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

356. Action Memorandum From the President’s Assistant for National Security Affairs (Kissinger) to President Nixon¹

Washington, undated.

SUBJECT

• Results of Initial Steps Toward Augmentation of Trade and Travel Between the PRC and the U.S., and Recommendations for Further Steps to be Taken

The report (Tab A) by the Under Secretaries’ Committee (USC)² indicates the results of your initiatives to augment travel and trade between the PRC and the U.S., and recommends further steps. You may wish to take some such steps prior to your visit to the PRC.

Results of Your Initial Steps

U.S.-PRC atmospherics have improved, due in part to your trade and travel initiatives of last April. Although it has not yet permitted direct trade, Peking has allowed exporters in third countries to re-export Chinese products to the U.S.

Recommendations for Further Steps

The USC recommended a considerable number of further trade modifications, only two of which involve discriminatory treatment between the PRC and USSR and would seem pertinent to your China trip: (a) expansion of the general license list to bring the PRC to the same level as the USSR, and (b) modification of two remaining Foreign Assets Control Regulations which are more restrictive on the PRC than on the USSR. The other options, which need not be considered in advance of the trip, pertain to the sale of aircraft to the PRC, the problem of PRC cotton textile exports to the U.S., the settlement of PRC and U.S. claims against one another, and mutual visitation of ships and aircraft.

During the October visit to Peking, we informed the Chinese that you would unilaterally and unconditionally make a further reduction in the U.S. restrictions on trade with the PRC, and that we would do so by increasing the number of items on our general list of exports to China “up to the limits of the law.”³ The most likely PRC interpretation of this is that we will place the PRC in the same category as the USSR in terms of items which can be exported directly from the U.S. without a license, or of items made in foreign countries with U.S. technical data.

Issue I—Expanding the general list to give the PRC parity with the USSR

A. Afford the PRC complete equality with the USSR both in commodities under general license regulations and, in the export of foreign products made with U.S. technical data, by placing the PRC in the same commodity control list category as the Soviet Union (Country Group Y; it is now in Z). This is the USC recommendation. However, Pete Peterson opposes (Tab B)⁴ until the Chinese demonstrate a desire to begin direct trade.

B. Afford the PRC complete equality with the USSR with respect to all commodities available under general license, but with no change in country group status. This would discriminate against the PRC with regard to foreign products made with U.S. technical data.

C. Set the general license list for the PRC at 90 percent (or some other arbitrary figure) of the present and subsequent USSR list.

D. In conjunction with B or C, remove controls on export to the PRC of foreign goods made with U.S. technical data to put them on the same level as controls governing such exports to the USSR. (Option A would have the effect of doing this as well.)

E. Continue controls on exports to the PRC at current levels and consider further relaxation only after reciprocal actions by the PRC are in evidence. (This is a non-option in terms of what actions should be taken with respect to last October’s remarks, but is the only one which Defense supports.)

Recommendation:

That you approve Option A. This is the only option we believe is fully consistent with our statement to the PRC in October. We disagree with DOD’s objection to Options A-D on strategic grounds, since the PRC can obtain almost all of the goods involved elsewhere.⁵

Issue 2—Modification of Foreign Assets Control Regulations

Abolish Foreign Asset Control Regulations requiring U.S. firms in COCOM countries (Western Europe and Japan) to obtain a Treasury license in addition to host country license for the export of strategic goods to the PRC. (Even without this restriction, the USG can approve the sale of the commodity through the COCOM Committee, but it is an added impediment serving little effective purpose.) This is the USC recommendation—from which DOD dissented on grounds that the move would be premature. Peter Peterson concurs in the USC recommendation.

Recommendation:

That you approve the USC recommendation. In addition to giving the PRC parity with the USSR on this second remaining element, the change would also remove the appearance of U.S. interference in the affairs of third countries (NATO allies and Japan).⁶

Issue 3—Other USC Recommendations

The remaining USC recommendations pertain to other economic issues in U.S.-PRC relations such as the sale of aircraft to the PRC, the problem of PRC cotton textile exports to the U.S., the settlement of PRC and U.S. claims against one another, and mutual visitation of ships and aircraft, and we believe need not be addressed until after the trip.

Recommendation:

That you consider the other USC recommendations after the trip.⁵

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Subject Files, Box 402, Trade, Volume V 1/72-4/7/73. Secret. Attached to a February 2 memorandum from Holdridge to Kissinger recommending he sign the memorandum to the President.
2. Document 354.
3. In his February 2 cover memorandum to Kissinger, Holdridge wrote that Jenkins, at Kissinger’s direction, had told this to Hsiung Hsiang-hui, Prime Minister Chou’s secretary.
4. Document 355.
5. Haig wrote “HK for RN” next to the Approve option.
6. Haig wrote “HK for RN” next to the Approve option. A February 11 Memorandum for the Record from Department of State Executive Secretary Eliot reported that Haig had called that evening to report the President’s approval of the Department’s recommendations in the January 13 USC memorandum. Haig noted that a draft press announcement for release on February 14 would be provided the next day for comment. (National Archives, RG 59, S/S Files: Lot 73 D 288, Box 838, NSC Under Secretaries Committee Memoranda, 1971-1972) For text of the statement, see Department of State Bulletin, March 6, 1972, p. 291.
5. Haig wrote “HK for RN” next to the Approve option.