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NATIONAL SECURITY COUNCIL
WASHINGTON, D.C. 20506
7300 899
SECRET
June 19, 1973
MEMORANDUM FOR:
Mr. Theodore L. Eliot, Jr.
Executive Secretary
Department of State
SUBJECT:
Implementation of Recommendations on
U.S. PRC Trade (NSSM 149)
Mr. Kissinger concurs in the first three recommendations of
Richard Sneider's memorandum of February 15 on implementation
of the recommendations contained in the response to NSSM 149 on
U.S. @ PRC trade.
He suggests, however, that no action be taken with respect to the
fourth recommendation until a claims settlement has been formally
concluded. Further, he believes recommendation five should be
handled through the National Council on U.S. .China Trade rather
than the U.S. Government.
Recommendation six has been resolved by the Administration's
proposal in the Trade Reform Act to repeal the fur embargo.
Jeann Davis
Staff Secretary
SECRET/GDS
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
DEPARTMENT OF STATE
720 5646
Washington, D.C. 20520
720 2669
March 24, 1972
SECRET
MEMORANDUM FOR MR. HENRY A. KISSINGER
MR. PETER M. FLANAGAN
THE WHITE HOUSE
Subject: Submission of Response to
NSSM 149 - CIEPSM 21
Attached is our response to NSSM 149, US-PRC Trade,
which is concurred in by all members of the Interdepartmental
Group for East Asia and the Pacific.
The following agencies participated in the group:
Department of State
Department of the Treasury
Department of Agriculture
Department of Commerce
Department of Defense
Department of Transportation
Central Intelligence Agency
National Security Council Staff
Wintherd G. Brown
Winthrop G. Brown
Chairman, Ad Hoc Group
for NSSM 149/CIEPSM 21
Attachment:
Response to NSSM 149 -
CIEPSM 21
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
7205646
SECRET
NSSM 149
US - PRC TRADE
TABLE OF CONTENTS
I. INTRODUCTION
1
A. BACKGROUND
1
B. US AND PRC OBJECTIVES.
2
1. US Objectives
2
a. Political Interests
3
b. Economic Interests
3
C. US Goals
4
2. PRC Objectives
5
a. Political Aims
5
b. Economic Aims
5
C. Military Aims
6
II PATTERNS AND PRACTICES IN PRC TRADE
7
A PATTERNS OF FREE-WORLD TRADE WITH
THE PEOPLE'S REPUBLIC OF CHINA IN 1970
7
B. PRC ATTITUDES AND PRACTICES
11
1. PRC Attitudes and Practices in Foreign Trade 11
2. Political Direction of PRC Trade
13
C. SIGNIFICANCE FOR US PRC TRADE
14
III. FACILITATION OF US-PRC TRADE
18
A. FORM OF CONTACTS
18
1. Governmental Contacts
18
a. Through Formal Meetings of Government
Officials
18
(1) Scheduled Meetings between the US
and PRC Ambassadors and their Advisers 18
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
ii
(2) Specialized Meetings at the
sub-Ambassadorial Level
19
(b) Through Frequent Liaison Between
Designated Government Officials in Paris.
19
(c) Sequence of Contacts
19
Stage 1. Personnel on Temporary Duty
20
Stage 2.
OPTION A: Assignment of Officers within
Existing Structure of
Embassy Paris
20
OPTION B:
Assignment of Personnel to a
Separate China Section in
Embassy Paris
21
2. Non-governmental Contacts
22
B. SUBSTANCE OF CONTACTS: USG MEASURES TO
FACILITATE TRADE
25
1. Exchange of General Commercial Information
25
2. Measures which the US Government Can Take
to Facilitate Trade
26
a. Trade Missions
26
b. Trade Exhibitions.
26
C. Invitations to PRC Businessmess and to
Exhibits Exhibitions
28
d. The Canton Trade Fair
30
e. Business Development Office/Agricultural
Trade Office
31
f. Agricultural Contacts through Foreign
Agricultural Service Representative
in Hong Kong
32
g. Banking Contacts through Treasury
Representative in Hong Kong
32
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
iii
SECRET
C. SPECIFIC ISSUES
33
1.
Agricultural Trade
33
(a) Introduction
33
(b) Farm Trade Prospects
33
(1) US Agricultural Imports
from the PRC
33
(2) US Agricultural Exports
to
the PRC
34
(i) Wheat
34
(ii) Cotton
34
2.
Sale of US Civil Aircraft to
the PRC
36
3. Reciprocal Visits by US-flag and
PRC-flag Ships and Aircraft
36
4.
Scheduled Air Service
39
5.
Export Licensing Questions
43
6.
Trade Complaints
44
7.
Industrial Property Protection
45
8
(a) Trademarks
45
(b) Patents
45
8.
Copyright Problems
46
IV. US LAWS AND REGULATIONS RESTRAINING TRADE -
47
A. EFFECT OF TARIFF BARRIERS
47
1.
Background and Options
47
2. Commodities Affected by Lack of MFN-
50
3. Commodities Unaffected by Lack
of MFN
52
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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iv
SECRET
4. PRC Commodity Trade with Japan, West
Germany and the United Kingdom
52
B. EFFECT ON US-PRC TRADE OF THE COCOM
CHINA DIFFERENTIAL
58
1. Background
58
2. Assessments
58
C. EFFECT OF OUTSTANDING US PRIVATE CLAIMS
ON TRADE WITH THE PRC
59
1.
Department of State Practice re
Sovereign Immunity
60
2. Sovereign Immunity in the Courts
60
3. The Act of State Doctrine
61
D. EXIMBANK PROBLEMS
62
E. EFFECT OF NON-TARIFF BARRIERS
64
1.
Cotton Textile Imports from the PRC
64
2. Meat
66
3.
Furs
68
4. Protection of Endangered Species
68
APPENDIX A: Agricultural Statistics
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
SECRET
1
NSSM 149: US-PRC Trade
Issues Paper
The President has directed a study of the ways in
which the statement on trade in the Joint US-PRC Communique
of February 28, 1972 should be implemented.
This study is divided into four parts.
Part one discusses the background of US-PRC trade to
date, and sets forth the objectives of both sides in the
trade field.
Part two analyzes the trade patterns and practices of
the PRC.
Part three discusses US facilitation of trade with the
PRC through the Paris contact point and elsewhere, and
treats the substantive issues the US might wish to raise
with the Chinese in Paris.
Part four analyzes US laws, regulations and adminis-
trative practices which affect trade with the PRC.
The annexes contain legal and technical notes, in
addition to statistical tables.
Where appropriate we have set forth options or made
recommendations.
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
2.
Major Findings of the Study
1. Prospects for rapid growth in US-PRC trade are poor.
The PRC is almost certain to subordinate economic to
political considerations.
2. The PRC attaches significant political importance to
obtaining MFN tariff treatment from the U.S. and our
continued inability to extend MFN is likely, for both
political and economic reasons, to inhibit the development
of U.S. PRC trade.
3. The difficult issue of US private claims against the
PRC for expropriation of property could lead to harassing
lawsuits. and attachments of PRC vessels and goods in com-
merce with the US, and might prejudice the development of
US-PRC trade.
4. If current negotiations to reduce the COCOM China
differential are successful, the negative impact of COCOM
export controls on US-PRC trade will be lessened but not
eliminated.
5. If the US takes the steps outlined in this study,
major obstacles to trade will have been removed, but,
in view of the political conditions attached by the PRC,
this will not of itself lead to rapid growth in Sino-
American trade.
Options and Recommendations
1. Form of Contacts
The US should conduct contacts in Paris through
(1) formal meetings at the Ambassadorial level; (2) formal
meetings at the sub-Ambassadorial or working level; and
(3) routine liaison between designated officers of the
US and PRC Embassies. While routine liaison can be
carried out in the beginning by assignment of personnel
on temporary duty from Washington, as working level con-
tacts develop they will require us to choose between two
staffing options:
OPTION 1: (see page 20)
Assignment of officers within the existing structure of
the Embassy Paris or
SECRET
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SECRET
3
OPTION 2: (see page 21) (RECOMMENDED)
Assignment of personnel to a separate China section in
Embassy Paris.
2. Unofficial Contacts between US and PRC Businessmen
US businessmen have already, on their own initiative,
established a pattern of contact with the PRC through the
Chinese Embassy in Ottawa, PRC trade corporations in
Hong Kong, etc. The US Government can facilitate further
contacts in a number of ways.
a. Liaison
OPTION 3: (see page 22)
Ask the PRC (through Paris) to designate one or more
contact points to which the US Government should refer
American businessmen for discussion of trade matters or
issuance of visas to visit the PRC for business purposes.
OPTION 4: (see page 23) (RECOMMENDED)
Continue and expand cooperation between the American
Consulate General in Hong Kong and the American Chamber
of Commerce in Hong Kong (ACCHK).
OPTION 5: (see page 23) (RECOMMENDED)
Encourage non-profit trade groups and associations as
well as groups of businessmen organized for promotion of
US-PRC - trade, and provide them with information concerning
how to contact the relevant PRC corporations and agencies,
as well as normal commercial information concerning the
market conditions inside the PRC.
OPTION 6: (see page 24) (RECOMMENDED)
Encourage formation of a prestigious, private "Sino-
American Trade Council," perhaps under the auspices of the
US Chamber of Commerce (and in close informal association
with the Department of Commerce), which could act as a
central clearing house for information and research on
PRC trading practices.
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
4
OPTION 7: (see page 26) (RECOMMENDED)
Under the auspices of the "Sino-American Trade Council"
proposed in Option 6 above, organize a vanguard trade
delegation (including prominent US businessmen and one
or more US Government representatives) to establish
liaison with the China council for the Promotion of
International Trade (CCPIT) in Peking and to visit
Chinese foreign trade corporations, research institutes,
marketing agencies and trade fair authorities in the PRC.
OPTION 8: (see page 31)
If the PRC over a long term refuses to negotiate trade
matters in Paris and refuses to permit a US trade presence
in the PRC, consider establishment of a Business Develop-
ment Office (BDO) and perhaps an Agricultural Trade Center
in Hong Kong to facilitate US-PRC trade.
OPTION 9: (see page 32)
Encourage specialized banking contacts through the American
Consulate General in Hong Kong, where the Treasury Repre-
sentative can be in contact with and serve as a liaison
channel between American bankers and their PRC counterparts.
b. Trade Exhibits
OPTION 10: (see page 27) (RECOMMENDED)
Under the auspices of the "Sino-American Trade Council"
proposed in Option 6 above, and in association with the
CCPIT, organize a US comprehensive solo exhibit in Peking
or another Chinese city.
OPTION 11: (see page 27) (RECOMMENDED)
Provide Commerce Department and Agriculture Department
assistance to US trade and industrial associations and
groups for organization of collective exhibitions by US
firms, featuring a single or multiple product line, in
Peking or another Chinese city.
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
5
OPTION 12: (see page 28)
Encourage Americans, especially those invited to the
Canton Trade Fairs, to extend invitations to Chinese
businessmen to visit the United States.
OPTION 13: (see page 29)
Invite the PRC to exhibit Chinese goods in the US at a
comprehensive solo exhibit.
OPTION 14: (see page 30) (RECOMMENDED)
Select one or more private or State-sponsored trade fairs
and (after informal consultation with the sponsoring
organization) inform the Chinese in Paris that the US
Government would be prepared to facilitate attendance by
PRC businessmen if they were interested.
OPTION 15: (see page 31)
Relay applications from American businessmen, firms, and
trade groups to attend the Canton and other PRC trade
fairs through working level contacts in Paris.
3. Obstacles to Trade Between the US and PRC
a. MFN
There are significant political and economic obstacles
to a rapid buildup of US-PRC - trade. However, we can take
a number of steps to make trade relations easier and more
attractive to the Chinese.
OPTION 16: (see page 48)
Seek legislation permitting the President to negotiate
MFN status with the PRC without reference to US tariff
policy toward the USSR and other Communist countries.
Negotiations with the PRC concerning MFN would proceed
separately; and MFN would be extended only after appro-
priate trade concessions from the PRC.
OPTION 17: (see page 49)
At the same time that legislation is sought to grant the
USSR MFN status, seek legislation giving the President
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
6
discretionary authority to negotiate MFN with the PRC.
After negotiations to extract appropriate concessions from
the PRC have been successfully concluded, the President
could take executive action to grant the PRC MFN treatment.
b. Licensing Procedures
OPTION 18:
(see page 44)
Explain to the PRC the necessity of adequate end use
information which is required in all validated license cases.
Take every opportunity to emphasize to US exporters the
great importance which full product end use information will
have in licensing decisions for the PRC.
c. Private Claims
OPTION 19:
(see page 61)
(RECOMMENDED)
Seek to negotiate a settlement of US private claims with the
PRC in Paris. (Also recommended by U/SM-91).
d.
Transportation Regulations
OPTION 20:
(see page 38)
(RECOMMENDED)
Amend Transportation Order T-2 to permit US ships and air-
craft to visit the PRC, and amend US Port Security
Regulations to permit PRC ships to call at US ports on the
same basis as that currently applicable to those from the
USSR. (Also recommended by U/SM-91)
OPTION 21:
(see page 38)
If current negotiations with the USSR result in the reduction
of the period required for advance notice of visits to the US
by Soviet ships and crews, offer an agreement on shipping
with the PRC which would permit similar reduction of the
advance notice period for Chinese ships and crews on the
basis of reciprocity.
e. U.S. Import Restrictions
OPTION 22:
(see page 65)
(RECOMMENDED)
Inform the PRC now: (1) we have LTA obligations to about
30 countries whose textile exports to the United States
are controlled, (2) textiles are a sensitive domestic
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
7.
economic and political problem, (3) the United States
routinely monitors cotton textile imports into the United
States to determine the need for restrictive action under
the LTA in the event of actual or threatened market dis-
ruption, and (4) if there is a buildup of cotton textile
imports from the PRC in the future we might have to take
action even though the goods are transshipments rather
than direct shipments.
OPTION 23: (see page 68)
Inform the PRC through Paris of US laws and regulations
concerning the importation and inspection of meat products.
OPTION 24: (see page 68)
Consider whether elimination of the legislative ban on
imports of certain Chinese furs would offer trade advantages.
OPTION 25: (see page 69)
Inform the PRC through Paris of US laws and regulations
prohibiting the importation of certain kinds of animal
products originating from endangered species.
4. Specific Trade Matters
a. Agriculture
OPTION
26: (see page 35)
Seek through Paris to arrange for contact between US
CCC and PRC CEROIL representatives. If prospects appear
worth following up, encourage representatives of US grain
export firms and WWA to apply for visas to visit the PRC
to explore US wheat trade possibilities with CEROIL officials.
b. Sale of aircraft
OPTION 27/: (see page 36) (RECOMMENDED)
Issue favorable advisory opinions in writing, when requested,
concerning sale of US aircraft for civil use, carrying
equipment appropriate for peaceful end use, and approve such
transactions when they develop, assuming the requirement for
peaceful end use is met. (U/SM-91 also made this
recommendation.)
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
8
OPTION 28: (see page 41)
Postpone for at least one year further steps toward the
establishment of scheduled air services and in the mean-
time instruct US airlines not to approach the PRC about
scheduled services until authorized to do so.
OPTION 29: (see page 41)
Instruct the US airlines not to approach the PRC about
scheduled services until authorized. Raise the question
of scheduled air service in the Ambassadorial talks in
Paris. If the PRC is at all receptive toward scheduled
services, ask the CAB to hold hearings on an urgent basis
and in executive session to determine how and by whom
traffic points in the PRC might best be served. The out-
come of the hearing could provide the basis for further
discussions with the PRC.
OR
OPTION 30: (see page 42)
Do nothing at the governmental level; let the airlines
negotiate with the PRC and consider the results of their
negotiation.
d. Eximbank
OPTION 31: (see page 62)
If a Presidential determination on Eximbank credit for the
USSR is to be made in connection with the forthcoming
visit to Moscow, a similar determination could be made at
the same time for the PRC.
OR
OPTION 32: (see page 63)
That the issue of the effect of the alleged Chinese
delinquencies on PRC eligibility for Eximbank financing be
considered by the National Advisory Council for Inter-
national Monetary and Financial Policies (NAC).
e. Patents
OPTION 33: (see page 46)
Ask the PRC through Paris for information on Chinese
trade-mark law. Upon confirmation that the PRC law reads
as we believe it to, inform the PRC that its nationals
may receive trademark protection in the US and request
reciprocal treatment for US citizens in the PRC.
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
SECRET
March 21, 1972
NSSM-149: US-PRC TRADE
I.
INTRODUCTION
A. BACKGROUND
Direct Sino-American trade became possible in
June 1971 when we authorized commercial imports from the
People's Republic of China (PRC) and non-strategic
exports to it. On February 14, 1972 the PRC was placed
in the same category as the USSR for non-strategic
exports. No direct trade was conducted under these
relaxations other than the February 1972 sale of the RCA
satellite earth station, a matter directly linked with
the Presidential visit. Otherwise, the PRC refused to
buy from, sell to, or even ship to the United States.
Indirect trade, almost entirely imports through third
countries, amounted to about $5 million in 1971. PRC
officials treated American businessmen courteously, but
stated firmly that there would be no direct trade until
the US changed its policy on Taiwan.
The Joint Communique issued by the US and the PRC
in Shanghai on February 28, 1972 states:
"Both sides view bilateral trade as another area
from which mutual benefit can be derived, and agreed
that economic relations based on equality and mutual
benefit are in the interest of the peoples of the two
countries. They agree to facilitate the progressive
development of trade between their two countries."
No specific trade deals or mechanism to facilitate
trade were discussed in Peking. However, Foreign
Minister Chi P'eng-fei stated that selected US businessmen
would be invited to the Spring Canton Trade Fair. The
Chinese indicated that trade could be expected to grow
only slowly and hinted that the rate of growth would be
determined politically.
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
2.
During the Peking talks, the PRC showed continuing
concern with the issue of tariff, trade quota and export
control discrimination against China, especially vis-a-vis
the USSR.
Secretary Rogers raised the question of private
claims in informal conversation with Foreign Minister Chi,
pointing out that in the absence of a claims settlement
PRC vessels and commerce in the US might be subject to
harassing lawsuits from the claimants. Chi indicated
that the claims question could be discussed.
Unconfirmed reports indicate that several US
businessmen, all associated with foreign firms, have been
offered visas for the Canton Export Fair. We know of no
direct trade transactions since the February 28 communique.
Some US foreign subsidiaries have been authorized to
exhibit in Canadian and Swedish trade fairs in Peking this
year. The atmosphere of American business contacts with
PRC officials since the President's trip has become
noticeably warmer, but without concrete results. Intelli-
gence reports have indicated continuing PRC interest in
all purchase of Boeing 707-type aircraft and US deep-
drilling petroleum technology and equipment. US airlines
have succeeded in negotiating ticketing agreements with
the official China Travel Service in Hong Kong. Members
of the American Chamber of Commerce in Hong Kong (ACCHK)
have recently established contacts with PRC businessmen.
B. US AND PRC OBJECTIVES
1. US Objectives
Despite the historic allure of the China market, the
PRC is unlikely soon to become a major market for US
goods. At this stage, USG expectations for developments
in the trade field are more political than economic.
Nevertheless, purchases by the PRC might become significant
to a number of US industries, among them such key eco-
nomically depressed industries as aircraft manufacturing
and machine tools. Commodity purchases could also become
important to US agriculture.
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
3.
a. Political Interests
"Progressive development of trade" serves both
US and PRC interests by providing tangible evidence of
momentum in the improvement of relations between the two
countries. In political terms, the statistical volume
of trade which we achieve may be considerably less im-
portant than the fact that there will be American business-
men and technicians working with Chinese counterparts in
the PRC and PRC technicians and trade corporation repre-
sentatives visiting the US.
Trade should prove to be an area of positive and
constructive discussion in both Ambassadorial and
working level contacts in Paris, helping to build trust
between our negotiators and setting a positive tone for
discussion of more difficult matters. The major purpose
of such contact is to develop negotiating patterns
favorable to the improvement of political relations.
When improvement in US-PRC political relations permits,
we may hope for establishment of a US Trade Office in
Peking or Shanghai, perhaps with a similar PRC Trade
Office in the US (e.g. in New York).
As American businessmen and technicians travel
to the PRC, and Chinese come to the US, our overt in-
telligence on Chinese industry and technology will
inevitably improve. American officials who might
accompany US trade fairs or trade delegations to the PRC
will acquire the first-hand experience of Communist
Chinese society which has up until now been denied them.
b. Economic Interests
Assuming the difficult problem of private claims
has been solved and PRC-owned goods and vessels are not
subject to harassing lawsuits from US claimants, US-PRC
trade might develop over a five-year period to between
$100 and $600 million annually, amounting to from 2%
to 10% of the PRC's total foreign trade. US industrial
exports will face heavy competition from established
Japanese and European firms, and in the first few years
(barring large sales of US aircraft or wheat) the PRC's
exports to the US may grow faster than its imports from
us.
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
4.
Although our primary interest is in sales to the
PRC, the principle of "equality and mutual benefit" to
which we have agreed also commits us to facilitate PRC
exports to the US. In the near term, US exports to the
PRC are likely to consist mostly of high technology
items not readily available from other suppliers. We
would also hope at some point to sell agricultural
commodities, such as wheat. US imports from the PRC are
likely to feature handicrafts, specialty foods, crude
animal products such as bristles and feathers, raw
materials (possibly including scarce antimony and
tungsten), and textiles.
Through our contacts in Paris we should be able
to exchange information on the laws and regulations of
both countries and to arrive at a more realistic evalua-
tion of the prospects for US-PRC trade. This will enable
us to provide US businessmen with more accurate and timely
advice on factors affecting potential sales to the PRC.
C. US Goals
-- use discussion of trade matters at the
Ambassadorial and working levels in Paris to build trust
between US and PRC negotiators, while acquiring experience
of PRC negotiating techniques;
-- maximize exports of US goods and services;
-- through development of trade provide
visible evidence of improvement in Sino-American relations;
-- look toward ultimate establishment of a
US Trade Office in the PRC, when improved US-PRC political
relations make this possible;
-- apply the same principles of import control
to the PRC as are applied to trade with other nations;
-- to the extent possible and consistent with
US security interests, encourage PRC purchases of US goods
and technology in areas of the US economy which are
currently depressed and which could benefit most from new
markets (e.g., aircraft, machine tools, agricultural
commodities) ;
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
5.
-- acquire information useful in advising
US businessmen interested in sales to the PRC;
and technology;
-- improve intelligence on PRC industry
-- improve US Government expertise on China
trade matters and the PRC in general.
2. PRC Objectives
The PRC also has an interest in the development of
US-PRC trade as a visible manifestation of its improved
relations with the US. Its immediate objectives are
essentially political, but over the longer term economic
and possibly military goals are also significant. During
the Peking talks, the Chinese emphasized that development
of Sino-US trade would be gradual, and hinted that the
rate of growth in trade would be determined in large part
by political factors.
a. Political Aims
Establishment of trade relations with the US
demonstrates US acceptance of the PRC and PRC willingness
to deal with the US on a people-to-people basis, without
compromising Peking's position on Taiwan or its ideo-
logical principles.
Relaxation of Sino-American tensions reduces
Soviet leverage on Peking. US-PRC trade and political
rapprochement also unsettles Japan, giving the PRC a
better opportunity to exploit pro-PRC sentiment there.
