690.419/6–2449: Telegram

The Ambassador in London (Douglas) to the Secretary of State

2457. For State and Commerce from Martin and McIntyre.

Have participated, together with Embassy officers, in series meetings with British reference US proposals application controls over exports to China and adjacent areas. Principal agencies represented in discussions have been Foreign Office, Defense, Board of Trade, Colonial Office, and Joint Intelligence Board.
Following our understanding export controls now exercised by UK and pertinent colonies:
License required for UK 1–A list exports to all but specifically excepted destinations, which consist primarily Western European countries, US, British dominions and colonies. Licenses also required for exports of fairly large number short supply items, some which on US 1–B list. Furthermore, UK exercises administrative control through industry agreements over few items, e.g., petroleum.
In connection 1–A list there is difference in treatment as between non-excepted areas. In case China no restrictions at present, but shipments being reviewed with report little moving that destination. No knowledge, however, extent such items moving from UK through Hong Kong.
In addition short supply controls, Hong Kong and Singapore presently control exports UK 1–A list items to USSR but not to China or Korea. Presumably possible post audit 1–A goods shipped latter countries. However, data Hong Kong exports of doubtful accuracy and value.
Following are procedural possibilities for extension controls should UK policy permit:
UK could readily use existing controls to restrict UK 1–A exports to China and Korea.
1–B items could be added to present export license list by administrative decision at Cabinet level without legislative action. Alternatively, Ministers also have administrative discretion bring 1–B items under license control by establishing separate new list controlled only to selected destinations. Such destinations could be limited to USSR, Eastern Europe, and/or Far Eastern areas.
Hong Kong and Singapore have machinery to expand present license controls regarding both areas and commodities, subject UK policy line.
British representatives unable give definite response US proposals, but their indication personal views, probable attitude Ministers, and definition issues provides basis following appraisal British attitude:
Military equipment now under strict control to China by UK, [Page 862] Hong Kong, and Singapore. No objection exemption for military aid programs. UK felt no problem this area and discussion brief.
UK would be willing prohibit UK 1–A exports China with prior consultation exceptional cases or joint advance programming any 1–A commodities likely move in bulk for normal civilian purposes (e.g., aviation gas). Corresponding action Hong Kong and Singapore involves public action and considerable additional administrative load. Reference to central point for prior consultation purposes also burdensome. On basis reasonable value exemption from control and/or prior consultation plus willingness to program promptly where number of cases becomes large, will seek views Hong Kong and Singapore Governments with general disposition London authorities favorable, our view. Action this regard almost certainly depends multilateral agreement as indicated 4(f) below.
Procedural aspects of parallel controls over select list of 1–B items to secure maximum bargaining advantages of general economic and political character discussed in detail with no apparent basic differences of view. British apprehensive damaging effect that additions selected key 1–B commodities to present UK 1–A list might have on UK exports generally because (1) it would create procedural obstacles and uncertainty for exporters to areas covered by license other than China, USSR and Eastern Europe, and (2) probability that Soviet and satellites and China would regard additional items as prohibited to them in same manner present 1–A list, thus cutting off urgently needed markets. Avoidance above consequences by creating separate UK list of 1–B items for which areas other than China, Korea, USSR and Eastern Europe would be excepted, accompanied by publicity indicating lenient treatment such list, objected to on grounds (1) would not be accepted by Ministers because open discrimination involved and (2) could not justify administrative burden new controls if they were not to be applied restrictively. Stressed present domestic political obstacles to new export controls.
Foreign Office representatives doubtful wisdom attempt demonstrate Western bargaining strength through stand-by controls selected 1–B items. Feels such action might elicit immediate Communist retaliation private foreign interests China or bring closer their probable eventual expulsion and expropriation. Inclined wait until Communists have by experience better appreciation importance trade with West.
UK regards use export controls for bargaining instrument trade or political objectives, as distinct from military security purposes, new principle in foreign policy requiring Ministerial approval.
British representatives believe that, even on assumption favorable attitude developed on 4(c), (d) and (e) above, Ministers would permit action only if necessary cooperation obtained other countries important as alternative sources and likely provide major trans-shipment facilities. Unfavorable experience to date in obtaining multilateral action Eastern European controls makes British cautious regarding China. However, British do not propose withholding policy decision until position other countries known. Countries whose cooperation required discussed without conclusion. British promised careful consideration this point with recognition complete coverage neither practical or necessary.
Reference Far Eastern entrepôt centers, British unwilling discriminate among colonies by applying controls from UK to Hong Kong or Singapore. Subject to UK policy decision, however, willing consider application selected 1–B controls at Hong Kong and Singapore. Appeared much concerned regarding possibility leakage via Macao and emphasized difficulty control exports Hong Kong to Macao. Suggested initial approach should be persuade Portuguese apply effective controls at Macao, failing which would consider imposition controls Hong Kong–Macao. Assumed that question NEI48 and Indochina entrepôt controls could be handled as matter course in general approach metropolitan governments. British have been informed US will take necessary steps approach Philippines.
British wanted consider promptly specific minimum list 1–B items US wished controlled for bargaining purposes. Jointly compiled tentative list. Deptel 2156, June 22, which arrived during discussions very helpful and in general conformed list items selected here. Reftel list given British for further study. Understood we want watch and report other 1–B items as now done for Eastern Europe. Made clear by US that these negotiations no way implied change our desire to have controls in effect all 1–B items to Eastern Europe, and in due course to China.
Discussions have achieved, we believe, adequate understanding US purposes and proposals, and British position in all aspects. British now wish consult Hong Kong and Singapore and refer policy questions to Ministers. They anticipate at least 2 or 3 weeks required reach decision.
In view recent uncertainty position French, Belgians and Dutch regarding 1–A controls Eastern Europe, believe unwise approach these Governments reference China controls at this time. Also prefer joint US–UK approach based on UK agreement in principle, subject only concurrence other principally interested governments. Believe UK representatives share these views as to procedure. [Martin and McIntyre.]
  1. Netherlands East Indies (Indonesia).