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

893.50 Recovery/5–2448: Telegram

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

Washington, May 24, 1948—8 p.m.

774. Following is text draft bilateral agreement with China to be presented ChiGovt in accordance Deptel 773 May 24, 8 p.m.

Preamble

The Governments of the United States of America and China:

Having in mind the considerations set forth in Section 402 of the China [Aid] Act of 1948, as follows:

(Quote entire Section 402 verbatim within quotation marks beginning with word “recognizing”.)

Considering that it is the policy of the Government of China to undertake a vigorous program of self-help in order to create more stable economic conditions in China, and to improve commercial relations with other countries;

Have agreed as follows:

Article I—1. The Government of the United States of America undertakes to assist the people of China by making available to the Government of China, or to any person, agency or organization designated by the Government of China, such commodities, services and other assistance as may be requested by the Government of China and authorized by the China Aid Act of 1948 (other than Section 404(b) thereof), and appropriation acts thereunder, and approved by the Government of the United States of America.

2. The undertakings of the Government of the United States of America under this Article are subject to the provisions of the China Aid Act of 1948 and shall not be construed to obligate the Government of the United States of America to furnish specific assistance or to guarantee the availability of specific commodities or services. The Government of the United States of America may suspend or terminate at any time the assistance under this Article.

Article II—The Government of China undertakes:

a) to adopt the measures necessary to assure efficient and practical use of the economic resources under its control or jurisdiction, including the assistance furnished pursuant to this Agreement;

b) to promote the development of industrial and agricultural production on an economic basis;

c) to initiate and maintain financial, monetary, budgetary and administrative measures necessary for the creation of more stable currency conditions and for the promotion of production and marketing of goods for domestic consumption and export;

d) to cooperate with other countries in facilitating and stimulating an increasing interchange of goods and services with other countries and in reducing public and private barriers to trade with other countries.

Article III—1. The Government of China undertakes to make all practicable efforts to improve commercial relations with other countries, including measures to improve the conditions affecting the carrying on of foreign trade by private enterprises in China.

2. The Governments of China and the United States of America will consult, upon the request of either Government, regarding any matter relating to the application of the provisions of this Article.

Article IV—1. The Government of China undertakes to adopt or maintain such measures of control as may be necessary to prevent the diversion of assistance obtained under the provisions of this Agreement from the uses for which it was furnished or to uses inconsistent with the purposes of this Agreement. These measures shall include effective measures for the prevention of pilferage and of the diversion of commodities furnished under this Agreement to illegal or improper markets or channels of trade.

2. The Government of China undertakes to ensure that all commodities provided by the Government of the United States of America pursuant to this Agreement shall be processed, distributed and sold only in accordance with price policies, terms and conditions agreed upon from time to time between the two Governments.

3. The Government of China will take all appropriate steps designed to achieve fair and equitable distribution within the areas under its control of commodities provided by the Government of the United States of America pursuant to this Agreement, and of similar commodities imported into China with other funds or produced locally.

Article V—1. a) The United States of America and China shall each accord to the commerce of the other, immediately and unconditionally, treatment no less favorable than that accorded to the commerce of any third country, provided that departures from the application of such most-favored-nation treatment shall be permitted to the extent that they are in accord with the exceptions recognized in the Havana Charter for an International Trade Organization.⁷⁰ The provisions of this sub-paragraph shall not be construed to require-adherence to the procedures specified in the Havana Charter with regard to the exceptions to most-favored-nation treatment.

b) The provisions of sub-paragraph (a) shall apply to China and to all territory under the sovereignty or authority of the United States of America. Moreover, if the Government of either country has authority with respect to the conduct of the international trade of any area in Western Germany, the Free Territory of Trieste, Japan, or Southern Korea, such Government shall exercise such authority, to the extent of its legal capacity, to make the treatment provided for in sub-paragraph (a) applicable by such area to the commerce of the other country, and the Government of such other country shall accord the treatment provided for in sub-paragraph (a) to the commerce of such area.

c) The provisions of sub-paragraph (a) and (b) shall not derogate from such other obligations relative to the matters contained herein as may at any time be in effect between the two Governments.

2. The Government of China will take appropriate measures and will cooperate with other countries to prevent, on the part of private or public commercial enterprises, business practices or business arrangements affecting international trade which have the effect of interfering with the purposes and policies of this Agreement.

Article VI—1. The Government of China will, to the extent practicable, take measures to locate, identify and put into appropriate use, in furtherance of its efforts to achieve more stable economic conditions in China, assets, and earnings therefrom, which are owned or beneficially owned by citizens of China and which are situated within, the United States of America, its territories or possessions.

2. Paragraph 1 of this Article shall not apply with respect to assets, and earnings therefrom, owned or beneficially owned by citizens of China who are nonresidents of China until after agreement between the Governments of the United States of America and China concerning the special problems affecting the property of such nonresidents which is situated within the United States of America, its territories or possessions.