By demonstrating willingness to conduct commercial
transactions with the US, the PRC has stimulated extensive
interest in the US business community, which it hopes will
influence US policies concerning the PRC and Taiwan and
damage the ROC's political standing.
The PRC will probably attempt to pressure US
businessmen to cut trade and investment links with Taiwan
in order to isolate the ROC economically.
b. Economic Aims
Through agreement to facilitate trade with the
US, the PRC has obtained a new source of supply for its
import requirements. It expects that trade with the US
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6
will make it easier to obtain items of advanced technology.
The PRC will attempt to take full advantage of changes in
the world market situation and will use access to US
suppliers to negotiate better terms from third countries.
The Chinese hope that trade with the US will in the long
run enable them to reduce their dependence on industrial
imports from Japan.
c. Military Aims
The political hostility between the PRC and the
USSR combined with the obvious military inferiority of
the PRC in advanced weapons systems probably will lead the
PRC to try to obtain commodities and advanced technology
which can most directly help to improve their strategic
position. They will probably press for such items to test
our controls.
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7.
II. PATTERNS AND PRACTICES IN PRC TRADE
A. PATTERN OF FREE-WORLD TRADE WITH THE PEOPLE'S
REPUBLIC OF CHINA IN 1970*
PRC foreign two-way trade rose 10% in 1970 to US$4.2
billion, and non-Communist countries again accounted for
about 80% ($3.3 billion) of that total. Two-way trade in
1971 was about $4.5 billion. Trade between the free world
and the PRC tends to be concentrated in relatively few
commodities, exchanged with a limited number of trading
partners. The largest free-world exports are steel,
chemicals, and wheat, while imports center on food, selec-
ted crude materials, and textiles.
Free-world exports to the PRC totalled an estimated
$1.6 billion in 1970. Twenty percent of the export total
was steel, largely tubes, pipes, universals, sheets, and
plates. Wheat sales amounted to $256 million. Urea and
various other organics, along with manufactured fertilizers,
were the most prominent among chemical shipments, and crude
rubber and cotton among raw materials. Copper, trucks, and
machine tools were also among the principal free-world com-
modities exported to China.
The free-world imported $1.7 billion worth of PRC goods
in 1970. Food accounted for about 30% of these imports.
About half, including fruit, vegetables, rice, live animals,
meat, and fish, were supplies for Hong Kong's consumption.
Textile manufactures exported by the PRC (mostly cotton
fabrics, yarns, and clothing) were roughly 20% of the total.
Silk was the most important among imports of textile fibers,
and soybeans among other crude materials. Imports of var-
ious types of chemicals amounted to about $90 million, and
metals and manufactures over $50 million.
Japan was the largest trade partner ($813 million) of
the PRC in 1970 by a wide margin. Its exports to the PRC
*Table 1 includes a review of trade with the PRC in the
decade of the 1960's.
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8.
($569 million) were more than one-third of total free-world
exports. Germany led West European suppliers with sales of
$167 million, while UK shipments amounted to $107 million.
Canadian and Australian shipments to China were both well
over $100 million.
Hong Kong, with purchases totalling $467 million, was
the primary importer of Chinese goods in 1970. This was
nearly twice the value of PRC exports to Japan, China's
second largest free-world customer. Other sizeable Asian
customers were Singapore, Ceylon, and Malaysia. In Europe,
Germany and the United Kingdom each bought about $80 mil-
lion from China, and France and Italy only slightly less.
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9.
Table la.
Major Commodities Traded by the Free World
with the People's Republic of China, 1970
(Millions
Commodity
of
dollars)
Exports, total
1,611
Wheat
256
Crude rubber
64
Cotton
60
Urea and other organic chemicals
135
Manufactured fertilizers
44
Chemicals, other
84
Metalworking machine tools
46
Nonelectric machinery, other
77
Trucks
47
Transport equipment, other
63
Iron and steel and semimanufactures
343
Copper and semimanufactures
71
Other merchandise
321
Imports, total
1,706
Live animals
65
Meat and prepartions
70
Rice
82
Fruit and vegetables
131
Food, other
152
Soybeans
46
Silk
77
Crude materials, other
211
Chemicals
91
Cotton fabrics
108
Clothing
61
Textile manufactures, other
142
Base metals and manufactures
56
Other merchandise
414
Note: Trade of Cuba is excluded
Source: Department of Commerce
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10.
Table lb.
Major Free-World Traders with the People's Republic of China
1960, 1965, 1970
(Millions of dollars)
Exports
Imports
Country
1960
1965
1970
1960
1965
1970
Free world,
Total
637
1,252
1,611
767
1,409
1,706
Asia:
Japan
3
245
569
21
225
254
Hong Kong
2
3
5
208
406
467
Singapore
28
23
126
2
7
Malaysia
22
57
106
54
Ceylon
25
36
42
28
24
49
Australia
23
164
129
10
26
36
Canada
9
98
135
6
13
18
Europe:
Germany Fed Rep
95
79
167
69
73
84
United Kingdom
90
72
107
69
83
80
Italy
40
56
57
24
38
63
France
53
60
81
23
44
70
1. Excluding trade of Cuba.
2. Excludes Sabah and Sarawak.
Source:
Department of Commerce
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11.
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March 18, 1972
FIRST DRAFT NSSM 149
II. B. PRC ATTITUDES AND PRACTICE
1. PRC Attitudes and Practices in Foreign Trade
The PRC conducts foreign trade as a state monopoly.
Foreign trade is viewed as a balancing mechanism in the
annual economic plans more than an income producing sector
capitalizing on international specialization. Essential
import needs are determined by the state plan, which also
allocates available export surpluses to finance the import
purchases. The state plans have emphasized "self-reliance",
or import substitution, in domestic development, and al-
though development continually generates new import needs,
the elimination of old import requirements has reduced the
share of foreign trade in national output.
The conduct of foreign trade is cumbersome, and places
a high premium on secrecy. The annual economic plan author-
izes the import of specified volumes of various commodities,
and were it to become known to foreign traders, it would
affect the prices and terms on which they could be purchased.
Similarly, specified quantities of various exports are des-
ignated to be sold to finance import plans, to be priced at
whatever level is required to move them. Again, advance
information to foreign traders on Chinese export intentions
could affect the terms on which these exports could be sold.
The Ministry of Foreign Trade, through its trading
corporations (see Table 1), forms the point of contact with
foreign traders. The Ministry does a great amount of re-
search on market conditions and the foreign companies in-
volved. It checks each company before doing business,
prefers to deal with principals, and keeps a record of
business performance as a guide for future business. The
semi-annual Canton Trade Fair provides a major forum for
business contacts at which perhaps one-third to one-half
of the annual foreign trade business with non-Communist
countries is conducted. The fall fair, which secures initial
requirements and sales for the succeeding year, is the major
one, with the smaller spring fair providing for supplemental
revisions in the trade plan. Major deals and bulk contracts
are likely to be negotiated separately; these are more
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12.
frequent with Chinese imports than with exports owing to
the character of the trade. Trade with Communist countries
and a few non-Communist countries is conducted under nego-
tiated annual trade pacts. Finally, a certain amount of
spot sales and purchases are carried on throughout the
year through bids and offers between the Chinese state
trading corporations and foreign traders.
The China Council for the Promotion of International
Trade (CCPIT) is the prime contact for free-world trade
groups and associations. It facilitates commercial trans-
actions by putting the foreign groups into contact with
the national import-export corporations in Peking. It
is a "non-governmental" association which does not it-
self engage in trade.
The Chinese prefer to deal directly with individual
firms; this is especially true regarding their purchas-
ing activity. They require firms with whom they trade
to provide extensive information on the firm's background,
product line and business affiliations, and, other things
being equal, favor firms that are sympathetic to China's
political views. Despite their demands for information
from Western firms, the Chinese are extremely reluctant
to provide information regarding their activities or
intentions, even when such information is considered
by the Western firm to be essential to providing the
most suitable product or service, such as in selling a
complete chemical plant.
The Chinese typically associate only with firms in
which they have a real and specific commercial interest.
They do not usually answer business correspondence that
does not relate to their immediate economic interests.
On the other hand, they often take the initiative in
establishing contact with Western firms in whose products
they are interested.
One form of conducting trade with Japan, which does
not recognize the PRC, is the reciprocal establishment
in Tokyo and Peking of trade offices. Ostensibly non-
official, these offices were established ten years ago
to implement an annually negotiated trade agreement
between China and a private Japanese delegation which in-
cluded political leaders from the ruling party. They
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13.
have been staffed, on the Japanese side, in part by
junior government officers on leave. In 1971 the Chinese
agreed to upgrade these offices, accepting the appoint-
ment of senior government officers, an enlargement of
staff from five to ten, diplomatic privileges (such as
use of codes and couriers, and juridical immunity), and
even certain consular functions. The trade that these
offices handle is substantial in absolute terms but
amounts only to about ten percent of total Sino-Japanese
trade. In the eyes of both the PRC and Japan these
offices' importance is mainly political, serving as a
substitute channel for diplomatic relations.
2. Political Direction of PRC Trade
Since the Sino-Soviet dispute, the foreign policy
factor has been a lesser, but by no means absent, con-
sideration in the geographical orientation of China's
trade. Political considerations have also been inten-
sified in periods of domestic political upheaval. China's
trade with Albania and Romania has been influenced by the
independence of these countries toward the USSR. Trade
is used as a lure for recognition from the developed
non-Communist countries and as a means of extending Chinese
influence to the less developed countries. For instance,
following Canadian recognition in 1971 China implied
that its wheat contracts with Canada to the exclusion of
Australia were a means of rewarding friends.
On the other hand, Peking's opposition to the Sato
government and the absence of diplomatic relations have
not blocked Japan's emergence as China's largest trading
partner. China has of course for years mixed trade and
politics in its commercial dealings with Japan: some
90% of Sino-Japanese trade is conducted on the Japanese
side by "friendly firms", which must meet various con-
ditions imposed by the Chinese from time to time, and
the remainder of the trade is governed by the semi-official
Memorandum Trade Agreement. However, it is clear that
there are economic limits to the extent of the influence
of politics in this trade. West Germany, which does not
recognize China, is China's leading trading partner in
Western Europe, selling much more to China than either
the United Kingdom and France, two countries which have
recognized China for years.
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14.
Prices, delivery dates, and other commercial factors
are normally the most important considerations with the
Chinese state trading companies. Tariffs are not a
factor since they are not levied upon goods imported by
the State. China usually seeks to purchase from sup-
pliers of the most advanced equipment in any given field
regardless of political considerations. China has reaped
considerable economic benefits by playing off Japanese
and West European suppliers of chemical fertilizer, steel,
and equipment. In the case of imports of standardized
commodities with more than one source of supply, the lion's
share has gone where commercial and political advantage
happen to coincide--for instance, the recent wheat pur-
chases from Canada and the shifting of copper purchases from
the London Metals Exchange to the producing countries, namely,
Chile, Peru, and Zambia.
C. SIGNIFICANCE FOR US-PRC TRADE
The foregoing analysis when coupled with remarks to
United States officials during the Peking visit gives a
strong indication that the PRC intends that political considera-
tions should determine the modalities and growth rate of US-PRC
trade. These considerations and the present state of US-PRC
relations suggest that Peking may favor a low level of direct
trade, at least initially. The PRC may be reluctant to send
PRC personnel to the US on trade missions. The PRC Embassy
in Ottawa may assume a regional procurement function, which
includes the US, similar to the roles played by PRC embassies
in Paris and Bern.
The Japanese experience described above may illustrate
how the PRC will attempt to utilize trade to influence US
relations with the ROC. One of the conditions imposed by
Chou En-lai on Japanese "friendly firm" trade with the PRC is
that these firms have no investments or trade with Taiwan.
Given China's present foreign trade policy, the United
States should undertake low-key efforts to modify the rigidity
of the Chinese position.
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15.
II. B. Table 1
List of PRC Trading Organizations
China National Chemicals Import and Export Corp.,
Erh Li Kou, Hsi Chiao, Peking. Cable: SINO-CHEM PEKING.
Rubber, rubber tires, and other rubber products, petroleum
and petroleum products, chemical fertilizers, insecticides,
fungicides, pharmaceuticals, medical apparatus, chemical
raw materials, dye-stuffs, and pigments.
China National Native Produce and Animal By-Products
Import and Export Corp., 82 Tung An Men Street, Peking.
Cable: CHINA-TUHSU PEKING. Tea, coffee, cocoa, tobacco,
bast fiber, rosin, feedingstuffs, timber, forest products,
spices, essential oils, patent medicines and medicinal herbs
as well as other native produce, bristles, horsetails,
feathers, down, feathers for decorative use, rabbit hair,
wool, cashmere, camel hair, casings, hides, leathers, fur
mattress, fur products, carpets, down products, living
animals.
China National Light Industrial Products Import and
Export Corp., 82 Tung An Men Street, Peking. Cable: INDUSTRY
PEKING. Paper, general merchandise, stationery, musical
instruments, sporting goods, toys, building materials and
electrical appliances, fishnets, net yarns, leather shoes,
leather products, pottery and porcelain, human hair, pearls,
precious stones and jewelry, ivory and jade carvings,
lacquer ware, plaited articles, furniture, artistic handi-
crafts, and other handicrafts for daily use.
China National Textiles Import and Export Corp., 82
Tung An Men Street, Peking. Cable: CHINATEX PEKING. Cotton,
cotton yarns, raw silk, steam filature, wool tops, rayon
fibers, synthetic and manmade fibers, cotton piecegoods,
woolen piecegoods, linen, garments and wearing apparel, knit-
ted goods, cotton and woolen manufactured goods, readymade
silk articles, drawn works.
China National Cereals, Oils and Foodstuffs Import
and Export Corp., 82 Tung An Men Street, Peking. Cable:
CEROILFOOD PEKING. Cereals, edible vegetable and animal
oils and fats, vegetable and animal oils and fats for
industrial use, oil seeds, seeds, oil cakes, feedingstuffs,
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16.
salt, edible livestock and poultry, meat and meat products,
eggs and egg products, fresh fruits and fruit products,
aquatic and marine products, canned goods of various kinds,
sugar and sweets, wines, liquors spirits of various kinds,
dairy products, vegetables and condiments, bean flour noodles,
grain products, canned goods, nuts and dried vegetables.
China National Machinery Import and Export Corp.,
Erh Li Kou, Hsi Chiao, Peking. Cable: MACHIMPEX PEKING.
Machine tools, presses, hammers, shears, forging machines,
diesel engines, gasoline engines, steam turbines, boilers,
minimg machinery, metallurgical machinery, compressors and
pumps, hoists, winches and cranes, transport machinery
(motor vehicles) and parts thereof, vessels, etc., agri-
cultural machinery and implements, printing machines, knit-
ting machines, building machinery, machinery for other light
industries, ball and roller bearings, tungsten carbide,
electric machinery and equipment, telecommunication equip-
ment, electric and electronic measuring instruments, scien-
tific instruments, complete industrial plants, technical
knowhow.
China National Metals and Minerals Import and Export
Corp., Erh Li Hou, Hsi Chiao, Peking. Cable: MINMETALS PEKING.
Steel plates, sheets and pipes, steel sections, steel tubes,
special steel railway materials, metallic products, pig
iron, ferroalloys, nonferrous metals, precious rare metals,
ferrous mineral ores, non-ferrous mineral ores, nonmetal
minerals and products, thereof, coal, cement, hardware.
Sinofracht Chartering and Shipbroking Corp., Erh Li
Kou, Hsi Chiao, Peking. Chartering of vessels and booking
of shipping space required for Chinese import and export
cargoes. Also, similar business on behalf of principals
located abroad. Canvassing cargoes for shipowners.
Complete Plant Export Corp., Fu-Wai St., Peking.
Exporters only: of complete factories, works and production
units, usually, but not exclusively, as part of an economic
aid agreement.
Publications Centre Guozi Shudian, P.O. Box 399, Peking.
Import and export of books and periodicals in Chinese and
foreign languages. Arranges subscriptions to Chinese news-
papers and periodicals on behalf of foreign readers.
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17.
Foreign Trade Transportation Corp., Erh Li Kou, Hsi
Chiao, Peking. Arrange customs clearance and delivery of
import/export cargoes by land, sea, and air, or by post.
May act as authorized agents clearing and delivering goods
in transit through Chinese ports. Arranges marine and
other insurance, and institutes claims on behalf of cargo
owners on request.
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NSSM - US-PRC Trade
III. FACILITATION OF US-PRC TRADE
A. FORM OF CONTACTS
The US and PRC Embassies in Paris have been designated
as the principal point of on-going Sino-American diplomatic
contact. However, we expect that private businessmen, firms,
and trade groups will continue to make contacts through the
PRC Embassy in Ottawa, and PRC trading corporations in
Hong Kong.
1. GOVERNMENTAL CONTACTS
The Paris talks begin on an entirely different basis
from the Warsaw Talks. We already have agreement that the
US and the PRC should work toward normalization of relations
and that trade and exchanges represent an appropriate way to
begin the process.
While the immediate goal of the Paris negotiations
is to seek agreement on ways to facilitate trade and cultural
exchange, our principal long-term objective should be to
institutionalize and broaden the Paris contacts so as to
prepare for mutual consideration of a whole range of
routine bilateral issues. The most visible aspect of the
contact will be the Ambassadorial meetings--the formal
locus for agreements on major questions of US-PRC economic
and cultural relations.
Of equal importance, however, will be continuing,
regularized working-level contacts where the myriad questions
which normally arise in relations between two countries can
be dealt with in a non-negotiating context.
With specific reference to trade, governmental contacts
might best be conducted in the following manner:
(a) Through Formal Meetings of Government Officials
(1) Scheduled Meetings between the US and
PRC Ambassadors and their Advisers.
Formal Ambassadorial meetings are probably most
appropriate for seeking agreement in principle on general
trade problems. Subjects which we might wish to raise
for discussion in this context include agreements in
principle on the exchange of trade information, two-way
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participation in trade fairs, establishment of trade
centers, negotiation of a private claims settlement,
airline and shipping links (both charter and scheduled),
designation of a point of contact to which we might
refer US businessmen, offers of major specific trade
deals (e.g., aircraft, wheat, etc.), and particular
trade problems such as the US obligation under the LTA
to restrain textile imports from the PRC, etc.
The PRC may wish at the Ambassadorial level to raise
such subjects as actions they consider discriminating
e.g., COCOM China differential,, tariff and Most Favored
Nation (MFN) problems, US non-tariff barriers to trade, and
perhaps extension of credit for PRC purchases of US products.
(2) Specialized Meetings at the Sub-
Ambassadorial Level.
Once Ambassadorial agreement has been reached in
principle, the technical complexity of most of these trade
and claims problems is such that negotiation on a concrete
agreement concerning them would probably best be left to
working level specialists. Major problems at the working
level could of course be referred to the Ambassadorial
level for resolution. Similarly, tentative agreements
reached at the working level could be referred to the
Ambassadorial level for approval or forwarding to
Washington and Peking.
(b) Through Frequent Liaison Between
Designated Government Officials in Paris
Many minor and technical problems would be best solved
in a lower-level non-negotiating context through exchange
of information or simple agreement to look into the matter
informally. For example, exchange of general trade and
market data and routine problems such as trade complaints
should be handled through normal contacts between officers
of the two Embassies in Paris, rather in the context of
the Ambassadorial talks. To work most effectively these
informal contacts will have to follow agreement in principle
with the PRC Embassy that each side designate an officer
or officers primarily responsible for routine trade matters.
(c) Sequence of Contacts
The sequence through which working-level contacts
could be established is as follows:
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Stage 1. Personnel on Temporary Duty
We can assign China specialists with relevant sub-
specialties on TDY to Paris during the course of the talks,
varying the composition of the group to reflect the particu-
lar topics under consideration. The group would presumably
not exceed three or four and might be as few as two. The
group would remain in Paris two to four weeks at a time
depending on the frequency of the sessions and the likeli-
hood of reaching agreement.
Principal Advantages:
-- Particularly in the initial stages, would allow
the group to confer frequently with concerned Departments
and agencies in Washington to assess the progress in
detail and to map out future steps in the talks;
-- Would not burden Embassy Paris with permanently
assigned personnel at a time when we are still uncertain
how valuable the contact will be;
-- Would nevertheless allow the team members sufficient
time in Paris to regularize both their official and informal
contacts with Chinese counterparts.
Principal Disadvantages:
-- Once negotiations have begun in earnest, constant
uprooting of the team could disrupt the rhythm of the
contact and seriously inhibit its development;
-- Periodic dispatch of teams could attract press
attention, casting the contact in a dramatic light which
might not be justified by concrete achievements.
Timing:
As soon as the talks in Paris proceed to discussion
of substantive matters.
Stage 2. OPTION 1: Assignment of Officers within Existing
Structure of Embassy Paris
We could assign China experts to Paris on a permanent
basis, supplemented as necessary by specialists on TDY
from Washington. These experts would be given special
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21
responsibility for liaison with the PRC Embassy but would
work through the existing structure of the Embassy.
Principal Advantages:
-- Would provide consistency of official and social
contact with Chinese counterparts. This would have a
favorable impact not only on the handling of immediate
problems but also on longer-term relationships between
those people on both sides who will be involved in
bilateral Sino-American relations in years to come.
-- Would diminish the dramatic aura which press
coverage of TDY missions would tend to convey.
Principal Disadvantages:
-- Subordination to other Embassy functions;
-- Officers with non-China duties could not give
full time to PRC contacts.
Timing:
When the negotiations begin to produce agreements
requiring follow-up.
OPTION 2 : Assignment of Personnel to a Separate China
Section in Embassy Paris (RECOMMENDED)
We could establish a section headed by a relatively
senior China specialist directly responsible to the
Ambassador.
Principal Advantages:
-- Would provide the consistency discussed in Option A,
but would reflect more accurately that the Paris contact
point is meant to be a temporary substitute for diplomatic
representation in Washington and Peking until such time as
other arrangements are possible.
-- Would place the head of the section on a "Counselor"
level, thus giving him higher status for dealing with the
Chinese (and encouraging them to reciprocate) as well as
providing the Ambassador with a senior resident adviser
on Chinese affairs.
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-- Would constitute another channel to the Chinese--
giving the Ambassdor flexibility on deciding which issues
to discuss at the Ambassadorial level and which might
more appropriately be handled at the working level.
Disadvantages:
-- None.
Timing:
-- When the negotiations begin to produce agreements
requiring follow-up.
2. NON-GOVERNMENTAL CONTACTS
Private businessmen continue to make contact with PRC
officials through the PRC Embassies in Ottawa, Paris and
elsewhere, as well as through the PRC's UN Mission. While
Ottawa is likely the preferred contact point from the PRC's
point of view, it would be useful for the US Government to
know to whom US businessmen seeking trade contacts should
be referred.
OPTION 3:
Ask the PRC (through Paris) to designate one or more
contact points to which the US Government should refer
American businessmen for discussion of trade matters or
issuance of visas to visit the PRC for business purposes.
Principal Advantages:
-- Would create established procedure by which American
businessmen could contact PRC trade corporations and agencies.
-- Would be in line with the principle of informal
cooperation by US and PRC governments to facilitate
business contacts.
Principal Disadvantages:
-- None.
Under current US Anti-Trust laws, we are barred from
designation of a central non-governmental coordinating
body for trade. Moreover, we would not in any case wish
to set up a competing private cartel or quasi-state trading
corporation.
