as to the appropriateness in the case of China of the reference to the “reduction of tariffs” which occurs at the end of the first paragraph of Article VII of the British lend-lease agreement and the attached draft of the proposed agreement with China. This question was raised by Mr. Currie on the ground that China may have a great industrial development after the war and may wish in this connection to impose tariffs as a means of protecting her infant industries in that period. He felt that a commitment by China in regard to the “reduction of tariffs” might, as a result of pressure by American exporters, tend to become a cause of irritation between the two Governments and even preclude the imposition of tariffs by China to protect her infant industries.

The “infant industry” argument in support of protective tariffs is virtually as old as the tariff question itself and has led more often than not to excessive protection of inefficient industries. Presumably, however, Mr. Currie did not have in mind that it would be in China’s interest to impose excessive tariffs which would unduly burden that country’s consumers and her foreign trade.

It is not believed that the words which Mr. Currie questioned would in any sense preclude the imposition by China of such tariffs as were not excessive or discriminatory and this was pointed out to him. It was also pointed out that Article VII is not in itself conclusive; on the contrary, it lays down broad principles which require implementation. As Mr. Hamilton has subsequently indicated, the second paragraph of Article VII deals with the question of implementation and states specifically that the best means of attaining the desired objectives shall be determined “in the light of governing economic conditions.” Such factors as the future industrialization of China would of course be taken into account in any discussions or negotiations for the purpose of implementing the principles laid down in Article VII; for example, the Chinese Government has recently and in the past expressed an interest in negotiating a trade agreement with the United States. It was pointed out to Mr. Currie in this connection, that Article VII, being reciprocal in its terms, would commit this Government in principle to the reduction of its tariffs and that this commitment would be desirable from the Chinese point of view, particularly since that Government has expressed an interest in trade agreement negotiations. Under our trade agreement policy, in return for concessions granted by this country, we would seek reductions or bindings of Chinese tariffs only on products of particular interest to us; in regard to other tariffs we would seek only nondiscriminatory treatment.

Finally, it was pointed out that the omissions of a reciprocal commitment involving the possibility of tariff reductions from the proposed lend-lease agreement with China would be open to misunderstanding and misinterpretation which would in all probability have a more serious and permanent adverse effect on our relations with China than the inclusion of this commitment could possibly have.

6. Supra.
7. Administrative Assistant to President Roosevelt, with primary responsibility for Lend-Lease matters for China.
8. Walter A. Adams.
9. Division of Exports and Defense Aid.
10. Hallett Johnson, Assistant Chief of the Division of Defense Materials.
11. Not attached to file copy of this document.
12. Department of State Executive Agreement Series No. 236, or 55 Stat. 1600.
13. Joint Declaration by British Prime Minister Churchill and President Roosevelt, August 14, 1941, Department of State Bulletin, August 16, 1941, p. 125.
14. T. V. Soong.