3. The provisions of this Article, except to such extent as hereafter may be agreed between the two Governments, shall not be construed to impose any obligation on the Government of the United States of America to assist in the carrying out of the measures contemplated by paragraph 1.

Article VII—1. The provisions of this Article shall apply with respect to assistance which may be furnished by the Government of the United States of America on a grant basis pursuant to this Agreement.

2. The Government of China agrees to establish a special account in the Central Bank of China in the name of the Government of China (hereinafter called the Special Account) and to make deposits in Chinese currency to this account as follows:

(a) The unencumbered balance at the close of business on the day of the signature of this Agreement in the Special Account in the Central Bank of China in the name of the Government of China established pursuant to the Agreement between the Government of the United States of America and the Government of China made on October 27, 1947 and any further sums which may, from time to time, be required by such agreement to be deposited in the Special Account. It is understood that subsection (e) of Section 114 of the Foreign Assistance Act of 1948 constitutes the approval and determination of the Government of the United States of America with respect to the disposition of such balance, referred to in that agreement, and

(b) The unencumbered balances of the deposits made by the Government of China pursuant to the exchange of notes between the two Governments dated April 30, 1948.

(c) Amounts commensurate with the indicated dollar cost to the Government of the United States of America of commodities, services and technical information (including any costs of processing, storing, transporting, repairing or other services incident thereto) furnished to China on a grant basis pursuant to this Agreement, less, however, the amount of deposits made pursuant to the exchange of notes referred to in sub-paragraph (b). The Government of the United States of America shall from time to time notify the Government of China of the indicated dollar cost of commodities, services and technical information so furnished, and the Government of China will deposit in the Special Account, at such times as may be specified by the Government of the United States of America, a commensurate amount of Chinese currency computed at a rate of exchange which shall be determined at the time of deposit by the Government of the United States of America in consultation with the Government of China. The Government of China may, upon the request of the Government of the United States of America, make advance deposits in the Special Account which shall be credited against subsequent notifications pursuant to this paragraph.

3. The Government of the United States of America will from time to time notify the Government of China of its requirements for administrative expenditures in Chinese currency incident to operations under the China Aid Act of 1948, and the Government of China will thereupon make such sums available out of any balances in the Special Account in the manner requested by the Government of the United States in the notification.

4. The Government of China undertakes further to make such sums of Chinese currency available out of any balances in the Special Account as may be required to cover:

(a) expenditures required to carry out the purposes of the Joint Commission on Rural Reconstruction in China as provided for in the Agreement of _______ between the Government of China and the Government of the United States of America; and

(b) costs (including port, storage, handling and similar charges) of transportation from any point of entry in China to the consignee’s designated shipping point in China of such relief supplies and packages as are provided for in section 117(c) of the Foreign Assistance Act of 1948.

5. The Government of China shall dispose of any remaining balance in the Special Account only for such purposes as may be agreed from time to time with the Government of the United States of America, including in particular:

(a) sterilization as a measure of monetary and financial stabilization;

(b) expenditures incident to the stimulation of productive activity and the development of new sources of wealth, including materials which may be required in the United States of America because of deficiencies or potential deficiencies in the resources of the United States of America;

(c) expenditures upon projects or programs the external costs of which are being covered, in whole or in part, by assistance rendered by the Government of the United States of America, or by loans from the International Bank for Reconstruction and Development; or

(d) expenditures upon uncompleted relief or work relief projects undertaken pursuant to the agreement between the Governments of the United States of America and China of October 27, 1947.

6. The Government of China will maintain the value in terms of United States dollar equivalent of such amount of the Special Account as is (a) indicated by the Government of the United States of America as necessary for administrative expenditures referred to in paragraph 3 of this Article; (b) required for the purposes of paragraph 4 (a) of this Article; and (c) agreed between the two Governments to be necessary to defray the expenses in Chinese currency associated with reconstruction projects or programs, the external costs of which are met, in whole or in part, by assistance rendered by the Government of the United States of America pursuant to the Agreement.

7. Any unencumbered balance remaining in the Special Account on April 3, 1949 shall be disposed of within China for such purposes as may hereafter be agreed between the Governments of the United States of America and China, it being understood that the agreement of the United States of America shall be subject to approval by Act or joint resolution of the Congress of the United States of America.

Article VIII—[Provisions relating to exchange rates may be proposed by the Government of the United States at a later stage of the negotiations.]⁷¹

Article IX—1. The Government of China undertakes to facilitate the transfer to the United States of America, for stockpiling or other purposes, of materials which are required by the United States of America as a result of deficiencies or potential deficiencies in its own resources, upon such reasonable terms of sale, exchange, barter or otherwise, and in such quantities, and for such period of time, as may be agreed to between the Governments of the United States of America and China and after due regard for the reasonable requirements of China for domestic use and commercial export of such materials. The Government of China agrees to take such specific measures as may be necessary to effectuate the provisions of this paragraph, including the promotion of the increased production of such materials within China, and the removal of any hindrances to the transfer of such materials to the United States of America. The Government of China stands ready, upon the request of the Government of the United States of America, to enter into negotiations for detailed arrangements necessary to carry out the provisions of this paragraph.

