Foreign Relations of the United States, 1952–1954, China and Japan, Volume XIV, Part 1

Eisenhower Library, Eisenhower papers, Whitman file

No. 419
Memorandum of Discussion at the 226th Meeting of the National Security Council, Washington, December 1, 1954¹

top secret
eyes only

Washington, December 1, 1954

[Extracts]

Present at this Council meeting were the President of the United States, presiding; the Secretary of State; the Secretary of Defense; the Director, Foreign Operations Administration; and the Director, Office of Defense Mobilization. Also present were Assistant Secretary Rose for the Secretary of the Treasury; the Secretary of Commerce (for Items 1 and 2); the Director, Bureau of the Budget; the Chairman, Atomic Energy Commission (for Item 5). The following were present for Item 4 only: Assistant Secretary of Defense Lanphier; Assistant Secretary of Defense Pike; Gen. Lodoen, Department of Defense; Col. Parsons, Department of Defense; Mr. Goodin, Department of the Army; Mr. Thomsen, Department of the Navy; Gen. Garrity, Department of the Air Force. Also present were the Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; Robert Cutler, Special Assistant to the President; Mr. Bowie, Department of State; the White House Staff Secretary; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.

There follows a summary of the discussion at the meeting and the main points taken.

. . . . . . .

2. U.S. Policy Toward the Far East (NSC 5429/3;² NSC 5429/2;³ Memo for NSC from Executive Secretary, same subject, dated November 29, 1954;⁴ NSC Action No. 1259⁵)

Mr. Cutler briefed the Council on the background of the reference report (NSC 5429/3), and said that the principal issue remaining to be decided was how the United States should use trade as a weapon to divide China from the Soviet Union. He noted that the Secretary of Commerce had been invited to participate in the Council discussion.

The President inquired about the bracketed sentence in paragraph 2, which read as follows: “While there is now no reason to anticipate an early collapse of the regime nor any means of seeing when one might occur, inherently such regimes have elements of rigidity and instability which might produce crises or break down unexpectedly.” With what thought in this sentence, asked the President, did CIA not concur? Mr. Allen Dulles replied that CIA took exception to the last phrase, because it seemed to them inconsistent with the rest of the sentence.

The President inquired of Mr. Dulles whether anyone in the intelligence business had foreseen Tito’s break with the USSR. These favorable developments, from our point of view, in the Soviet bloc sometimes developed very unexpectedly out of thin air.

Secretary Dulles asked Mr. Allen Dulles whether he had anticipated the Beria⁶ affair. Pointing to the sudden accord in 1939 between Stalin and Hitler, he agreed with the President’s judgment as to the unexpected quality of such developments in the Soviet Union. Mr. Allen Dulles said that he was quite prepared to admit that there was a chance of disassociating Communist China from the Soviet Union, but that there was no reason to expect any sudden collapse of the Communist regime in China.

The President said that while he was willing to revise the disputed sentence, he was unwilling to agree with CIA that it should be deleted, since he really believed that these totalitarian regimes were excessively rigid and have inherent weaknesses on which we should attempt to capitalize.

After suggesting language to revise the sentence in question, Mr. Cutler went on, and pointed out the next split view in the paper, which occurred in paragraph 4–c, reading: “reduction of [relative]⁷ Chinese Communist power and prestige”. Mr. Cutler explained that Defense, the JCS, and ODM proposed deletion of the word “relative”, since they desired courses of action which would reduce Chinese power absolutely and not merely relatively. State and the other agencies opposed this view, and desired to reduce Chinese power relatively, particularly by building up the strength of India and the other free Asian states. The representatives of these agencies on the Planning Board could see no present prospect of any absolute reduction of Chinese Communist power, short of war, and therefore were inclined to regard anything more than a relative reduction as “pie in the sky”.

Proponents of this paragraph in Defense did not contemplate anything like the complete destruction of Chinese power and prestige, observed Secretary Wilson, and the President added that even a change by the Chinese Communists to an attitude less violently antagonistic to the United States would help a lot.

Secretary Dulles believed that there were two thoughts hooked up together in paragraph 4–c which were not necessarily related to one another. You might possibly secure the reorientation of Communist China without securing at the same time a reduction of its power and prestige.

