690.419/10–1149: Circular airgram

The Secretary of State to Certain Diplomatic and Consular Officers 66

Proposed Control Over Exports to China and Adjacent Areas

After extended negotiations with the British regarding control over exports to China, the Secretary and Mr. Bevin agreed in recent discussions here to proceed along lines which British had previously indicated acceptable to them, as follows:
UK will exercise existing licensing controls over 1A list exports (see paragraph 14) to China, Macao and Korea, and Hong Kong and Singapore Governments institute similar controls to prevent Chinese Communist and north Korea acquisition goods of direct military utility and USSR and eastern European acquisition such goods via transshipment. UK action this regard, however, contingent French, Belgian and Dutch imposition similar controls on exports from their metropolitan and Far Eastern territories. Presumption would be for denial 1A exports to Chinese Communists and north Korea, with possible exception, after consultation cooperating governments, on case by case basis (e.g. aviation gas for regular international air carrier services). Understood that 1A controls include munitions, export of which British state now prohibited from UK and Hong Kong to China.
US and UK will seek collaboration of Netherlands Government in informal arrangements with major oil companies under which petroleum sales Chinese Communist areas and north Korea would not exceed normal civilian requirements and avoid long term contracts. (Such arrangements would cover sales from Middle East and NEI, US exports to be similarly controlled by license).
US, UK and other cooperating governments would watch flow 1B list goods (see paragraph 14) to China and north Korea and exchange information thereon with view corrective measures if volume excessive or injurious mutual interests (British not prepared at this time place any 1B exports to China under licensing control).
US and UK agreed make parallel approach obtain cooperation French, Dutch and Belgian Governments. Department undertook approach Philippine Government and obtain control transshipments south Korea. British proposed approach commonwealth governments (for your information we have not regarded Commonwealth cooperation other than Canada as necessary for time being). We assured British that SCAP now controls strategic Japanese exports to China, Agreed that Portuguese cooperation establish controls to cover Macao transshipments unnecessary for present in view shallow water Macao harbor.
British were informed that, while imposition US controls subject further interdepartmental consideration, such action may be necessary near future. Department indicated that, while US export controls China probably would have to be, for administrative reasons, more comprehensive than proposed for adoption by European governments, we did not intend at present apply other than 1A controls with severity. (US action probably will entail extension R procedure to China and adjacent areas. This will enable control over US petroleum exports in accordance paragraph (1–b) above, screening 1B and lower categories to guard against transshipment via China to USSR, eastern Europe and north Korea such goods as otherwise denied those destinations, and more adequate observation movement 1B goods for exchange information cooperating governments. For your information only, anticipated north Korea would be treated same manner eastern European satellites and 1B exports Manchuria licensed conservatively in view transshipment possibilities due Soviet control railroads that area.)
Timing of parallel approach not yet agreed with British. Meanwhile, however, Embassies Paris, Brussels and The Hague should prepare to open conversations with respective governments, subject subsequent instruction, with view obtain their early concurrence joint action along lines above agreed with British. While OSR67 and ECA [Page 882] not expected share responsibility China negotiations, Embassies should obtain their technical assistance as required and ensure full coordination China and east-west European negotiations. You should also keep your British colleague informed and concert your actions with him.
Embassy conversations should take account following points: Extension 1A controls China axiomatic to effective application east-west European controls already agreed upon or under negotiation. Present low level China trade does not minimize need early action since highly strategic goods could nevertheless be involved, and since more feasible impose controls before trade revives. 1A list goods generally not suited to Chinese civilian economy and licensing controls therefore directed primarily against USSR and European satellites and against acquisition munitions by Chinese Communists. Although not made explicit in discussions with British, it should be understood that application 1A controls to all China, including Taiwan, and to Korea as whole does not preclude licensing 1A exports to Chinese Nationalist areas and south Korea under conditions that serve national interests cooperating governments. Agreement to watch closely and exchange information on 1B exports represents minimum precaution in which major western governments should collaborate in their mutual strategic interest with reference to highly uncertain situation resulting Communist control China. Proposal to Dutch Government re control petroleum should be viewed in this sense, and as particularly important and desirable because petroleum most critical commodity to Chinese and, by virtue character industry, most susceptible control without formal action.