2. The Government of China stands ready, upon the request of the Government of the United States of America, to enter into negotiations for such arrangements as are required to carry out the provisions of paragraph (9) of sub-Section 115 (b) of the Foreign Assistance Act of 1948, which relates to the development and transfer of materials required by the United States of America.

3. The Government of China will, upon the request of the Government of the United States of America, use its good offices, wherever appropriate, to effectuate the purposes of paragraphs 1 and 2 of this Article in areas not within the jurisdiction of China.

Article X—The Government of China undertakes upon the request of the Government of the United States of America to enter into negotiations for agreements to facilitate the entry into China, including duty-free treatment, of supplies donated to or purchased by United States voluntary non-profit relief agencies and of relief packages originating in the United States and consigned to an individual residing in China.

Article XI—1. Each Government agrees, upon the request of the other Government, to consult regarding any matter relating to the application of this Agreement or to operations or arrangements carried out pursuant to this Agreement.

2. The Government of China undertakes to transmit to the Government of the United States of America, in such form and at such times as the latter may request but in no event less frequently than the end of each calendar quarter after the day of the signature of this Agreement, full statements of operations under this Agreement, including a statement on the use of funds, commodities, and services received thereunder. The Government of China also undertakes to make public in China, not less frequently than the end of each calendar quarter after the day of the signature of this Agreement, full statements of operations under this Agreement, including a report of the use of funds, commodities and services received pursuant to this Agreement.

3. The Government of China will assist the Government of the United States of America to obtain information relating to the materials referred to in Article IX which is necessary to the formulation and execution of the arrangements provided for in that Article.

4. The Government of China undertakes, upon request, to furnish the Government of the United States of America with such other information as may be relevant to the application and the carrying out of the provisions of this Agreement or as would be of assistance to the Government of the United States of America in appraising and determining the nature and scope of operations under the China Aid Act of 1948 or the use of assistance provided pursuant to this Agreement.

5. The Government of China affirms its intention to keep the people of China fully informed of the progress achieved by the Government of China in implementing the undertakings contained in this Agreement designed to achieve more stable economic conditions in China, and it will keep the people of China continuously advised regarding the nature and extent of assistance furnished to them pursuant to this Agreement.

Article XII—1. The Government of the United States of America proposes to establish for China a Special Mission for Economic Aid which will discharge the responsibilities of the United States of America in China under this Agreement.

2. The Government of China agrees to grant to the personnel of the Special Mission the privileges and immunities necessary to its effective functioning.

3. The Government of China undertakes to extend to the Special Mission full cooperation, including the provision of information and facilities for observation and review necessary to the effective carrying out of this Agreement. Such cooperation shall also include the designation, upon the request of the Government of the United States of America, of a high-ranking official to represent the Government of China in its relations with the Government of the United State of America in respect of matters relating to this Agreement.

Article XIII—The Government of China undertakes, upon the request of the Government of the United States of America, to submit, jointly with the Government of the United States of America, for the decision of the International Court of Justice, or of such other arbitral tribunal as may be designated by special agreement between the two Governments, any claim espoused by the Government of the United States of America on behalf of a national of the United States of America against the Government of China for compensation or damage arising as a consequence of governmental measures affecting property or interests of such national, including rights arising as a consequence of contracts with, or concessions granted by, duly authorized authorities of the Government of China. It is understood that, in making its decision whether to espouse a claim, the Government of the United States of America will have due regard to the availability of remedies in the administrative or judicial tribunals of China and to whether such remedies have been exhausted.

Article XIV—1. This Agreement shall become effective on this day’s date. It shall remain in force until June 30, 1950 or until 6 months after the day on which either Government shall have given the other notice of intention to terminate it, whichever is the later date. Subsidiary agreements and arrangements negotiated pursuant to this Agreement may remain in force beyond the date of termination of this Agreement and the period of effectiveness of such subsidiary agreements and arrangements shall be governed by the terms thereof.

2. This Agreement may be amended at any time by agreement between the two Governments.

3. A copy of this Agreement certified by the two Governments shall be deposited with the Secretary-General of the United Nations, who is authorized to effect registration thereof.

In Witness Whereof the respective representatives, duly authorized for the purpose, have signed the present Agreement.

Done at Nanking, in duplicate, in the English and Chinese languages, both texts authentic, this ———— day of June, 1948.

Marshall

70. Approved March 24, 1948, by the United Nations Conference on Trade and Employment; for text, see Department of State Commercial Policy Series No. 113: Havana Charter for an International Trade Organization and Final Act and Related Documents, p. 3. For documentation, see volume i.
71. Brackets appear in the original.