The Council agreed with Secretary Dulles’ analysis, and turned its attention to paragraph 4–e, where the views of the Planning Board were again split. Paragraph 4–e read as follows: “Creation in non-Communist Asia, and ultimately within Communist China, of political and social forces which will zealously spread the greater values of the free world and simultaneously expose the falsity of the Communist ideological offensive.” The President said he could not understand why anybody objected to this paragraph. Was it not one of the fundamental objectives of Mr. Streibert’s organization (the USIA)? Of course, it didn’t mean that we would resort to every possible means, such as war, to accomplish the objective.

Secretary Dulles commented that while this was a wonderful idea and he had no particular objection to it as such, it was certainly a very unrealistic objective, far removed from any degree of practicality. The President replied that he was obliged to disagree with Secretary Dulles. Zealots, in this paragraph, did not necessarily mean evangelists of the Billy Sunday type, who would be running up and down the countryside in Communist China publicly proclaiming democratic ideals. The actual task could be done quite differently and perhaps with some effect. Secretary Dulles countered that he remained unconvinced, and the President said in that case why do we spend so much money to enable the Voice of America to beam messages to the captive Communist states?

Mr. Cutler met Secretary Dulles’ objections to the paragraph by suggesting the deletion of the term “non-Communist” before Asia, and the phrase “, and ultimately within Communist China,”.

With respect to paragraph 5–c, the President suggested deletion, in view of Secretary Dulles’ statement a moment ago that we were about to sign a mutual security treaty with the Chinese Nationalists. The President agreed to the inclusion of the paragraph when it was pointed out to him that signature of the treaty did not necessarily mean its ratification.

[Here follows discussion of paragraph 5–a, relating to Indonesia, and of paragraphs 5–f and 6–e.]

After further discussion of paragraphs 6–f and 6–g, the Council proceeded to consider the most significant split in the paper, which occurred in paragraph 7. This paragraph, which had been originally proposed by the Department of Commerce, called for a package deal which, in return for seating both Chinas in the UN Assembly and opening trade with Communist China on the same basis with the European bloc and recognizing the existence of two Chinas, the Communists would admit Japan to the UN, would withdraw their forces from North Korea and agree to free elections there, and abandon their subversive pressure in South Vietnam and elsewhere in free Asia. Mr. Cutler said that FOA had joined with the Commerce Department in at least desiring to get these big issues up for discussion by the National Security Council.

Governor Stassen said that the process by which these issues were brought up to the Council through the mechanism of the NSC Planning Board was a desirable and useful process, but that FOA did not desire to press such policy issues as those contained in this paragraph unless the State Department desired to press them. Mr. Cutler again stated that initially paragraph 7 had been a Commerce Department proposal. He pointed out its relationship to paragraph 8, in which the Commerce Department took a quite contrary view in urging a very tough U.S. policy with respect to continued embargo and restrictions on trade with Communist China. This apparent contradiction in the position of the Department of Commerce he explained as animated by a desire to force a decision one way or the other, since Commerce felt that our present trade policy toward Communist China lacked consistency and clarity. It was not designed clearly to woo Communist China away from Russia by inducements or by harsh measures. He then asked Secretary Weeks to elucidate the Commerce position.

Secretary Weeks stated initially that he desired to address himself solely to the “trade angle”. This was full of difficulties. We clearly recognize that Soviet Russia and Communist China cannot have war machines unless they first have industrial machines. Neither of these countries could be described now as a first-rate industrial power, but we are in a fair way to assist Russia and China to become industrial nations. Secondly, we tend to look at Communist China and Soviet Russia as a single unit, not as separate countries. He understood, continued Secretary Weeks, that there were two viewpoints within the walls of this room. One wished to maximize China’s dependence on Russia as a means of destroying their close relationship; others desired to minimize China’s dependence on Russia to the same end.

