Foreign Relations of the United States, 1948, The Far East: China, Volume VIII

893.50 Recovery/4–1448: Telegram

The Ambassador in China ( Stuart ) to the Secretary of State

Nanking , April 14, 1948—5 p.m.
[Received April 14—10:54 a.m.]

669. Embassy appreciates most helpful flow information re aid program (Ref Embtel 614, April 6;²⁹ Deptel 519, April 8 and Deptels 527 and 528, April 10³¹). With specific reference Deptel 519, Embassy agrees (1) bilateral agreement required by section 405 should cover only aid under section 404a; (2) prior to and during negotiation bilateral agreement discussions should take place at highest level Chinese Government for purpose of maximizing Chinese commitments to be incorporated in bilateral agreement and concurrently securing specific private undertakings on matters where publicity might jeopardize Chinese Government’s ability to perform.

I. Embassy recognizes complexity inherent in drafting and negotiating bilateral agreement. To Embassy there appear pronounced advantages to USA in building agreement on appropriate provisions which Foreign Assistance Act requires of European participants. Moreover, similarity to European pattern would be more palatable to Chinese. Embassy’s suggestions re form and content draft Bilateral Agreement follow:

1. Following appropriate statement of intent (derived from section 402 of Act) there could be inserted subparagraphs 1 through 10 of subsection b of section 115. It would appear that these could be abstracted verbatim with following exceptions: Modification of 3 in direction of generalized undertaking to reduce trade barriers; condensing section 4 to express intention on part of Chinese Government to locate and use Chinese assets in USA; and appropriate but minor rewording of 9 to make clear that China must submit to same rules of equity as European countries in allocation of scarce materials. It might be well to name materials available in China in increased production of which USA has an interest such as tungsten, antimony, bristles, tung oil and possibly tin.

2. Ten specific points of Premier Chang Chun’s January 28 public statement could then be incorporated verbatim with introductory language to effect that these 10 objectives constitute financial and economic policy of Chinese Government and that specific and effective measures to put them in force constitute an undertaking of Chinese Government under this Agreement.

3. Finally certain provisions of Agreement of October 27, 1947 between US and China³³ which are not specifically covered by 10 points drawn from section 115, and which are not otherwise in conflict with terms of Foreign Assistance Act should be incorporated by reference into draft bilateral agreement.

II. Foregoing would appear to cover water front insofar as maximum possible public undertakings by Chinese Government are concerned. During course of contemplated discussions Embassy suggests that specific but private engagements should be sought on following:

1. Reopening river ports for all shipping if possible but at least for US aid cargoes.

2. Prompt adherence to GATT.³⁴

3. Assurance that if and when Treaty of Friendship, Navigation and Commerce³⁵ shall come into force, most-favored-nation treatment for USA will apply with respect to all articles of such treaty in which most-favored-nation treatment is not specifically stipulated.³⁶

4. Agreement that Universal Trading Corporation³⁷ shall in fact restrict its purchases in USA to those made on behalf of Ministries and agencies of Government.

5. An engagement that within a stated period, say 3 months, Chinese shall present to US Government for comment a specific program for modification of export-import controls and exchange regulations designed to provide maximum freedom in commercial interchanges.

III. In conclusion Embassy believes that least of difficulties confronting successful operation of China Aid Program will lie in extracting sweeping public and private undertakings from Chinese Government. Heart of difficulty resides in Government’s chronic inability or unwillingness to execute its promises. Course of action most likely to produce constructive and durable results would in Embassy’s opinion be following:

1. Maximum public undertakings by Chinese Government in bilateral agreement supplemented by private engagements where practicalities so required as discussed above.

2. Insertion into key posts in operational Chinese Ministries of top-drawer US technical experts who would report directly to chief of Economic Cooperation Mission.³⁸

3. Maximum delegation of authority by administrator in Washington to chief of ECM in China thereby insuring latter’s ability to withhold or interrupt aid on specific projects on phases of operation without prior reference to Washington.

4. A substantial and organized draft on established American business concerns and voluntary agencies in China for advice and manpower.

IV. Embassy regrets that owing to his inaccessibility in North China on CRM business Gilpatric’s³⁹ specific comments are not incorporated in this telegram. Likewise full comments ConGen Shanghai not at hand. Additional recommendations may follow after consultations.

Sent Secretary State as 669, April 14, repeated AmConGen Shanghai as 270.

Stuart

29. Ante, p. 486.
31. For telegrams Nos. 527 and 528, see pp. 491 and 492, respectively.
33. On United States relief assistance to the Chinese people, signed at Nanking; Department of State Treaties and Other International Acts Series No. 1674, or 61 Stat. (pt. 4) 3374. For correspondence on negotiation of this agreement, see Foreign Relations, 1947, vol. vii, pp. 1293 ff.
34. General Agreement on Tariffs and Trade adopted at Geneva, October 30, 1947, by the Preparatory Committee of the United Nations Conference on Trade and Employment; Treaties and Other International Acts Series No. 1700, or 61 Stat, pts. 5 and 6.
35. Signed at Nanking, November 4, 1946; Treaties and Other International Acts Series No. 1871, or 63 Stat. (pt. 2) 1299.
36. In telegram No. 676, April 15, 3 p.m., the Embassy suggested that the following be substituted for this paragraph: “Assurance that if and when the Treaty of Friendship, Commerce and Navigation shall come into force, unconditional most-favored-nation treatment for the US will apply with respect to all articles of such treaty in which MFN treatment is specifically stipulated.” (893.50–Recovery/4–1548)
37. An official Chinese agency incorporated under the laws of the State of New York, October 18, 1938. Its chief functions were to market tung oil and other Chinese products in the United States and to act as purchasing agent in the United States against Export-Import Bank credits to China. For correspondence on the curtailment of its activities, see Foreign Relations, 1947, vol. vii, pp. 1159, 1306, 1376–1383, passim.
38. Roger D. Lapham was appointed Chief of the China Mission (ECM) of the Economic Cooperation Administration (ECA) on May 5.
39. Donald S. Gilpatric, Attaché at the Shanghai Consulate General and Director of the China Relief Mission (CRM) which administered the U. S. Foreign Relief Program (USFRP) in China under the agreement of October 27, 1947.