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Nevertheless, there are organizations such as the
American Chamber of Commerce in Hong Kong (ACCHK) which
have close and cordial relations with the US Consulate
General and have made increasingly successful efforts to
establish contact with Communist businessmen and PRC
trade corporations in Hong Kong. Even without US Government
encouragement, the ACCHK is likely to become a broker and
middleman for US businessmen seeking to establish contact
with PRC firms in Hong Kong.
OPTION 4 : (RECOMMENDED)
Continue and expand cooperation between the American
Consulate General in Hong Kong and ACCHK.
Principal Advantages:
-- ACCHK could become an important source of information
on PRC trading practices and plans.
-- Would facilitate eventual direct contact between
the Consulate General and PRC businessmen.
-- Would insure that ACCHK obtained the most up-to-date
and relevant US Government information on China trade and
improve the prospects for US-PRC trade.
Principal Disadvantages:
-- None.
Non-profit trade groups and associations (e.g., Western
Wheat Associates which has been instrumental in developing
markets both in communist and non-communist countries) could
be useful in developing trade. There are also groups of
businessmen who have organized themselves either for the
purpose of long-range trade with the PRC, or for such short
term objectives as a single trade show or delegation to
the PRC.
OPTION 5: (RECOMMENDED)
Encourage such groups and provide them with information
concerning how to contact the relevant PRC corporations and
agencies, as well as normal commercial information concerning
the market conditions inside the PRC.
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Principal Advantages:
-- Improve US business contacts with the PRC and
enhance prospects for US exports to the PRC.
-- If formed with US Government support, such groups
might be less likely to become spokesmen for PRC interests
in the US along the lines of the so-called "friendly firms"
in Japan.
Principal Disadvantages:
-- None.
OPTION 6 : (RECOMMENDED)
Encourage formation of a prestigious, private "Sino-
American Trade Council," perhaps under the auspices of the
US Chamber of Commerce (and in close informal association
with the Department of Commerce). The Council's charter
would specify that it would act as a non-political central
clearing house for information and research on PRC trading
practices.
Principal Advantages:
-- Could serve as a central point of reference for
US businessmen seeking information on standard contract
language, arbitration procedures, marketing problems, etc.
-- Would be representative US business body, not PRC
front organization or "friendly firm".
-- Might preempt or displace some pro-PRC trade groups.
-- Could act as an intermediary for US businessmen
seeking contact with PRC agencies and corporations.
-- Could be the US liaison point for the China Council
for the Promotion of International Trade (CCPIT).
-- Could be official sponsoring organization for US
trade delegations and multi-firm US exhibits in the PRC.
-- Could co-sponsor PRC exhibits in the US.
Principal Disadvantages:
-- Despite moderate, respectable US business membership,
might be exploited by the PRC to serve its economic and
political interests and goals.
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III. B. SUBSTANCE OF CONTACTS: USG MEASURES TO FACILITATE
TRADE
1. Exchange of General Commercial Information
To facilitate US exports to the PRC, US officials
in Paris could offer to provide the Chinese with:
--information regarding US domestic production and
foreign trade
--lists of US manufacturing firms in specific
product categories
--lists of US grain and agricultural commodities
export firms
--lists of private and State industrial, commercial
and agricultural fairs in the US
--statistics on US economic performance
--copies of US laws and regulations concerning
trade; e.g. weights and standards of US products,
food and drug inspection procedures, etc.
To facilitate PRC exports to the US, US officials
in Paris could in addition offer to provide the
Chinese with:
--market information on goods the Chinese would
like to export to the US
--information on US import laws and regulations,
including US tariff structure
--information on US laws and regulations relating
to industrial property (i.e., patents, trademarks,
copyrights, etc.)
In return, the US should ask the Chinese for:
--information about what goods the PRC might be
interested in buying from the US
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--information on CPRC import laws and regulations
--information on manufacturers and agricultural
producers interested in imports or exports
B.
2.
Measures which the US Government Can Take to
Facilitate Trade.
a. Trade Missions
OPTION 7 : (RECOMMENDED)
Under the auspices of the Sino-American Trade
Council proposed in Option
above, organize a
vanguard trade delegation including prominent US
businessmen and one or more US Government repre-
sentatives) to establish liaison with the China
Council for the Promotion of International Trade
(CCPIT) in Peking and to visit Chinese foreign
trade corporations, research institutes, marketing
agencies and trade fair authorities in the PRC.
Principal Advantages
--would get the Sino-American Trade Council into
the act at an early date
--would improve US knowledge of the structure and
practices of PRC trade corporations and agencies
--would establish the liaison between CCPIT and
the Sino-American Trade Council which we wish to
foster
--would pavesthehway for US trade fairs in the PRC
--would tend to upstage trade delegations organized
by PRC front groups in the US
Principal Disadvantages
-- None
b. Trade Exhibitions
Collective exhibitions by US firms featuring a
single or multiple product line, held in Peking
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or other Chinese city, should be possible.
Such events would be assisted by the De-
partments of Commerce and/or Agriculture
under the sponsorship of a trade association
which would actually install and man the
exhibition. Technical seminars separately,
or in conjunction with the exhibitions or
trade missions, could also be offered.
OPTION: 10 (RECOMMENDED)
Under the auspices of the Sino-American Trade
Council proposed in Option 4 above, and in
association with the CCPIT, organize a US
comprehensive solo exhibit in Peking or other
Chinese city.
Principal Advantages:
-- would promote US exports to the PRC.
-- would be reciprocal to US invitation to the
PRC to organize a similar exhibit in the US.
-- would establish the Sino-American Trade
Council as a prime liaison mechanism between
US firms and PRC trade corporations and agencies.
-- though assisted by Commerce Department, the
fair would be privately sponsored, preserving
the people-to-people character of our trade
relationship with the PRC--and would therefore
be most acceptable to the Chinese.
Principal Disadvantages:
-- None.
OPTION11 : (RECOMMENDED)
Provide Commerce and Agriculture Department
assistance to US trade and industrial associa-
tions and groups for organization of collective
exhibitions by US firms, featuring a single
or multiple product line, in Peking or another
Chinese city.
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Principal Advantages
-- promotes US exports to the PRC
-- is positive USG action to "facilitate"
development of US-PRC trade as agreed in the
Shanghai Communique
-- reciprocates PRC trade fairs which we hope
will be organized in the US
Principal Disadvantages
-- None
C. Invitations to PRC Businessmen and to
Exhibitions
The PRC refuses to attend events to which Taiwan
has been invited. The ROC has already been in-
vited to most of the major expositions scheduled
to take place over the next year in the US. Under
the normal international practice (codified in a
1928 Convention), invitations to Governments to
attend officially sponsored general international
expositions go out through diplomatic channels
to those countries with which the sponsoring
Government has diplomatic relations. As long as
the US maintains diplomatic relations with Taiwan,
invitations to officially sponsored trade fairs
and expositions will go to the ROC and the PRC
will refuse to attend under these circumstances.
Fairs organized by state and local governments
and by private industrial and commercial associa-
tions are not, however, bound by the same rules.
It is perfectly possible for the organizers of
such fairs to invite only PRC attendance. A
list of key private and state trade fairs to which
PRC businessmen might be invited is provided
in Annex
.
OPTION: 12
Encourage Americans, especially those invited
to the Canton Trade Fairs, to extend invitations
to Chinese businessmen to visit the US.
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Principal Advantages
-- furthers US-PRC contacts
-- promotes US-PRC trade
-- is positive USG action to "facilitate" develop-
ment of US-PRC trade as agreed in the Shanghai
Communique
-- enables US to reciprocate invitations from
PRC to Americans to visit the PRC
Principal Disadvantages
-- PRC businessmen inJUS might engage in espionage
activities
OPTION 13:
Invite the PRC to exhibit Chinese goods in the
US at a comprehensive solo exhibit
Principal Advantages
-- would be highly visible evidence of basic
improvement in US-PRC relations
-- would promote contacts between US and PRC
businessmen
-- would promote trade between the US and PRC
Principal Disadvantages
-- if the claims problem has not been solved
private claimants might try to attach PRC
exhibits in harassing law suits
-- US Government facilitation of the trade fair
would be SO obvious that the ROC would likely
issue a formal protest
-- the trade fair could become the center of
disruptive activities of right-wing and anti-
communist groups
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OPTION 14:
Select one or more private or State-sponsored
trade fairs and (after informal consultation
with the sponsoring organization) inform the
Chinese in Paris that the US Government would
be prepared to facilitate attendance by PRC
businessmen if they were interested.
Principal Advantages
-- would allow US to reciprocate Canton Trade
Fair without involving the Federal Government
in any open way (avoiding the problem of ROC
attendance)
-- would promote US-PRC - trade and business
contacts
-- promotes US exports
Principal Disadvantages
-- None
d. The Canton Trade Fair
Only businessmen, firms or organizations
specifically invited by an official PRC agency
may attend the semi-annual (April 15- May 15
and October 15- November 15) Canton Trade Fair,
or the Chinese Export Commodities Fair, as it
is officially called. The PRC has informed
us that a few selected US businessmen will be
invited to attend the Spring 1972 Fair. These
fairs are a unique opportunity for American
businessmen to meet with representatives of
China's trading corporations and personally
engage in practical trade negotiations, even
though they cannot display US goods at the Canton
Fair. The American Embassy in Paris could
forward applications for invitations to the
fair through the Commercial Attache of the
PRC Embassy. Furthermore, businessmen or
organizations who wish to attend the fair can
directly request an invitation from the appropriate
foreign trade corporation. Invitations may also
be obtained, particularly if the commodities
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Forty percent of China's imports (those
coming from Sudan and Egypt) were extra long
staple cotton, and the United States is not
competitive for that type of cotton. Thus
the market we could hope to share with other
upland cotton producing countries is around
200,000 bales.
2. Sale of US Civil Aircraft to the PRC
The PRC has canvassed world aircraft suppliers for
information about modern civil aircraft. It purchased four
used Tridents from Pakistan International Airways in 1970,
and ordered six new Tridents from the UK in 1971. The PRC
has taken delivery of two Soviet IL-62;s and has at least
three more on order. Peking has discussed Caravelles with
the French and discussed the Concorde with an Anglo-French
team. The potential size of the Chinese market is unknown,
but estimates by the aircraft industry have ranged upwards
from twenty-five aircraft during the next several years.
American aircraft suppliers argue that unless they
get into the Chinese market now they will be excluded by
foreign suppliers, for at least the near term, and perhaps
longer. Our aircraft suppliers complain that they are
hampered by a lack of clear-cut USG policy statement on sale
of US civil aircraft to the PRC. Boeing, McDonnell Douglas,
and Lockheed tell us that successful aircraft negotiations
with the PRC depend upon a prior assurance from the USG that
sales of civil aircraft would be approved.
OPTION 28 : (RECOMMENDED)
Issue favorable advisory opinions in writing, when
requested, concerning sale of US aircraft for civil use,
carrying equipment appropriate for peaceful end use, and
that if such transactions develop, that the USG approve
them, assuming that these conditions are met. (The Under
Secretaries Committee made the same recommendation in
U/SM 91 for discussion see U/SMG. P 8-10).
3. Reciprocal Visits by US-flag and PRC-flag Ships and
Aircraft
US-flag ships and aircraft are currently prohibited
from visiting the PRC under Transportation Order T-2 and
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similar regulations. Removal of this prohibition as recommended
in NSC U/SM 91 would encourage US-PRC contacts and facilitate
trade by clearing the way for routine charter flights by US
airlines and normal port calls by US-flag ships to the PRC.
US airlines wish to begin scheduled service to the PRC and
the Chinese, who are about to extend their own international
air routes to Europe for the first time, may also become
interested in acquiring the right to serve New York. Yet,
unless carefully managed, the attempt to initiate scheduled
air service between the US and PRC could lead to a scramble
among US airlines accompanied by public declarations of their
intent to abandon service to Taiwan which could damage Taiwan
politically and economically. This competition could also
promote irrational route patterns for East Asia.
US maritime companies wish to be able to visit PRC ports.
PRC merchant ships presently call on Canadian ports and
presumably will wish to transport PRC cargoes to the US when
Sino-US trade develops. Amendment of the Transportation
Order T-2 and similar regulations will permit the US-flag
ships to visit the PRC, but in order for PRC vessels to
visit US ports, US Port Security Regulations will have to be
amended.
Shipping and Port Security
At present PRC vessels are ineligible to enter US ports and
waters except enroute via the St. Lawrence Seaway to Canadian
Great Lakes ports. Under US Port Security Regulations the
PRC is a Category III country, along with Albania, Cuba, East
Germany, North Korea and North Viet-Nam. To permit PRC ships
entry into US ports, the PRC should be moved to Category I,
which includes the USSR and Eastern European countries. At
present Category I countries must provide an advance request
(14 days for ships, 21 days for crews) before entry into
US ports is granted (or denied).
Current negotiations with the USSR may reduce the time period
and permit entry into many US ports on a simple advance
notice basis, provided that there is reciprocity for US vessels.
OPTION: 21:If these negotiations with the USSR result in the
reduction of the period required for advanced notice
of visits to the US by Soviet ships and crews, seek
to negotiate an agreement on shipping with the PRC
which would permit similar reduction of the advance
notice period for Chinese ships and crews.
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Principal Advantages:
--would facilitate mutual access to our respective ports
and waters;
-- would maintain PRC parity with the USSR;
--would be seen by the PRC as eliminating another element
of discrimination.
Principal Disadvantages:
--None, providing PRC gives quid pro quo.
Non-scheduled and Private Flights to the PRC
Non-scheduled flights would consist primarily of charter
flights by US scheduled and supplemental airlines and pos-
sibly also flights by privately owned US aircraft. Relative-
ly few such flights are likely to gain PRC approval. The pre-
liminary groundwork (intergovernmental discussions with the
PRC, CAB hearings, etc.) which we consider desirable before
scheduled services could be established would not be necessary
in the case of non-scheduled flights to the PRC. We do not,
however, believe that it would be desirable to draw a dis-
tinction between non-scheduled and scheduled flights insofar
as Transportation Order T-2 is concerned because there are no
security considerations (the rationale for T-2) which apply
to one but not the other.
OPTION 2C
Amend Transportation Order T-2 and similar regulations to per-
mit US-flag ships and aircraft to visit the PRC, linking this
action with our desire to facilitate non-scheduled air service
and merchant shipping between the US and PRC. At the same
time amend the Port Security Regulations to place the PRC in
the same category as the USSR and announce that the USG would
be willing to give the same treatment as other Category I
countries on the basis of reciprocity. Upon removal of the
T-2 prohibition, announce that the US would, on a reciprocal
basis, facilitate entry of PRC civil aircraft engaged in
non-scheduled activites.* (RECOMMENDED)
(NOTE: Similar action was also recommended by the Under
Secretaries Committee in U/SM 91.)
*If the PRC took action to become a party to the Convention
on International Civil Aviation (Chicago, 1944), the US would be obliged,
under the terms of Article 5, to permit PRC civil aircraft not engaged
in scheduled services to make flights into or transit non-stop across US
territory, and to make stops for non-traffic purposes. The obligation
is reciprocal and the PRC would have to give permission to US aircraft
under the same circumstances.
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39.
Principal Advantages:
-would facilitate contacts between Chinese and American
peoples
--would open channels of direct communication and increase
our knowledge of PRC civil aviation facilities
--would avoid competitive scramble by US scheduled airlines
and allow time for intergovernmental contacts in Paris and
other procedures necessary to prepare the way for scheduled
service.
--would be logical first step toward eventual scheduled
services.
Principal Disadvantages:
--could subject US vessels and aircraft to seizure
--could result in detention of US seamen without USG con-
sular protection
--could expose the PRC to harassing lawsuits seeking attach-
ment of PRC vessels and aircraft to satisfy private claims
against the PRC
--might confer a one-sided advantage to PRC merchant vessels
which, like Soviet vessels, are state-owned and can transport
cargoes at well below conference rates.
--could enhance PRC intelligence gathering in the US
--could conceivably invite GRC retaliation against US regis-
tered aircraft and US carriers whose aircraft have called at
PRC airports.
4. Scheduled Air Service
Three US airlines, TWA, Pan Am and NWA (Northwest) claim to
have US CAB authority to provide scheduled service to the
PRC. Their rights*, although probably still valid, have not
been operable since 1949.
*The Office of the Legal Adviser, Department of State, considers that
the better legal view is that the 1946 US-ROC Air Transport Agreement,
as amended in 1969, does not require the US to obtain GRC agreement to
US airline services to mainland China if the US accepts the authority
of the PRC over mainland China in respect to aviation matters. However,
we should recognize that the 1969 Amendment appears to give the GRC a
veto and we must anticipate strong GRC legal objection.
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40.
Despite the expected jockeying for position by US airlines
(because none wants itscompetitors to gain an advantage),
scheduled services to the PRC, would probably be unprofit-
able at least in the early stages. On the other hand,
there is a US political interest in establishing scheduled
service at a reasonably early date or at least to appear
to be taking steps toward accomplishing that objective.
Both TWA and NWA currently serve Taiwan, and for political
reasons would almost certainly have to abandon this service
in order to gain access to the PRC. NWA has already private-
ly indicated its willingness to do so. Termination of
service to Taiwan by one or both US airlines would damage
Taiwan politically and economically.
If T-2 is amended to permit US flag aircraft to visit the
PRC and no further action is taken with respect to the
route rights of the scheduled airlines, the PRC would be
in a position to play one airline off against another in
such a way as to cause the greatest possible damage to
Taiwan, a major goal of PRC foreign policy, and something
we wish, to the extent possible, to avoid. The PRC's
ability to do this would be significantly reduced by the
Department of State and the CAB instructing the US airlines
not to approach the PRC on scheduled services until author-
ized to do so.
The route authority of US airlines issued in the 1940s,
while probably still valid, nevertheless is badly out-of-
date. CAB hearings will be necessary to make service to
the PRC compatible with existing route patterns in East
Asia and to determine how and by whom traffic points in the
PRC should be served. At the hearings, competition between
airlines might lead TWA and NWA to record their willing-
ness to abandon service to Taiwan in order to serve the
PRC. This would hurt Taiwan. The likelihood of damage to
Taiwan would be lessened, however, if we requested the
Board to take appropriate steps, consistent with its man-
date, to exclude matters relating to US carrier service
to Taiwan as an issue in the proceedings.* Such hearings
would greatly reduce the ability of the PRC to manipulate
US airlines for political advantage.
The Board has the authority to do so. These matters, as
matters involving foreign policy, are considered by the
President pursuant to 8801 of the Federal Aviation Act,
in his decision whether to approve the recommendation of
the Board.
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41.
Option 28
Postpone for at least one year further steps toward the
establishment of scheduled services and in the meantime
instruct US airline not to approach the PRC about sched-
uled services until authorized to do so.
Principal Advantages:
-- would enhance chances of eventual establishment of
scheduled services on a rational, economic basis.
-- would be consistent with gradual approach US has adopted
with respect to scheduled service to other communist
countries.
-- presents opportunity to deal with this question in a
calmer setting once public interest in China has subsided.
Principal Disadvantages:
-- restraint on US scheduled airlines might be misinterpreted
by PRC as foot-dragging on US implementation of Shanghai
communique.
--- some airlines may "cheat" on the restriction against
direct approaches to the PRC thus affording the PRC an
opportunity to play one airline against another over the
Taiwan issue.
Option 29
Instruct the US airlines not to approach the PRC about
scheduled services until authorized. Raise the question
of scheduled air service in the Ambassadorial talks in
Paris. If the PRC is at all receptive toward scheduled
services, ask the CAB to hold hearings to determine how
and by whom traffic points in the PRC might best be
served and request the CAB to exclude from such hearings
any matters relating to US carrier service to Taiwan. The
outcome of the hearing could provide a basis for further
discussions with the PRC.
Principal Advantages:
-- would give us a reading on PRC receptivity to scheduled
air service between the US and China, enabling us to deter-
mine whether CAB hearings would be pertinent.
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42.
the PRC might disclose political and other conditions it
would impose on scheduled air services with the US, there-
by enabling us to cope better with such conditions.
-- might provide a basis for subsequent negotiation of an
inter-governmental understanding on scheduled air services.
would lay the necessary groundwork for a rational pattern
of scheduled service.
-- might restrain competition by TWA, NWA, Pan Am for
PRC favor.
would minimize damage to Taiwan's position.
Principal Disadvantages:
some US airlines may "cheat" on the restriction against
direct approaches to the PRC and the PRC may try to play
them off against each other over the Taiwan issue.
-holding of hearings now would intensify pressure on
carriers to compete for selection.
Option 30:
Do nothing at the governmental level; let the airlines
negotiate with the PRC and consider the results of their
negotiation.
Principal Advantages:
-- might be the procedure preferred by the PRC, and thus
the one most likely to lead to a start of scheduled air
services.
Principal Disadvantages:
would give the PRC the greatest possible opportunity
to play US airlines off against each other on the Taiwan
issue.
would be contrary to normal CAB procedures, and would
give the PRC advantages denied to other countries.
result would probably not be compatible with existing
over-all Pacific route pattern.
could well result in a situation where US airlines, in
an effort to pre-empt the rights of one another, would
undertake uneconomic operations.
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5. Export Licensing Questions
Our exports to the PRC fall into three categories:
those under general license, those requiring validated
licenses but not COCOM approval, and those requiring both
US and COCOM approval. The first category provides no
problem, of course, while the latter two can require a
period ranging from several days to very much longer
licensing processing timespan.
Delays in the licensing decision process for any
country are generally caused by: (1) inadequate informa-
tion on the product, the end use, or the end user, result-
ing in additional inquiries; (2) time needed for full
consideration as part of the US inter-agency decision-
making process, and (3) time needed for COCOM consideration.
Licensing decisions for the PRC should not in
principle take any longer than those for the USSR. How-
ever, initially possible delays may be introduced by
(1) lack of licensing history concerning exports to the
PRC, and (2) the comparatively scarce resources available
to obtain and verify end use and end user information
with respect to the PRC.
Some restrictive impact on potential US exports to the
PRC could result from the "differential" licensing practice
of the US as compared to other Western countries and Japan
which do not go through a process of individual export
license review for non-cocom items as a rule. The dif-
ferential aspect of the problem arises from applying the
normal U.S. export licensing conditions in the case of a
country where our experience in doing so is still very
limited, as contrasted with our experience in dealing
with the USSR and Eastern Europe.
The PRC has displayed great sensitivity when
requested to reveal end use information. The solution
is to educate PRC officials in the nature of the licensing
decision process. We should explain the importance of
adequate end use information, emphasizing that such
information is required in all cases where validated
licenses are issued, regardless of country of destination.
(As COCOM has dealt for some years with PRC exceptions
cases where this information is required, such require-
ments should not come as a surprise.) We should also
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explain that under the Export Administration Act and
of COCOM, end use and end user information is a pre-
requisite to a licensing decision. To waive this for
PRC cases would be discriminatory against others.
At the same time, we can continue to emphasize to
US exporters the great importance which full product
and end use information will have in licensing decision
for the PRC.
An early increase to a substantial volume is not
anticipated. For the foreseeable future we can assure
early action on PRC cases by prompt analysis and rapid
preparation, followed by early inclusion on the agenda
of the Operating Committee and by encouraging prompt
formulation of positions by participating agencies.
Should it be considered desirable to expedite
COCOM action on PRC cases, applications of those techniques
utilized to expedite cases for Eastern Europe should
produce the desired result.
OPTION18:
-- Explain to PRC the necessity of adequate end use
information which is required in all validated license
cases. Take every opportunity to emphasize to US exporters
the great importance which full product and end use informa-
tion will have in licensing decisions for the PRC.
