693.419/9–1249
The British Embassy to the Department of State 65
Aide-mémoire
control of trade with china
Upon receipt of the American Embassy’s Aide-mémoire of 3rd August,65a the United States proposals regarding the control of trade with China were once again made the subject of careful study by the interested Departments of His Majesty’s Government.
2. The objectives of the United States proposals appear to be—
- (a)
- to ensure that Western trade with China does not have as a direct consequence an increase in the military strength of the Chinese Communist administration; and
- (b)
- in the words of the American Embassy’s Aide-mémoire, “to influence the orientation of that (the Chinese Communist) regime, and therefore to combat the spread of Communism throughout Asia.” It appears to be the United States view that this end might be achieved by demonstrating to the Chinese Communists the economic bargaining strength of the West through the concerted control of selected exports of key importance to the Chinese economy.
3. It is perhaps unnecessary to emphasise that there is no difference between His Majesty’s Government and the United States Government as to the importance of these aims. Indeed, His Majesty’s Government, because of their position in Hong Kong and South-East Asia, have immediate and compelling reasons for being anxious to secure the achievement of both objectives.
4. His Majesty’s Government consider that, as far as the first of these two objectives is concerned, they have already taken steps which safeguard the position. They have, for example, not only effectively prohibited the export from the United Kingdom of weapons of war of any kind destined for the Chinese National Government, but have refused to permit the trans-shipment in Hong Kong of military equipment [Page 876] so destined irrespective of its country of origin. They have done this because experience has shown that such shipments usually eventually result in an accretion to the military strength of the Chinese Communists. In any case, the fact that the American Embassy’s Aide-mémoire under reference lays almost exclusive stress on the importance of controls, not from the narrower and more direct security point of view, but in the light of broader political considerations, suggests that it is to this latter aspect of the question that the United States Government now wish to draw especial attention.
5. It has already been stated that His Majesty’s Government fully share the United States Government’s anxiety to take such steps as may be effective and practicable to influence the Communist regime in China in the direction of more moderate and co-operative courses. Indeed, His Majesty’s Government noted with gratification that the United States Aide-mémoire implies the practicability of the exertion of Western influence on the Chinese Communists, since it is because they share this view that His Majesty’s Government do not favour a general policy of evacuation but on the contrary believe it important that the maximum Western influence should continue to be exerted in China. The basic difference between the two Governments on this issue appears to be that His Majesty’s Government see no grounds for believing that the imposition of export controls of the kind proposed is likely to produce this desirable result.
6. It is understood that the United States proposals do not contemplate any immediate interference in the export to China of the list 1B items which have been suggested for control and that the powers which it would be necessary to assume would, in fact, be held in reserve; the argument being that the mere assumption of these powers would provide an effective demonstration of Western bargaining strength and might also have the desirable political consequences mentioned above.
7. His Majesty’s Government find it difficult to see the force of this argument. The Chinese Communists are presumably aware that a sovereign State has the power to control its own exports. The assumption of controls for this purpose would be regarded as a threat to impose economic sanctions and it is hard to see why such a step should be any more effective than an announcement designed to remind the Chinese Communists of the economic bargaining position of the West.
8. In any case, experience has shown that Communist Governments regard commercial relations as being entirely dissociated from political relations: they have consistently shown themselves to be unwilling to modify their political principles for the sake of commercial advantages, but they have at the same time demonstrated their willingness [Page 877] to trade freely, in so far as it is advantageous to them, with capitalist countries with whom they are in acute political divergence.
9. The American Embassy’s Aide-mémoire refers to the subject of petroleum products in the following terms:—
“The Foreign Office has already indicated its desire to control the export of petroleum products. The same reasoning would appear to require control of the other categories studied by the sub-committee”.
There is, however, an important difference between the United Kingdom objective in regard to petroleum products and the United States objective in regard to the other categories proposed for control. The United States proposal is that this latter group of items should be controlled, not because of its immediate security importance but because of the general political bargaining strength which it is asserted that such controls would bestow. As has already been stated, His Majesty’s Government are skeptical of the efficacy of export controls aimed at a modification of the political alignment of the Chinese Communist regime, and are not disposed to institute controls for such a purpose. In the case of petroleum products, however, there is an obvious security interest. It is clearly of direct security importance to prevent the Chinese Communists from acquiring substantial reserves of petroleum products. Although the military operations of the Chinese Communists within China have not involved any substantial consumption of petroleum products, plans must be made on the assumption that sooner or later they will endeavour to expand beyond the frontiers of China. For such a purpose substantial quantities of petroleum products might well be indispensable. His Majesty’s Government have to give particular consideration to the case of Hong Kong. It is considered that any overt attack on Hong Kong from the Chinese mainland could be successfully resisted unless the aggressor were able to acquire, at any rate temporarily, command of the air and sea. It was because of considerations of this order that the communication recently made by the Foreign Office to the American Embassy laid particular stress on the importance of petroleum products.
10. His Majesty’s Government have indicated to the United States Government in another context that they see important advantages in the continued maintenance in China for as long as possible of Western commercial and financial interests. It is precisely because they are anxious to secure the second of the two objectives referred to in paragraph 2 above that they do not wish to show open hostility to the Chinese Communists by dissuading British commercial interests from entering into normal commercial relations with them. [Page 878] This does not mean that their policy in this regard can be considered as purely passive as is suggested in the United States Aide-mémoire. On the contrary, they consider it to be of importance to maintain their general position in China for as long as possible in order to permit the carrying out of a flexible policy of exerting influence and pressure whenever opportunity offers. They do not, however, consider that the means proposed by the United States Government are likely to lead to the desired result.