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

693.009/12–2049

The Department of State to the British Embassy

Memorandum

The Department of State has studied carefully the proposed note to the French, Belgian and Netherlands Governments regarding export controls for certain Far Eastern areas, which was enclosed with the British Embassy’s memorandum of December 8, 1949.⁷⁸

The Department concurs in the general tenor of the proposed communications to the other Governments, with certain suggested changes and additions. The Department believes, however, that it would be unwise to present the subject to the Governments in a formal communication of any kind, and prefers to place it before them in an informal memorandum which might be the basis of informal oral discussion and agreement, to be confirmed by the Governments addressed by means of an informal memorandum informing us of their unilateral decisions to adopt the system of controls desired. It is understood that formal agreements relating to trade are required to be registered with the United Nations, and that for this reason consultations regarding export controls for Eastern European countries have been conducted in this manner.

The Department concurs in the view of the British Government that it is preferable at this time merely to seek the agreement of the Governments to an extension to the Far East of the system of control agreed on with respect to Eastern Europe, and to leave for determination by subsequent consultation the definition of commodities to be watched with a view to exchange of information.

Finally, the Department is happy to note, in the British Embassy’s memorandum of December 20 [19], 1949,⁷⁹ that the Foreign Office is prepared to request the cooperation of the Netherlands Government in an effort to control sales and shipments of petroleum products to China. The two draft communications attached, one to be addressed by the U.S. Government to the French and Belgian Governments (with alterations to suit the case), and the other to the Netherlands Government, differ in the addition of this request in the communication to the latter Government. The attached drafts represent the Department’s views concerning what should be said to the Governments we intend to approach.⁸⁰ The significant differences between the Department’s drafts and that submitted by the British Embassy are discussed below.

In the first paragraph of the Department’s draft two reasons, rather than one, are given for the desirability of imposing controls on trade with designated areas of the Far East. As the British Government is aware, the United States Government is concerned both with the possibility of an increase of Chinese Communist military strength and with the possibility of transshipment via the Far East of strategic commodities now denied to certain Eastern European countries in direct channels of trade. The Department of State therefore believes the latter is an additional weighty consideration which should be mentioned in seeking the cooperation of other Governments, especially if reference is to be made (as the Department agrees that it should be made) to the meetings of November 14 which were concerned solely with the Eastern European problem. In the second paragraph of the Department’s draft North Korea has been added to the whole of China (including Formosa) as an area to which exports of strategic commodities should be controlled. Since it is obvious that North Korea might provide a loophole potentially nullifying the effect of any restrictions that might be agreed on, it is believed that the British Government will readily perceive the necessity of adding it to the areas to which exports should be restricted.

One change that might appear to be of a minor nature should be noted, in order that the British Government may be aware of the exact position with reference to the Government of the Philippines. In the fifth paragraph of the British Government’s draft it is stated that “the United States Government are prepared to obtain the cooperation of the Government of the Republic of the Philippines.” It has been reported to the Department that a recent decision of the Supreme Court of the Philippines has voided what were believed to be the powers of the Philippine executive to prescribe and enforce export control regulations, and it appears that additional legislation may be necessary to authorize the Philippine Government to establish such regulations. For this reason the Department would prefer to see the statement in the British Government’s draft read as follows: “the United States Government are prepared to seek the cooperation of the Government of the Republic of the Philippines.”

With reference to the proviso contained in the second paragraph of the British Government’s draft concerning the cooperation of “other Governments most directly concerned”, the United States Government understands that the quoted phrase in the British draft refers only to the French, Belgian and Netherlands Governments.

The Department of State agrees that, if the British Government deems it advisable because of the special relations of Macao to Hong Kong, the Portuguese Government might be asked to cooperate; but the Department does not think the cooperation of the Portuguese Government should be made a condition of adopting the proposals if the other Governments agree to cooperate. The Department has not envisaged that the United States Government would approach the Portuguese Government but is prepared to support an approach by the British Government if such support is desired.

With reference to timing, the United States Government desires to proceed with our approaches to the other governments as soon as the nature and texts of the communications are agreed upon.

Finally, with reference to the comments of the British Government with respect to the possibility that the United States Government might, under its proposal, license some 1–A list exports to Chinese Nationalist areas, it is noted that in the view of the British Government this would seriously prejudice the effectiveness of the proposed controls. The British Government expresses the hope that the United States will be prepared to revise its view on this point, and notes that under United Kingdom practice prohibited goods of United States origin would be automatically stopped at Hong Kong.

