893.50 Recovery/11–948: Telegram

The ECA Administrator (Hoffman) to the Chief of the ECA China Mission (Lapham)

Ecato62 570. Reur 2127 from Nanking Nov 7 and Embtel 2117 Nov 6.63 Reftels raise questions both of law and policy. Although urtel requests delegation certain authority, basic question is rather what authority I have as Administrator in case events foreshadowed Embtel 2117 occur during life present legislation.

Main legal problem is that under China Aid Act and bilateral agreement, decisions on allocation of funds, distribution and pricing of supplies, and deposits and use of local currency must be agreed between ChiGovt and US Govt.
As we see it now, ECA could not assist outright Communist Govt in China, and authority assist regional or private groups in absence agreement with recognized Central Govt is at best dubious. If there is a coalition govt, question will be how much it is dominated by [Page 648] Communists. If seat of present National Govt is moved, we could continue to deal with it and provide assistance desirable from policy standpoint.
Administrator of course has authority under Act and bilateral agreement to stop assistance any time. We are presently studying exact point at which current assistance already authorized for procurement or shipment could be stopped as practical matter.
Following is reply your requests for delegation of authority:
Actual financial steps involved reallocation unexpended funds must be taken Washington. We are prepared to act urgently on proposals for such reallocation as you think required. See no justification at this time for increasing rate of expenditures and deliveries. Additional funds probably unavailable before March at earliest, and would be unfortunate for us to be left fundless at time when allocation of funds for some particular purpose might give us effective means of influencing events in China. You should therefore plan to continue substantially present spending rate on Commodity Program.
With regard distribution ECA commodities, believe you should try to make arrangements with Govt for distribution by ECA direct to provincial or municipal authorities when and if this becomes necessary. As to food, which remains in hands of US Govt until arrival in Chinese ports, you authorized seek agreement with existing authorities for title to remain in ECA after arrival at port and for distribution to be at discretion ECA, bearing in mind legal necessity operate always under terms of Act and bilateral. As to other ECA commodities, imported through commercial channels, you authorized to make whatever arrangements with importers and distribution agencies are feasible, bearing in mind need for covering agreement with Chinese authorities on arrangements made. Suggest you explore possibility repossessing cotton now in hands CTI,64 for distribution under direct ECA control, to forestall possible breakdown present joint control system or seizure of stockpile by Communists. Believe it important to keep at minimum stockpiles in areas subject to possible early capture, to avoid large windfalls to Communists. In view of this consideration suggest desirability spacing wheat/flour cargoes for Tientsin, now all scheduled arrive before Feb 1, over longer period. Please comment.
Your rerouting ship movements authorized in case of food. We will notify USDA65 and CCC66 to abide your instructions and inform agents and masters of all ships carrying ECA cargoes accordingly. Rerouting other types commodities handled through commercial channels raises problems which probably need to be tackled case by case. Suggest that if there is question rerouting cotton, fertilizer or petroleum shipments, you work directly with importers, informing us of necessary financial and other arrangements to be made through banks and shippers here.
Cable on local currency follows.67
On industrial program for North and Central China suggest you drag feet until picture clarifies.
Please report fully, currently and in detail on each action taken or prepared to be taken under authority contained this cable.68
  1. Symbol used by ECA to identify telegrams sent by its Headquarters Office to its field establishments.
  2. Vol. vii, p. 543.
  3. China Textile Industries.
  4. United States Department of Agriculture.
  5. Commodity Credit Corporation.
  6. Ecato 584, November 13, 3 p.m.; it approved “your agreeing with Chi Govt to use of funds out of Joint Acct for emergency purposes such as procurement of food and coal.” (848 ECA Joint Acct).
  7. This telegram was cleared for the Department of State by Mr. Butterworth. In telegram No. 1597, November 11, 2 p.m., the Department requested the Ambassador in China to “note Ecato 570”. (893.50 Recovery/11–648)