Exchange information re entire 1B list exports eastern Europe has not been accepted by western European governments other than British and Italian. Embassy proposals for exchange information re 1B exports to China should therefore be couched in terms surveillance movement selected group items of key importance Chinese economy and 1B list as such not emphasized. Department has in mind about 50 1B items agreed informally with British as of major importance, and will transmit soonest.
Initial negotiations should attempt reach agreement in principle with technical details re procedure to be worked out subsequently (e.g. arrangements for exchange information re 1B exports). Any attempt by continental governments to make their cooperation contingent upon similar action by governments other than those agreed with British should be resisted strongly on grounds latter governments control primary sources and entrepot centers China trade and watertight control system obviously impossible. (See paragraph 12) If [Page 883] significant diversion trade in 1A goods develops in other areas, necessary remedial action could be taken. Embassies should ascertain extent to which licenses now required for 1A exports to China and whether imposition proposed controls by metropolitan and Far Eastern colonial territories requires legislative or administrative action. Embassy The Hague’s comments, after consultation Cochran,68 requested re short and long term aspects proposed action with reference Indonesia.
Embassy London should consult Foreign Office re timing and procedure parallel approach continental governments and ensure understanding pertinent substance this telegram. Also should agree on scope 1A controls for China to be requested of continental governments. Department suggests US and UK both request adoption full UK 1A list with understanding this subject expansion in accordance US desire control full US 1A list, but that UK will promptly impose at least such 1A controls as continental governments can now extend China on interim basis.
Embassies Paris, Brussels and The Hague should not approach respective governments on any of above pending further instructions.
Department intends initial approach to Philippine Government through Embassy Manila but no action required pending further instruction.
Undecided whether R procedure will apply south Korea or whether reliance to be placed on cooperation Korean Government with ECA mission. No action expected Embassy Seoul at present.
Western Germany not mentioned thus far in discussions with British, but Department would of course wish The High Commission to apply same policies and procedures to China and adjacent areas as agreed with British and will take up with Frankfort in separate message.
Department would appreciate any comments missions and posts by telegram.
For information missions and posts, 1A and 1B lists refer first two commodity classifications under the US Government’s R procedure of export licensing now operated by Department of Commerce in consultation other agencies concerned. R procedure requires licenses for exports to designated countries (presently all Europe, including UK) of large number items classified confidentially in order strategic importance. Class 1A comprises Department’s munitions list and other highly specialized equipment and materials of high military significance. US now denies 1A exports to USSR and European satellites, as do UK and certain continental governments for shorter but parallel lists of varying scope. Class 1B covers a wide range of key industrial, [Page 884] transportation and communications equipment and supplies, export of which to USSR and European satellites the US now licenses only in small quantities. UK and continental governments require license only for such 1B exports as are in short supply. U.S. also restricts exports to USSR and European satellites of certain goods in Class 2, but remainder exports Class 2 and lower categories generally licensed freely.

Existing UK control system requires license for 1A exports to all countries except US, western Europe, and British dominions and territories. However, 1A exports to China not now denied UK licenses unless on munitions list. UK prefers to establish 1A controls at Hong Kong and Singapore rather than on UK exports to those destinations.

  1. Sent to Batavia, Brussels, Canberra, Frankfurt, The Hague, Hong Kong (also for Embassy Office Canton), Karachi, London, Manila, Moscow, New Delhi, Ottawa, Paris, Saigon, Seoul, Singapore, Tokyo, and Wellington.
  2. Office of Special Representative (in Europe, Harriman).
  3. H. Merle Cochran, U.S. Member of the United Nations Security Council’s Good Offices Committee for Indonesia.