893.24/1712

The Department of State to the British Embassy 14

Memorandum

The United States Government is deeply interested in seeing that there is sent to China as effective aid as possible under the very limited air space available for the needed importation of supplies into China. It reiterates its earlier statement that it will be glad at all times to collaborate with the British Government in any steps which usefully can be taken to facilitate the flow of supplies into China. It has, accordingly, considered with great care the proposals submitted by the British Government on March 29.

The United States Government concurs that there should be full understanding between the United States and the United Kingdom on supply policy and supply procedure for China and it is glad to make a statement as to these in accordance with the inquiry submitted by the British Government. When new and substantial supply routes into China are available or their availability may reasonably be anticipated, the more specific proposals which the British Government made may well be of substantial benefit to the United Kingdom, to China, and to the United States. Under existing conditions, however, the United States Government does not feel that these specific proposals could facilitate the flow of goods into China, that they might, indeed, on occasion cause unfortunate delay and that their purpose might be misconstrued by our Chinese allies. The United States Government feels that its present machinery is working with great effectiveness in expediting the flow of the most essential supplies into China and that the present Combined Board machinery is adequate to prevent duplication where materials in short supply may be involved. It will, of course, at any time be willing to furnish information which will indicate whether an order submitted to the British Government may be a duplication of an order placed with the United States.

If, after consideration of the supply policies and procedure of the United States, the British Government feels that additional steps should be taken at this time, the United States Government will be glad to discuss the matter further, and consider what steps would be most effective to achieve the common objective of both Governments.

The largest amount of materials dispatched to India for China is direct lend-lease military equipment consigned to General Stilwell. Assignments of such material are made by the Munitions Assignment [Page 965]Board on theatre requisition, but no assignment is currently made unless there is assurance from the theatre that the material can be in use within six months after such assignment.

The next largest amount of materials shipped to India from the United States for China—but relatively small in actual tonnage—is material procured by the Foreign Economic Administration on lend-lease. Such materials are of semi-military and non-military nature, but the Foreign Economic Administration will not ship on lend-lease any item which is not directly connected with the war effort or essential to the maintenance of a basic Chinese economy. Such materials consist mainly of raw and semi-finished materials, tools and equipment for arsenals or for essential industries, drugs and medicine, and equipment needed in connection with transportation and communications.

Preliminary requests for such lend-lease material are made in Chungking to Foreign Economic Administration representatives. There being no effective Chinese statistics or sources of over-all information, the urgency and validity of each request is separately considered and is discussed with the United States War Department lend-lease representatives in Chungking who advise on transportation priorities available for requests under Foreign Economic Administration consideration.

Formal requests to the Foreign Economic Administration in Washington for such lend-lease materials are made by the China Defense Supplies Corporation. Decisions on these requests are made by the Foreign Economic Administration in Washington. When the Foreign Economic Administration has the benefit of the recommendations of its field representatives before it, time is not lost in referring such requests to Chungking for screening.

Considerable stockpiles have been built up in India in anticipation of the availability of routes in addition to air transport. During the past six to eight months, with the failure to develop these routes, a much stricter policy has been pursued with regard to procurement and shipment. Stockpiles are being reduced and it is intended to continue such reduction until they consist of what may be determined to be a reasonable reserve. Thereafter, procurement and shipment of lend-lease material will not exceed the amounts which can be transported into China within a reasonably short period or are required to maintain reasonable reserves in India.

The third category of materials which go to China are those purchased for cash in this country. In 1938 the Universal Trading Corporation was established as a non-profit, American corporation wholly owned by the Chinese Government to act as agent on behalf of all Chinese Government agencies desiring to make purchases in the United States. In general, the Universal Trading Corporation [Page 966]does not endeavor to procure material in this country except on the basis of import licenses issued through the Central Trust in Chungking. Such import licenses are not issued until the need for the commodity has been agreed to, currency arrangements accepted and air priority secured. American control is exercised through export licenses which limit exports to those items which are directly beneficial to the war effort or for which there is critical need. Although export licenses may exceed 200 tons a month, by a gentlemen’s agreement the Universal Trading Corporation limits its actual shipments from the United States to an average of 200 tons a month. Within this limit also are included any items procured and shipped by private Chinese importers.

Except for this gentlemen’s agreement with the Universal Trading Corporation, no specific tonnage limit has been or is placed on any supplies to be shipped to India for China, but the requirement that such supplies must be limited to what can be imported into China within a reasonable period or are required to replenish reasonable reserves in India has the effect of limiting the tonnage that is actually shipped.

No restrictions are placed on the amount of goods which China may obtain by cash purchases in the United States. However, the quantity of such products and materials is in fact limited by the necessity of securing export licenses or support from the Foreign Economic Administration for the acquisition of critical materials.

It is an absolute policy of the United States authorities to refuse requests for supplies put forward by one Chinese Government ministry which might be met from goods ordered by another Chinese Government ministry and available in India.

As indicated above, the United States authorities do not lend-lease material or act as claimant for a critical material which it does not appear can be utilized within the reasonably foreseeable future. Certain materials, most of which were ordered prior to Pearl Harbor but which it has been and still is impossible to deliver to China, are being held for road delivery. Where urgent need for any of these items has developed in other areas of the world, the original items have been diverted to such need and production of replacements promptly undertaken. None of such materials, however, are being snipped to India. No commitments have been made with regard to supplies for China to be delivered by sea or river upon withdrawal of the Japanese.

  1. Handed to a representative of the British Embassy by the Adviser, Liberated Areas Division, on May 15; a similar note was handed to a representative of the Canadian Embassy on the same day.