Principal Advantages:
--- Will make clear our licensing procedures.
-- Would demonstrate our desire to put trade relations
on a businesslike basis.
Principal Disadvantages:
-- Might antagonize PRC officials.
-- Might lead PRC to feel discriminated against.
6. Trade Complaints
Normal trade complaints originating on either
side can be handled routinely, using existing Department
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of Commerce facilities and the Paris contact point
as necessary.
7. Industrial Property Protection
Unlike the USSR, the PRC is not a party to
the International Convention for the Protection of
Industrial Property (Paris Union), which provides for
national treatment in patent and trademark matters and
certain other advantages for member countries. Chinese
adherence to the Convention would require that govern-
ment to treat US citizens on the same terms as PRC citizens
under laws and regulations pertaining to rights in patents,
inventions and trademarks.
(a) Trademarks
The US trademark law makes no distinction
of nationality for registration of trademarks in the
US. Thus, a PRC national can apply for and register a
trademark in the US in accordance with our laws and
regulations. The only requirement is that he designate
a local representative.
Under PRC trademark law foreigners can apply for
registration of trademarks in the PRC, if nationals
of the PRC can do likewise in the foreigner's country.
In order to qualify US citizens for trademark protection
in the PRC, therefore, it is quite possible that the US
Batent Office could simply inform the PRC that nationals
of the PRC can apply for and register trademarks in the
US. The PRC would be requested to provide reciprocal
treatment to US nationals wishing to obtain trademark
registration in the PRC. It might be necessary to enter
into a formal agreement with the PRC in order to establish
such reciprocity.
(b) Patents
US patent laws make no distinction of
nationality for the application for and grant of a US
patent. PRC patent law does not grant like treatment
to US nationals. As far as we know, there is no pro-
vision in PRC law permitting foreigners residing outside
of the PRC to apply for a patent.
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OPTION 33: (RECOMMENDED)
Ask the PRC through Paris for information on
Chinese trademark law. Upon confirmation that the PRC
law reads as we believe it to, inform the PRC that its
nationals may receive trademark protection in the US
and request reciprocal treatment for US citizens
in the PRC.
Principal Advantages
-- Utilizes the Paris contact point to obtain
information of interest to the US Government and the
American business community
-- Could clear up a minor problem affecting US-PRC
trade relations.
Principal Disadvantages
-- None.
8. Copyright Problems
Copyright protection in the PRC is not available
to US creators and publishers of literary and artistic
works. Little is known about the extent US works are, or
are likely to be, used in the PRC. Neither is information
available at present on the existence or content of PRC
copyright law and how it does or does not apply to
foreign works. While copyright problems may arise
between the US and PRC at a later date, at the moment
they are merely hypothetical.
Were the PRC to adhere to either the UCC or the
Berne Convention, potential copyright problems would be
obviated, since US copyrighted works would receive auto-
matic protection in that country. However, while most
communist countries adhere to one or the other of these
conventions, the USSR does not and there is little reason
to expect the P.RC to do so. The ROC has refused to join.
There seems little point in raising the matter of copy-
right problems with the PRC until they actually occur.
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IV. U.S. LAWS AND REGULATIONS RESTRAINING TRADE
A. EFFECT OF TARIFF BARRIERS
1. Background and Options
Full normalization of our commercial relations can-
not be achieved without most-favored-nation tariff treat-
ment (MFN). Peking views non-MFN treatment as discrimin-
atory and a political affront. Lack of MFN may also pre-
clude their making a serious effort to penetrate the US
market. None of our west European allies, nor Japan,
withhold MFN from the PRC; this tends to spotlight the
US position as especially aggravating. Within the narrow
range of products that China is currently able to ex-
port, and especially those that appear most marketable
in the United States, the difference between MFN and
non-MFN tariff rates ranges from 0 - 90%, with a con-
siderable number of PRC products which might be attrac-
tive to US buyers at the upper end of the scale. Such
a large tariff differential places the PRC at a signifi-
cant competitive disadvantage vis-a-vis free world
countries. Bilateral trade problems are further increased
by the likelihood of restrictions being applied to US im-
ports of PRC textiles and perhaps other commodities such
as shoes. Given the special significance the PRC will
probably assign to balancing trade with the United States,
the elimination of this tariff difference would enhance
the potential for Chinese sales in the US market. If the
PRC attempts to balance its trade with the US and non-
MFN tariffs continue to apply, the result will be a
correspondingly low level of US exports to the PRC.
China, until very recently, did not attempt to de-
sign its export goods for maximum saleability in foreign
markets. Since Chinese goods were shipped mainly to
Southeast Asian markets, the Chinese could afford to ex-
port whatever goods were considered surplus relative to
domestic needs in order to finance their imports. As
China has expanded its commerce with economically develop-
ed Western countries, the exacting tastes of these markets
have compelled greater Chinese attention to marketability,
uniform quality, packaging and labeling. As the Chinese
expand their export production capacity, especially in
manufactured items, the question of non-MFN tariffs will
become increasingly important.
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48
The mystique of China, the 20-year absence of Chinese
goods from the American market, the high per capita US
disposable income and the inherently high quality of many
Chinese products have resulted in a heavy demand for
Chinese products in the US market. Although the Chinese
welcome trade with the United States as an additional
competitive element in their economic calculus, as exact-
ing bargainers they will press for an extension of MFN as
an integral part of improved commercial relations.
Imports of Chinese-origin goods in 1971 from third
countries totalled $4.9 million. Under present circum-
stances, imports of Chinese goods for 1972 might reason-
ably be expected to reach $25-35 million. We are currently
prohibited by (Section 231 of the Trade Expansion Act of
1962) from extending MFN treatment to Communist countries
(except Poland and Yugoslavia). Thus Congressional action
will be necessary if we wish to extend MFN to the PRC. We
could seek authorization to do so for the PRC alone or as
part of a broader authorization to extend MFN to Communist
countries in general. In this connection, it should be
noted that we have recently informed Chairman Mills of
the House Ways and Means Committee that we support the
Findley bill which would authorize the President to
extend MFN to Romania and we anticipate that the question
of MFN for the USSR will arise in the context of the lend-
lease negotiations with the Soviets). Once the authority
to offer MFN to the PRC were available, we would wish to
obtain in return--and Congress will undoubtedly require--
reciprocal trade and commercial concessions from the PRC.
OPTION 16
Seek legislation permitting the President to negotiate
MFN status with the PRC without reference to US tariff
policy toward the USSR and ot her Communist countries.
Negotiations with the PRC concerning MFN would proceed
separately; and MFN would be extended only after ap-
propriate trade concessions from the PRC.
Principal Advantages:
-- would follow traditional US practice of insisting
on reciprocal concessions from any country to which we
grant MFN.
-- might enable the US to extract concessions from
the PRC which could not otherwise be obtained.
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Principal Disadvantages:
-- during possible long and difficult negotiations,
the negative impact of non-MFN treatment would continue
to fall upon US-PRC trade.
-- in view of the fact that Japan and Western
European countries give MFN to the PRC, might be seen by
the PRC as evidence of US desire to continue policies of
discrimination against China.
-- if MFN was granted to the USSR without being
given to the PRC, might be seen by the PRC as evidence
of US discrimination against the PRC in favor of the USSR.
-- if MFN was granted to the PRC before being granted
to the USSR.
-- if MFN was granted to the PRC before being granted
to the USSR, would be viewed by the Soviets as US pro-
Chinese discrimination, with consequent damage to US-
Soviet relations.
--- PRC might feel that US commitment to economic
relations based on "equality and mutual benefit" implied
equal treatment with other countries, including MFN, and
that US was not implementing the Shanghai Communique in
good faith.
OPTION 17
At the same time we seek legislation permitting the
President to negotiate MFN status for the USSR (and other
Eastern European countries), we seek such authority also
for the PRC. Negotiations with the PRC concerning MFN
could proceed separately; and MFN would be extended only
after appropriate trade concessions from the PRC.
Principal Advantages:
-- would follow traditional US practice of insisting
on reciprocal concessions from any country to which we
grant MFN.
-- might enable the US to extract concessions from
the PRC which could not otherwise be obtained.
-- seeking of legislation authorizing grant of MFN
would be evidence of US willingness to proceed in
development of US-PRC trade ties.
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Principal Disadvantages
-- during possibly long and difficult negotiations,
the negative impact of non-MFN treatment would continue
to fall upon US-PRC trade.
-- in view of the fact that Japan and Western European
countries give MFN to the PRC, might be seen by the PRC as
evidence of US desire to continue policies of discrimina-
tion against China.
2. Commodities Affected by Lack of MFN
The vast majority of potential PRC exports would en-
counter a significant tariff differential in comparison
with similar exports by other developing countries in the
US market. Willingness to extend MFN to China may affect
considerably the extent to which the PRC will include the
US market in deciding which export industries to favor
relative to western markets in general. An important
example is bicycles. There is currently a significant
US market for ten-gear light-weight bicycles. An Ameri-
can businessman would like to assist the Chinese in pro-
ducing these bikes and guarantee the Chinese a market for
their entire output for the next twenty years. Despite
inexpensive Chinese labor, such opportunities will be dif-
ficult to realize in the absence of MFN.
The following is a selective list of PRC export items
and the relevant 1970 tariffs:
Percent
Reduction
Commodity
Column I
Column II
From
Category
(MFN Duties)
(Non-MFN Duties)
High Rate
1. Meats
2.2-3¢ lb.
3.25-6$
30-50%
2. Fruits-
vegetables
.1-10¢ lb.
.5-10¢
80-0%
3. Soybean
1.5¢
2¢
50%
4. Silk
Free-9.5%
Free-35%
0-70%
5. Salt
1¢ (100 lb.)
11¢ (100 lb.)
90%
6. Manganese
.7¢ (lb.)
1¢
85%
7. Bristles
.75$ lb.
3¢
75%
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51
Percent
Reduction
Commodity
Column I
Column II
From
Category
(MFN Duties)
(Non-MFN Duties)
High Rate
(Contd.)
(Contd.)
(Contd.)
(Contd.)
8. Clothing
8.5-40%
37-90%a.v.
70-55%
9. Essential oils
Free-12%
Free-25%
0-55%
10. Furs, dressed
(Embargo item)
3.5%
25%
84%
11. Silk yarns,
threads
10-19%
20-65%
50-70%
12. Silk fabrics
21-26%
60-82%
65-70%
13. Hides
1.5%
10%
85%
14. Rattan and
basket
5.5-25%
20-50%
70-50%
15. Eggs
Free-4¢ doz.
Free-10¢ doz.
0-60%
16. Alcoholic
beverages
(70-1.75¢ gal.)
$5 gal.
90-60%
17. Tungsten
35¢ lb.
50¢ lb.
30%
18. Perfumery
11.2¢ per lb.
50c per lb.
80% plus
and 10% a.v.
and 75% a.v.
87%
19. Rapeseed oil
Free-1.8¢ lb.
Free-4.5¢ lb.
0-60%
20. Paper and board
1.5%
10%
85%
21. Cotton fabrics
13-19%
20-30%
40-30%
22. Tin
8.5%
25%
66%
23. Diamonds
0.5%
6%
10%
(non indus.)
24. Cassia
Free-2.1¢ lb.
Free-5¢ lb.
0-60%
25. Feathers
17%
20%
15%
26. Leather goods
20%
45%
56%
27. Footwear
7-38%
35-75%
40-49%
28. Hand tools
13%
60%
78%
29. Sporting goods
14-20%
30-55%
53-45%
30. Earthenware
13-36%
50-70%
74-49%
31. Bicycles
7-13%
30%
77-57%
32. Cameras
9-12%
20%
55-40%
33. Mushrooms
2-3.2¢ lb
3.9-10¢ lb
49-68%
+10%
+45%
+78%
34. Human hair
5%
20%'
75%
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3. Commodities Unaffected by Lack of MFN
Current imports of Chinese-origin goods offer some index
of the types of goods that will sell in the US market in the
absence of MFN, since these goods are dutiable at non-MFN
rates even though not acquired directly from the PRC. The
following is a selective list of items that would not con-
front a significant tariff differential.
Commodity
Column I
Column II
Difference
Rice
2.5¢ (1b.)
2.5c (1b.)
0
Tea
Free
Free
0
Turpentine
5%
5%
0
Rosin
5%
5%
0
Quartz
Free
Free
0
Some Chinese goods are likely to enjoy a high demand
in the United States market despite a significant tariff
differential. These goods would typically be luxury items,
such as jewelry and oriental rugs, and therefore not es-
pecially price-sensitive, or items relatively unique to
China, such as specialty foods and antiques.
4. PRC Commodity Trade with Japan, West Germany
and the United Kingdom
Trade data for recent years reveal a slower rate of
growth and some decline for a number of Chinese products
traditionally exported to Asian markets, such as soybeans,
scrap metal and coal. In contrast, the data indicate that
a number of commodities are being exported to the West at
increasing rates, such as silk, hog bristles and textiles.
Purchases by these developed Western countries demonstrate
that China can penetrate and stay in sophisticated markets.
Given the narrow range of Chinese commodities avail-
able for export, the commodity composition of China's exports
to these countries is quite similar, with some variation
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in emphasis. For example, Japanese purchases favor food-
stuffs (especially fish), soybeans, clothing, raw silk and
coal; Germany's purchases emphasize fruit and vegetables,
tobacco, animal hides, feathers and hog bristles; and United
Kingdom's imports emphasize foodstuffs, fur skins, hog bristles
and nonmetallic mineral manufactures. Other categories of
increased Chinese exports to the West are glassware and
earthenware, toys and sporting goods, rugs, handtools, foot-
wear and leather goods.
Recent sales in Germany of Chinese cameras at 40% be-
low the price of similar Japanese cameras indicate that the
Chinese may be testing that market for substantial sales of
light manufactures.
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Japanese Imports from PRC
(Thousands of US $)
1967
1970
Total
269,460
253,838
1. Food and beverages
90,584
66,981
meat and preparations
5,696
9,730
fruit and vegetables
16,002
25,945
fish and preparations
33,983
23,199
rice
33,983
2. Crude materials, inedible
114,669
113,936
peanuts, green
3,643
2,086
soybeans
47,574
36,047
oilseeds
7,003
3,730
silk
18,502
27,104
animal hair
4,680
6,846
salt
8,888
8,883
fluospar
3,229
3. Mineral fuels
17,142
6,423
coal
15,052
4,439
4. Chemicals
8,694
23,183
5. Manufactured goods
23,086
20,160
silk fabrics
4,955
10,790
pig iron
9,609
90
6. Miscellaneous manufactures
13,164
19,821
clothing
3,492
10,068
basketwork
4,725
2,098
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West German Imports from PRC
(In thousands of US $)
1967
1970
Total
76,542
84,323
1. Food, beverages and tobacco
13,221
18,747
meat and preparations
9
15
fruit and vegetables
4,240
6,772
rice
1,181
279
natural honey
1,265
1,907
tobacco and manufactures
2,628
6,088
tea
107
210
eggs
2,639
1,609
fish and preparations
617
1,070
2. Crude materials, inedible,
excess fuels
40,190
45,586
hides and skins, excess fur
skins, undressed
4,975
5,492
fur skins, undressed
769
2,136
peanuts, green
674
159
silk
2,474
2,585
animal intestines and bladders
7,861
crude nonmetallic minerals, other
---
2,807
tungsten ore and concentrates
5,895
1,116
bristles
1,457
16,253
feathers and downs
6,560
6,548
3. Chemicals
5,144
6,671
wood and resin-based chem-
ical products
--
2,250
essential oils and resinoids
593
1,150
4. Manufactured goods, classified
chiefly by material
9,368
7,731
furs, dressed
316
727
silk fabrics, woven
1,058
1,791
carpets of wool and animal hair
363
945
glassware and pottery
111
129
tin and alloys, unwrought
981
1,779
antimony, unwrought, waste
and scrap
1,211
966
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1967
1970
5. Machinery and transport
57
20
equipment
6. Miscellaneous manufactured
items
3,593
4,529
clothing, except for fur
238
696
fur clothing and other
fur articles
455
798
footwear
762
688
basketwork and other articles
of plaiting materials
1,380
1,123
toys, games, sporting goods
66
365
Source: US Department of Commerce
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UNITED KINGDOM IMPORTS FROM PRC
(In thousands of US $)
1967
1970
Total
81,566
80,491
1. Food and beverages
16,111
15,900
meat and preparations
4,155
5,107
fruit and vegetables
3,376
3,838
fish and preparations
1,921
1,274
rice
2,657
2,158
tea
1,264
1,579
2. Crude materials, inedible,
excess fuels
33,483
25,361
hides and skins
--
50
fur skins, undressed
1,481
2,866
silk
2,402
3,278
wool and animal hair
3,396
--
tungsten ores and concentrates
2,955
1,817
bristles
8,631
7,694
3. Chemicals
6,230
10,658
4. Manufactured goods classified
chiefly by material
16,402
22,527
furs, dressed
2,656
2,669
nonmetallic mineral manufactures
--
9,177
cotton fabrics, woven
5,381
2,870
glassware and pottery
711
779
carpets, carpeting, and rugs,
kirtled of wood or fine hair
2,166
2,870
5. Machinery and transport equip-
ment
136
280
6. Miscellaneous manufactured
articles
4,736
4,402
basketwork and other articles
of plaiting materials
--
1,229
clothing, except of fur
690
526
travel goods, handbags,
similar articles
355
684
toys, games, sporting goods
880
439
Source:
US Department of Commerce
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IV. B. EFFECT ON US-PRC TRADE OF THE COCOM CHINA
DIFFERENTIAL
1. Background
COCOM (NATO countries except Iceland, but including
Japan) controls are applied to goods which the participant
countries consider to have strategic significance for
communist countries. The treatment of export applications
varies considerably according to the country of destina-
tion, with restrictions upon trade with the PRC being
more severe than those placed upon trade with other com-
munist countries. The present "China differential" arose
in 1968 and was based upon the view that because military
capabilities and military support capabilities of the
economies of the PRC and USSR and Eastern European coun-
tries differed in degree of development, some items which
are not of strategic significance for the USSR or Eastern
Europe might have strategic significance for the PRC.
The differential was disguised by a formula which did not
mention China but provided for automatic COCOM clearance
after an 18-day waiting period for 45 items for export to
areas "capable of producing similar items or having easy
access to such items." Those areas meant the USSR and
Eastern Europe except Albania.
In the present COCOM List Review the differential on
most items is being removed. The remaining 15 differential
items can probably be reduced to only a few, and we believe
this differential can be disguised for all remaining items
by attaching end use conditions which the USSR presently
accepts but which the PRC would be unlikely to accept.
Peking would continue to grumble politically at any visible
discrimination in our treatment of China vis-a-vis the
USSR.
2. Assessment
If the Chinese are willing to turn a blind eye to a
continued differential and if all COCOM countries continue
to accept the differential, it would not appear likely to
result in a greater loss to US trade than to other COCOM
countries' trade. However, in areas where the United States
* For the purposes of this study, we have not re-examined
this view.
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has a technological lead -- namely, avionics, communications
equipment, and computers -- COCOM controls would tend to
have greater adverse effect on the United States than on
other COCOM countries because the more sophisticated US
items are caught by the embargo while the products of less
advanced producers are not.
IV. C. EFFECT OF OUTSTANDING U.S. PRIVATE CLAIMS ON TRADE
WITH THE PRC *
Private Claims
There is $196,471,059.33 (plus interest) in private
claims against the PRC adjudicated by the Foreign Claims
Settlement Commission under the Chinese Claims Act of 1946
(22 U.S.C. 1643). These claims are for losses arising since
October 1, 1949, resulting from the nationalization, expropria-
tion, interventions, or other taking of, or special measures
directed against property or rights and interests therein.
Actions in U.S. Courts
As trade and travel between the United States and the
PRC are normalized, PRC vessels, aircraft, commodities,
and other property or assets may come within the territory
of the United States. United States nationals and others
with claims against the PRC may seek the attachment of such
property by United States courts to satisfy their claims
against the PRC. Various questions arise, including
whether the PRC would be found immune from suit and its
property immune from attachment, as well as whether or not
the act of state doctrine might be applicable, the resolution
of which in the context of a specific case could be expected
to take several weeks at best. These problems are summarized
below.
There are also USG claims and counter-claims deriving from
American financial and military support of China during
World War II, the subsequent expulsion óf the GRC from the
mainland of China, and the PRC's entry into the Korean War.
These USG claims with the exception of Ex-Im Bank claims,
infra, are not discussed in this paper as they have no
direct bearing on the question of increased trade with the
PRC. A decision will have to be taken, of course, as to
whether or not we will press for settlement of these
claims at the same time we discuss settlement of the
private claims.
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1. Department of State Practice Re Sovereign Immunity.
a. Since 1952 the Department of State has followed
the restrictive theory of sovereign immunity and recognized
a foreign state's immunity from suit in courts in the U.S.
with respect to its governmental or public acts but not
with respect to commercial or private acts. No case has
yet arisen involving the question whether a Department of
State suggestion of immunity should be made on behalf of
an unrecognized regime. The absence of recognition of
the PRC need not constitute a barrier to a Department
suggestion of immunity -- provided that the Department was
otherwise satisfied that the requirements for a suggestion
of immunity were met. However, it would be difficult to
explain the consistency of continued non-recognition with
a suggestion of immunity.
b. Whether claims against the PRC arising out of
the nationalization of other taking of property by the
PRC since 1949 should be considered to rest upon governmental
or commercial transactions would depend upon a careful
analysis of each claim. The Department of State has in the
past suggested immunity where the case involved a foreign
government nationalization.
C. Under the restrictive theory the Department
has suggested the immunity from attachment of property
if the activity forming the basis of the complaint was
governmental in nature or if the property attached was
being used for governmental purposes. Where, however,
a foreign government's property is attached for the
purpose of executing a judgment (and not for the pur-
pose of obtaining jurisdiction), the Department has
suggested immunity even when the property was used for
commercial purposes.
2. Sovereign Immunity in the Courts.
The courts have generally acted in accordance with
Department suggestions of immunity. However, the
procedures involved before the court dismissed a suit
and released any property that may have been attached
eould take a considerable period of time. Because of
the novel and complex legal issues that would be
involved in any suit against the PRC arising out of
the nationalization or other taking of property by
the PRC since 1949, it is difficult to predict the out-
come of such litigation. Some claimants might decide
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61
it was in their interest to bring suit--even if only
for purposes of harassment--- to bring pressure on the USG
and PRC to conclude an acceptable claims settlement. A
series of harassing suits against the PRC could present
significant problems and constitute a barrier to normal
trade relations between the United States and the PRC.
Each suit would involve either the tying up of whatever
property may have been attached or the posting of a
substantial bond by the PRC in order to gain an earlier
release of the property. Also involved, of course, would
be the trouble and expense to the PRC of defending in
each suit.
3. The Act of State Doctrine
Under this doctrine the courts would not examine
the validity of a taking of property within its own
territory by a recognized foreign government, even if a
complaint alleged that the taking violated international
law. The doctrine normally would be available to a
foreign government as a defense in a suit where nation-
alization or other takings of property formed the basis
of the plaintiff's cause of action. Since recognition
is a prerequisite for applying the act of state doctrine,
the PRC would not be able to protect its takings of
property from the scrutiny of courts in the U.S. as long
as the U.S. did not recognize its government. It should
be noted, however, that an act which constituted an act
of state would in all probability also constitute a
governmental act under the restrictive theory of sovereign
immunity. If the PRC prevailed on the issue of sovereign
immunity, the court would not reach the issue of the act
of state doctrine.
