19. Memorandum From the President’s Assistant for National Security Affairs (Brzezinski) to President Carter1

SUBJECT

  • Brzezinski’s Memorandum to Treasury and Commerce on U.S.–PRC Trade Relations2

You inquired into our 1976 trade deficit with the PRC. The deficit—but a small part of our total national trade deficit—arises from:

—Slow but steadily growing PRC exports to the U.S., in sectors with a steady demand (particularly sales in such labor intensive commodities as cotton textiles); and

—A drop in U.S. exports, which were composed of discrete items of high technology equipment and large agricultural sales.

The growth in PRC exports is due to increasing Chinese awareness of U.S. markets. Their success has been obtained without MFN. One way to decrease their exports would be to impose self-restraint agreements on them, but given the state of our relationship, this would be unwise.

The sluggish U.S. exports are due to: (a) Peking’s penalizing us for not having full diplomatic relations (they treat us as a residual supplier); (b) an overall balance of payments problem, which caused them to reduce total imports; and (c) their domestic economic and political difficulties which reduced their desire for and capacity to absorb for[Page 55]eign plants and technology. Their bad agricultural and industrial performance in 1976 will force the PRC to spend a high portion of available foreign exchange on grain and steel—commodities where we clearly are the residual supplier.3

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 8, China (People’s Republic of): 3–6/77. Confidential. Sent for information. A handwritten “C” at the top of the page indicates Carter saw the memorandum.
  2. See Document 15.
  3. A draft of this memorandum prepared by Oksenberg apparently before he received the responses from the Commerce and Treasury Department (See Documents 17 and 18), contains four sentences that were crossed out and do not appear in the final version sent to the President: “The only sure way to increase sales is to recognize the PRC. Settlement of the claims and assets issue may narrow the gap, but is as likely to increase Chinese sales in the U.S. as much as it will increase Chinese imports. In any case, a desire to remedy the deficit should not be the determinant of our China policy. In fact, it may not be a bad idea from a broader strategic point of view to encourage Chinese sales in the U.S.—so we can accrue leverage over them by being able eventually to threaten their access to U.S. markets.” (Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 8, China (People’s Republic of): 3–6/77)