Foreign Relations of the United States, 1949, The Far East: China, Volume IX

893.50 Recovery/6–2449: Telegram

The Deputy ECA Administrator (Foster) to the Minister-Counselor of Embassy in China (Clark), at Canton

Washington, June 27, 1949—noon.

Ecato 271. [Re] Toeca 2110³¹ repeated Canton Shaeca 261; ECASha 226, repeated Wash Toeca 285; Toeca 204 repeated Shanghai ECASha 199; ECASha 190 repeated Wash Toeca 203.³²

1. Amplification marching orders you requested Toeca 204 now possible due better understanding application policy to complicated situation Shanghai.

2. In interpreting marching orders for Shanghai, you and SRO should be guided by following general principles:

(a) You are to seek earliest possible liquidation ECA responsibilities Shanghai consistent with need for making orderly arrangements and adhering to ECA policies.

(b) You should avoid any arrangement which would be open to interpretation that it assists Communist government or provides for any continuing help for Communist areas flowing from ECA program. For example, Plan One in Toeca 2110, June 17, suggested setting up revolving fund to finance additional raw cotton imports into Shanghai. This would violate principle of no continuing help to Communist areas.

(c) Main emphasis under present changed conditions should be on making sure ECA residual stocks serve humanitarian purposes.

(d) Methods and procedures must be left to you within principles established in marching orders as modified by this cable.

(e) St. Louis³³ should keep ECA/W³⁴ as closely and promptly informed as possible. Major decisions, or decisions involving political questions not dealt with in this cable, should be referred to Washington.

3. In line with above principles, Plan One is not acceptable because of the revolving fund feature. It appears that Plan Two is impractical in view of impossibility expect welfare agencies to handle problems involved in managing, processing, and distribution of large amounts of cotton under present conditions in Shanghai. Therefore, we believe that general scheme in draft resolution Toeca 2110 appears to be the best arrangement under the circumstances.

4. The priority for the allocation of local currency proceeds should be generally in the following order: (a) ECA administrative expenses, (b) welfare agencies and projects previously receiving aid such as Chien Tang sea wall, (c) administrative expenses of Embassy and Consulate. If use of proceeds for Embassy and ConGen administrative purposes raises political questions with Communists, you should refer matter to Washington, and avoid any breakdown of negotiations on this account.

5. Plan should if possible be formalized in some way in writing, and should be subject of full report from SRO with copies of any basic agreements or exchanges of letters.

6. Cotton should be sold not subject to quality claims and price should be invoice value landed Shanghai. Weight to be taken as determined by Shanghai Controller. Twenty percent sample should be drawn at time of weighing and sent to Kobe when feasible for classing for ECA purposes.

7. Following are some specific queries which are cited both as considerations in your negotiations and as points which final SRO report on this operation should be sure to cover: Why replace SAC³⁵ with Ad Hoc Committee? What personnel proposed for membership new committee? This important in view proposed powers. Do you consider collective guarantee mill owners association members effective insurance of full payment to beneficiaries?

8. In line with above instructions, St. Louis authorized to negotiate final arrangement subject to above principles and in consultation with American Consulate General and Ambassador, if available.

9. Careful presentation this problem in your Toeca 2110, June 17, much appreciated here and greatly assisted rational consideration of problem on this end.

10. This cable represents views of both Department and ECA, including Lapham and Griffin.³⁶

Repeated Shanghai as Ecato 1436.

Foster

31. Not printed; see footnote 25 to telegram No. 2350, June 19, 11 a. m., from the Consul General at Shanghai, p. 649.
32. ECA messages not found in Department of State files.
33. George W. St. Louis, Assistant Deputy for Operations of ECA China Mission.
34. ECA/Washington.
35. Shanghai Assistance Committee.
36. Both returned to Washington after completing their work with the ECA China Mission.