Office of the Historian

161. Memorandum From the Deputy Under Secretary of State for Economic Affairs (Dillon) to the Secretary of State1

Washington, May 15, 1957.

SUBJECT

  • China Trade Controls

The U.K. and Japan are anxious to eliminate the China differential entirely. While almost all the other countries agree with the U.K. and Japan in principle, they also wish to avoid a break with the U.S. and therefore are desirous of reaching a compromise acceptable to both the U.S. and the U.K. Lloyd has recently indicated to Whitney that a compromise might be possible.

In my opinion that basis for a compromise acceptable to the U.K. would be the following:

1.
Agreement by the U.S. to the decontrol of all items on the consolidated China special list (207 item list) that we are unable to justify on strategic grounds to our allies for inclusion on the Soviet List III, We have proposed the addition of 35–50 items. I assume that we could only reach general agreement to add relatively few of these items to List III. The final agreement would actually have to be a horse trade.
2.
Extension of the milder exception procedure (Section 782) to all items on List III. It is presently applicable to only 11 out of the 63 items on List III.
3.
Agreement to review List III at a later date to see if any items could be dropped.

I do not feel that steps 1 and 2 require further consideration by the NSC although you may find it adviseable to review them with the President. They have both been approved in the EDAC by representatives of all agencies except State which has so far reserved its position.

Before agreement could be given to dropping any item from List III an NSC decision would be required. An NSC decision would not be needed, however, for Item 3 above as all members of COCOM have the right to ask for such a review at any time.

The British have told us that their Parliamentary position is such that they must come to a decision during the course of next week. If we decide to offer a compromise as indicated above it would be advisable for the President to send a letter to Macmillan outlining it as our irreducible minimum position. News that such a letter was on its way should reach London by Monday next, and the letter itself should be delivered not later than next Tuesday.

  1. Source: Department of State, Central Files, 460.509/5–1557. Secret.↩