175. Memorandum by the Under Secretary of State for Economic Affairs (Dillon)1
MEMORANDUM ON CHINA TRADE CONTROL NEGOTIATIONS
Negotiations on multilateral China trade controls began in CHINCOM on May 7. The French proposed immediate abolition of all special China controls except for the 25 items under quantitative control to the Soviet Bloc. Quantitative limits for the export of these items to China were to be set within six months. In accordance with NSC 5704/1 the United States, while seeking to maintain a significant differential in the level and severity of controls applied to Communist China as compared with the Soviet Union, proposed a substantial relaxation of the existing special China controls. After hearing the two proposals, twelve of the sixteen participating countries, led by the U.K., supported the French proposal, and it became obvious that the initial United States position would have to be modified if any agreement were to result.
During the course of the ensuing negotiations the United States made a number of relatively important concessions in an attempt to reach agreement. While these concessions did not rally any substantial support, they markedly changed the atmosphere of the negotiations [Page 469] and led four of the countries to formulate jointly a possible compromise solution.
This plan would have maintained a differential on China trade, essentially limited to the 25 items under quantitative control to the Soviet Union, and represented the maximum concession possible if a differential was to be maintained. In a final attempt to reach agreement it was accepted by our delegation without change.
This compromise was also supported by the Germans, the Benelux countries, the Italians, Turks, and Greeks, a total of eight countries, including the United States. The Canadians maintained a neutral position. Led by the United Kingdom the plan was opposed by France, Japan, Norway, Denmark and Portugal.
At this point it became clear that the only hope of moving the United Kingdom was to rally unanimous support for this compromise from the other countries. Determined efforts to sway these countries were unsuccessful, and, at least in the case of France, it became clear that there must have been a prior binding commitment to support the U.K. position to the end.
The result was the declaration by the British of their intent to proceed on their own to terminate the differential entirely. This will force the other countries to follow suit and the China trade differential is therefore gone. All countries have agreed, however, to apply to Communist China the same controls now applied to the Soviet Bloc countries in Europe; and there will be a negotiation of quotas for China on the List II (quantitative control) items.
While we were unsuccessful in maintaining the differential, our negotiators succeeded in aligning a majority with us, proved that we were flexible and cooperative, and created by their reasonableness, substantial good will among all the other negotiating countries.
If we had been able to accept something like the proposed compromise about six months or a year ago, we might have been able to retain a significant differential. Our failure to consider a modified position at an earlier date apparently led the British to conclude that our concessions would never be enough to suit them, and consequently to promise their domestic pressure groups, before negotiations began, that they would not agree to the maintenance of any differential at all. Although they recognized that we had gone a long way to accommodate ourselves to their problem, they were apparently so firmly committed that they could not consider our position on its merits.