841.503193/4–549
The Department of State to the British Embassy
Memorandum
The receipt is acknowledged of a memorandum dated April 5, 1949 from the British Embassy to which was attached a statement presenting the views of the Foreign Office regarding the measures which might be taken in defense of British economic interests in China. The Department of State finds itself in general agreement with the views expressed in the statement of the Foreign Office.
The Foreign Office statement points out that denial to China, by agreement with other Powers, of goods of strategic importance, where such denial would be effective, would not be precluded by agreement in principle with other Powers on measures of economic pressure against the Chinese Communists to be held in reserve for possible use should they later prove necessary and expedient. The Department believes that, for the time being, such denial to China should be considered only for goods of direct military utility and for those strategic goods, the transshipment of which to the USSR, eastern Europe and [Page 845] northern Korea should be prevented. Furthermore, it is believed that goods should not be denied to China so long as they are of a non-military character and there is reasonable presumption that they are intended for use within the normal civilian requirements of that country.
The only means available to the United States Government for controlling exports from the United States to China is the institution of a system of export licensing. Export controls should be applied initially with a minimum of restriction on ordinary private trade with Communist-controlled areas of China, and this Government intends to issue a public announcement making this clear at the time export licensing is introduced. However, the existence of comprehensive controls over goods of importance to the Chinese economy should indicate to the Chinese Communists our ability, if occasion should require it, to impose further economic restrictions, and the introduction of a system of export controls may therefore tend to influence favorably the treatment accorded foreign interests in China. The symbolic and practical effectiveness of such controls would, of course, depend on multilateral cooperation in their application.
It is believed that the cooperation of SCAP can be obtained with respect to control of Japanese exports to China, and the United States Government intends to seek cooperation by such other Governments as may be necessary to give effect to the policy envisaged. It was with a view to ascertaining the attitude of the British Government on this matter, particularly with respect to the question of transshipments at the entrepôt center of Hong Kong, that conversations were held with the Counselor of the British Embassy on February 10 and on March 22, 1949. Copies of memoranda stating the Department’s views in this regard were handed the Counselor by officers of the Department at the meeting on March 22.
The Department is not aware whether effective control of strategic exports to China by the British Government would require a system of export licensing for the United Kingdom and British Colonies, or whether it could be accomplished by other means. It is believed, however, that the Governments of the United States and Great Britain, perhaps in collaboration with other Powers, should be prepared on short notice to indicate to the Chinese Communists their ability to control the export to China of important commodities. The rapid course of events in China requires prompt action in this regard. The Department would, therefore, appreciate an early indication of the views of the British Government, whereupon the Department would be prepared to consult with the British Embassy regarding the detailed application of export controls.