Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

163. Memorandum From the Secretary of State to the President¹

Washington, May 16, 1957.

SUBJECT

• China Trade Controls

We have reached a rather critical phase in our negotiations with the British, Japanese, French, et al., with reference to China trade controls.

I received yesterday a strong memorandum from Selwyn Lloyd pointing out that the British would have to gain greater freedom in respect to China trade and do so quickly because of their parliamentary situation. He also said that there was rising criticism of the United States in areas where there was unemployment, which was ascribed, rightly or wrongly, to our refusal to let them trade with China. The Japanese are in this matter aligned closely with the United Kingdom.

Mr. Dillon, who is handling this matter for us, believes that we can obtain agreement with the United Kingdom only if we agree to a substantial reduction of the present differential between China trade and Soviet trade. We could perhaps maintain a differential to the following extent:

1. Prohibiting the sale to Communist China of items which, as regards the Soviet Union, are on a quantitative limitation basis;

2. While maintaining the principle of embargo in the case of China for those items which, in the case of Russia, are on a “watch” basis, agreeing that they, or most of them, be subject to the so-called “exceptions procedure”. This would allow sale of these items by our allies after advance notification so as to permit of our interposing objection if this seemed desirable and feasible.

3. Adding to the list dealt with in paragraph 2 above a few items which are now not on any of the Russian lists. However, these additions would probably not be of great significance.

From the standpoint of our Congressional relations and probably from the standpoint of our relations with such anti-Communist allies as Korea, Formosa, Vietnam, Thailand and the Philippines, we would be better off to let the British, Japanese, etc., “go it alone”. Walter Robertson believes, and I am inclined to concur, that it would be better for us to let the British, Japanese, etc., “go it alone” because the fact of our acceding to a substantial elimination of the China differential would be widely regarded in Asia as foreshadowing a policy of lessening opposition to the Chinese Communists which might precipitate widespread efforts by Asian countries to seek an accommodation with Peiping.

On the other hand, to split with the British, Japanese and most of the other trading countries on this issue would obviously have undesirable implications. If they start “going it alone”, we cannot be sure that they will stop with the present measures. These could constitute a precedent which, if pursued, could lead to a breakdown of the basic strategic controls which apply both to the Soviet Union and to China. Also it would give rise to somewhat greater anti-foreign sentiment in the Congress which may militate against assistance to, and cooperation with, our European allies. If we agree with them, we will absorb some of the criticism which otherwise they alone would bear.

My suggestion is that you and I should send messages to Macmillan and Lloyd, respectively, to the effect that we cannot go all the way to meet them and that they must go further to meet us, and then that we give Douglas Dillon, who is directing negotiations, discretionary authority within what we interpret to be the latitude permitted by the NSC decision.

Matters are coming to a climax and some centralized authority to act quickly is necessary.

I attach the suggested messages referred to.²

JFD

1. Source: Department of State, Central Files, 460.509/5–1657. Secret. Another copy is in Eisenhower Library, Dulles Papers, White House Memoranda. According to a handwritten note on that copy, the memorandum was carried to Eisenhower by Dulles for their meeting of May 17. Also attached to that copy was the draft of a suggested message from the President to Prime Minister Macmillan and the draft of a suggested message from Dulles to Foreign Minister Lloyd.
2. Secretary Dulles met with the President at 10:45 a.m. on May 17: “We discussed China trade controls. The President indicated his feeling that basically Communist China and Soviet Russia should be treated alike. He went over my memorandum, however, and approved it, as well as the prospective cables from him to Macmillan and from me to Selwyn Lloyd.” (Memorandum of conversation by Dulles; ibid., Meetings with the President)