OPTION19:
-- Instruct the US Ambassador to raise the question of
private claims with the PRC Ambassador in Paris, pointing
out the above-mentioned difficulties which may arise if
these claims are not satisfactorily settled, and requesting
that there be discussions between representatives of our
two governments for the purpose of arriving at such a
settlement. These discussions could be expected to include
the question of approximately $78 million in blocked assets
in the U.S. in which the PRC has an interest, as well as
the question of United States Government claims, particu-
larly those relating to our former diplomatic and consular
SECRET
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SECRET
62
premises. For a discussion of claims settlement options,
see U/SM 91, pp. 24-32.
Principal Advantages:
-- Might result in settlement of outstanding issue.
-- If agreement is reached, US claimants would receive
at least partial satisfaction of their claims.
-- Reduces considerably the incentive for harassing
lawsuits and legal attachments.
Principal Disadvantages:
-- None.
IV. D. EXIMBANK PROBLEMS
Although the PRC does not at present seek long term
credits, and claims to have no external debt, we should
begin now to lay the groundwork for possible future trans-
actions requiring Export-Import Bank credits, such as
sales of large plants.
The Export-Import Bank Act of 1945 as amended prohibits
extension of Exim facilities in Communist countries unless
the President makes a determination that it is in the
national interest to waive this prohibition. Such deter-
minations are now in effect for Yugoslavia and Romania.
Based on the preliminary recommendations of NSSM 145, the
President has directed that a recommendation concerning the
appropriate degree of Eximbank financing of exports to the
USSR be prepared. One issue with respect to a Presidential
determination on Eximbank credit for the PRC is a question
of timing.
OPTION 33:
If a Presidential determination on Eximbank credit
for the USSR is to be made in connection with the forth-
coming visit to Moscow, a similar determination could be
made at the same time for the PRC.
Principal Advantages
-- Permits maintenance parity of treatment for the
USSR and PRC.
SECRET
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SECRET
63
-- Is evidence of US desire faithfully to facilitate
trade with the PRC under the Shanghai Communique.
-- Would allow US policy to come into line with that
of Japan and other countries which are willing to grant
Eximbank-type credits to the PRC.
Principal Disadvantages:
--- The PRC would be unlikely to regard lack of access
to Eximbank financing as discriminatory since there is no
evidence of Chinese interest in such financing.
-- In view of lack of PRC interest, would likely have
no impact on US-PRC trade.
Another troublesome issue is that of a $40 million
default now on Eximbank books. The Republic of China is
not at this time being called upon to make payments on
portions of 4 loans made to the ROC prior to 1947 when
the ROC seat of government was on the mainland, since
these loans relate to assets no longer under ROC control.
These 4 loans totalled $26 million of which $21.9 million
in principal and $18.1 million in interest is now
delinquent.
Eximbank takes the position that these delinquencies
would have to be satisfactorily resolved before Eximbank
would support trade with the PRC even after a Presidential
determination. It is very unlikely that the PRC would be
willing to assume the obligation for these credits,
especially the accrued interest.
OPTION 32: (RECOMMENDED)
That the issue of the effect of these alleged delinquencies
on PRC eligibility for Eximbank financing be considered by
the National Advisory Council for International Monetary
and Financial Policies (NAC).
Principal Advantage:
--- Would result in a coordinated interagency
determination on whether or not the PRC is eligible for
Eximbank programs.
SECRET
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SECRET
64
Principal Disadvantage:
-- None.
IV. E. EFFECT OF NON-TARIFF BARRIERS
1. Cotton Textile Imports from the PRC
Background
Imports of cotton textiles into the United States are
controlled pursuant to a number of bilateral agreements and
by the Long-Term Arrangement Regarding International Trade
in Cotton Textiles (LTA), negotiated in Geneva in 1962 and
extended through September 30, 1973. The LTA is a multi-
lateral instrument negotiated under GATT auspices.
Article 3 of the LTA authorizes the United States and
other participating governments to restrain imports of
cotton textiles that cause or threaten to cause market
disruption, and spells out the criteria and procedures for
taking such action. Article 4 of the LTA authorizes bi-
lateral agreements on cotton textile imports. Article 6 (c)
of the LTA obligates each participating government not to
restrain imports of cotton textiles from LTA participants
more severely than it restrains non-participants' trade
which causes or threatens market disruption. Domestic U.S.
legislative authority to enter into the bilateral agreements,
and the LTA, and to impose restraints as envisioned by the
LTA, is contained in Section 204 of the Agriculture Act
of 1956 (7USC 1854).
The PRC is not a party to the LTA and our obligations
under the LTA would require that we not treat the PRC more
favorably than any other participant.
From the time the embargo was lifted, through January
we have received from the PRC more than 300,000 square yards
of cotton textiles. Of this total, 145,000 square yards was
received in January alone. A large part of these goods
appear to be sample shipments to test quality, pricing and
marketability. Because of the rapid increase in sample
shipments and because shipments are already spread over nine
categories, we could have an extremely sharp buildup in a
wide variety of products.
Informing the PRC of our LTA program and LTA obligations
does not commit us to action to restrain PRC textiles. If
the trade does not build up, no action need be taken. If it
SECRET
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SECRET
65
increases slowly we can wait to take action. If there is a
buildup of trade, we would be permitted an elapse of time
between the notification and the need to take action.
However, if we do not inform the PRC, and there is a
rapid buildup, as seems likely, we would be faced with
unpalatable choices: We could take unilateral action with-
out delay, that is without any time lapse after informing
the PRC of the program, or, we could delay action in the
face of a buildup, which would antagonize both the domestic
industry and our cotton textile bilateral partners. Both
are watching PRC imports closely to see if we show favoritism
to the PRC.
The PRC is no stranger to the fact that textile imports
create problems for a substantial number of countries. At
the present time, there are at least a half dozen countries
which are restricting textile imports from the PRC, either
unilaterally, or by agreement. These include Austria,
Canada, Denmark, Italy, Sweden and the United Kingdom.
OPTION 22:
(RECOMMENDED)
Inform the PRC now: (1) we have LTA obligations to
about 30 countries whose textile exports to the United
States are controlled, (2) textiles are a sensitive domestic
economic and political problem, (3) the United States
routinely monitors cotton textile imports into the United
States to determine the need for restrictive action under
the LTA in the event of actual or threatened market dis-
ruption, and (4) if there is a build-up of cotton textile
imports from the PRC in the future we might have to take
action even though the goods are transshipments rather than
direct shipments.
Principal Advantages:
-- forewarns the PRC of US intention to discharge LTA
obligations;
-- would allay fears of domestic industry;
-- lays the groundwork for future discussions with the
PRC on cotton textiles.
Principal Disadvantages:
-- None.
SECRET
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SECRET
66
2.
Meat*
This problem of imports of meat from the PRC
is important because meat is an item that the PRC exports,
and several consignments have already been seized and
confiscated at Customs.
Several acts of Congress give the U.S. Secretary of
Agriculture the authority and also require him to assume
the responsibility for protecting the United States
against diseases of foreign origin.
The Act of June 17, 1930, contains an absolute
prohibition against the importation into the United States
of domestic ruminants or swine and fresh, chilled, or
frozen meat of all ruminants or swine from countries
declared to be infected with foot-and-mouth disease or
rinderpest. Once such declaration is made, no govern-
mental agency has any discretionary authority and the
prohibition is absolute. Both foot-and-mouth disease and
rinderpest exist in the PRC and there is little likelihood
that these diseases will be eradicated within the foresee-
able future.
In addition to the prohibitory statute, there are
a number of other acts of Congress which provide the
Secretary of Agriculture with the authority and responsi-
bility for establishing restrictions applicable to the
importation of animals or animal products that might
transmit diseases of livestock and poultry. The Department's
current import restrictions are applicable to cattle, sheep,
goats, other ruminants, swine (including domestic hogs
and all varieties of wild hogs), horses (including mules,
burros, zebras), dogs to be used around livestock, and
poultry (chickens, ducks, geese, swans, turkeys, pigeons,
doves, pheasants, grouse, partridges, quail, guinea fowl,
peafowl, and hatching eggs from these birds). Recently
psittacine birds and Greater and Lesser Hill mynah birds
have been added to the restricted list because of
Newcastle disease.
Other animal products are potentially eligible but
all are required to be inspected at the U.S. port of
* This term includes all forms of red meat, pork, poultry,
and other items such as rabbit, game birds and wild
animals.
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SECRET
67
arrival and may be required to be consigned to specifically
approved establishments for further treatment or processing.
Meat products, fully cooked by a commercial method and
properly canned may be permitted entry insofar as animal
health is concerned; however, such products are subject
to USDA meat inspection requirements.
The Meat and Poultry Inspection Program of the
U.S. Department of Agriculture administers laws and
regulations governing inspection requirements for all
forms of red meat and poultry products including canned
products but excluding meat of rabbits, game birds and
wild animals. To meet these requirements the PRC would
have to:
1) apply, through diplomatic channels, for official
recognition of their system of export meat inspection
2) provide, at the time of application, copies of
laws and regulations which will govern activities in the
plants handling product for export
3) after the USG determines that the applicable
laws and regulations are satisfactory, invite a team
of USDA experts to perform on-sight inspection of the
system in operation.
If at this point the USDA findings are favorable, the
PRC would be authorized to ship meat and/or poultry to
the United States. In connection with the requirements
of the meat and poultry inspection program, U.S. inspectors
usually visit "approved" foreign plants four times annually.
The Meat Import Act of 1964 requires the President
to limit imports of fresh, chilled or frozen beef and
veal, mutton and goat meat. The law establishes a
formula, based on the relationship between imports and
domestic commercial production, for proclaiming a quota
when estimated imports exceed trigger levels. When meat
imports approached the trigger level in 1968, a voluntary
meat export restraint program was adopted with the major
supplying countries agreeing to limit exports to the
United States to specific levels to avoid the need to
impose an import quota. Voluntary restraints are still
in effect. Provisions can be made for new suppliers.
SECRET
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68
OPTION23:
Inform the PRC through Paris of US laws and regulations
concerning the importation and inspection of meat products.
Principal Advantage:
-- Would avoid misunderstanding on the part of the PRC
if more shipments are confiscated.
Principal Disadvantage:
-- None.
3. Furs
Current tariff legislation prohibits the importation
from either the PRC or the USSR of seven kinds of skins:
ermine, fox, kolinsky, marten, mink, muskrat and weasel, raw
or not dressed or dressed. The prohibition does not apply
to garments manufactured from such skins in third countries.
The PRC does export some of these skins, and PRC officials
have reportedly complained of this restriction. There are,
however, domestic interests involved (mink and fox ranchers),
and the Department of Agriculture has indicated that it
opposes a change in the legislation on the grounds that
admitting these skins would injure the American fur ranching
industry.
OPTION 24
Consider whether elimination of the legislative ban on
importation of certain Chinese furs would offer trade advantages.
Principal Advantage:
-- Might result in removal of anomalous legislation and
increase trade opportunities.
Principal Disadvantage:
-- Would cause dissatisfaction in US for ranching industry.
4. Protection of Endangered Species
The Department of Interior has the authority
to prohibit the importation of the skins or other
SECRET
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Appendix A
Table 1. MAINLAND CHINA'S FARM TRADE IMPORTS AND EXPORTS, 1960-69 1
Imports
Exports
Year
Presit
Shell
Fresh
Wheat 2
Dates
Sugar 3
Rubber
Cotton
Jute
meat
eggs
Rice
fruit 4
Sugar 3
Tea
Soybeans
Wool
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
metric
metric
metric
metric
metric
metr C
metric
metric
metric
metric
metric
metric
metric
metric
tons
tons
tons
tons
tons
ton.:
tons
tons
tons
tons
tons
tons
tons
tons
1960
60
39
203
119
80
14
86
20
1,174
132
16
40
996
15
1961
3,123
32
1,534
93
58
15
29
15
444
76
127
34
335
2
1962
4,730
63
938
96
67
13
11
26
577
96
284
28
342
5
1963
4,394
71
511
120
143
23
24
35
640
114
217
28
332
11
1964
5,597
62
408
141
155
57
76
40
791
142
362
32
498
14
1965
5,273
35
419
150
168
67
140
43
552
166
390
32
577
16
1966
6,375
60
620
165
107
52
170
50
1,215
179
552
37
550
18
1967
3,329
59
556
149
88
64
110
42
1,149
187
389
29
565
11
1968
5,194
59
431
213
66
57
118
40
886
179
244
35
571
14
1969
:
3,200
56
445
278
83
48
105
39
710
183
145
32
487
12
1 Source: FAO, Rome. Supplementary statistics to Trade Yearbook, 1965-71. 2 Inclu de S flour as wheat equivalent. 3 Raw value. 4 Citrus fruit, apples, pears, and grapes. a Imports in
1970 were 4.7 million tons; estimate for 1971 is 3 million tons.
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APPENDIX A
AGRICULTURAL STATISTICS
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SECRET
69
products of certain species or animals which are on
the endangered species list for purposes other than
propagation and essential scientific purposes. The
listed animals, including those native, to China such
as the Douc langur, the wild yak, and probably soon
the Siberian tiger, are so rare that prohibition of
their importation will have no significant effect on
trade.
OPTION 25
Inform the PRC through Paris of US laws and regu-
lations prohibiting the importation of certain kinds of
animal products originating from endangered species.
Principal Advantage
-- Would forewarn the PRC of the existence of US
regulations which might affect its exports to the US
Principal Disadvantages
-- None.
SECRET
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Table 2. PRC-Potential Agricultural Exports
Appendix A
to the United States
RATE
TSUS
ITEM
STAT
MFN
186.30
Bristles, Hog, Crude Or Processed
3¢/lb.
.75¢ lb.
306.00
Wool, not finer than 46s for
Free
Free
manufacturing
186.1520
Feathers
20%
15% (1/1/72)
186.1540
Down
20%
15% (1/1/72)
119.55
Eggs, chicken, in shell
10¢/doz.
3.5¢/doz.
119.70
Eggs, not in shell other than dried
11¢/lb.
5.5¢/lb (1/1/72)
119.65
Eggs, not in shell, dried
27¢/lb
27¢/lb
120.14
Hides and skins, bovine, other than
10%
Free (1/1/72)
buffalo, weighing over 12 lbs. each
when dried or dry-salted or over 25
lbs. each when wet or wet-salted
176.60
Oil, Tung
Free
Free
176.01
Oil, castor, not over 16.7¢ lb.
3¢/1b.
7.5% (1/1/72)
176.02
Oil, castor, over 16.7¢ lb.
3¢/1b.
1/5¢/lb
308.0420,40
Silk, raw, not in yarns not processed
Free
Free
160.50
Tea, crude or prepared
Free
Free
1/ Imports of feathers or skins of birds are prohibited with respect to certain fowl origins
and limited to certain purposes. In addition, skins bearing feathers are limited to certain
quotas regulated by the Secretary of Interior.
Source: USDA, FAS, IT
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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Table 3. PRC - Imports of Wheat and Wheat Flour, 1960-61 to 1971-72-
Appendix A
(000 Metric Tons)
Country of
1960-61
1961-62
1962-63
1963-64
1964-65
1965-66
1966-67
1967-68
1968-69
1969-70
1970-71
1971-72
Origin
Argentina
0
88
98
988
598
2,216
324
10
0
0
0
0
Australia
1,158
1,953
2,075
2,543
2,276
2,018
2,165
2,416
1,182
2,517
1,218
Canada
781
1,968
1,678
1,005
1,758
1,987
2,465
1,367
2,098
1,830
2,287
3,000
(EC)
(10)
(584)
(989)
(222)
(399)
(61)
(71)
(363)
(257)
(778)
(0)
France
0
199
870
222
399
38
71
363
257
778
0
W.Germany
10
384
119
0
0
0
0
0
0
0
0
Italy
0
1
0
0
0
23
0
0
0
0
0
USSR
0
300
52
0
0
0
0
0
0
0
0
Mexico
0
0
0
450
0
0
0
0
0
0
0
Uruguay
0
0
0
0
1
0
0
0
0
0
0
Total
1,949
4,893
4.892
5,208
5,032
6,282
5,025
4,156
3,537
5,125
3,505
3,000
Data are for exports to China, rather than imports by China
Estimate for full year.
Source: USDA, FAS, IT
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
DOC
RECD
LOG NBR
INITIAL ACTION OFF
MO DA
MO DA HR
NSC CORRESPONDEN E PROFILE
324
33710
02669
LOG IN/OUT ONLY
FROM: ELIOT
U
NO FORN
NODIS
TO: PRES
LOU
BUO
EXDIS
KISSINGER
ROGERS, W
EYES ONLY
LIMDIS
DOC SOURCE/CLASS/DESCRIFTION
HAIG
BRauN, LAIRD, M Winthrop. C x
CODE WORD
RES DATA
TS
SENSITIVE
Forwards Response to NSSM 149 on US-PRC Trade
SUBJECT:
REFERENCE: S/S 7205646 OTHER
NOT XEROXED
APP'TS: PRES
HAK
TALKER
MEMCON
DATE REQ.
INTERNAL ROUTING AND DISTRIBUTION
ACTION REQUIRED
ACTION
INFO
REC
MEMO FOR HAK
(
)
CY
ADVANCE CYS TO HAK/HAIG
FOR
MEMO FOR PRES.
(
)
STAFF SECRETARY
REPLY FOR
SIGNATURE
(
)
FAR EAST
FOR DISTRIBUTION/DISPATCH
(
)
SECRETARIAT DISTRIBUTION/ACTION
SUB-SAHARAN AFRICA
MEMO
TO
(
)
NR EAST/NORTH AFRICA
RECOMMENDATIONS
(
)
EUROPE/CANADA
JOINT MEMO
(
)
LATIN AMERICA
REFER TO STATE
(
)
UNITED NATIONS
ANY ACTION necessary
(
)
ECONOMIC
CONCURRENCE
(
)
SCIENTIFIC
DUE DATE:
LR PLANNING
COMMENTS: (Including Special Instructions)
PROGRAM ANALYSIS
NSC PLANNING
CONGRESSIONAL
LOG IN AND OUT
CY TO
DATE
FROM
TO
S
ACTION REQUIRED
INTERNAL/INTERIM ROUTING
m/R Distribution Beng Handled of
MICROFILM DATA
CROSS REF WITH
NOTIFY
DATE
DO
Hom
SEE LOG
DISPATCH: LETTER/MEMO
JOINED BY LOG
COPIES: (AS MARKED ABOVE)
DISPOSITION
1972 INIT DATE
SPECIAL FILE RQMT:
SA,
HP,
HM
ORIG)
NSC
TO )
AF
SPECIAL DISPOSITION COMMENTS:
WHC
SUSPENSE CY ATTACHED:
YES
NO
SUBF
GPO: 1972-455-927
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MEMORANDUM
899 (redo)
NATIONAL SECURITY COUNCIL
ACTION
SECRET
June 12, 1973
MEMORANDUM FOR:
MR. KISSINGER
RH/RHS
FROM:
ROBERT HORMATS
RICHARD SOLOMON RHS
SUBJECT:
Implementation of NSSM 149, China Trade
State, with Commerce, has submitted (Tab A.) recommendations pursuant
to NSSM 149 on further steps to facilitate trade between the U.S. and the
PRC. The State memo makes six recommendations for further action:
1. Encourage the National Council on U.S. - China Trade to organize a
vanguard trade delegation to the PRC.
2. Provide the Council's delegation with a highly selective list of trade
fairs in the U.S. and encourage PRC attendance at such fairs.
3. Provide the Council with assistance in formulating a proposal for a
comprehensive American exhibit in Peking or another Chinese city for
presentation to the Chinese authorities by the Council's trade delegation.
4. Encourage the Council to inform the Chinese that it would be willing
to host a reciprocal comprehensive PRC exhibit in the U.S. at an appropriate
time.
5. Offer to provide the Chinese with a list of U.S. exporters in product
areas of interest to the PRC.
6. Seek legislation to eliminate the embargo on importing certain categories
of Soviet and Chinese furs.
The first three recommendations would be appropriate for early imple-
mentation, and we recommend that you authorize us to so inform State
by means of a Davis to Eliot memorandum.
Approve H but alsoinform (continued) them
Other
already
seems
hair.
SECRET
GDS Dec 31, 1981
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
2
Recommendation #4 is tied to the problem of U.S. claims against the PRC.
The main problem is that until a claims settlement has been formally con-
cluded, private claimants could attempt to attach items in a PRC exhibit.
Other problems include the possibility of disruption of an exhibit by anti-
communist groups and/or adverse ROC reaction. These
latter
problems do not appear too serious in view of the successful visits to the
U.S. of the Shenyang acrobats and the PRC journalists, and the uneventful
arrival of Liaison Office Chief Huang Chen. We should, however, proceed
with final settlement of the claims issue before encouraging the Council to
discuss a PRC exhibit in the U.S. (State is now working on legislation for the
President to submit to Congress on the claims issue, and our Peking
Liaison Office is seeking from PRC authorities a final response to our
proposal of March 21 regarding final language of an exchange of lettersoon
this issue between the President and Premier Chou Enelai.) We recommend
that State be advised to await the settlement of the claims issue before en-
couraging a PRC exhibit in the U.S.
Approve
Other
Recommendation #5 seems to present no problem, but should be done
through the National Council rather than the U.S. Government. We
recommend that State be so informed.
Approve
Other
Recommendation #6 has already been resolved by the Administration's
proposal to repeal the fur embargo, which is contained in the Trade
Reform Act.
Other Trade Issues
On April 18 I (Hormats) sent you a memo on Ex-Im Bank financing of
exports to the PRC (NSC #5499, copy at Tab B), recommending that you
sign a memo to Secretary Shultz on this subject. The issue of Ex-Im Bank
financing is a pertinent aspect of our trade relations with the PRC and I
recommend that you sign the memo to Secretary Shultz that is attached to
NSC #5499.
(continued)
SECRET
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SECRET
3
Approve
Other
Concurrence: Mr. Flanigan PF/Rets
Mr. Kennedy RTK/ENS
Mr. Cooper CAC/RITS
SECRET
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THE White House
WASHINGTON
June 8, 1973
FOR:
JEANNE DAVIS
FROM:
JON HOWE
Returned, per our telephone
conversation.
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526
and has been determined to be declassified.
MEMORANDUM
NATIONAL SECURITY COUNCIL
899 & 5499
SECRET/NODIS/HOMER
ACTION
GDS
June 5, 1973
MEMORANDUM FOR: DR. KISSINGER
FROM:
ROBERT HORMATS
RH
RICHARD SOLOMON PHS
SUBJECT:
Implementation of NSSM 149, China Trade
State, with Commerce, has submitted (Tab A) recommendations pursuant
to NSSM 149 on further steps to facilitate trade between the US and the PRC.
The State memo makes six recommendations for further action:
1.
Encourage the National Council on US-China Trade to organize a van-
guard trade delegation to the PRC.
2.
Provide the Council's delegation with a highly selective list of trade
fairs in the US and encourage PRC attendance at such fairs.
3.
Provide the Council with assistance in formulating a proposal for a
comprehensive American exhibit in Peking or another Chinese city for
presentation to the Chinese authorities by the Council's trade delegation.
4.
Encourage the Council to inform the Chinese that it would be willing
to host a reciprocal comprehensive PRC exhibit in the US at an appropriate
time.
5.
