611.9331/4–1349: Telegram
The Consul General at Shanghai (Cabot) to the Secretary of State
[Received April 13—8:52 a. m.]
1182. Department in its discretion please pass Peiping.
Developing picture North China trade suggests we must consider at early date point at which we must take specific measures protect American business and commercial interests as well as Consular prerogatives if we are ever to do so.
Recognizing fully logic Department’s position that we do not want to get into full scale economic warfare with Chinese Communists unless we are forced to, we must nevertheless decide whether too soft attitude may not invite or encourage Communists take measures against American business and trade which firmer attitude would block. Resumption trade with Tientsin on individual basis especially via Hong Kong as we see it greatly weakened position western business communities in dealing with Chinese Communists and has doubtless suggested to them they can take measures impunity against western business and officials (e.g., Yee Tsoong, Kailan Mines, and American Consul General [at] Mukden). While we must be careful not to over-play our hand (for example, importations Russian oil reported [Page 932] in Tientsin’s 201, April 6 [4], 9 a. m. [2 p. m.]47 indicate withholding petroleum products is by no means as strong a weapon as we had thought), we must remember we do have weapons particularly at present time which we have not yet given any indication of using. Communists may well assume they can play individual firms and nations against each other. Since entire situation may be aggravated when Shanghai comes under Communist control, some specific plan (for example, that recomended in mytel 390, February 4, 8 p. m.) seems desirable.
It would be very helpful to us to be given further indications lines Department’s thinking regarding weapons at our [disposal if?] present attitude passivity proves ineffective meeting later developments. We feel our arsenal should be examined to determine what weapons additional to export controls might prove effective. Is Department exploring feasibility import controls, freezing orders? Has Treasury been consulted regarding possibilities substantial penalties for non-production [of] Consular invoices? We are not seeking decision at this time—merely indications as to lines thinking in Washington without final commitments.
We must specifically consider importance to US of protecting US citizens, American property, American trade and American officials against varying pressures to which they may be subjected. We should I feel study question indirect pressures which would in effect result confiscation American property and also question whether we should seek in any way oppose Communist trade monopolies which would clearly be harmful our trading interests. We appreciate Dept has already given very careful consideration to question import and export measures which might be used as weapons against Chinese Communists and that discussions have been held with British. We have nevertheless not been informed Department’s views regarding what weapons if any might prove effective and how far British and we are prepared to act in cooperation. We do not know whether American and British companies operating outside of respective jurisdictions (e.g., deriving oil supplies from Middle East) can be persuaded or coerced into cooperation.
Should pessimistic views as to Communist intent take over KMA or Yee Tsoong NC48 properties prove correct as feared by their Tientsin managers, British attitude toward whole NC problem might be profoundly modified including their acquiescence in use Hong Kong as Communist trading center. One British businessman explained British [Page 933] attitude regarding trading with Communists by saying they must stay with local ship even if it sinks as they have no other place to go and must appear cheerful in sheer self-defense. British officials and businessmen seem increasingly pessimistic regarding situation.
Consul General of course realizes use of any weapons at this time may be premature and/or dangerous. Nevertheless Communist acts suggest we must decide immediately whether we are to make stand and if so on what line since pattern is clearly now being set.
Repeated Nanking 677, OffEmb Canton 260, pouched Taipei 61.