Secretary Weeks then indicated his extreme dislike of the changes in the trade controls of the free world on Communist China that had been brought about by the British initiative of last August.⁸ He believed that many of these changes had been dangerous to the national security of the United States. What are we going to do, he asked, about China? The British contend that we should treat trade with China just as we treat trade with the European Soviet bloc. In short, we should put controls only on military and highly strategic items. Trade with the Soviet bloc, according to the British, was one of the best means of enhancing the prospects for peace, especially if more consumer goods were provided to the Soviet bloc populations. Accordingly, the British are now going to propose a new look at the controls on the free world’s trade with Communist China. If, as a result, these controls are reduced, they will be reduced all along the line, including items the U.S. regards as highly strategic. The Department of Commerce believed that this would be very unfortunate.

Secretary Weeks then said he had two or three suggestions for meeting the situation. In the first place, the United States might decide to go along with the British in looking at trade with China and Russia in the same light, but try to get our allies to back us up in an effort to impose more severe restrictions on trade in items with either China or Russia which we deemed of great significance for our security. Secondly, and if the first suggestion didn’t work, we might consider the possibility of trading “bloc to bloc” with the Communist nations.

The President leaned back and said, let’s assume a condition in which all trade between the free world and the Soviet bloc is completely cut off. How much will the United States then do to help those free world countries which depend on trade, such as Japan? Will we dole out sheer subsidies to save their economies from collapse? Secretary Weeks replied that with respect to Japan he would permit the Japanese to trade with Communist China. But you would not permit the British to do so, replied the President.

Secretary Weeks denied that he was proposing to cut off all trade. Indeed, he favored trade. But he wished more attention paid to the control of significant strategic materials. Perhaps if everyone was going to trade with Communist China the United States ought to do so too. The President in turn denied that he had any desire to build up Chinese Communist war potential. He was merely insisting, he said, that both parts of the question be answered at the same time. If we propose to prevent trade between the free world countries and the Soviet bloc, what alternative do we provide these free world nations?

Governor Stassen commented that one obvious factor was our growing inability to force our views on the other free nations. Over and above this fact was the fate of governments if they made the attempt to go along with our present trade policy vis-à-vis the Soviet bloc. They were at once attacked by their own citizens, as was illustrated by the current difficulties of Premier Yoshida in Japan, not to mention Ceylon and Indonesia. Accordingly, Governor Stassen said he was convinced that we must find a more realistic approach to trade with the Communist bloc. We must recognize that these countries must earn their livings, and confine our restrictions on East-West trade to the really significant and strategic materials which contributed directly to the war potential of our enemies. Governor Stassen took issue with Secretary Weeks’ appraisal of the effect of the relaxation in trade controls instigated by the British last summer. He cited the fact that controls on transshipment of strategic materials were working more effectively than ever before. We have also secured credit controls on a significant list of materials. He doubted, therefore, if the recent changes had really been to the net disadvantage of the free world vis-à-vis the Soviet bloc.

Mr. Cutler then invited the opinion of Secretary Dulles with respect to paragraphs 7 and 8.

Secretary Dulles stated that it would be, in his opinion, disastrous to set up a group to study the recognition of China, its seating in the UN, and the opening of trade with China on the same basis as current trading with the Soviet European bloc. To study such a package deal as called for by paragraph 7 would be to cause a whirlpool in the free world. Mr. Cutler interrupted to point out that an equally dangerous whirlpool would be caused in the United States if such a study were undertaken by the Government. Accordingly, Secretary Dulles called for the deletion of paragraph 7.

The President inquired whether a study had ever been made of the conditions under which the United States could possibly recognize Communist China at some future time. Secretary Dulles replied in the affirmative, but pointed out that the basic condition for such recognition was rather intangible. As long as Communist China is so bitterly hostile to the United States, we certainly do not want to enhance its prestige. There were no visible signs of any diminution of this hostility and, indeed, announcement of the forthcoming treaty between the United States and Formosa would serve to heighten Communist China’s hatred. Accordingly, at the present time no such package deal for a settlement, as outlined in paragraph 7, was desirable.

Governor Stassen expressed agreement with the Secretary of State as to the undesirability of such a study at this time, but warned that it was important for the United States to study such problems as this early enough to have a timely solution when the appropriate moment arrived.