Offer to provide the Chinese with a list of US exporters in product
areas of interest to the PRC.
6.
Seek legislation to eliminate the embargo on importing certain categories
of Soviet and Chinese furs.
The first three recommendations would be appropriate for early implemen-
tation. The fourth--a comprehensive PRC exhibit in the US--is tied to the
problem of US claims against the PRC. The main problem is that until a
claims settlement has been formally concluded, private claimants could
attempt to attach items exhibited. Other objections to an exhibit are the
possibility that -Communist groups might try to disrupt it and the
possibility of an adverse ROC reaction to USG assistance to a PRC exhibit.
In the light of no adverse reaction to such recent events as the visit of the
Shenyang acrobats, the PRC journalists, and the arrival of Liaison Office
Chief Huang Chen, however, these objections do not appear to be overriding.
SECRET/NODIS/HOMER GDS
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
2
We should nonetheless proceed with final settlement of the claims issue
before encouraging the Council to discuss a PRC exhibit in the US. (My
memo to you of March 15 --updated on May 8 -recommended that we request
Done.
State to prepare needed legislation for final disposition of the claims question. )
Recommendation 5 --provide the Chinese with a list of US exporters in product
areas of interest to the PRC--seems to present no problems but should be
done through the National Council, not the USG.
The final recommendation refers to legislation which currently bans the
import of certain kinds of furs from either China or the USSR. The Admin-
istration has proposed the repeal of the fur embargo in the Trade Reform Act.
Other Trade Issues
My April 18 memorandum to you on Ex-Im financing of exports to the PRC (Tab B)
recommended that you sign a memo to Mr. Shultz stating that 1) you believe
that the Ex-Im Bank can finance exports to the PRC without raising the question
of pre-1949 debt; 2) if we recognize the PRC in the future we would have a
stronger legal claim against the PRC for this debt, but that we would still be
able--if we wished--to continue Ex-Im lending to the PRC; and 3) you would
like to discuss this with Shultz to insure that your views are consistent.
RECOMMENDATIONS:
1.
That you approve the State Commerce scenario as modified. (Peter
Flanigan concurs. ) Messrs Kennedy and Cooper concur.
Approve
Disapprove
See me
2.
That you sign the memorandum to Shultz on Ex-Im Bank financing for
the PRC. NSC log #5499, April 18, 1973.
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
6/13
NATIONAL SECURITY COUNCIL
Poods Hounts- -
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Reproduced at the Richard Nixon Presidential Library DECLASSIFIED This
document has been reviewed pursuant to Executive Order 13526 and
has been determined to be declassified.
MEMORANDUM
SECRET GDS
NATIONAL SECURITY OUNCIL
1297
ACTION
May 10, 1973
MEMORANDUM FOR: DR. KISSINGER
FROM:
ROBERT HORMATS
RICHARD SOLOMON
SUBJECT:
Legislation to Implement the US-PRC Claims
Settlement
As you know, the PRC has agreed to settle US private claims by assigning
blocked PRC assets to the US Government for use in compensating American
claimants. We have recently sent to the Chinese proposed drafts of the
letters which would be exchanged between the President and Chou En-lai
to effect the agreement. Once these are exchanged, we will need legisla-
tion to:
Give title to all PRC assets to the Government, which will then use
these assets to pay American claimants.
Prevent further prosecution of all claims against the PRC by private
claimants.
Prescribe priorities for the various liens that might be asseted
against these assets.
Until such legislation has been approved by the Congress, the danger of
attachment of PRC property by US private claimants will continue to impode
normal trade between the US and the PRC. It is therefore imperative that
the legislation be drafted as soon as possible. Hormats' original memo-
randum to you on this subject (Tab B), recommended that you ask State to
submit legislation for the President's approval by May 1. Since this date
has now passed, we should set a new submission deadline of July 1.
To draft necessary legislation and to make further recommendations relating
to implementation of the claims settlement, the Department of State (Tab A)
recommends that it, Treasury, Justice, and the Foreign Claims Settlement
Commission be directed to form an ad hoc working group chaired by the
representative of the Department of State.
RECOMMENDATION: That you approve the above recommendation and
Doral
authorize General Scowcroft to so inform Ted Eliot and ask that legislation
be submitted for the President's approval by July 1. Peter Flanigan concurs.
28
Approve
Disapprove
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NSO CORRESPONDENCE PROFILE
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SUBJECT:
STatus Report on NSOM 170 & only faster steps
he US-PRC Trade
REFERENCE: S/S 7302886
OTHER
NOT XEROXED
INTERNAL ROUTING AND DISTRIBUTION
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NET ASSESSMENT GROUP
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Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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899
7302886
department OF state
Washington, D.C. 20520
February 15, 1973
SECRET/NODIS/HOMER
MEMORANDUM FOR MR. HENRY A. KISSINGER
THE WHITE HOUSE
Subject: Implementation of NSSM-149, China Trade
The President directed in NSDM-170 that memoranda
on the implementation of the options and recommendations
contained in NSSM-149, US-PRC Trade, be submitted from
time to time for his consideration.
Attached are State and Commerce recommendations
for further steps which might be taken to facilitate
trade between the U.S. and the People's Republic of
China.
Copies of this memorandum are being sent to CIEP
and to the Department of Agriculture.
Richard L. Sneider
Chairman,
Ad Hoc Interdepartmental Group
Attachment:
Recommendations,
February 1973
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
Recommendations for Implementing NSSM-149--US-PRC Trade
This paper sets forth joint State and Commerce
Department recommendations on the sequence, timing and
implementation of certain steps proposed in NSSM-149,
US-PRC Trade, as directed in NSDM-170, dated June 8, 1972.
What has already been done
The US has proposed that negotiations be held to
resolve the linked issues of US private claims and PRC
blocked assets. Although the Chinese have not explicitly
agreed to such negotiations, they indicated they are giv-
ing "positive consideration" to the question and that "we
have made a beginning from which we can proceed steadily
to a resolution." Exchanges of information regarding
claims have begun, and negotiations appear likely to
begin soon. We believe the Chinese understand that a
claims settlement is a prerequisite to negotiating an
agreement on MFN.
We have given the Chinese lists of potential imports
and exports to and from the US. While they have not
commented on the lists, the list of potential imports was
used by the US to respond to a PRC request for the names
of US firms they could invite to the Fall Chinese Export
Commodities Fair (October 15-November 15). The Chinese
invited some of the firms on the list we provided. The
number of US firms attending the Spring Fair (36) was
doubled to 72 at the Fall 1972 Fair. The Chinese told
some American businessmen at the Fall Fair that a still
larger number of US firms is likely to be invited to the
Spring 1973 Fair (April 15-May 15).
We have told the Chinese that we are concerned about
the rising level of Chinese cotton textile goods being
imported into the United States and that it may be
necessary to establish quotas on such imports. Similarly,
the Chinese have been made aware of US laws and regulations
barring imports of certain furs, products of endangered
animal species and meat products produced in foreign
plants not subject to inspection by the USDA. We have
also informed them of the provisions of US anti-dumping
laws and regulations.
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
2
Direct air and sea services appear unlikely in
advance of a private claims settlement, because a US
citizen with a claim against the PRC might initiate
legal proceedings to attach Chinese property, including
Chinese ships. However, the way has been paved for the
eventual discussion of air and sea links by the modifica-
tion of US port security regulations to permit Chinese
vessels to call at US ports and the modification of
Transportation Order T-2 to remove the restrictions on
visits to the PRC by US ships and aircraft. United
States vessels are now subject only to normal export
control requirements. The Chinese earlier gave a non-
commital response to a statement that we are prepared
to discuss establishment of scheduled air services at
an appropriate stage in the development of our economic
relations.
Since the President's trip to Peking, contracts
have been signed for the sale to China of ten Boeing 707
aircraft, two more earth satellite stations and related
equipment and shipments of wheat, corn and cotton.
Preliminary figures on US-PRC trade show about
$60.2 million in US exports in 1972. The figure could
reach $300 million in 1973. Sale to China of inertial
navigation systems for the Boeing aircraft has been
approved and licenses for an additional earth satellite
station and a Hughes Aircraft proposal for a domestic
communications satellite system are now being considered.
The Chinese have become familiar with basic export control
requirements through a variety of channels, largely
unofficial.
*
The Chinese have consistently demurred from complying
with the standard requirement for end-use/end-user in-
formation essential for the United States and the inter-
national control organization (COCOM) in making licensing
judgments regarding exports of strategic goods. Although
this was not a problem in the case of commercial aircraft
or earth satellite station sales for reasons peculiar to
these transactions, in many other types of transactions
it can constitute a serious obstacle to exports. This
problem is being separately addressed in connection with
a current transaction involving a wide range and large
quantity of sophisticated electronic instruments.
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
3
PRC exports to the US averaged almost $3 million
per month during 1972 for a year-end total of about
$32.3 million. There is likely to be a substantial
increase in the monthly average for 1973 because of
contracts signed by US businessmen at the 1972 Fall
Canton Fair.
The Chinese have been informed of our intention to
establish a National Council for the promotion of US-
China trade. The President has approved establishment
of the Council which is now being formed by the Depart-
ment of Commerce in consultation with the Department of
State.
RECOMMENDATIONS
1. Encourage the Council to organize a vanguard
trade delegation to the PRC (NSSM-149, Option 7). As
noted above, we have already informed the Chinese that
the Council would be organizing a trade delegation of
"prominent US businessmen and one or more US Government
representatives to visit Chinese foreign trade corpora-
tions, research institutes, marketing agencies and trade
fair authorities in the PRC." In view of the positive
Chinese response to this proposal, the organization of
such a trade delegation should be among the first acts
of the Council.
Approve
Disapprove
2. Provide the Council's delegation with a highly
selective list of trade fairs in the US and encourage
PRC attendance at such fairs (NSSM-149, variant of
Option 14). The Council's vanguard trade delegation
should be given a list of trade fairs in the US at which
PRC attendance would be appropriate. The list, to be
prepared by the Department of Commerce in consultation
with the Department of State, would be submitted
separately for approval. The trade fairs should be
selected on the basis of the following criteria: (1) the
exhibitions feature items included in the list of potential
US exports to the PRC earlier provided to the Chinese
which do not create export control problems, and (2) no
official participation by the Republic of China (ROC) is
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
4
anticipated. The Council's trade delegation would
deliver the list to the Chinese together with appropriate
material on individual expositions, and could discuss the
possibility of PRC attendance. The Chinese could then be
informed in Paris that the USG would facilitate their
attendance at any of the listed fairs.
Approve
Disapprove
3. Provide the Council with assistance in
formulating a proposal for a comprehensive solo exhibit
in Peking or another Chinese city for presentation to the
Chinese authorities by the Council's trade delegation
(NSSM-149, Option 10). The Department of Commerce would
assist the Council in formulating such a proposal for
discussion with the Chinese during the trade delegation's
visit to Peking. The goods to be exhibited should be
chosen according to: (1) their potential for market-
ability in the PRC, (2) the prospect of their sale at the
exhibition, (3) the likelihood of their being approved
for export, and other appropriate criteria.
Approve
Disapprove
4. Encourage the Council to inform the Chinese that
it would be willing to host a reciprocal PRC comprehensive
solo exhibit in the US at an appropriate time (NSSM-149,
Option 13). A PRC trade exhibit in the US would probably
have to await settlement of the private claims issue to
avoid the danger of attachment by US private claimants.
However, once a claims settlement has been concluded,
such an exhibit would be appropriate and feasible, and
should be undertaken.
Approve
Disapprove
5. Offer to provide the Chinese with a list of US
exporters in product areas of interest to the PRC. The
United States has already provided the PRC with a list
of US importers. We should offer to provide a similar
list of US exporters; this might facilitate the purchase
of US goods by the PRC. Such a list should be based on
the list of potential US exports provided to the PRC
earlier. This list could be revised periodically to
include additional firms with demonstrated interest and
competence. The Department of Commerce should select
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
5
firms according to the following criteria: (1) large,
medium and small size firms would be represented;
(2) all would be established, reputable firms with good
credit ratings; (3) firms would be representative of
broad geographic distribution in the US; (4) firms with
extensive exporting experience in the categories of
goods listed. In accordance with Option 26 of NSSM-149,
this would also provide an opportunity to bring US
grain exporting firms to the attention of the PRC. The
Chinese have thus far only purchased US agricultural
commodities through third country firms. In view of the
PRC's recent purchases of cotton, firms specialized in
exporting cotton should also be added to the list.
If this recommendation is approved, a consolidated
list of US exporters prepared by the Department of
Commerce in consultation with the Department of
Agriculture could be transmitted to the Chinese through
the Paris contact point and/or through the National
Council that will soon be established.
Approve
Disapprove
6. Seek Legislation to Eliminate the Embargo on
Importing Certain Categories of Soviet and Chinese Furs
(NSSM-149, Option 24). NSSM-149 called attention to the
desirability of eliminating the legislative ban on
imports of certain furs, (ermine, fox, kolinsky, marten,
mink, muskrat and weasel) from the USSR and China. Both
the PRC and the USSR export these skins and have com-
plained about this discriminatory restriction. Eliminat-
ing this restriction would be in line with our policy of
promoting East-West trade.
However, as NSSM-149 notes (p. 68 ) "there are
domestic interests involved (mink and fox ranchers) and
the Department of Agriculture has indicated that it
opposes a change in the legislation on the grounds that
admitting these skins would injure the American Fur
ranching industry."
State and Commerce favor general removal of
discriminatory restrictions on trade with the USSR and
China which are not supportable on strategic grounds
and which pose a needless irritant to the PRC and USSR.
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
6
Noting that removal of the restriction would be welcomed
by furriers in the US as well as by the PRC and the USSR,
both Departments again urge that consideration be given to
its early elimination in connection with whatever legisla-
tion is introduced in the 93rd Congress to give the USSR
MFN status. Should imports of such furs (mink and fox)
later prove injurious to the fur ranching industry, the
President could act topprotect the US market from dis-
ruption under existing legislative authority (e.g.,
escape clause of the Trade Expansion Act). Alternatively,
he could take action under the anti-market disruption
provision of the US-USSR Trade Agreement and negotiate
similar voluntary quota restrictions with the PRC (which
in any event is able to export a considerably smaller
quantity of furs than the USSR can export.)
Approve
Disapprove
As directed by NSDM-170, the Departments of State
and Commerce will periodically submit further recom-
mendations for actions that could be taken by the
US Government to facilitate trade with the People's
Republic of China.
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
5499
ACTION
April 18, 1973
MEMORANDUM FOR: DR. KISSINGER
FROM:
ROBERT HORMATS
SUBJECT:
Ex-Im Bank Credits for PRC
Now that agreement has been reached to resolve the question of blocked
assets and private claims, the question of Ex-Im Bank loans to the PRC
should be addressed. Last year Secretary Shultz prepared a memorandum
(Tab B) on the subject, which I have not staffed previously because the
question of the PRC asking for Ex-Im Bank financing had not arisen, nor
was it probable in the absence of a claims/blocked assets settlement.
The Situation
In 1946 the Ex-Im Bank made four loans to the Republic of China totaling
$29 million. The ROC stopped payment on these loans on April 1, 1949.
In 1961 the ROC agreed to undertake payments on the portion of the loans
that could, according to it, be imputed to materials utilized on Taiwan
plus the applicable share of the interest accrued between 1949 and December
1960. This amount, consisting of $2. 6 million in principle and $1 million
in interest, was finally repaid on January 1, 1971. The Ex-Im Bank granted
a moratorium on the payment of that portion of the original loans which,
according to the ROC, was not used on Taiwan. It agreed to take no action
with respect to this "indebtedness of the ROC" until the matter was again
open for discussion.
When discussions on this remaining portion were resumed between Ex-Im
and the ROC in 1967, the ROC's legal responsibility for the debt was recog-
nized again. The ROC Minister, while recognizing that there had
been
no repudiation or denial of the obligations" questioned whether it was proper
to resume payments in view of the "status of the Chinese economy". As
of 1972 the total amount of delinquent interest plus principle was roughly
$40 million.
The major points with respect to the PRC are:
--
The ROC still has an obligation to pay the delinquent amount.
:
In the event of US recognition of the PRC as the successor government
to the ROC, Ex-Im would have a clear legal basis for holding the PRC
responsible for these debts.
SECRET
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SECRET
2
-- If the US recognized the PRC in addition to the ROC there would be no
clear legal basis for PRC liability.
-- At present the Ex-Im legally looks to the ROC for payment and the US
thus has the option to make no claim against the PRC. Accordingly, these
debts would not now constitute an obstacle to Ex-Im lending to the PRC.
-- Should a decision now be made to seek PRC repayment, there would be
precedence based on the theory that the Mainland benefited from the utiliza-
tion of the loans. However, in the absence of recognition the PRC would be
in a strong position not to accept responsibility. Should a claim be made
against the PRC and be refused, future Ex-Im lending would raise questions
in light of its present policy of not lending to debtors in default; although
loans would not be prohibited.
-- A middle course would be to seek PRC acceptance under the benefit-of-
use theory, without holding them in default. Ex-Im could then lend to the
PRC.
The paper concludes by indicating that we must take into account the following
factors:
-- Ex-Im loans are among a number of ROC debts to the USG in suspense
since at least 1961; resolution of this particular issue will have implications
for these; also, this issue will have implications for PRC debts to the US.
-- Seeking PRC agreement to assume this debt on the benefit-of-use could
be done now without changing our recognition policy, but would raise questions
about the ROC's claim to legitimacy.
-- Any decision will have implications for potential delinquencies in other
areas.
My View
From an operational point of view, this paper leads me to the following con-
clusions:
-- We can provide Ex-Im Bank loans to the PRC at any time prior to recog-
nizing it without having to raise the Ex-Im Bank debt issue.
-- Should we recognize the PRC we would have to make a decision on how to
play the debt issue. In that case, the best solution might be to seek PRC
agreement to assume the obligations (which they obviously would not agree to
meet) but not hold them in default if they refuse such obligations. This would
mean using the same optics for the PRC as we now do for the ROC.
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
3
Shults has indicated that he would like to discuss with you the policy
implications of Ex-Im lending to the PRC. The attached memorandum
for Shultz summarizes your conclusions from this paper and indicates
that you would like to discuss these with him.
RECOMMENDATION:
That you sign the memorandum to Secretary Shultz at Tab A.
Concerrence: John Holdridge
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS
MEMORANDUM FOR
THE SECRETARY OF TREASURY
SUBJECT: Ex-Im Bank Credits for PRC
New that agreement has been reached to resolve the question
of blocked assets and private claims, the question of Ex-Im
loans to the PRC may come to the fore in the near future.
Because a PRC request for Ex-Im Bank financing was unlikely
to arise in the absence of a claims/blocked assets settlement,
I have not previously thought it timely for us to discuss this
issue and your memorandum of last July on this subject. How-
ever, 1 believe we should soon-in light of recent events--
reach an understanding before we are presented with a PRC
request.
Your memorandum on this question leads me to two conclusions:
-- That at present the Ex-Im Bank can make loans to the PRC
without raising the question of Ex-Im Bank debt.
-- That at such a time as we might recognize the PRC, we
could if we so desired seek PRC acceptance of the responsibility
for this debt on the benefit-of-use theory. But should the PRC
reject our claim we would not be required to hold it in default;
thus Ex-Im lending could continue.
I hope that we can discuss this in the near future to insure that
our views are in fact, consistent.
Henry A. Kissinger
SECRET/NODIS Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET
5499
THE SECRETARY OF THE TREASURY
WASHINGTON
JUL 1 3 1972
MEMORANDUM FOR THE HONORABLE HENRY A. KISSINGER
ASSISTANT TO THE PRESIDENT
FOR NATIONAL SECURITY AFFAIRS
SUBJECT: U.S. - PRC TRADE
In response to your request contained in NSDM 170 and
CIEP DM 7, enclosed is the report of an interagency committee
composed of representatives of State, Commerce, Eximbank and
Treasury.
This report has the approval of the participating
agencies.
The report outlines the possible courses of action from
the point of view of the effect of the debts on lending to
the PRC, but does not recommend a policy. I would like to
discuss with you the important policy implications of possible
Eximbank lending to the PRC.
Sr P. Steals
Enclosure
CC: Mr. Flanigan
AA 4144-1
Reproduced at the Richard Nixon Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
OPTIONAL FORM NO. 10
MAY 1982 EDITION
GSA FPMR (4) CFR) 101-11.0
UNITED STATES GOVERNMENT
Memorandum
SECRET
TO
:
Deputy Under Secretary Bennett
DATE: July 3, 1972
Chairman, Ad Hoc Inter-agency Committee
FROM :
Report of Inter-agency Committee; Alleged Debt
SUBJECT: Delinquency of People's Republic of China
The Inter-agency Committee was requested to "consider
the alleged failure of the People's Republic of China to
repay certain debts to the Export-Import Bank and the effect
of this alleged failure on the eligibility of the PRC for
the use of Export-Import Bank financing facilities."
The basic facts concerning these debts are as follows:
In 1946, Eximbank made four unsecured loans to the
Republic of China (ROC) in principal amounts totaling $29
million. The loans were made for the purpose of financing
cargo vessels; procuring electric power equipment and engi-
neering services; railway construction materials; and coal
mining machinery and equipment. The ROC stopped payment on
these loans on April 1, 1949.
In 1961, following extensive negotiations, the ROC
agreed to undertake payments on the portion of the loans
that could, according to the ROC's representation at the
time, be imputed to materials and equipment utilized on
Taiwan, as well as the applicable share of the interest
accrued between April 1949 and December 1960. The re-
negotiated portion of the debt, which consisted of approxi-
mately $2.6 million in principal and $1 million in interest,
was repaid by the ROC, together with current interest on
principal, in twenty semi-annual payments ending on
January 1, 1971.
The agreement of 1961, as evidenced by the Bank's
letter to Ambassador Yeh, dated May 11, 1961, granted a
moratorium on payment of that portion of the loans which,
according to the ROC, were not used on Taiwan. As the
letter stated in relevant part, in consideration for re-
suming payment on the agreed portion of the loans, "Eximbank
agrees to forebear and take no action with respect to the
remaining balance of the indebtedness of the Republic of
China until such time as the matter may be opened for dis-
cussion by Eximbank or your Government." The letter
further stated that in the event of a default on the agreed
SECRET
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Plan
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SECRET
- 2 -
installments, " Eximbank will be free to take such
action with respect to the total indebtedness of your
Government as it may deem appropriate." "
When discussions concerning the remaining portion of
the debt were resumed by the Eximbank and ROC in 1967, ROC's
legal responsibility for the debt was recognized again.
According to a Bank memorandum of conversation dated
February 20, 1968, Vice President Sauer, who had raised
this matter with Minister Counselor Wong, suggested "that
the Government of China direct its attention to these obli-
gations, recalling that there had been no question, in the
earlier negotiations as to their validity. " Minister Wong,
in turn, while recognizing that there had " been no
repudiation or denial of the obligations
questioned
whether it was the proper time to resume payments in view
of the status of the Chinese economy.
The status of the debt to Eximbank, which the Bank
carries on its list of delinquencies under "China (Mainland)
was as follows on March 31, 1972.
Credit
Principal
Delinquent
Delinquent
Total
No.
