130. Memorandum From the Secretary of State to
the Chairman of the Council on Foreign Economic Policy (Randall)1
Washington, August 7,
1956.
SUBJECT
- China Trade Controls Problem
Transmitted herewith is a proposal for an interim course of action with
respect to the China trade control problem pending development of definitive
policy recommendations by the Economic Defense Advisory Committee in
accordance with the assignment of July 31 by the Council on Foreign Economic
Policy.
The attached proposal would provide a basis for renewed talks with CHINCOM participating countries prior to
the resumption of CHINCOM sessions the
end of August. Early consideration of this matter by the Council would
therefore be appreciated.
John Foster
Dulles2
[Page 387]
[Enclosure]
CHINA TRADE CONTROLS PROBLEM3
Problem
The problem is to determine an interim policy with respect to the China
trade control question to permit an early series of bilateral
discussions with other CHINCOM
participating countries prior to the resumption of CHINCOM meetings the latter part of
August and pending the development of final policy recommendations by
the Economic Defense Advisory Committee by October 31.
Discussion
- 1.
- It was agreed in the Council on Foreign Economic Policy on July 31
that the State Department would submit its proposal for an interim
policy with respect to the China trade control question for
consideration by the Council at an early meeting. The background
assumptions underlying the State Department proposal contained
herein are as follows:
- a.
- The interim policy approved by the NSC on April 26 has been found to be
non-negotiable with the United Kingdom and Japan in its
present form. The British have rejected the proposal for
embargo of copper wire and have found the list of 81 items
unacceptable as a basis for limiting their exceptions. The
Japanese have accepted the proposal for embargo of copper
wire but have suggested the addition of 19 items to the list
of 81. Settlement with the Japanese seems possible if the
United States agrees to some or all of these items.
- b.
- In view of the United Kingdom and Japanese positions, it
has seemed impracticable to approach other participating
countries in the same terms. Most other CHINCOM participating
countries favor ultimate abandonment of the China
differential list though not necessarily in a single step.
The French, the Germans and the Italians have each devised
lists of items for priority deletion and have developed
varying formulas for removal of the differential none of
which would fit within the United States package proposal of
April 26.
- c.
- If no further bilateral talks are held by the United
States with other participating countries prior to the end
of the year, it remains possible for any other participating
country to urge a Consultative Group meeting in terms that
the United States would find it difficult to reject even
though the United States review of long-term policy were
incomplete.
- d.
- In the meantime, increased and indiscriminate use of the
exceptions procedures seems likely unless the United States
takes some initiative in urging restraint.
- e.
- The inability of the United States thus far to propose
some negotiable accommodation on the China trade control
question has resulted in at least the temporary loss of our
position of leadership in the CHINCOM to the United Kingdom as a result of
its statement of July 13 and has had a corroding effect upon
cooperation within the multilateral organization.
- f.
- If the United States is unable to devise some realistic
basis on which to resume discussions with other
participating countries on the China problem, the damage may
extend to the COCOM system
as well. The French have already requested trilateral talks
on both the CHINCOM
problem and the deletion of items from the COCOM list.
- 2.
- In light of the foregoing assumptions, it seems clear that the
United States must find some basis for approaching other
participating countries on the China trade control question if the
situation in CHINCOM/COCOM is to be kept from virtually
irreparable deterioration.
Recommendation
It is recommended that pending the development of a final position by the
United States on the China trade control question, the following should
be the interim course of action:
- (1)
- Settlement should be made with the Japanese on the basis of
adding to the original United States list of 81 items as many of
the 19 items covered by the 782 procedure as necessary (see
ED/EC D–102 of June 14, 19564 for the
listing of items), the Japanese thereafter to support the United
States in efforts to gain acceptance of this list by other
participating countries.
- (2)
- The list as amended should be proposed to other participating
countries (the United Kingdom to be approached last) as a basis
for United States non-objection to CHINCOM exceptions. It should be understood that
the list might be expanded in the course of discussions with
other countries by an additional limited number of items subject
to the 782 procedure (in the range of ten to twenty items of
interest to countries other than Japan) to permit the
development of an agreed list.5
- (3)
- The negotiating objectives set forth in paragraph 3(b) of the
CFEP report of April 6,
1956 should not be considered as a sine qua non for purposes of
the interim policy, but instead as objectives to be pursued on
their merits at the most propitious time; the objective
[Page 389]
for copper wire
specifically to be changed from embargo to quantitative
control.
- (4)
If the attempt to develop a list of items for liberalized
exceptions treatment is not successful, agreement should
then be sought for a more general interim agreement as
follows:
a. The United States would seek agreement that the
participating countries:
- i)
- will be discriminating in their use of the
exceptions procedures so as to avoid vitiating the
central purpose of the multilateral China controls
pending definitive discussion of the problem;
- ii)
- will permit only limited quantities of items to be
shipped and these to be judged on a case-by-case
basis; and
- iii)
- will have regard to the contribution which the
item may make to the military strength of Communist
China in accordance with a strict interpretation of
the CHINCOM
exceptions procedures.
- 5.
- In return for agreement by other participating countries
either on a specific list or on the more general formula set
forth in paragraph 4, the United States would agree:
- (a)
- to participate in a CG
meeting by the end of the year to seek a definitive
settlement of differences between the United States and
other participating countries on the China trade control
problem;
- (b)
- not to object to reasonable shipments of items
appearing on the agreed list provided for in paragraph 2
or alternatively, to exceptions cases meeting the
standards outlined in paragraph 4. (In fulfilling the
latter commitment relating to paragraph 4 the United
States as a general rule would refrain from raising
objections to Document 782 cases unless there is clear
evidence that the above-listed standards are not being
met.)
Herbert V.
Prochnow6
Deputy Under Secretary for Economic
Affairs 