The Secretary of Defense (Johnson) to the Secretary of State
Dear Mr. Secretary: I am informed that the HICOG has been authorized to license up to 15,000 tons of steel rails for export to Communist China during the balance of the calendar year, and that SCAP was informed of this action. It is understood that this action was taken because the UK had indicated its intention to accept a Chinese bid for the supply of 87,000 tons, in spite of representations made by the U.S. Embassy at London requesting British denial of the transaction.
This lack of accord among friendly countries in the export of highly strategic commodities to Communist areas is unfortunate. The British are well aware of the vital strategic importance of the lines of communications within the Communist areas. It is quite evident that the absence of adequate British export controls is the factor responsible for increasing the security hazard to both our countries.
As you may recall, in his letter of 7 February 19501 to the Secretary of Commerce, the Acting Secretary of Defense noted that “the strategic implications of … transportation systems of the communist area are such that from the short-time viewpoint the lines of communication in China, including Manchuria, are a most important means for the consolidation of recent gains and for expansionist activities, particularly in South and Southeast Asia.” Recent intelligence reports now indicate that such expansionist activities may be developing. I have noted the concern expressed by the Department of State in its report to the National Security Council (NSC 64) which points out that “the presence of Chinese Communist troops along the border of Indochina makes it possible for arms, matériel and troops to move freely from Communist China” and concludes that Indochina is under [Page 626]immediate threat.2 Under such circumstances, the Chinese Communists would clearly require adequate transportation to bring troops and supplies to their southern borders.
The Department of Defense is now giving priority consideration from the military viewpoint to the whole problem of the Communist threat to Southeast Asia, with a view to acting upon your suggestion in NSC 64 that “Departments of State and Defense should prepare as a matter of priority a program of all practicable measures designed to protect U.S. security interests in Indochina.” In view of the rapid development of the situation in Southeast Asia, it now appears that a shipment of steel rails or any transportation equipment to Communist China might eventually frustrate whatever measures may be decided upon by our respective departments as necessary to prevent further communist encroachment in this area. I therefore recommend for your consideration the following steps:
- The strongest possible further representations be made to the British to deny the Chinese bid for 87,000 tons of steel rails and that the authorization for export of 15,000 tons given to HICOG be rescinded. SCAP will be advised of the action taken and of the U.S. position in the matter.
- The Department of State join with the Department of Defense in urging the immediate reclassification of railway transportation equipment to 1A in order to prevent such occurrences in the future.
- Efforts to obtain parallel action by the British and other participants in the ERP program on controls of exports of all strategic commodities to Communist areas of the Far East be accelerated.
- As a matter of urgency, the Departments of State and Defense and other interested government agencies, consult and reach a final and workable understanding of the practical implementation of export policy to China under NSC 48/2 in the light of the situation now confronting the United States in Asia and the U.S. national interest.