Outstanding
Principal
Interest
Delinquent
Purpose
396
292,300
292,300
235,600
527,900
Cargo Vessels
397
7,949,200
6,509,200
5,487,500
11,996,700
Power Generatin
Equipment
398
16,650,000
13,653,000
11,498,100
25,151,100
Railway Repair
Materials
399
1,494,500
1,494,500
1,032,000
2,526,500
Coal Mining
Equipment and
Supplies
26,386,000
21,949,000
18,253,200
40,202,200
These figures do not include interest accrued on overdue
interest, which Eximbank normally calculates only at the
time of final settlement. The additional amount due on this
account, as of the date of the above figures, is of the
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SECRET
- 3 -
rough order of magnitude of $6 million. Thus the total
approximate delinquent amount is $46 million.
The four 1946 Eximbank loans to the ROC are only a
part of the ROC's debts to the USG. The ROC has acknowledged
a lend-lease obligation of $81.6 million, representing
civilian-type articles furnished during the war, and in the
possession of the ROC on VJ Day, as well as lend-lease aid
after VJ Day covered by specific arrangements. The $81.6
million covered by these arrangements is only a small part
of the $1.6 billion in lend-lease furnished to China during
World War II. Other ROC debts to the USG include a surplus
property claim against the ROC of about $5.8 million in
arrears; about $45 million under a 1946 Bulk Sale Agreement;
and about $20 million under a 1945 "West China Balance"
agreement.
The fixing of responsibility for the 1946 Eximbank
loans is complicated by the fact that the U.S. continues
to recognize and maintain diplomatic relations with the
ROC and has not recognized the PRC. The U.S. normally
looks to the government of a foreign state recognized by
it for fulfillment of that state's financial obligations.
Ultimate liability and means or method of settlement
of these debts appear to the committee to involve both
difficult issues of international law and delicate political
questions which it seems neither possible nor necessary to
resolve at the present time. However on the basis of
available facts, it is possible to draw certain conclusions.
1.
The debts exist as valid receivables of Eximbank,
i.e., they represent credits disbursed and not
repaid or otherwise settled.
2.
They are state obligations of China validly
entered into by its government.
3.
In the light of the letter of May 11, 1961,
referred to above, in which Eximbank agreed
"
to forebear and take no action with
respect to the remaining balance of the in-
debtedness of the Republic of China until
such time as the matter may be opened for
discussion
these debts are not now in
default. However, Eximbank could, as a legal
matter, place the ROC in default by opening
the issue for discussion and demanding repay-
ment.
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SECRET
- 4 -
4.
Eximbank appears never, either explicitly or
by implication, to have released the ROC from
these obligations and the ROC, as recorded in
the Eximbank Memorandum of Conversation of
February 20, 1968, cited above, recognized
their validity.
5.
In the event of U.S. recognition of the PRC as
the successor government to the government of
the ROC for the State of China, Eximbank would
have a clear legal basis for holding the PRC
responsible for these debts.
6.
In the event of less than full succession by
the PRC (with, for example, the U.S. recognizing
the PRC in addition to the ROC), there would be
no clear legal basis for PRC liability, although
there are some precedents where by agreement
there has been a division of financial responsi-
bility for debts, depending upon benefit.
7.
As a matter of law, Eximbank is entitled to look
to the ROC for payment and the U.S. has the
option to make no claim against the PRC. In
this case, the debts would not constitute an
obstacle to Eximbank lending to the PRC.
8.
Should a policy decision be made to look to the
PRC for repayment, there are precedents in inter-
national practice which would support a request
to the PRC for agreement to assume these debts,
on the theory that the mainland benefitted from
the utilization of the loans. However, our non-
recognition of the PRC would militate against PRC
acceptance of responsibility for the loans; also,
should a claim be made against the PRC and should
the PRC refuse repayment, future Eximbank lending
to the PRC would raise questions in the light of
Eximbank's policy against lending to debtors in
default. However, the PRC could not, in any event,
be "in default" until there had been a formal
demand for repayment and the demand had been re-
fused by the PRC. Even if the PRC were considered
SECRET
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SECRET
- 5 -
in default, this would not, as a legal
matter prevent Eximbank's lending to the PRC
although it would be contrary to the long-
standing policy of Eximbank and the National
Advisory Council.
9.
A middle course between 7 and 8 would be to
seek PRC acceptance of responsibility on the
benefit-of-use theory, without holding the
PRC in default. Under this course, Eximbank's
default policy would not constitute an impedi-
ment to lending to the PRC.
Any future policy determination on the issue of responsibility
for the Eximbank debts must take into account the following
factors:
1.
Eximbank loans are among a number of ROC debts to
the U.S. Government which have been in suspense since at
least 1961, and any decision regarding Eximbank's loans will
have inevitable implications for the resolution of the larger
question of the ROC's debt to the U.S. Government and to the
U.S. Government's claims, both public and private, against
the PRC.
2.
We could seek PRC agreement to assume the debt obliga-
tions on the benefit theory (as described in numbered para-
graph 9 above) without changing our recognition policy or our
support for the ROC's international position, but any such
agreement could raise questions about the ROC's claim to
legitimacy.
3.
Any decision as to ultimate settlement of these
debts will have implications for potential delinquencies in
other areas.
SECRET
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7202345
THE WHITE HOUSE
WASHINGTON
SECRET
March 10, 1972
National Security Study Memorandum 149
-
-
Council on International Economic Policy Study Memorandum 21
TO:
The Secretary of State
The Secretary of Treasury
The Secretary of Defense
The Secretary of Agriculture
The Secretary of Commerce
The Director of Central Intelligence
SUBJECT:
US-PRC Trade
The President has directed a study of ways in which the statement on
trade in the Joint US-PRC Communique of February 28, 1972 should
be implemented.
The study should address PRC attitudes and practices in conducting
trade with other countries, with special emphasis on countries with
which the PRC does not have diplomatic relations, and past trading
patterns and specific commodities which have constituted the principal
imports and exports of the PRC. The study should also examine the
political aspects of PRC trading arrangements.
Consideration of the following means of facilitating trade should be
included:
-- Ways in which the US Government can begin and facilitate
an exchange of general trade information and data between the US and
the PRC. The possible uses of our third-country contact in this effort
should be examined.
-- Measures which the US Government can take to facilitate
contacts between exporters and importers on both sides. This should
include an examination of the role which should be played by the US
Government and how it should relate to US private individuals and
corporations.
-- Effects on US-PRC trade of the China COCOM differential.
SECRET
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- 2 -
SECRET
-
-- The effect of non-tariff and tariff barriers and the claims
settlement problem on US-PRC trade.
-
-- Additional issues including the establishment of trade
centers, the exchange of trade delegations, additional means of contact,
and other measures to facilitate trade.
This study should be conducted by an ad hoc group chaired by the
State Department and including representatives of the addressees and
the Assistant to the President for National Security Affairs. The
study should be submitted to the CIEP Review Group and the Senior
Review Group by March 24, 1972.
Henry
Henry A. Kissinger
Tehm. Hanyi
Peter M. Flanigan
SECRET
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THE WHITE HOUSE
file
Kemedy
WASHINGTON
SECRET
March 10, 1972
National Security Study Memorandum 149
Council on International Economic Policy Study Memorandum 21
TO:
The Secretary of State
The Secretary of Treasury
The Secretary of Defense
The Secretary of Agriculture
The Secretary of Commerce
The Director of Central Intelligence
SUBJECT:
US-PRC Trade
The President has directed a study of ways in which the statement on
trade in the Joint US-PRC Communique of February 28, 1972 should
be implemented.
The study should address PRC attitudes and practices in conducting
trade with other countries, with special emphasis on countries with
which the PRC does not have diplomatic relations, and past trading
patterns and specific commodities which have constituted the principal
imports and exports of the PRC. The study should also examine the
political aspects of PRC trading arrangements.
Consideration of the following means of facilitating trade should be
included:
-- Ways in which the US Government can begin and facilitate
an exchange of general trade information and data between the US and
the PRC. The possible uses of our third-country contact in this effort
should be examined.
-- Measures which the US Government can take to facilitate
contacts between exporters and importers on both sides. This should
include an examination of the role which should be played by the US
Government and how it should relate to US private individuals and
corporations.
-- Effects on US-PRC trade of the China COCOM differential.
SECRET
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SECRET
- 2 -
-- The effect of non-tariff and tariff barriers and the claims
settlement problem on US-PRC trade.
-- Additional issues including the establishment of trade
centers, the exchange of trade delegations, additional means of contact,
and other measures to facilitate trade.
This study should be conducted by an ad hoc group chaired by the
State Department and including representatives of the addressees and
the Assistant to the President for National Security Affairs. The
study should be submitted to the CIEP Review Group and the Senior
Review Group by March 24, 1972.
Henry A. A
Henry A. Kissinger
Tehm. Hanyi
Peter M. Flanigan
SECRET
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DISTRIBUTION SHEET
NSC Staff
Item
NSSM 149 & CIEPSM 21
Dr. Kissinger
Gen. Haig
From
Mr. Young
Mr. Lord
Date
March 10, 1972
Mr. Rodman
Cdr. Howe
Classification
Mr. Houdek
Mr. McManis
Mr. Sonnenfeldt
Mr. Latimer
Mr. Downey
Mrs. Davis
Mr. Hyland
Mr. Guthrie
Mr. Kohl
Dr. Smith
Mr. Holdridge
Mr. Levin
Capt. Sansom
Mr. Hamilton
Mr. Smyser
Mr. Edmundson
Mr. Court
Secretariat
Mr. Ryan
Mr. Saunders
W.H. Files
Col. Merritt
Central Files
Mr. Hoskinson
Mr. Sachs
Miss Neaher
Col. Kennedy
Mr. Bergsten
Mr. Crocker
Mr. Johnston
Lt. Col. Loeffke
Mr. Hormats
Mr. Negroponte
Mr. Wright
Mr. England
Mrs. Moock
Mr. Lehman
Col. Behr
Mr. Guhin
Mr. Vaky
Mr. Nachmanoff
Miss Brownell
Vice President
OMB (J. Frey)
Secretary of State
JCS, Adm. Robinson
Secretary of Defense
Director, OEP
Director, USIA
Attorney General
Other Departments & Agencies:
Under Secretary of State
Deputy Secretary of Def.
Chairman, JCS
Director, CIA
Jre Agricult Comm
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NATIONAL SECURITY COUNCIL
March 10, 1972
MEMORANDUM FOR THE RECORD
Bob Curran called to say that the Secretary of
State agreed with the NSSM on U. S. - PRC Trade.
The Secretary suggested, however, that it would
be preferable that the USC be given responsibility
for preparing the response since the USC had
preparedan earlier paper on the subject. I
noted that because this was an NSC and CIEP
study, it was considered preferable to have the
ad hoc group prepare the paper and forward it
to the NSC and CIEP groups. Thus we would
prefer not to make the change.
Curran also said that the Secretary thought the
NSSM should ask for a discussion of the COCOM
differential. After discussion with Bob Hormats
we added this requirement to the NSSM.
I then requested Mrs. Davis to have the NSSM
issued.
RTK
CC: Mrs. Davis
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and has been determined to be declassified.
WHITE HOUSE
SITUATION ROOM
LDX'd
'72 MAR 9 PM 4 : 29
will
TDX
NATIONAL SECURITY COUNCIL
SECRET
March 9, 1972
MEMORANDUM FOR
Mr. Robert T. Curran
Office of the Executive Secretary
Department of State
FROM:
RICHARD T. KENNEDY RTK
Attached is the NSSM on U.S. - PRC trade,
which we discussed on the telephone. As I
indicated, there is great urgency and I will
appreciate your help in an early response.
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526
and has been determined to be declassified.
Please LDX to
An WAB Carran
rDx.r
МООЯ MOITAUTIS
MHILE HONSE
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This document has been reviewed pursuant to Executive Order 13526
and has been determined to be declassified.
THE WHITE HOUSE
WASHINGTON
SECRET
National Security Study Memorandum
Council on International Economic Policy Study Memorandum
TO:
The Secretary of State
The Secretary of Treasury
The Secretary of Defense
The Secretary of Agriculture
The Secretary of Commerce
The Director of Central Intelligence
SUBJECT:
US-PRC Trade
The President has directed a study of ways in which the statement on
trade in the Joint US-PRC Communique of February 28, 1972 should
be implemented.
The study should address PRC attitudes and practices in conducting
trade with other countries, with special emphasis on countries with
which the PRC does not have diplomatic relations, and past trading
patterns and specific commodities which have constituted the principal
imports and exports of the PRC. The study should also examine the
political aspects of PRC trading arrangements.
Consideration of the following means of facilitating trade should be
included:
-- Ways in which the US Government can begin and facilitate
an exchange of general trade information and data between the US and
the PRC. The possible uses of our third-country contact in this effort
should be examined.
- Measures which the US Government can take to facilitate
contacts between exporters and importers on both sides. This should
include an examination of the role which should be played by the US
Government and how it should relate to US private individuals and
corporations.
SECRET
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SECRET
- 2 -
-- The effect of non-tariff and tariff barriers and the claims
settlement problem on US-PRC trade.
-- Additional issues including the establishment of trade
centers, the exchange of trade delegations, additional means of contact,
and other measures to facilitate trade.
This study should be conducted by an ad hoc group chaired by the
State Department and including representatives of the addressees and
the Assistant to the President for National Security Affairs. The
study should be submitted to the CIEP Review Group and the Senior
Review Group by March 24, 1972.
SECRET
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This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
NIXON PRESIDENTIAL MATERIALS PROJECT
DOCUMENT CONTROL RECORD
ITEM REMOVED FROM THIS FILE FOLDER
A RESTRICTED DOCUMENT OR CASE FILE HAS BEEN REMOVED FROM
THIS FILE FOLDER. FOR A DESCRIPTION OF THE ITEM REMOVED
AND THE REASON FOR ITS REMOVAL, CONSULT DOCUMENT ENTRY
NUMBER
1
ON EITHER THE DOCUMENT WITHDRAWAL RECORD
(GSA FORM 7292 OR NA FORM 1421) OR NARA WITHDRAWAL SHEET
(GSA FORM 7122) LOCATED IN THE FRONT OF THIS FILE FOLDER.
A sanitized copy substituted for an original item which
Contains information restricted under the Privacy Act.
NATIONAL ARCHIVES AND RECORDS ADMINISTRATION
NLN FORM 101 (revised 6-85)
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7207787
NSSM 149
THE WHITE HOUSE
SECRET
washington
December 23, 1972
MEMORANDUM FOR
THE UNDER SECRETARY OF COMMERCE
SUBJECT:
Creation of a Sino-American Trade Council
On the basis of your memorandum of November 1, the President has
approved your proposal for the formation of a Sino-American Trade
Council. Because of the President's interest in this Council, we
request that representatives of our staffs be included in preparatory
planning activities and in meetings between representatives of the
U.S. Government and the Council. We would also request that, in
cooperation with the Department of State, you periodically submit to
the President status reports on the formation and activities of the
Council.
We recommend, on the basis of the demonstrated effectiveness of
present arrangements for handling Sino-American cultural exchanges,
that the Council have direct liaison with representatives of the People's
Republic of China in New York. The Department of State would provide
a parallel channel of communication with the Chinese at an official
level via our embassies in Paris. It is the judgment of the Department
of State that the Council should be called "The National Council for
Sino-American Trade". This name is intended to distinguish the
organization from the numerous private groups which have been formed
to promote trade with China.
Henry A. Kissinger
Petern Flanigan
CC: Deputy Secretary of State
SECRET
Dispatched 12/26/72 - Rcpts. nos. 3401-3402 (rb
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THE WHITE HOUSE
WASHINGTON
December 23, 1972
Dear Alex:
I apologize for the delay in responding to your
letter of September 28. It provided some very
useful suggestions concerning the creation of a
Sino-American Trade Council and we expect to
move very soon to form such a group, which will
substantially reflect your thinking. Primary
responsibility for establishment of the Council
will be with the Department of Commerce.
I want to thank you again for all the help and sound
advice that you personally, and the National Com-
mittee collectively, have provided.
Warm regards,
ti-1
Henry A. Kissinger
Dr. Alexander Eckstein
President, National Committee
on U.S. - China Relations
University of Michigan
Ann Arbor, Michigan 48104
Dispatched 12/26/72 (rb)
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
NATIONAL SECURITY COUNCIL
WASHINGTON, D.C. 20506
7787
December 26, 1972
SECRET ATTACHMENT
MEMORANDUM FOR
Mr. Theodore L. Eliot, Jr.
Executive Secretary
Department of State
SUBJECT:
Sino-American Trade Council
Will you please send the attached telegram to Embassy
Paris.
Jeanne W. Davis
Staff Secretary
SECRET/ATTACHMENT
GDS 1980
Dispatched 12/26/72 - NSC Rcpt. (rb)
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This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
SECRET
X
VIA WIRE
TO:
AMERICAN EMBASSY/PARIS
SUBJECT:
Creation of Sino-American Trade Council
The USG is moving ahead to create a National Council for
Sino-American Trade. You should deliver to the Chinese Embassy
the memorandum which follows informing them of our plans.
For delivery to the Embassy of the PRC
In July, Ambassador Watson indicated to Ambassador
Huang that US was considering establishment of a council of prominent
businessmen to promote trade between the US and the People's Republic
of China. Subsequent to that time interest within the American business
community in trade with China has increased. We believe there is now a
need to establish in the US a single non-governmental organization which
would serve as a focus for information on trading with the People's
Republic of China and a contact point for dealings with officials and
institutions of the People's Republic of China on trade issues. This
organization would facilitate the progressive development of trade
consistent with the Shanghai communique. It would not, of course, deal with
such matters as claims, blocked assets, tariffs, and governmental
regulations, which are being or would eventually be dealt with through
SECRET
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SECRET
2
governmental channels.
We are at present encouraging establishment of this
group -- "The National Council for Sino-American Trade". It will
be private and broadly representative of the US business and financial
community. Its purpose would be to exchange information and promote
trade through such activities as facilitation of industrial and trade
exhibits. In view of the success of the "two-track" pattern we have
established in the cultural and scientific exchange areas, we believe
that a similar pattern of contacts for dealing with trade matters will be
in the interests of both governments. Any suggestions you have on means
of facilitating contact between this group and appropriate officials and
institutions of the People's Republic of China would be most helpful.
SEC/STATE
SECRET
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MEMORANDUM
sequed
NATIONAL SECURITY COUNCIL
SECRET
November tab 2 29, 1972
ACTION
MEMORANDUM FOR: DR. KISSINGER
FROM:
JOHN HOLDRIDGE
ROBERT HORMATS RH 19mg
SUBJECT:
Creation of a Sino-American Trade Council
At Tab B is a memorandum to you and Peter Flanigan from Under Secre-
tary of Commerce Jim Lynn which provides an operational proposal for
the formation of a Sino-American Trade Coucil. This is in response to
NSDM 170/ CIEPDM 7.
The Council would be a prestigious, private organization which would
facilitate the development of US/PRC trade, especially during the period
where there are no diplomatic relations. It would provide the focus for
trade contacts by US businessmen and PRC officials. More specifically,
it would:
-- Establish and maintain contact with the China Council for the Promo-
tion of International Trade (CCPIT), the official PRC international trading
organization.
-- Arrange for reciprocal trade missions and exhibitions.
--
Provide information to US businessmen wishing to trade with the PRC.
-- Publish a trade information bulletin.
-- Maintain liaison with the US Government.
The Secretary of Commerce, or his representatives, would appoint a select
group of interested businessmen outside the government to form the Council.
It would include representatives of firms likely to be involved in US-China
trade. The private organizers would agree to undertake the initial work
and expense of forming the Council without special advantages and would
follow an objective set of guidelines on the Council's organization, to be
provided by the Department of Commerce.
In a separate letter
Alex Eckstein, President of the National
Cammittee on US/C
has made a similar proposal
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SECRET
Page 2.
2. Arrange for reciprocal trade missions and exhibitions.
Because the Chinese permit only limited contact between
American businessmen and Chinese foreign trade officials,
manufacturers and end-users, reciprocal trade missions and
exhibitions will be of paramount importance to developing
trade. The SATC would arrange such exchanges, primarily
in the initial period when there are no diplomatic relations.
3. Provide information to U.S. businessmen. The SATC would
encourage and facilitate the accumulation of business
experience and would create mechanisms to communicate its
findings and experience to U.S. business. The SATC would
also provide to the Department of Commerce, for dissemina-
tion to U.S. business, information that is developed on
PRC trade practices, its economy, and trade opportunities.
4. Publish a trade information bulletin. As a by-product of
its contacts with American industry, the SATC would publish
a trade bulletin for distribution in China that would at-
tempt to evoke Chinese interest in U.S. products. This
would, of course, require Chinese concurrence.
5. Maintain liaison with U.S. Government. Given the highly
politicized nature of China's foreign trade policy, the
SATC would maintain a close liaison with interested
government agencies, including Commerce, State and
Agriculture.
II. FORMING THE SINO-AMERICAN TRADE COUNCIL
The Secretary of Commerce, or his representative, would appoint a
select group of interested businessmen to undertake the formation
of the SATC. They would include representatives of firms tikely
to be involved in U.S.-China trade, and would (a) agree to under-
take the initial work and expense of forming the SATC without
special advantages, and (b) agree to follow an objective set of
guidelines on the Council's organization, to be provided by
Commerce.
The group of businessmen would include representatives from agri-
culture, manufacturing, banking, transportation, trading companies
and trade associations. They would meet with the Secretary of
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SECRET
Page 3.
Commerce, or his representative, and appropriate officials from
State and Agriculture to plan the formation and organization of
the SATC.
III. ORGANIZATION OF THE SATC
The businessmen appointed by the Secretary of Commerce would agree
to serve as an executive committee for one year, elect a chairman,
and be responsible for drafting the Council's charter and imple-
menting its organizational structure.
The following are suggested guidelines for the organization and
operation of the SATC:
1. Membership in the SATC will be open to all U.S. firms on
a fee basis;
2. One year after forming the SATC, the membership will elect
a new executive committee to serve for specified terms
(e.g., 2 years);
3. The SATC will maintain a close relationship with interested
government agencies;
4. The SATC will arrange annual meetings with Chinese trade
officials to exchange views on how best to improve U.S.-
China trade relations.
5. The SATC will regularly send representatives to the semi-
annual Chinese Export Commodities (CANTON) Trade Fair.
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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1
THE UNDER SECRETARY OF COMMERCE
7787
UNITED STATES OF AMERICA
WASHINGTON. D.C. 20230
SECRET
November 1, 1972
MEMORANDUM FOR: Honorable Henry A. Kissinger, Assistant to the
President for National Security Affairs
Honorable Peter M. Flanigan, Assistant to the
President for International Economic Affairs
FROM:
Under Secretary Lynn Jan To
SUBJECT:
Creation of Sino-American Trade Council
The following outlines Commerce's proposal for the formation of a
Sino-American Trade Council (SATC) in accordance with your in-
structions in NSDM 170/CIEPDM 7 dated June 8, 1972.
I. OBJECTIVE
The Sino-American Trade Council would be a prestigious, private
organization which would facilitate the development of U.S. trade
with the People's Republic of China (PRC), especially during the
period when there are no diplomatic relations. It would serve as
a forum for discussing trade policy issues with the Chinese and
would provide the focus for trade contacts between American
businessmen and PRC officials. Because its membership would have
direct contact with the Chinese, it would act in an advisory role
to the U.S. Government before and after diplomatic relations are
established.
More specifically it would:
1. Establish contact with the China Council for the Promotion
of International Tr
(CCPIT). The CCPIT, as the Chinese
Agency responsibl
rranging the exchange of trade
missions and
would be the PRC agency of
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SECRET
2
informal links to it. He offers the National Committee's help in forming
this Council, in part because the Chinese have approached the National
Committee for assistance in setting up a trade exhibition in the U.S.