Mr. Cutler then called on the Council for a decision between the two versions of paragraph 8–c. He pointed out that the version in the left-hand column, proposed by State, Treasury, Budget and CIA, was the more moderate, and called for a continuation of approximately our present policy with respect to restrictions on the trade of free world nations with Communist China. The version on the right-hand side, supported by Defense, Commerce, ODM and the JCS, was harsher, and sought a virtual embargo on all this trade.

The President said that to his way of thinking the embargo course of action in the right-hand version simply slammed the door in Japan’s face. Secretary Dulles also indicated that he could not go along with this harsher course of action, although he also objected to the proposal on the left-hand side, which called for early consultations, particularly with the UK and France, looking toward agreement on Chinese trade controls. This was not the moment, insisted Secretary Dulles, to start such conversations.

The President inquired of the Secretary of State whether he thought that the course of action to reimpose more effective controls by the U.S. and other countries over the Soviet bloc in Europe, to prevent transshipments to China, was feasible. Secretary Dulles replied in the negative, indicating again that the entire course of action on the right-hand side of the page was infeasible. He said he would like to have Governor Stassen’s opinion as to whether there was any likelihood of our securing more effective controls to prevent the transshipment of materials sent to the Soviet Union from being transshipped thence to China. Secretary Dulles said that Thorneycroft (President of the British Board of Trade) had indicated to him that Britain might be willing to impose more effective transshipment controls if in return the United States would agree on a list of controls common to both the Soviet Union and Communist China.

Governor Stassen said he believed that this was the British point of view, and that we might even manage to add additional items to the lists for international control if the lists for the European Soviet bloc and Communist China were made identical.

Dr. Flemming inquired whether, if the Council adopted the left-hand version of paragraph 8–c, language could be added to it which would prevent exchange of materials which contributed to the buildup of Chinese Communist war potential. The President pointed out to Dr. Flemming that his suggestion was already agreed U.S. policy. It was, however, a matter of degree and of seeing to it that friendly nations were able to make their livings. With 52 million people cooped up in the United Kingdom and 85 million in Japan, trade was a vital necessity. We have made it all too plain that we will not trade to any great extent with these countries. Every time you bring up to Congress a proposal to lower tariff barriers, Congress responds by trying to raise the level. The President said he was afraid that nations like Japan might well go Communist if they were deprived of the possibility of trading. Such a turn of events would really build up the war potential of the Communist powers.

Mr. Cutler proposed language to meet the President’s point, but the President said with impatience that he was not interested in mere agreement on words. What he wanted was an agreed NSC policy and a decision on his initial basic question of finding alternatives if we insisted on trying to eliminate free world trade with Communist China.

Secretary Weeks said there appeared to be three major questions which needed answering. If this trade with the Communist bloc was to be permitted or encouraged, do all the free nations except the United States engage in the trade? Second, do we trade with the Soviet bloc as individual nations, or do we trade bloc to bloc? Third, how do we make sure that the Communist bloc doesn’t get war materials and that we ourselves receive a quid pro quo?

The President said that the time was approaching to settle three big questions with respect to U.S. trade policy. First, should U.S. trade policy with the Soviet bloc be the same policy as that of its major allies? Second, do we agree that we ought to treat Communist China and the European Soviet bloc in the same fashion, subject, of course, to special situations? Third, are we agreed that we should hold the line against exporting munitions of war, heavy fabricating machinery, and the like? Let us, continued the President, take these three questions and develop our simple plan; for we shall have to explain this thing and clear it all with the Congress, and we should have our arguments ready.

Secretary Weeks suggested that the NSC Planning Board be directed to present a paper answering these questions, but Mr. Cutler said that we could quickly get a new paragraph in the present paper to cover the President’s point.

Taking issue with Mr. Cutler’s timing, the President said jokingly that while he was dead sure of his competence to decide very difficult issues (with a smile), on this particular one he had just shot from the hip. He wanted his three questions, therefore, to be studied, particularly by the Joint Chiefs of Staff, and not decided by the Council at this time.

