Telegram from Walter McConaughy to Secretary of State Dean Acheson

iNCOMING TELEGRAM Department of State RE 79 TELEGRAPH BRANCH SECRET N 25-H Action Control: 6755 FE Rec'd: August 13, 1951 FROM: Hong Kong 4:22 p.m. Info SS TO: Secretary of State G H NO: 578, August 12, 8 p.m. EUR E DCLC SENT DEPT 578, RPTD INFO LONDON 32, TOKYO UNNUMBERED, MANILA REP UNNUMBERED, BANGKOK UNNUMBERED. P OLI DEPTEL 253 July 17 and London's 386 July 19 rptd Hong Kong 7, CIA export control info from Hong Kong Govt. DCR I had frank and friendly discussion with Col Qec* Nicoll Aug 4. Briefly, I pointed out CONGEN considerably handicapped in assisting Hong Kong obtain US export licences because Hong Kong's insistence withhold China trade figures; that ultra secrecy these data not (rpt not) understood in Wash or CONGEN, especially since June 25 local controls practically eliminated questionable items from colony's trade with Commie China, that natural assumption was Hong Kong Govt had something to conceal. I offered give formal written assurances that data trade with China wld continue be classified confidential or secret as Hong Kong desired; that in unlikely event material were supplied Congress it wld be paraphrased and given no attribution. Nicoll, who was affable and on point entering three week's vacation Japan, said highly confidential nature info wld have to be preserved, recognized Hong Kong interests were probably suffering and believed satisfactory solution cld be worked out. Said whole trouble was Brit Parliament was denied this info and consequently US Congress cld hardly expect have access thereto. He said Brit Govt cld not easily overlook fact highly classified info reached public thru US Govt official testifying before Congress. To keep record straight, I made correction that Gen MacArthur at time testimony held no portfolio in exec branch govt. I said CONGEN'S written assurances wld constitute sufficient guarantee that no leak in future wld occur thru exec branch of govt. I added that upon return former basis I personally and econ staff CONGEN wld do every- thing possible expedite favorable action on licenses for materials essential local industries provided fabricated arts not exported China or Macao. Nicoll said he felt strongly that Hong Kong not receiving equal treatment and pointed to Japan as well as SE Asian countries receiving more favorable consideration for US raw cotton and black plate. He said govt was alarmed at prospect Jap competition capturing Hong Kong markets, adding that Japs and others were 45 62 consistently REPRODUCTION OF THIS SECRET MESSAGE IS PROHIBITED