Foreign Relations of the United States, 1952–1954, Africa and South Asia, Volume XI, Part 2

446E.119/11–553

Memorandum by A. Guy Hope of the Office of Chinese Affairs to the Director of That Office (McConaughy)

secret

[Washington,] November 5, 1953.

Subject:

• Urgent requirement for statement of position on Ceylon: export of dusting sulfur and bunkering of rice-rubber ships

1. Dusting sulfur: Commerce position:

The Operating Committee, an interdepartmental advisory group to the Secretary of Commerce, has called a meeting for 2 p.m. today to consider a paper submitted by the Bureau of Foreign Commerce (new name for OIT) recommending the resumption of licensing of dusting sulfur to Ceylon (Tab A).¹

If it argued that the withholding of sulfur (used by the Ceylonese as an insecticide in spraying rubber trees) has not caused Ceylon to withdraw from its sales of rubber to the Chinese Communists, and Ceylon has been able to obtain supplies of dusting sulfur from several of our European allies, including the U.K., despite U.S. protests.

Commerce states that the only basis on which it would consider continuing to withhold sulfur shipments to Ceylon is a renewed, vigorous U.S. approach to Ceylon and/or Western countries shipping rubber to the Soviet Bloc. Even then Commerce doubts the effectiveness or usefulness of including sulfur denials as a weapon against the trade in rubber to Communist China.

2. Sulfur and bunkering: MDAC position:

Yesterday afternoon I was invited to a meeting in Commerce with Mr. Braderman, chief of the Far Eastern Division of the Bureau of Foreign Commerce, and Mr. Hale, Far Eastern adviser to the Battle Act Administrator. There I was presented with Tab B, a paper prepared by the MDAC staff² following meetings of an ad hoc interdepartmental group (with Mr. Goodkind of EDS³ sitting for State).

This paper postulates that the denial to Ceylon of sulfur and the refusal to permit U.S. oil companies in the Far East to bunker vessels carrying rice from Communist China to Ceylon as a part of rubber-rice transactions have been ineffective in cutting off the Ceylon-Communist China rubber trade, will not discourage other nations from shipping strategic materials to Communist China, and may be aggravating relationships between the U.S. and Ceylon, the U.K., and other friendly nations and jeopardizing cooperation of our allies in “other economic defense and larger endeavors.”

The paper then recommends that the U.S. “disengage itself from existing economic defense policy toward Ceylon” by approving bunkers for the rice ships and by resuming exports of dusting sulfur, but “that the timing and manner of this disengagement be arranged so as to minimize any possible adverse inferences, either here or abroad, with respect to U.S. policy on China-trade control”.

Braderman has stated that Commerce could agree to its formula. Treasury and Defense have not been consulted, as far as I am aware. E and EUR can be presumed to like it, and I am certain it would be agreeable to NEA/SOA.⁴

3. Analysis of factors:

A. The original Commercial proposition reflects: (1) long-standing Commerce unhappiness with the Ceylon situation and pressure from U.S. sulfur exporters to abrogate the controls over dusting sulfur, accentuated by the sales to Ceylon of sulfur by European suppliers; (2) a Commerce doctrine that trade controls of other nations should parallel those of the U.S., now applied with the reverse twist that the U.S. should relax where other countries refuse to get in line: (3) the philosophy which is attributed to Assistant Secretary of Commerce Anderson⁵ that U.S. controls appear generally too restrictive in the light of the uneven application of controls by various countries of the free world, and that we should give more consideration to the needs and desires of American businessmen seeking markets.

B. (1) The MDAC proposal generally reflects Mr. Hansen’s⁶ dissatisfaction with the ruling of the Secretary of State on the denial of bunkers by oil companies under U.S. jurisdiction, and further reflects his understanding of Mr. Stassen’s⁷ philosophy of easing trade controls where they appear to be ineffective and are provocative to our allies.

