893.24/1717

The British Embassy to the Department of State 1

Aide-Mémoire

The position in regard to civilian supplies to China has been the cause of concern to the U. K. authorities for some time past, and they have been considering what steps might usefully be taken to improve the present somewhat unsatisfactory situation.

As far as the U. K. authorities themselves are concerned they are naturally anxious to do whatever they can, subject to considerations of supply and transport, to meet the orders which the Chinese Government wish to place in the U. K. Under present circumstances, however, they find great difficulty in dealing with individual Chinese orders owing to their lack of information on a number of very relevant points. For example it is important for the U. K. authorities, in present conditions of shortages of materials and production capacities, to know before deciding whether or not to accept a Chinese order the degree of importance or essentiality which should be placed on the particular order. Otherwise there is a risk of valuable production facilities in the U. K. or much needed shipping space being used for articles which subsequently turn out to be of little real value to the Chinese war economy. The essentiality of these Chinese orders can only be established on the spot in China, but at present the machinery for doing so is lacking.

Again, it is important for the U. K. authorities before deciding whether to make supplies available in response to a request from the Chinese, to be sure that a similar order has not been placed elsewhere or duplicated by some other department of the Chinese Government. But at present the absence of information regarding the commercial orders placed or being placed by the Chinese authorities in the U. S. or of the supplies being made available to them under Lend-Lease makes it difficult for the U. K. authorities when considering Chinese requests addressed to them to be sure that no such duplication is taking place.

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Furthermore as long as the Chinese are dependent upon air transport for obtaining their supplies from the U. K. and U. S., it is inevitable that only a very small proportion of the goods which they want and which the two countries can supply can in fact reach China. It is obviously desirable that the best use should be made of the limited space available for the import of civilian supplies into China and that those supplies which are flown into China should be those which the Chinese most urgently need. It is equally desirable that as long as transportation facilities are so strictly limited, scarce materials or valuable productive capacity should not be devoted to producing goods which have no chance of reaching China within the period during which they are required. However, unless and until some closer coordination between Chinese requirements and U. S. and U. K. supply policy and supply action can be established it will be impossible to achieve these objectives.

Finally it is important that in arranging for supplies to China, regard should be had to the transport facilities, storage capacity, etc., available in India. Otherwise there will be a risk of valuable stores being mislaid or deteriorating, or of an undue strain being placed on transport and other facilities at a time when military operations are laying a heavy burden on them. In the absence, however, of some coordination of information regarding civilian supplies despatched from the U. K. and the U. S. to India for onward transport to China it is difficult to guard against this danger.

It is of course true that the contribution in respect of civilian supplies which the U. K. can at present make to China is small compared with that of the U. S., but this fact does not make the supply problems of the U. K. any simpler—as will indeed be seen from the specific cases of difficulty quoted in the first annex to this note2—nor make the need for a full understanding between the U. K. and U. S. on supply policy and supply procedure with regard to China any less.

In the hopes of bringing about an improvement in the situation the U. K. Government suggested in the British Embassy’s note of July 27th, 1943,3 that consideration should be given to the possibility of setting up some machinery in Chungking for the “screening” of Chinese non-military requirements. Subsequently as the U. S. authorities were unofficially informed a tentative suggestion was made in London that some kind of combined Transit Board might be set up in India to supervise the storage and on-shipment of goods arriving in India for China.

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The State Department replied on November 27th4 to the Embassy’s communication of July 27th, explaining that the U. S. authorities, though they were anxious to see the principle of joint “screening” extended wherever practicable, thought it premature to set up any formal “screening” machinery in Chungking at this stage.

The State Department added, however, that the U. S. Government would be glad at all times to collaborate with the U. K. Government in any steps which might usefully be taken to facilitate the flow of supplies into China and taking advantage of this assurance the U. K. Government now wish to put forward the following proposals which have been drawn up in the light of recommendations made by Mr. Mair of the British Ministry of Supply who recently visited India and China where he had the advantage of discussions with Mr. Ray of F. E. A.5 and other U. S. officials.

A. Combined Anglo-American Action in Chungking.

For the reasons set out above the U. K. authorities feel that it is most important to devise some form of Anglo-American examination in Chungking of Chinese civilian requirements which would enable agreement to be reached on the spot with the Chinese authorities on China’s essential requirements, having regard to the available transport capacity. The fact that the quantities of such supplies which can actually be delivered are limited by the difficulties of transport seems to make such examination of the requirements all the more necessary. Only by some such procedure can one be certain that the best is being done to meet China’s most urgent needs while at the same time ensuring that no unjustified demands are made on U. S. or U. K. supplies or productive capacities. No elaborate machinery would be required. It would be sufficient to have at Chungking representatives of the U. S. and U. K. who would examine with the Chinese authorities their import requirements for a given period from all sources and relate it to the available transport capacity. A member of the British Embassy at Chungking is already entrusted with the task of examining in this way all Chinese demands on the U. K. and he would be available to act as the U. K. representative in any combined examination of requirements of the kind suggested.

