Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

322. Memorandum From the Chairman of the National Security Council Under Secretaries Committee (Irwin) to President Nixon ¹

Washington, February 23, 1971.

SUBJECT

• Steps Towards Augmentation of Travel and Trade between the People’s Republic of China and the United States

You have asked for recommendations for steps to carry out your policy of increasing personal and commercial contacts between the People’s Republic of China (PRC) and the United States as a step toward improvement of relations between our two governments. After a review based on NSDM 17² and the current studies under way in NSSM 106,³ the Under Secretaries Committee⁴ recommends two steps to facilitate personal contacts by relaxing restrictions on travel by American and PRC citizens, as well as steps in seven areas which would provide the basis for development of more normal commercial relations. All of the recommended steps can be implemented without new legislation.

I enclose a study containing a full review of the various issues and action possibilities considered by the Committee.⁵ The following is a summary of our action recommendations, with appropriate page references to the full study.

Travel

In the field of travel, the Committee recommends removal of all passport restrictions on travel to the PRC when they expire on March 15 (Travel, Option B, page 4). The Department of Justice opposes this proposal [5 lines of source text not declassified] (see Annex).⁶ The remainder of the Committee believe the potential gains outweigh the risks.

The Secretary of State, under whose authority the passport regulations are issued, concurs in recommending that controls on the use of passports for travel to the PRC be dropped on March 15, while continuing them on travel to North Viet-Nam, North Korea, and Cuba. This would eliminate the last formal passport barrier on our part to travel by American citizens to the PRC. Because of court decisions, and in keeping with our policy since 1969 of granting exceptions to the passport restrictions on travel to the PRC for broad categories of travelers, the barrier has in any event had little practical effect.⁷

Additionally, it appears to us desirable to make a public statement offering to expedite visas for groups of visitors from the People’s Republic of China to the U.S. (Travel, Step 2, page 6), in order to establish our willingness to facilitate on a reciprocal basis a flow of persons between the two countries. Justice opposes [1-1/2 lines of source text not declassified] (see Annex).

Trade

The United States relaxed some of its controls affecting trade between the PRC and third countries in December 1969, in April 1970, and again in August 1970 by a minor move on bunkering non-communist ships. The Committee believes that we should now commence relaxation of our controls on direct Sino-US trade, eventually to accord the PRC approximate parity with the Soviet Union. The closer our treatment of trade with the PRC approaches that applied to the Soviet Union, the more seriously our assertions of willingness to improve relations with the PRC will be believed, and the more likely it becomes that Peking will eventually respond favorably to our initiatives.

Timing

The trade steps could be accomplished separately or in a single package. The single package would probably have the most favorable effect on the PRC, while gradualism runs a greater risk of inviting scornful responses from Peking.

However, implementing these measures on a steady phased basis, in an undramatic fashion, would minimize an adverse effect on Taipei in general and on our limited ability to influence the GRC on the sensitive Chirep issue in particular. In fact a first step in this process, if not too dramatic, might well be helpful in making clear to the GRC that while we are anxious to help preserve its position in the UN, our purpose of seeking improved relations with the mainland is still firm and something which it would do well to take seriously. The timing of steps beyond the initial one would depend on a number of considerations, including the climate of US-GRC relations and the evolution of our Chirep position. For these reasons the Committee makes no recommendations on precise timing after the first step.

To sum up, therefore, the Committee recommends approval of all the steps described below, in deliberately spaced stages, and in an undramatic fashion, starting in the near future with authorization of direct export trade (Timing, Option A, page 33). The Committee is prepared to supervise the implementation of your decision with the aim of completing the program at or near the end of 1971.

Exports

The Committee’s objective is ultimately to place exports to the PRC on the same footing as the Soviet Union, but the Committee believes it is necessary to review experience with a more restricted level of exports before moving all the way to that goal. Specifically, therefore, the Committee recommends at this time the authorization of exports to the PRC under general license of all commodities currently under general license to the USSR except those which, after item-by-item interagency review, are deemed to be of strategic significance to the PRC (Exports, Option B, page 16).

Imports

The Committee recommends that later this year direct commercial imports from the PRC be authorized on essentially the same basis as the Soviet Union (Imports, Option A, page 20). It is important that this move be correlated with exports, preferably as one of the first steps subsequent to the initial export step.

