300. Memorandum From the Under Secretary of State (Richardson) to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Removal of Restrictions on US Trade with China

As you know, the United States currently maintains a virtually total embargo on all trade and financial transactions with Communist China, the only significant exception being the licensing of exports and imports of certain publications and educational materials. These controls prevent the export of American goods to China and prohibit the use of US dollars in any transactions involving Chinese Communist interests. Our regulations apply not only to US domestic firms but also to American subsidiaries abroad and to foreign firms insofar as we control resale of American goods and bank use of dollars in business involving Communist China.

At your request,2 [Page 786]I have reviewed these controls in order to identify restrictions which could be lifted without materially assisting the Chinese Communists, while still maintaining the basic regulatory framework.

In each of the situations described below, the removal of an existing restriction would, I believe, do more to promote US foreign policy and economic interests than it would benefit the Chinese Communists.

1.
Controls on Foreign Subsidiaries. We could modify or completely remove the prohibition on transactions with China that now applies to foreign corporations owned by US interests. Without altering our controls on direct US/Communist China trade or Peking’s access to US dollars, removal of this prohibition would be welcomed by friendly countries which regard our assertion of controls over the trading practices of their US-owned domestic corporations as an objectionable exercise of extra-territorial jurisdiction.
2.
Bunkering Restrictions. We could remove the restrictions precluding US firms from supplying petroleum products to ships owned or chartered by Communist China or any ship destined for China. As matters now stand, a Norwegian freighter bound for China cannot—without licensing approval from Washington in each case—buy oil in Singapore from an American company but must buy it from a competitor of American companies. The result, of course, is to hurt our oil companies but not in the slightest to bother the Chinese.
3.
Liberalization of US Tourist Purchases. We could modify the Foreign Asset Control Regulations prohibiting purchase of Communist Chinese manufactured goods to permit American tourists abroad to purchase Chinese goods in limited quantity. We would by this step eliminate the incessant irritation and annoyance of our tourists with the Government without contributing significantly to Chinese Communist foreign exchange earnings.
4.
Selective Reduction of Controlled Items. We could modify the administration of the Foreign Asset Control regulations and Export Control Act to permit a more liberal licensing policy for such items as food grains, agricultural equipment, pharmaceuticals, and chemical fertilizers. (Additionally, if desired, we could link this with a similar licensing policy for certain mainland goods which would allow for a gradual development of trade generally balancing imports and exports.)

The Department from time to time has considered these and even more extensive reductions of China trade restrictions. (At the end of last year the Department recommended to the President removal of the extraterritorial controls on US subsidiaries abroad.)3 [Page 787]The previously foreseen benefits from taking these steps are, I believe, still pertinent:

  • —They remove the irritant which extraterritorial aspects of our present trade controls create in our relations with our allies, particularly those allies, like Canada, where our investment is heavy.
  • —They indicate our desire for increased contacts and a reduction in tension with Communist China and hold open the door for further relaxation of controls if the Chinese respond positively.
  • —They would substantially reduce an irritant to American citizens travelling abroad and simplify cumbersome and expensive administrative procedures.
  • —They remove elements of our policy which have little or no effect on China and would put our China policy on a more rational basis before both the domestic and international publics.

Although the GRC (and some of our other Asian allies) could be expected to react somewhat unhappily, the modesty of these measures would soften their impact on the GRC, and I think their reaction would be manageable. In any case, we now have, in my opinion, an important additional reason for taking these measures now. The tense relations between Russia and China make the Soviets extremely sensitive as to our attitude toward China. There is no question that our taking the proposed steps would arouse Soviet curiosity if not concern. The Russians would be reminded that they cannot take us for granted in respect to our relations with China and that we too have options in this area. It would point out to them that better relations with the US are not only in Russian long-term interest but are also a two-way street. And the Russians might thereby be encouraged to show a greater willingness to be helpful on some of the more vexing problems between us.

But if we are to obtain the benefits we seek from these moves, it is important they be quickly effected, before Sino-Soviet tensions worsen. This will require fast top-level consideration and direction to preclude their being thrown into the bureaucratic arena where they will be talked and nibbled to death as has occurred in the past. Widespread discussion will also lead to leaks and the diminution of the desired impact on the USSR.

Elliot L. Richardson 4
  1. Source: National Archives, RG 59, S/S Files: Lot 83 D 305, NSDM 17. Secret. Attached to a typewritten note, dated June 21, which reads: “Henry: If we are serious about moving quickly we would need something like an NSDM from the President indicating his approval in principle on foreign policy grounds of measures along these lines. Such a directive would also call upon State, Treasury, and Commerce to work out the specific details within a certain time period and for the Department to prepare a scenario for press, congressional, and diplomatic handling. I would see that all this would be prepared immediately if the basic go-ahead could be given. ELR” Another copy of the memorandum with Richardson’s note is attached to Document 301.
  2. Not further identified.
  3. Reference is presumably to Secretary Rusk’s memorandum to President Johnson, January 4, 1969; see Foreign Relations, 1964-1968, vol. XXX, Document 336 and footnote 2 thereto.
  4. Printed from a copy that bears this typed signature.