B. Combined Anglo-American Consultation in Washington.

It is suggested that some closer liaison should be established than at present exists between the appropriate U. S. Agencies and the interested U. K. Missions in Washington to deal with matters of common interest concerning civilian supplies to China. If such liaison could be effected then perhaps without the necessity of setting up any formal “Area Committee”, machinery would be established which [Page 955]would provide the means not only for a regular exchange of information on Chinese supply matters but for handling the import requirements agreed on in Chungking. Such a piece of machinery in Washington would enable the U. S. and U. K. authorities to consider these requirements and agree on sources of supply and each country would then be able to make its contribution knowing that there was no duplication and that air transport into China was assured. In regard to the question of sources of supply, the U. K. authorities would propose that in order not to disturb Chinese susceptibilities, the Chinese Government should, subject always to the recommendations of the Combined Boards, continue to make the first selection of source of supply as at present. If that source could not meet the demands then it would be for the U. S. authorities to suggest an alternative. This alternative source would be agreed with the U. K. authorities and then put to the Chinese Government.

This piece of Anglo-American machinery—which might well be organized on a purely informal ad hoc basis—would also be useful in providing a place for discussing general questions of supply policy towards China. A number of such questions have recently been posed by the authorities in London and are set out in the second annex to this note. If and when the suggested liaison machinery is set up, these questions might usefully be considered by it. Alternatively the U. S. authorities may prefer to give their views on some of the questions forthwith.

Arrangements in India.

As a result of Mr. Mair’s investigations, the U. K. Government have decided that it is unnecessary to pursue further at present the proposal to establish a Transit Board in India. It is considered that the existing arrangements for dealing with goods arriving in India for onward shipment to China are adequate and probably capable of handling a considerably increased volume of supplies.

The U. K. authorities are, however, anxious to devise some official means of exchanging regularly with the U. S. authorities information on non-military supplies for China shipped via India. For the reasons given earlier in this note, such an exchange of information seems highly desirable. It is suggested that the information should if possible cover all civilian goods of U. S. origin—i. e. not only goods supplied under Lend-Lease to China but also civilian stores purchased commercially in the U. S. A. by the Chinese Government through the Universal Trading Corporation or other channels and shipped to India. It is hoped that the information could be furnished at regular intervals in respect of all civilian stores of U. S. origin and destined for the Chinese Government (a) stored in India, (b) shipped from the U. S. to India, (c) transported from India to China. If as it is hoped [Page 956]the U. S. authorities are prepared to make such information available the U. K. Government will, if desired, be glad to furnish similar information about supplies from the U. K. It is suggested that this information might most suitably be exchanged between the appropriate U. S. and U. K. representatives in India.

British Civil Secretariat
[Annex]

Annex II. Questions Affecting the General Supply Policy Towards China on Which the United Kingdom Authorities Would Welcome an Indication of the Attitude of the U. S. Authorities

At the present time the general policy of the United Kingdom authorities in the matter of civilian supplies for China is not to despatch goods to India for on-shipment to China unless there is some prospect of their import into China taking place within a reasonable period. Exceptions to this general rule are occasionally made in cases where for example goods were ordered some time ago and are already in production and for which there is no urgent alternative use elsewhere. The U. K. authorities would greatly appreciate some indication of the views of the U. S. authorities on the following points.

(a)
Are the United States authorities following a similar general policy to that adopted by the United Kingdom authorities outlined above—i. e. is there a general rule that civilian supplies for China are not despatched from the United States to India unless there is a fair chance that they can be on-shipped to China within a reasonable period? If such a general policy is being followed, does it apply not only to goods furnished under Lend-Lease but also to articles purchased commercially in the United States by the Universal Trading Corporation or any other agency?
(b)
It is understood that at one time a tonnage limit was placed on the amount of Lend-Lease non-military supplies which were allowed to be shipped each month to India in order to prevent any undue increase in the stockpiles of such materials in India. Is this tonnage limit still in force and if so what is in fact the amount of Lend-Lease supplies which are at present permitted to be shipped each month? Are any other restrictions placed on the quantities of civilian supplies furnished to the Chinese Government under Lend-Lease?
(c)
Are any restrictions placed on the amount of goods for China which may be obtained from the United States by cash purchase? Is there any tonnage limit placed on the quantity of such cash purchases which may be shipped to India each month?
(d)
Is it the policy of the United States authorities to refuse requests for supplies put forward by one Chinese Government Department which might be met from goods ordered by another Chinese Government Department and now lying in India?
(e)
Have the U. S. authorities adopted any policy in regard to supplies for China to be delivered by sea and river on the withdrawal of the Japanese (such as for example Floating Power Stations described in paragraph (g) of Annex I)? So far the U. K. authorities have reached no conclusions on this point.
  1. Received in the Department on March 29; copy transmitted to the Ambassador in China in the Department’s instruction No. 662, May 25.
  2. First annex not printed; it cited a number of cases where the British Government had found it difficult to deal with requests for supplies from the Chinese Government owing to lack of information.
  3. Foreign Relations, 1943, China, p. 503.
  4. Foreign Relations, 1943, China, p. 514.
  5. Foreign Economic Administration.