337. Memorandum From the Acting Assistant Director, Research and Reports, Central Intelligence Agency, to the Director, Office of Intelligence and Research Analysis (Evans), Department of State0
SUBJECT
- Office of Secretary of Defense Suggestion for Reimposition of Trade Controls
- 1.
- I have discussed with [less than 1 line of source text not declassified] and [less than 1 line of source text not declassified] the following which is in response to your request for an OER reaction to the memorandum from Acting Secretary of Defense Quarles1 suggesting that certain multilateral embargoes be reimposed against Communist China.
- 2.
- The controls proposed in the OSD memorandum would, we feel, in no way deter the present level of activity in the Taiwan Strait. The disposition of forces in being and of supplies accumulated through earlier Russian shipments of military equipment are more than sufficient to sustain the present or higher level of activity in this area for some time to come.
- 3.
- It is of course possible that a high level of Communist Chinese air activity in the Taiwan area might be reduced to some extent in the future by an effective restriction of tanker tonnage available to Communist China. China’s present demand for petroleum fuels apparently exceeds the capability for overland supply from the USSR; the bottleneck is principally the Chinese rail system. On the other hand, even if seaborne shipments of POL are interdicted, a fairly modest reallocation of existing supplies would permit the support of such limited action as that in the Taiwan Straits.
- 4.
- Because of limited capability of overland supply, any significant increase in present levels of China’s demand for petroleum will require either charter of Western tankers or the deployment of Soviet tankers. Even in this case it should be pointed out that the numbers of tankers required would not be great. For example, the estimated probable movement of 200,000 tons of Soviet petroleum to China by sea in 1958 could have been moved in only four Soviet tankers. Of the total of 92 ships in the Soviet tanker fleet, 40–50 of them are of the type required for such voyages.
- 5.
- We think it is important to emphasize that the partial embargo of selected strategic goods could be expected to have no significant impact on Communist Chinese military effectiveness. In a controlled economy the size of Communist China’s, particularly when backed by the combined economies of the rest of the Bloc, the inconvenience resulting from selected trade controls such as those proposed could be easily accommodated. The Chinese military build-up depends rather on: (1) Chinese decision to divert domestic economic resources away from other programs to defense, and (2) Russian willingness to augment Chinese resources by [illegible] exports of Soviet strategic supplies.
- 6.
- The Chinese economy although growing rapidly is still relatively underdeveloped by Western standards. Nevertheless, the rate of expansion of Chinese military strength has been considerable in the past few years and may be expected to grow with increased Chinese industrial growth.2
- Source: Department of State, INR Files: Lot 58 D 776, East-West Trade Controls. Secret.↩
- Document 336.↩
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John D. Lacey of the Division of Research and Analysis for Far East sent Hugh S. Cumming, Jr., Director of INR, a memorandum which came to a similar conclusion. In his November 7 memorandum, Lacey concluded:
“It would thus appear that the imposition of the proposed controls would have little immediate effect on a Chinese Communist military build-up. Over the longer run the controls would to some extent limit the economic choices available to Peiping, and thereby impose certain costs. These costs would clearly be very small in relation to Communist China’s total economic and military effort, but to the extent they existed they could be considered to reduce Communist China’s industrial expansion and thereby its long-run military capabilities.” (Department of State, INR Files: Lot 58 D 776, East-West Trade Controls)
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