Executive Secretariat Files: NSC 92 Series
Memorandum by the Assistant Secretary of State for Far Eastern Affairs (Rusk) to the Secretary of State
Subject: NSC 92
NSC 92 states that:
“The United States should continue, for the moment, its present policies regarding the placement of all exports under license to China and the NSC should keep under review the questions of a trade embargo, a blocking of assets of Communist China and action to prevent American shipping from calling at China mainland ports.”
This was submitted by State to the Executive Secretary of the National Security Council on December 8 for circulation to Council Members. The Treasury Department could not concur and desires authority to institute standby financial controls parallel to those which have been established by the Commerce Department to control exports. [Page 679] I have stated in Tab A the reasons why we should not now accept the Treasury view on financial controls.1
I recommend that you support NSC 92 as now formulated and that you state that the phrase “keep under review” should be understood to mean that while the United States Government should take all necessary advance steps and hold itself in instant readiness to apply severe and comprehensive measures to Communist China embargoing exports, freezing assets, and preventing movement of American shipping to its ports, those measures should not be applied until the NSC has received a report from the Department of State as to whether Mr. Bevin and the Foreign Ministers of the principal Western European countries see in this proposed action by the United States Government consequences which, if taken unilaterally, would seriously endanger our common interests in the Far East and elsewhere in the world.
The following considerations underlie my recommendation:
In Favor of Unilateral Action
The American people, in Congress, in the Executive Branch of the Government, speaking through the press and through correspondence to their Government, are, quite rightly, outraged that Chinese troops are killing American troops and feel that the United States should reply to China’s aggression with all means available.
There is no longer any valid basis for the theory that United States interests are served by keeping a business foot in the Chinese door.
The limits upon the effectivenes of unilateral action are obvious but this is not a conclusive argument against taking action which would have some harmful effect upon Communist China.
If the Executive Branch of the Government does not act in this field, Congress may pass legislation which will require action.
[Page 680]Possible Harmful Effects of Unilateral Action
UNA believes that unilateral economic sanctions by the United States at this moment would embarrass the cease-fire negotiations at Lake Success and jeopardize agreement in the UN on further measures which may have to be taken against Communist China.
Communist China and the USSR might regard application of economic sanctions as having the same relation to U.S. plans and prospects with respect to World War III that the U.S. freezing order on Japanese assets in July 1941 had to U.S. participation in World War II.
The United Kingdom and our other allies might regard unilateral U.S. sanctions, without prior consultation with them and an earnest attempt to secure their cooperation, as an alarming indication of unreliability and disregard of the implications of this action upon their interests, not only in Hong Kong, Malaya, and French Indo-China, but also in the defense of Western Europe.
At the same time, you should inform other Council Members that the Department has already opened discussions with the British and is in process of consulting other interested governments. You can state that the Department intends to report on their views before December 20. A telegram to selected missions is in draft and will be submitted to you for approval.
G, S/P, E, UNA, and EUR concur in this memorandum.
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Tab A was not attached to the source text in the Department of State files. Mr. Rusk, however, had set forth his reasons for opposing the Treasury position in a memorandum of December 13 to Messrs. Matthews, Thorp, and Nitze, which reads in part as follows:
“The Treasury Department would freeze Chinese Communist assets in the United States.
“This would be done under legal authority contained in the Trading with the Enemy Act which has not hitherto been cited unless it was the intention of this Government to undertake economic warfare measures of indefinite duration and very wide scope.
“Even if the Treasury Department permitted limited withdrawals under license for approved purposes, e.g. to finance exports which Commerce decides to license, the freezing would have an impact much wider than export controls and would probably stop transfers of funds to third countries and withdrawals for uses of funds for other than exports.
“The institution of stand-by controls by Commerce still permits the employment of those controls flexibly. The institution of ‘appropriate parallel licensing policies’ by Treasury would be a freeze of all Chinese Communist assets. For technical reasons this freeze would be regarded as and in fact would be the counterpart of a full Commerce embargo on exports.” (493.009/12–1350)
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