The United States Government appreciates the concern of the British Government at the possibility that such goods might fall into the hands of the Chinese Communists, and agrees that the proposed control system should apply to China as a whole, including Formosa. As a matter of fact under present United States practice all 1–A list goods are under license control to the whole of China, including Formosa; licenses for exportation to those destinations are granted only as exceptions to the general rule, after careful review of each individual case, and only when in the opinion of the United States Government such export is advantageous to United States and western interests. In view of the United States Government an embargo of United States exports of munitions and 1–A list goods at this time almost certainly would lead to the collapse of Chinese Government resistance and a prompt surrender of Formosa to the Chinese Communists—an event which surely could be in the interests neither of the United States Government nor of the British Government.

While the United States Government cannot, therefore, agree to an automatic embargo of all 1–A list exports to China including Formosa, and North Korea, it is prepared to engage in the process of consultation and information exchanges called for in the attached draft notes and to consider sympathetically British views regarding licensed exports to Formosa of particular types of such goods.

Washington, [December 30, 1949.]

[Annex]

Draft Informal Communication to the Netherlands Government

The United States Government and the British Government, in the course of recent discussions, agreed on the desirability of taking steps to insure that western trade with China and North Korea should not result in any increase in the military strength of the Chinese Communist regime, and that certain Eastern European countries should not be enabled to obtain, by transshipment via China and North Korea, supplies of goods now denied them by the Western Governments in direct channels of trade; and it was considered that one essential measure would be the imposition of controls over the export or re-export to China and North Korea of goods of the highest security significance.

The United States already controls the export of such goods from the United States to all destinations except Canada. The Netherlands Government will recall that meetings were convened in Paris on November 14 by the French Government to consider with certain other Governments the adoption of a common policy for the denial to certain Eastern European countries of goods to be included in an agreed list. In view of the possibility that such denial might be ineffective if agents of those countries were permitted to obtain such goods freely through China and North Korea, and in view of the dangers to western interests in Asia and the Pacific in permitting the Chinese Communists unrestricted access to materials that will directly increase their military strength, the United States Government suggests the extension of the common policy of control to cover the whole of China, including Manchuria and Taiwan, and North Korea.

The United States Government accordingly hopes that the Netherlands Government (in respect both of its metropolitan and Far Eastern territories) will be prepared to impose controls over the export or re-export to China and North Korea of goods in the agreed list referred to in the second paragraph above as it may be subsequently amended by agreement. It is believed that such control should be for presumptive denial to the Chinese Communists and North Koreans of all exports on the agreed list, with the possibility of exceptions on a case by case basis after consultation among the cooperating Governments. On the other hand, exports to areas controlled by the Chinese Nationalist Government, although subject to control and careful scrutiny, would be licensed where it served the interests of one or more of the cooperating Governments to do so. The United States is prepared to arrange that the Netherlands Government receive reports on such exports actually licensed by the U.S. Government.

The United States Government and the British Government have also agreed on the desirability of watching closely, and of exchanging information on, the export to China and North Korea of a selected list of items considered to be of especial importance to the Chinese economy. A suggested list is under consideration and it is proposed that its exact composition should be the subject of later consultation and agreement.

The United States Government is prepared to seek the cooperation of the Government of the Republic of the Philippines, and it is understood that strategic exports to China and North Korea from Japan are being controlled. It is also understood that the British Government is approaching certain members of the British Commonwealth of Nations on the same subject.

A similar communication is being addressed to the Belgian Government and to the French Government, which is being invited to cooperate with respect to its metropolitan and Far Eastern territories.

The United States Government and the British Government have also, considering the critical importance of petroleum supplies to Chinese Communist military strength as well as to the Chinese economy, agreed that an effort should be made to prevent the Chinese Communists from obtaining dangerous quantities of such products by arranging for the voluntary cooperation of the major petroleum companies of their respective nationalities in an agreed program for restricting shipments of petroleum to China to the kinds and quantities essential for the normal civilian economy of China. Since the effectiveness of such a program necessarily depends on the cooperation of all the major suppliers of petroleum products to China, the United States suggests to the Netherlands Government the desirability of adopting a similar policy with respect to Netherlands petroleum companies. The United States is prepared to discuss this subject with the Netherlands and British Governments in detail with a view to arriving at a common understanding.

Washington,

78. See despatch No. 1888 and enclosures, p. 897.
79. Post, p. 1035.
80. For draft for informal communication to the Netherlands Government, see infra; draft for informal communication to the French and Belgian Governments not printed. The latter draft is the same in substance as the former with omission of the last paragraph regarding petroleum products.