Memorandum by the Associate Chief of the Division of Commercial Policy (Willoughby) to the Director of the Office of Economic Affairs (Hawkins)

Mr. Hawkins: Ambassador Gauss has recommended in the attached paraphrase of secret telegram (no. 1303),36 recently received in the Department, that advantage be taken of Dr. Kung’s presence in this country to express to him our misgivings caused by present indications that the Chinese Government may be inclined to pursue extremely nationalistic policies in respect to American and other foreign business interests in China. It has lately become apparent that the influence of the reactionary element in Chungking, spearheaded by the Minister of Education, Chen Li Fu, is on the increase. The Embassy telegram indicates the importance of approaching Kung at this particular time. Kung’s close association with the reactionaries and his direct access to the Generalissimo make him a particularly important point of contact.

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The Embassy in its telegram appears to contemplate chiefly the conduct of business by Americans within China after the war. We are told that FE37 is endorsing these recommendations and suggesting the possibility of the President discussing the matter with Dr. Kung. If the President should wish to do so, it would, in our opinion, materially assist the Department in its efforts to protect and promote American commercial interests in China.

We believe that it would also be very useful if Dr. Kung could be impressed with the importance of cooperating with the United States and other like-minded countries with a view to avoiding excessive tariffs and other unnecessary barriers to the free flow of international trade.

The most effective way no doubt would be for the Secretary to discuss the matter fully with Dr. Kung. If the Secretary does not have time to converse at length with Dr. Kung, he may be able to discuss with him the broader aspects of the problem and arrange for Mr. Acheson38 and you to continue the conversations in more detail at a subsequent meeting.

In the latter eventuality, it would have to be borne in mind that Dr. Kung is of cabinet rank and that the Chinese are extremely sensitive in regard to matters of protocol. It is believed that difficulty on this score could be avoided if Mr. Acheson and you were to call upon Dr. Kung at the Chinese Embassy and any proposed conversations with Mr. Acheson and you were to be characterized as informal exchanges of views with specialists in the field of economic foreign relations and commercial policy.

Woodbury Willoughby
  1. Dated July 28, 11 a.m., p. 1060.
  2. Office of Far Eastern Affairs.
  3. Dean Acheson, Assistant Secretary of State.