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250. Memorandum From John H. Holdridge of the National Security Council Staff to the President’s Assistant for National Security Affairs (Kissinger)1

SUBJECT

  • Impending Chinese Wheat Purchase from the U.S. and Possible Snags

The Chinese seem to be actively buying foreign wheat at this time for their own domestic use, and one nearly-consummated purchase consists of 400,000 tons of U.S. wheat via a French trading firm. The Chinese have indicated to the French firm, however, that they are very concerned about possible publicity surrounding the purchase. The present memo reviews this particular transaction on the assumption that you might wish to raise the matter of publicity about the sale with the Chinese via your own channels in order to minimize misunderstanding.

[Page 1058]

The Sale

Representatives of the U.S. firm of Louis Dreyfus Corporation of New York met with Secretary of Agriculture Butz and Dick Solomon of your staff on Thursday September 7.2 They said that the Chinese had approached their sister firm in France, Louis Dreyfus et Cie., Paris, about a wheat purchase of up to a million tons. Representatives of the French firm went to Peking (where they have now been for three weeks) and indicated to the Chinese that a purchase of that magnitude would mean buying wheat from the U.S. The Chinese said that they wanted to buy the wheat, but indicated in a variety of ways that they wish to sweep under the rug the fact that it was produced in America. They have requested more costly shipping arrangements and unusual procedures in documenting the sale which would tend to obscure the fact that the wheat was shipped from the U.S.

At the point at which the negotiation was near consummation, a Chinese political official entered the discussions in Peking and complained to the French trading representatives that, 1) the PRC is annoyed at the recent change in U.S. subsidy policy, which they claim was done purposefully to harm their interests; 2) they are upset at what they claim was an August 20 statement by Secretary Butz circulated in the press impugning the veracity of Chinese claims about their level of grain production; and 3) PRC authorities are concerned that President Nixon will give highly visible publicity to a grain sale to the PRC for domestic political purposes.

Subsequent to this political intervention, a sale of 400,000 tons was nevertheless consummated with the French firm, which through its American sister firm has now purchased most of the volume of wheat in the U.S. Representatives of the French firm have been asked by the Chinese to remain in Peking, apparently because additional purchases are desired. According to Department of Agriculture procedures, the sale—to be eligible for governmental subsidy—must be registered at the USDA within 5 business days after its conclusion. Such registration, which will take place next Monday (September 11), will make the deal public information, although it is not certain that the press will pick up the fact of the transaction right away.

Raising the Matter with the Chinese

On the basis of the fragmentary information available to us about this sale and the negotiations associated with it, it is difficult to gauge PRC concerns about publicity. Perhaps they are hypersensitive about the impact of such a transaction on their friends and allies; perhaps [Page 1059]they don’t want to appear to be “me-too-ers” with a wheat purchase so shortly after the Soviet grain sale; or perhaps they fear the implication that American wheat is saving starving Chinese. You may wish to explore with PRC authorities a number of options regarding managing the publicity about the sale. (The utility of some understanding on this matter with the Chinese is heightened by current interest on the domestic side of the White House in publicizing the wheat sale for political purposes. See the memo from John Whitaker to the President at Tab A.)3

1)
Do not raise the matter with PRC authorities; let the Chinese work out their own press arrangements with the private firms involved. [Comment: The representatives of Dreyfus Corp. are fearful that an approach by USG officials to the PRC may sabotage the grain sale, inasmuch as formally the Chinese are negotiating with a French firm, and because they have shown great sensitivity to the publicity issue. While this concern of the American trader is understandable, we think it is naive to assume that the PRC does not believe the USG is aware of the purchase. Perhaps the various complaints which Chinese officials raised with the representatives of Dreyfus et Cie. were intended to reach USG ears. Your not raising the issue with the Chinese might lead to uncontrolled and offensive publicity which would damage future trade prospects.4
2)
Work out with PRC authorities a mutually agreeable press position on the transaction. This could involve a commonly agreed upon statement at various levels of formality:
  • —A description of the purchase is to be issued by low-level USG authorities only if the sale becomes a visible press item. [Comment: Given the magnitude of the sale, and public interest in such an event in an election year, it is most unlikely that the sale would not become headline news. You might take this opportunity to educate the Chinese about the difficulties of working with our press, and urge them to be reasonably open about the purchase.]
  • —A low-key statement which could be issued either unilaterally in the U.S. or by both governments at a common time and at a mutually agreed-upon level.
  • —A Presidential statement about the sale, identifying it as a further indication of the progress being made in normalizing Sino–American relations. [In the September 7 meeting Secretary Butz expressed a preference for a Presidential statement. In view of apparent Chinese sensitivities about the matter, however, you may wish to weigh the immediate domestic advantages of such an announcement against our longer-term commercial and political relations with the PRC.]5
  1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 850, President’s File—China Trip, China Exchanges. Secret. Initialed by Holdridge and Solomon and concurred in by Hormats.
  2. No other record of this conversation has been found.
  3. Attached at Tab A is an August 30 memorandum from John C. Whitaker, through John D. Ehlichman, to the President. It described the possible wheat purchase and its domestic economic and political impact.
  4. All brackets are in the source text.
  5. See Document 252.