Secretary Wilson said that he felt that he was closer to the President on this whole problem of U.S. trade policy. He was, however, personally opposed to Secretary Weeks’ suggestion of conducting trade with the Communist powers on a bloc-to-bloc basis. The Director of the Budget said that he quite agreed with Secretary Wilson, adding that such a bloc-to-bloc approach was directly contrary to traditional U.S. trade practices and the idea of free enterprise. It would be tantamount to “government-to-government” trade. The President said it would be quite different if the present world were organized on a free enterprise basis, but as matters now stood we must recognize the facts and deal with them realistically.

Mr. Cutler turned to the final split paragraph of the report, 10–b, which read: “Make clear to the Communist regimes that resumption of normal relations between them and the United States is dependent on concrete evidence that they have abandoned efforts to expand their control by military force or subversion.” The State Department, Mr. Cutler pointed out, proposed that this subparagraph be deleted; the other agencies favored its inclusion. The President said that he was opposed to the inclusion of the subparagraph, for the simple reason that it was not enough justification for the resumption of normal relations between the U.S. and the Communist powers of Asia.

The National Security Council:⁹

a. Discussed the subject on the basis of the reference report (NSC 5429/3) in the light of the views of the Joint Chiefs of Staff contained in the reference memorandum.

b. Agreed upon the following changes in the statement of policy contained in NSC 5429/3:

(1) Paragraph 2: Include the sentence in brackets, amending the last portion to read as follows: “inherently such regimes have elements of rigidity and instability which sometimes produce crises.”

(2) Paragraph 4–c: Reword as follows:

“c. Reduction of Chinese Communist power and prestige, or securing by reorientation a government on the mainland of China whose objectives do not conflict with the vital interests of the United States.”

(3) Paragraph 4–e: Include, deleting from the first two lines the words “non-Communist” and “, and ultimately within Communist China,”.

(4) Paragraph 5–b: Revise the last two lines to read as follows: “with U.S. security interests and subject to continued ROK cooperation.”

(5) Paragraph 6–e: Delete the bracketed sentence and the footnote relating thereto.

(6) Paragraph 6–f: Delete the bracketed section and the footnote relating thereto.

(7) Paragraph 6–g: Delete the bracketed section and the footnote relating thereto.

(8) Paragraph 7: Delete, together with the footnote relating thereto, and renumber the remaining paragraphs accordingly.

(9) Paragraph 8: Delete the bracketed section at the beginning, and the footnote relating thereto.

(10) Paragraph 8–d: Delete the bracketed section and the footnote relating thereto, and insert, after the words “each other” in line 7, the words “, particularly by stimulating Sino-Soviet estrangement.”.

(11) Paragraph 10: Delete subparagraph b and the footnote relating thereto.

(12) Revisions, in the light of the discussion, to be prepared by the NSC Planning Board for further Council consideration, of:

(a) An additional paragraph under paragraph 5, covering Indonesia.

(b) Paragraph 5–f.

(c) Paragraph 8–c.

. . . . . . .

S. Everett Gleason

1. Drafted by Gleason on Dec. 2.
2. Document 397.
3. Dated Aug. 20, 1954; for text, see vol. xii, Part 1, p. 769.
4. Lay’s Nov. 29 memorandum enclosed a memorandum of Nov. 26 from the Joint Chiefs of Staff to the Secretary of Defense, commenting on NSC 5429/3; for text of the Nov. 26 memorandum, see ibid., p. 992.
5. See footnote 9, Document 375.
6. Lavrentiy Pavlovich Beria, former Deputy Chairman of the USSR Council of Ministers and Minister of Internal Affairs, had been removed from office in mid-1953, Charged with conspiring against the Soviet Government, tried, and executed in December 1953.
7. Brackets in the source text.
8. Weeks was presumably referring to the relaxation in July of multilateral controls on trade with the Eastern European Soviet bloc or to the British suggestions, made in September, that the United States and the United Kingdom should hold discussions looking toward a reduction of multilateral controls on trade with China; see Secto 24 from Manila, and Dulte 16 from London, Documents 287 and 312.
9. The lettered subparagraphs constitute NSC Action No. 1275. (S/S–NSC (Miscellaneous) files, lot 66 D 95, “Record of Actions by the National Security Council, 1954”)