(2) The second recommendation (on timing) is an effort on the part of an interdepartmental group under EDAC⁸ (in which CA was not a direct participant) to arrive at some formula which might be submitted to the Secretary for a new ruling.

4. Alternative courses of action:

FE appears to have the following alternatives:

A. Attempt to maintain the line that it is untimely to consider relaxation of any controls in view of the negotiations with the Chinese Communists.

B. Agree to the MDAC line that these controls have been a mistake but will not be unwound until a political decision is made that such relaxation will not damage substantially the structure of economic pressures against Communist China.

C. Attempt to persuade E, EUR, and SOA that a new, vigorous campaign against Ceylon’s supplying rubber to Communist China should be undertaken, accompanied by new pressures against the Western suppliers of rubber to the Bloc; and maintain the sulfur controls as they are, separating out for later consideration the question of bunkers.

5. Conclusions:

A. The first alternative accords best with the doctrine of NSC 154/1 and the relevant portions of NSC 152/2, despite arguments by MDAC to the contrary. We must recognize that the Department is being attacked in influential quarters as being unreasonable and responding to political pressures without regard to the total interest of the U.S. in keeping its allies friendly for the long struggle ahead. The Department is charged with inconsistency in having unilaterally announced relaxations in the case of Japan, and in having urged the case for non-opposition to British proposals for disembargo on antibiotics, while trying to maintain a rigid line in the Ceylon cases. Opponents cite NSC 152/2 as a general statement calling for liberalization of trade controls, and ignore the exceptions set out in that paper with regard to controls directed against Communist China.

B. The second course would establish a precedent that every action which offended some ally, and which did not stop some undesirable trade, should be abrogated. U.S. authority would be terribly weakened in the eyes of nations which expect us to be reasonably firm on basic moral issues.

C. From the long history of these difficulties with Ceylon and even older problems with U.K. shipments of rubber to the Soviets, it is apparent that none of the three areas mentioned would go along with the third course.

6. Recommendations:

That the Department take the following position in the Operating Committee:

A. The Department would favor a re-examination of controls applied against Ceylon in connection with rubber shipments to Communist China only under one of the following conditions:

(1) It is demonstrated that such controls are, in fact, jeopardizing our relations with Ceylon to the point where real and immediate danger exists that Ceylon will become dominated by Communism;⁹

(2) the Chinese Communists have demonstrated by word and action that the essential character of the regime has changed so that a real desire exists for peaceful settlement of outstanding problems in the Far East;

(3) there is a basic change in the U.S. view of the strategic nature of rubber, and controls over rubber are abrogated.

1. See OC Document 1120, supra.
2. Tab B was not found in the Department of State files. The Mutual Defense Assistance Control (MDAC) staff assisted the Director of the Foreign Operations Administration (formerly the Mutual Security Program) in administering the Battle Act.
3. sThe Economic Defense Staff (EDS) served in the Office of Economic Defense and Trade Policy in the Bureau of Economic Affairs.
4. The Office of South Asian Affairs (SOA), which had direct responsibility for Ceylon, was a branch of the Bureau of Near Eastern, South Asian, and African Affairs (NEA), headed at this time by Assistant Secretary Henry A. Byroade.
5. Samuel W. Anderson.
6. Kenneth R. Hansen, Acting Deputy Administrator of the Mutual Defense Assistance Control Act.
7. Harold E. Stassen, Director of the Foreign Operations Administration.
8. The Economic Defense Advisory Committee (EDAC) was an interagency committee set up to coordinate government activities in support of the enforcement of Battle Act provisions. The committee consisted of representatives from the Departments of State, Defense, Commerce, Treasury, and Agriculture in addition to other government agencies.
9. The phrase, “Ceylon will become dominated by Communism,” is crossed out in the source text. However, the words, “a rupture may occur,” which appear to have been penciled in as a replacement, are also crossed out. The existence of two check marks over the original phrase suggests that in the final review it was reinstated to read as printed.