Aircraft Sales

A gesture in the trade field which would enhance the political impact of relaxation of export and import controls would be a decision to permit the export to China of used American passenger aircraft not under COCOM restrictions (i.e. of a type which has been operating in normal civil use for more than one year), providing certain strategic equipment on board the aircraft is first removed. We have in the past approved the sale of British-made aircraft containing American-made components, after strategic equipment was removed.

A large number of older American aircraft are owned by airlines which would like to sell them to get capital to buy new American aircraft—which would be much welcomed by our industry. A case in point is a proposal by Pakistan International Airlines to sell to the PRC three of its used Boeing 720B passenger aircraft, after certain strategic equipment aboard them is removed (Aircraft Sales, page 23). If the PRC makes a firm offer to PIA, we recommend approval. We would accord the same treatment on a case-by-case basis to proposed transactions concerning similar used passenger aircraft of American manufacture, after certain strategic equipment is removed.

Currency Controls

The Committee also recommends relaxation later this year of our currency controls to permit Chinese use of dollars (Currency Controls, Option A, page 24). This would be important in conjunction with a decision to permit direct trade, especially imports, but could also be put into effect independently.

Bunkering

An irritation to the PRC and to American oil companies could be removed by changing bunkering controls (including those on petroleum products of US origin) to permit fueling Chinese-owned or chartered carriers—surface as well as air—(except those bound to or from North Viet-Nam, North Korea or Cuba) as well as non-communist and Eastern European carriers bound to or from China (Bunkering, page 26). The Committee recommends this relaxation of bunkering controls before the end of this year. (This relaxation would not affect our existing controls on entry of PRC carriers into US ports.)

Trade Delegations

A step in the trade field which would integrate closely with efforts to spur travel between the U.S. and the PRC would be to propose an exchange of trade delegations if circumstances warrant (e.g. a positive PRC response to our trade relaxation emerges) (Trade delegations, page 27). The Committee recommends that this step be authorized as a means of getting the proposal on record with the PRC. (Justice opposes; see Annex).

Chinese Port Entry and Cargoes

Finally, the Committee recommends adoption of two steps to permit (i) U.S. vessels to carry Chinese cargoes between non-Chinese ports and (ii) U.S.-owned foreign flag vessels to call at Chinese ports (Shipping, Options B and C, pages 30 and 31). We make no recommendation on amending current regulations to permit U.S. vessels and aircraft to call at Chinese ports at this time.

We note, however, that a decision in the export field to permit grain sales to the PRC—a major importer of grain—would raise the question of whether to allow more favorable treatment of the PRC than the USSR by not requiring that 50 percent be shipped in American bottoms. (The Department of Commerce expects shortly to refer a case to the White House involving grain sales to the USSR which is stymied because of the cost of shipping 50 percent in American bottoms.) If we do extend the 50 percent requirement to apply to the PRC as well, we might defeat the purpose of permitting sales of grain to the PRC because of high shipping costs. Moreover, regulations would have to be amended to permit U.S. ships to call at PRC ports.

We recommend these steps, not in the expectation of any substantial immediate increases in travel or trade, but because their adoption would be designed to show the genuineness of our desire to improve relations and eventually to develop significant trade.

John N. Irwin II

1. Source: National Archives, RG 59, S/S Files: Lot 73 D 288, NSC-U/DM 60. Secret; Sensitive. A February 23 transmittal memorandum for this memorandum from Staff Director Hartman to the Deputy Secretary of Defense; the President’s Assistant for National Security Affairs; Director of Central Intelligence; Chairman of the Joint Chiefs of Staff; Under Secretaries of the Treasury, Commerce, and Agriculture; Deputy Attorney General; and the Special Trade Representative is ibid.
2. Document 302.
3. NSSM 106, November 19, 1970, requested a comprehensive study of U.S.-China policy.
4. The Committee was augmented for the purpose of this study by representatives of the Departments of Commerce, Treasury, Justice and Agriculture. [Footnote in the source text.]
5. Entitled “Travel and Trade With Communist China,” February 22 (NSC-U/SM 91); not printed.
6. Deputy Attorney General Kleindienst’s February 12 letter to Hartman is not printed.
7. None of the decision options in this memorandum is checked or initialed.