102.22/8–249: Telegram
The Consul at Shanghai (McConaughy) to the Secretary of State
[Received August 1—8:28 p. m.]
2983. Re ConGentel 2979, July 31, repeated Nanking 1665, invasion of Consulate General premises. Thomas and Smith31 called at General Labor Union (GLU), semi-official Communist agency, at 1:30 p. m. today [August 1] to discuss case and consider recommendations GLU. So-called mediator, named Hsu, designated by GLU. Interview lasted 5 hours, representatives of naval workers were present part time.
Hsu maintained outward air impartiality but had been well briefed by workers and acted as their advocate. He did reject as unreasonable workers’ demand for six and one-half months’ pay. Tacitly recognized that Consulate General officers were there as US Government officials, not private citizens. Argued that delay of more than 3 months in reaching final settlement justified increased termination bonus. When figure of 3 months’ pay for all was mentioned, Hsu observed that the lowest paid coolies could not purchase any substantial amount of rice with such a small sum. Mediator thereupon recommended a minimum payment of $150 US regardless of salary level or length of service. This is most costly feature of mediator’s recommendation and would greatly increase total sum payable since many of workers received less than $50 per month.
Thomas of course made it clear to mediator as previously to claimants that he had no authority to make any agreement on the spot; the matter would have to be referred to the Navy Department for decision. He was not at all certain that the Navy Department had the funds to [Page 1261] cover such a costly settlement. Mediator intimated that details of proposal would not be communicated to claimants yet and if total sum required seemed excessive after estimates based on payrolls had been prepared, he would reexamine his recommendation. Additional meeting is scheduled for 2 p. m. August 2.
Thomas exerted himself to place the position of Navy and Consulate General fully before labor union. He delivered written memorandum setting forth full facts of case including siege of July 6 and invasion and detention currently in progress. He stressed absence of any legal or moral obligation of Navy for further payment, responsibility of Communist regime for delay in consummating settlement worked out several weeks ago and inability of Consulate General to act on its own responsibility or to serve as transmitting medium when it was subjected to occupation and intimidation.
Mediator said he was sure workers would not interfere with free movement of Consular personnel while answer from Washington was being awaited. He did not touch on vital matter of continued occupation of Consulate General lobby by token force of workers.
Shortly after Thomas returned to Consulate General, we received word that all workers had voluntarily vacated building. Guards were ordered to secure outside gate immediately. While they were doing so workers who had just left changed their minds and came back, pushing their way in and again establishing themselves in lobby. European employee of Consulate General who was watching says they returned after talking to two PLA soldiers who were standing across the street. They are here for night. Undoubtedly workers intend to keep force here continuously until they get their money.
While the workers probably would not stop Thomas, Slayton or me if we sought to leave the building tonight, we have decided to remain. With building unlawfully occupied, there is no security and siege must be considered as still in effect.
Situation highly unsatisfactory, not only because of large increase suggested, which is probably now the least amount we can settle for without trouble, but also because of impasse resulting from our firm refusal to make definitive settlement while building is occupied. Workers equally adamant in their refusal to leave before final settlement.
In my view we must resolutely refuse to give an inch on occupation issue.
The amount of total payment is a more debatable question. We all resent the gangster methods used to extort more money from the Navy and we feel amount suggested is unjustifiably high and an undue burden on our taxpayers and on the Naval appropriations. At the same time, it is a fact that separation bonuses of some sort are by custom payable in China as in most foreign countries by government agencies as well as by private firms and that pattern bonuses paid [Page 1262] by ECA and ESD Shanghai recently set unfortunate precedent fully known to claimants. Furthermore, price of rice (standard unit of value to low paid workers here) has more than quintupled in terms of US currency since end of April. Therefore it is true that proposed payments will buy less rice for most workers than they could have bought with one month’s pay at time dismissal.
It seems to me that this highly controversial payments question can only be determined by Navy Department. AstALUSNA compiling US dollars totals from payrolls on hand accordance recommendation payment, roughly estimates will amount to about $150,000 or more than triple original amount CNO permitted him to expend. He will send priority despatch a. m. tomorrow32 when totals computed.
I trust Department and Navy Department will bear in mind our earnest desire to reach an equitable, dignified and consistent settlement of this business which will enable the Consulate General to resume its important reporting and protective functions unimpeded at this most critical time for American interests in Shanghai. At the same time essential principles involved are even more important than the uninterrupted functioning of the office. We shall be in some personal jeopardy if the proposal is rejected, but this should not be a governing consideration. We do not wish to yield to intimidation. If amount proposed is found to be entirely outside bounds of reason, I recommend refusal, AstALUSNA concurs.
AstALUSNA and I request instructions within 48 hours if at all possible, as to maximum amount we should agree to. We also request endorsement our position we will not pay one cent until besiegers are removed from Consulate General building.
Department pass to CNO.
Sent Department 2983; repeated Nanking 1667.