493.119/11–2850
Memorandum by the Deputy Director of the Office of Chinese Affairs (Perkins) to the Assistant Secretary of State for Far Eastern Affairs (Rusk)
secret
[Washington,] November 28, 1950.
Subject: Standby Economic Control Measures for Communist China
- 1.
- This Government is now applying control measures to deny export to Communist China of all Positive List commodities from the United States, has secured the cooperation of the European CoCom countries in applying to China their restrictive controls for the U.S.S.R. and its Eastern European satellites, and has obtained the voluntary cooperation of American business interests in the embargo of petroleum products. These measures, although effective in preventing movement of strategic commodities to Communist China, do not add up to a program of all-out American economic warfare. For that to be accomplished there should be an embargo on all United States exports to Communist China, including those which have no strategic rating, a blocking of all Chinese properties in the United States (with licenses granted for withdrawals by Chinese Nationalist agencies and individuals and perhaps for Americans on the mainland who can demonstrate hardship), an elimination of American flag and American owned shipping from Communist Chinese ports, and an embargo on Chinese Communist imports into the United States.
- 2.
- Under the Trading with the Enemy Act1 these measures can be taken by the United States Government without legislation even though Communist China is not declared a belligerent at war with this country. These measures can be put in effect, either by a comprehensive [Page 665] executive order of the President or by selected executive orders covering parts of the program of control, and violators of the orders would, thereafter be liable to prosecution. To do this requires no longer than the time taken in drafting and clearing the order (or orders) with the various administering agencies (Treasury Department, Maritime Administration of the Commerce Department, Commerce Department, Justice Department). L is now engaged in preparing drafts of such orders.
- 3.
- There is considerable scope for applying effective controls upon U.S. economic relations with Communist China without resort to executive orders. The Commerce Department can apply a complete embargo on United States exports to Communist China under the authority of the Export Control Act of 1949.2 The Commerce Department, the Maritime Administration, and the Federal Reserve Board are prepared to provide to American business, shipping companies, and banks policy advice which the State Department desires circulated, including, for example, a regime that their voluntary cooperation is desired in terminating all economic relations with Communist China. Policy advice of this sort, in the past, has been promptly and willingly accepted.
- 4.
- Unilateral application of the above economic measures, in an effort to hurt or punish the Chinese Communist regime, would have marginal effect only and even this would diminish as the Chinese Communists turned from the U.S. to other competing markets for its imports and exports.
- 5.
- To determine when, how, or if the measures above should be applied
at all the following considerations should be borne in mind:
- a.
- China’s economy is not vitally dependent upon foreign trade to maintain operations at present low levels of production and welfare;
- b.
- Application of economic warfare measures by the United States would place in acute jeopardy the safety of the American missionaries in China which are virtually the last and only foothold which the United States retains in China;
- c.
- To impose pressure upon our Western European Allies to join in effective multilateral economic control measures—which is essential for the effectiveness of such a program—would probably impose added strains upon their security position, particularly at Hong Kong and in Indo-China;
- d.
- In any situation short of one where a naval blockade has been imposed, thus committing the United States to a more extreme posture of hostility than economic warfare would imply, the measures listed would deprive the United States of its last remaining method for giving China an alternative to all-out orientation towards the U.S.S.R.