We think the time has come to take the initiative in establishing a Sino-
American trade council. While the Chinese have not responded to a pro-
posal we made to them through the Paris channel last July for the creation
of a non-governmental trade group, a number of considerations incline us
to present them a positive proposal at this time:
-- The substantial expansion of Sino-American trade over the past year
has created great interest in the China trade within the American business
community, and there is a need for a single focus of information on trading
with the PRC and a non-governmental contact point for dealings with the
Chinese on trade issues.
-- At present there are a number of attempts being made in the private
sector to form Sino-American trade groups. We have doubts about the
representativeness of some of these groups, and feel it is in the government's
interest to encourage the formation of a national private organization with
which it can work.
-- The pattern that has now been established in the areas of cultural and
scientific exchanges has set a precedent to which the Chinese should respond
if presented a proposal that has White House backing.
At Tab (A) is a draft cable to Paris which contains a proposal to the Chinese
requesting their support in working with the "National Council for Sino-American
Trade". The cable indicates that this will be a private organization broadly
representative of the national business community, and whose purpose will be
to exchange information and promote trade through such activities as facili-
tation of industrial and trade exhibits. (The cable makes clear that such
matters as claims, blocked assets, and tariffs, and governmental regulations,
will not be handled through this organization, but will be dealt with through
governmental channels.) It is emphasized that in view of the recent expansion
of Sino-American trade, and the success of the "two track" pattern we have
now established in the cultural and scientific exchange areas, & similar pattera
of contacts for dealing with trade matters will be in the interests of both
governments.
SECRET
This document has been Reproduced reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
at the Richard Nixon Presidential Library DECLASSIFIED
SECRET
3
At the same time that we approach the Chinese on this issue, we should
have Commerce proceed in stimulating leaders in the business community
to establish the trade council. A memorandum to Under Secretary Lynn
from yourself and Peter Flanigan urging that action be taken is at Tab (A).
While it might be argued that we should wait until we get PRC agreement
before proceeding with the formation of this group, we feel that the positive
Chinese response to our urgings that they work with certain private groups
in the exchange areas makes it most unlikely they would refuse to be
cooperative in the trade field. We should not let them have a veto on the
group we wish to encourage. In addition, if we delay in taking action on
the formation of such a group, we may lose the initiative to other efforts
now being made to form trading organizations which are less representative,
or with whom we might not be able to work effectively.
NSDM 170 was classified SECRET/NODIS/HOMER because it related
to our contacts with the PRC, however, as several agencies and even
the business community will be involved in the Sino-American Trade
Council, we propose to drop the special NODIS/HOMER indicators.
RECOMMENDATIONS:
That you sign:
(1) Approve the draft cable to be sent to the PRC
via Paris at Tab (A).
(2) The memorandum for Under Secretary of
Commerce Lynn at Tab (A) approving his moving
ahead with the organization of the Council.
(3) The letter tc Alexander Eckstein thanking
him for his suggestion at Tab (A).
Flanigan concurs.
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721.5
THE UNIVERSITY OF MICHIGAN
DEPARTMENT OF ECONOMICS
ANN ARBOR
September 28, 1972
Dr. Henry Kissinger
Special Assistant to the President
The White House
Washington, D.C. 20506
Dear Henry:
Thank you very much for your most kind and helpful letter concerning
recent developments in the field of cultural exchanges with China and the
potential role the National Committee might play in these.
I am now writing to you about a different, but not totally unrelated
matter, concerned with possible institutional arrangements for the development
of Sino-American trade. I understand that the formation of a Sino-American
Trade Courcil is under active consideration in the government. It is my
impression that some thought is being given to launching this new organization
as a semi-official body under government sponsorship.
It seems to me that there might perhaps be better ways of initiating
and organizing this new body. The British have many years ago formed the
Sino-British Trade Council and the Japanese have a semi-official trade
agreement with the Chinese which is implemented through the so called
"memorandum trade" channel. In both of these cases the launching of semi-
official bodies invited or encouraged the formation of counterorganizations,
politically more pro-Chinese. In Britain this is the "48 Group" and in Japan
it is the "friendly firms". I suspect something like this could happen here.
For this and several additional reasons cited below, it seems to me it
would be preferable to form an organization totally independent of the govern-
ment, privately financed, but enjoying the full confidence of the government
and with informal links to it. Such a body would be in a better position to
pursue certain initiatives which may be welcomed by the government but which
it may not wish to be publicly associated with at a particular time. Finally
a Sino-American Trade Council would necessarily receive many inquiries from
the Chinese about American firms. A private organization not linked to
government could provide such information without being vulnerable to possible
charges of favoritism. A semi-official body on the other hand might be
embarrassed by such charges.
I suspect it would not be too difficult to get something like this
started. It may be facilitated by the fact that the National Committee on
U.S.-China Relations was recently approached by the Chinese with indications
that they would like our help in exploring the possibilities for a large-
scale trade exhibit in the U.S. Our staff is exploring the meaning, intent
and seriousness of this approach with their Commercial Attache in Ottawa.
If as a result of this contact it should turn out that we might be helpful in
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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Henry Kissinger
-2-
September 28, 1972
forming this Council we would be glad to do so. If some other auspices would
be better or more logical to convene it we would be happy to help in any way
we can without intruding in any way.
In any case whoever plays the convening role, once formed the Council
should probably be fully on its own, independent of any other organization.
In proposing this I hope you will not find me presumptuous in bringing these
reservations of mine to your attention. But I know that all of us agree that
the management of our relations with China in these early stages is a most
delicate, sensitive and vital problem. With many thanks for your continuing
interest and looking forward to seeing you soon.
Sincerely yours,
Der
Alexander Eckstein
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DOC
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Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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720 3556
departmenT OF STATE
Washington, D.C. 20520
April 24, 1972
SECRET/NODIS/HOMER
MEMORANDUM FOR MR. HENRY A. KISSINGER
THE WHITE HOUSE
Subject: Implementation of NSSM-149,
China Trade
As requested at our March 31 Senior Review Group
meeting I attach State and Commerce recommendations for
implementation of NSSM-149 on trade with the People's
Republic of China. Also attached are proposed negotiating
instructions to be sent to Ambassador Watson, if these
recommendations are approved.
A decision is required on whether the issue of Most
Favored Nation status should be raised at U.S. initiative.
State favors inclusion of such a discussion and Commerce
opposes. The alternative positions are presented as
options on pages 3-4. The instructions to our Ambassador
and the Memorandum to be delivered to Ambassador Huang
will have to be brought into conformity with whatever
decision is reached on this point.
A decision is also required on whether questions
involving Eximbank financing should be raised in the
Memorandum to be delivered to Ambassador Huang. Commerce
holds that if the PRC is to be held legally responsible
for certain debts to Eximbank this item should be in-
cluded because until the issue is settled Eximbank
financing would not be available to the PRC. Even if we
decide to hold the PRC legally responsible for these
debts to Eximbank, State opposes inclusion of this item
in the Memorandum on the grounds that a) we should not
raise any public USG claims as contentious issues at
this stage and b) the PRC is not currently interested in
obtaining Eximbank or other foreign financing. The
Memorandum to be delivered to Ambassador Huang will have
to reflect whatever decision is reached on this point.
Port Security regulations and Transportation Order
T-2 must be amended before Ambassador Watson can be
authorized to inform Ambassador Huang (as is recommended)
that U.S. flag carriers are authorized to enter China
and PRC carriers are authorized to enter the U.S.
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
2
We continue to endorse the recommendation made in
both NSSM-149 and U/SM-91 that Transportation Order T-2
be amended to permit U.S. flag ships and aircraft to
visit the PRC.
As NSSM-149 pointed out, however, if the U.S.
scheduled airlines with authority to serve the PRC
(Pan American, TWA and Northwest) are not restrained
from approaching the PRC individually as soon as T-2 is
amended, the PRC would be in a position to play off one
U.S. airline against another in a way that would be
contrary to over-all U.S. interests.
To minimize this possibility, we recommend that if
and when T-2 is amended, such action be accompanied by
a public statement to the effect that the eventual
establishment of scheduled services would be subject to
US-PRC intergovernmental discussions. We also urge that
the Department of State be given advance notice of the
T-2 amendment SO that we can immediately instruct the
scheduled airlines not to approach the PRC about estab-
lishing scheduled services until authorized to do so.
(The foregoing recommendations would be consistent with
Option 29 of NSSM-149.)
Copies of this memorandum are being sent to the
CIEP and to the other members who were present at the
March 31 Senior Review Group meeting, as well as to the
Department of Agriculture.
Winthrop G. Brown
Winther C Brown
Chairman, Interdepartmental Group
Enclosures:
1. Recommendations
2. Proposed Telegram to Ambassador Watson
3. Proposed Memorandum and Annexes
SECRET/NODIS/HOMER
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
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SECRET/NODIS/HOMER
Recommendations for Implementing NSSM-149
This paper sets forth joint State and Commerce
Department recommendations concerning the sequence,
timing, and implementation of the steps outlined in
NSSM-149: U.S.-P.R.C. Trade.
What Has Already Been Done
In response to our inquiry, the Chinese have
indicated they prefer that Americans wishing to travel
to China apply for visas at the Embassy of the People's
Republic of China in Ottawa. Under unusual circum-
stances, they are prepared to process visa applications
at any of their other embassies as well.
The Chinese have informed us that they issued
invitations to 30 U.S. firms to attend the Chinese
Export Commodities (Canton) Fair (April 15-May 15).
RECOMMENDATIONS
I. What Should We Do Now (Within the Next 3 Months)
To develop U.S.-P.R.C. relations in a manner that
best serves U.S. interests, we should present to the
Chinese as soon as possible a well defined set of
proposals and notifications of action which the United
States is taking to implement the trade sections of the
Shanghai Communique. This will focus their attention
on what we consider the most appropriate issues.
1. Proposed Formation of a Sino-American
Trade Council
Notify the P.R.C. that the United States is in the
process of forming a prestigious, private Sino-American
Trade Council (SATC) which will act as a central clearing
house for information and research on P.R.C. trading
practices for U.S. businessmen. Commerce, in consulta-
tion with State, will be responsible for selecting the
group of firms that will initially comprise the SATC and
furnish them with all appropriate services to ensure its
successful development. (Options 6-7, pp. 24-26 in
NSSM-149).
SECRET/NODIS/HOMER
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SECRET/NODIS/HOMER
2
2. Product Lists and Approval of Export Licenses
Advise the Chinese that we will consider favorably
license applications for a broad range of products
clearly intended for peaceful end uses. In this connec-
tion, present the P.R.C. with a list of U.S. export
products, including aircraft, and a list of Chinese
export products that appear to offer the best potential
in U.S.-P.R.C. trade. The U.S. export list would be
developed on the basis, of those products the P.R.C. is
now importing from other economically advanced countries,
in which we are generally competitive and which we are
prepared to license for export to China. The list of
Chinese exports would be based on what the Chinese are
now successfully exporting to economically advanced
countries and for which there is a market in the United
States. The list of U.S. exports is attached. (The
import list is now being prepared by Commerce.) Invite
the Chinese to comment on these lists and to suggest
additional items. Offer to provide commercial informa-
tion (economic data, market information, trade regula-
tions, etc.) and ask whether they would be willing to
provide similar information in return (Option 27,
pp. 25-26, 36 in NSSM-149).
3. Amend Transportation Order T-2
a. Department of Commerce believes that,
providing it is appropriate, given the context of our
over-all strategy relative to China, we should amend
T-2 to allow reciprocal port visits by U.S. and P.R.C.
vessels, thus effectively according China the same
treatment we presently grant the U.S.S.R., and advise
the Chinese of this change (Option 20, pp. 38-39 in
NSSM-149) State Department believes that this action
should be taken now. N.B.: Requires Presidential action.
4. Presentation of a Memorandum Outlining
"Possible Topics for Future Discussion",
as Follows:
a. Settlement of Private Claims. The Memorandum
should note that Foreign Minister Chi P'eng-fei agreed
in an informal discussion with Secretary Rogers that the
problem of private claims is one that can be discussed
SECRET/NODIS/HOMER
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SECRET/NODIS/HOMER
3
between us. This would make the Chinese agreement to
discuss the issue a matter of formal record (Option 19,
pp. 59-61 in NSSM-149)
b. Scheduled Air Service Between China
and the United States. The Memorandum should note the
necessity of hearings by the Civil Aeronautics Board to
determine which U.S. airline (s) would be given the
route (s) (Options 28, 29; pp. 41-42 in NSSM-149).
C. U.S. Import Restrictions on textiles and
other goods. The Memorandum should present concise
explanations of U.S. import restrictions, clarify the
criteria for determining market disruption and dumping,
and explain the procedures for handling these problems.
The Memorandum should also offer to provide more detailed
explanations if desired (Options 22-25, pp. 64-69 in
NSSM-149)
d. 1) Most Favored Nation Tariff Treatment for
Chinese Goods and Settlement of Export-Import Bank Debt.
State and Commerce have differing views on these
questions which are presented below. The P.R.C. raised
this matter at a high level in Peking and State wishes
to take cognizance of their interest. The instructions
to our Ambassador and the Memorandum to be left with
Ambassador Huang will have to be changed according to
the determination made.
OPTION 1. (RECOMMENDED BY STATE)
The Memorandum should take cognizance of P.R.C. interest
in MFN and offer to negotiate a bilateral agreement
which would lead to seeking legislation to grant MFN
status to the P.R.C.
Advantages:
-- Would be responsive to P.R.C. inquiries on MFN
in Peking during the Presidential visit.
-- Would offer positive element in developing
trade relations.
-- Would provide incentive for P.R.C. to settle
private claims issue.
Reproduced at the Richard SSIFIED
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SECRET/NODIS/HOMER
4
Disadvantages:
-- Might make U.S. side appear to be overanxious.
-- Might be premature in view of long time
required to get necessary legislation.
OPTION 2. (RECOMMENDED BY COMMERCE)
Make no mention of MFN in the Memorandum passed to
Ambassador Huang, but instruct our Ambassador to reply,
if asked, that MFN should be a subject for later dis-
cussions after major initial issues, such as claims,
are resolved.
Advantages:
-- Would avoid making us appear overeager.
-- Would keep our reserve on a negotiable issue.
Disadvantages:
-- Would miss opportunity to tie Paris talks into
discussions in Peking.
-- Would allow the Chinese to raise the issue in a
framework of their choosing.
-- Would leave the Memorandum passed to
Ambassador Huang largely negative in tone.
SECRET/NODIS/HOMER
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SECRET/NODIS/HOMER
5
d. 2) Settlement of Export-Import Bank Debt
The Export-Import Bank asserts certain claims
against the P.R.C. deriving from shipments of U.S. goods
to China before the P.R.C. was established in October,
1949. It holds that until periodic payments are made
under these claims it cannot finance trade with the
P.R.C. State and Commerce have differing views on
whether this issue is pertinent. These views are
represented in the two options below. The instructions
to our Ambassador and the Memorandum to be left with
Ambassador Huang will have to be changed according to
the determination made.
OPTION 3. (RECOMMENDED BY COMMERCE)
If a policy determination is made that the debts presently
ascribed by the Export-Import Bank to the P.R.C. are
properly lodged against the P.R.C., inscribe this issue
in the Memorandum to be passed to Ambassador Huang as
one of the subjects for future discussion.
Advantage:
-- Would permit early determination on whether
EXIMBANK financing would be available to finance
US-PRC trade.
Disadvantages:
-- Would raise an issue of no current interest to
the P.R.C. since it does not seek foreign financing at
present.
-- Could introduce as contentious issues other USG
claims and P.R.C. counterclaims.
OPTION 4. (RECOMMENDED BY STATE)
That the issue of USG claims not be raised at this time,
nor in this Memorandum, but that the effect of these
alleged delinquencies on P.R.C. eligibility for Eximbank
financing be considered by the National Advisory Council
for International Monetary and Financial Policies (NAC)
SECRET/NODIS/HOMER
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SECRET/NODIS/HOMER
6
Advantages:
-- Would result in a coordinated interagency
determination on whether or not the P.R.C. is eligible
for Eximbank programs.
-- Would permit a considered position on the total
USG claims against the P.R.C.
Disadvantage:
-- None.
e. Industrial Property Protection (Patents,
Trademarks and Copyrights) should be mentioned as an
issue of great importance to the United States and a
statement of our practice in following international
conventions regarding these matters provided
(Option 33, pp. 45-46 in NSSM-149).
ACTIONS THAT SHOULD BE TAKEN UNILATERALLY BY THE USG
AT THIS TIME
5. Encourage U.S. Businessmen to Invite Their
Chinese Counterparts to the United States
United States businessmen, especially those attending
the Canton Trade Fairs, should be encouraged to invite
Chinese businessmen to the United States (Option 12,
pp. 28-29 in NSSM-149)
6. Alleged Chinese Delinquencies Relative to the
Export-Import Bank should be reviewed by the National
Advisory Council for International Monetary and Financial
Policies as expeditiously as possible (Option 32, p. 63
in NSSM-149)
7. All Businessmen Wishing Information on the P.R.C.
Market and Foreign Trade Practices Should be
Referred to the Office of International
Commercial Relations, Bureau of International
Commerce, Department of Commerce (Option 5,
pp. 23-24 in NSSM-149)
8. The American Consulate General Should be Instructed
to Expand Cooperation with the American Chamber of
Commerce in Hong Kong (Option 4, p. 23 in NSSM-149)
SECRET/NODIS/HOMER
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SECRET/NODIS/HOMER
7
II. The Near Term (3-6 Months from Now)
1. Announce the Formation of a Prestigious, Private
"Sino-American Trade Council" (SATC) referred
to in I. 1 above. The Council will act as a central
clearing house for information and research on P.R.C.
trading practices for American businessmen. The SATC
should, as one of its first activities, contact the
Chinese Council for the Promotion of International Trade
regarding the possibility of sending a vanguard trade
delegation to China (possibly accompanied by one or more
U.S. Government representatives) to visit the P.R.C.'s
foreign trade corporations, research institutes, marketing
agencies and trade fair authorities. The SATC would work
in close cooperation with the Department of Commerce
(Options 6-7, pp. 24-26 in NSSM-149).
2. Initiate Discussion of Topics Listed in the
Memorandum
3. Give the Chinese a Highly Selective List of
Trade Fairs in the United States and Encourage
Their Attendance. Offer to facilitate P.R.C.
attendance by issuing visas, acting as a liaison with
fair authorities, etc. (Option 14, pp. 30-31 in NSSM-149)
4. Encourage the Sino-American Trade Council (SATC)
to Organize a Comprehensive Solo Exhibit in
Peking and Other Chinese Cities. The Commerce
Department would provide whatever assistance is appropriate
at that time (Option 10, p. 27 in NSSM-149). .
5. Invite the P.R.C. to Hold a Comprehensive Solo
Exhibit in the United States. The Chinese are
participating in the Canadian National Exhibition (Toronto,
August 16-September 4, 1972) with a comprehensive, solo
exhibit. We should propose that they bring this exhibit
to the United States (Option 13, p. 29 in NSSM-149)
III. Intermediate Term (6-12 Months from Now)
1. Provide Commerce and Agriculture Department
assistance to collective exhibitions by U.S.
firms of a single or multiple product line
in Peking or another Chinese city (Option 11,
p. 27 in NSSM-149)
SECRET/NODIS/HOMER
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SECRET/NODIS/HOMER
8
2.
Seek through Paris to arrange for contact
between U.S. Commodity Credit Corporation and P.R.C.
Ceroil (China National Cereals, Oils and Foodstuffs
Import and Export Corporation) representatives. If
prospects appear worth following up, encourage repre-
sentatives of U.S. grain export firms and Western Wheat
Association to apply for visas to visit the P.R.C. to
explore wheat trade possibilities with Ceroil officials.
Those labor unions on the west coast that would be
involved in such grain shipments are favorably disposed
toward exporting grain to the People's Republic of China
(Option 26, p. 35 in NSSM-149)
IV. Can Be Done At Any Time
1. Explain to the P.R.C. (preferably at the
earliest opportunity) that adequate end-use information
is required for all validated export license cases.
Emphasize to U.S. exporters the great importance which
full product end-use information will have in licensing
decisions for the P.R.C. (Option 18, p. 44 in NSSM-149)
2. Ask the P.R.C. through Paris for details and
procedural information on Chinese trade-mark law. Upon
confirmation that the P.R.C. law reads as we believe it
to, inform the P.R.C. that its nationals may receive
trademark protection in the United States and request
reciprocal treatment for U.S. citizens in the P.R.C.
Ask the P.R.C. for information on the protection available
for foreigners' inventions and technology under its laws
and regulations, including details on any patent and/or
inventor's certificate system that the P.R.C. has in
force (Option 33, p. 45-46 in NSSM-149).
3. Use the American Consulate General in Hong Kong
to encourage specialized banking contact. The Treasury
representative could act as a liaison between American
bankers and their P.R.C. counterparts (Option 9, p. 32
in NSSM-149)
SECRET/NODIS/HOMER
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SUGGESTED TELEGRAM IMPLEMENTING NSSM-149
SECRET
ACTION {ROUTINE} PARIS
NODIS/HOMER
FOR AMBASSADOR ONLY FROM THE SECRETARY
SUBJ: US-PRC - TRADE
1. WE BELIEVE THAT YOU SHOULD TAKE ADVANTAGE OF THE RETURN
OF AMBASSADOR HUANG FROM PEKING TO INFORM THE PRC OF A
NUMBER OF CONCRETE ACTIONS THE US HAS TAKEN OR IS TAKING TO
IMPLEMENT THE TRADE SECTIONS OF THE SHANGHAI COMMUNIQUE.
2. WE HAVE PREPARED A LIST OF IMPORTS AND EXPORTS THAT
APPEAR TO OFFER THE GREATEST POTENTIAL FOR US-PRC TRADE.
LIST FOLLOWS IN SEPTEL. YOU SHOULD INDICATE TO THE CHINESE
THAT THIS LIST IS MERELY PRELIMINARY. WE WOULD WELCOME
THEIR COMMENT ON IT AND CLARIFICATION FROM THEM OF WHAT THEY
WOULD LIKE TO BUY AND SELL. WE FOR OUR PART ARE PREPARED TO
PROVIDE THEM WITH WHATEVER COMMERCIAL INFORMATION THEY WOULD
LIKE--INCLUDING ECONOMIC DATA, MARKET INFORMATION, TRADE
REGULATIONS, ETC. WE HOPE THAT THEY WILL BE ABLE TO
PROVIDE US WITH SIMILAR INFORMATION IN RETURN.
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2
3. YOU SHOULD INFORM AMBASSADOR HUANG THAT WE WILL CONSIDER
FAVORABLY EXPORT LICENSE APPLICATIONS FOR A BROAD RANGE OF
COMMODITIES INTENDED FOR PEACEFUL END USES.
4. YOU SHOULD INFORM AMBASSADOR HUANG THAT THE PRESIDENT
HAS TAKEN ACTION TO REMOVE THE SPECIAL LICENSING REQUIREMENT
FOR US AIRCRAFT AND VESSELS VISITING THE PRC. AT THE SAME
TIME, US PORT SECURITY REGULATIONS HAVE BEEN AMENDED TO
PERMIT CHINESE VESSELS TO VISIT US PORTS ON THE SAME BASIS
AS THOSE FROM THE USSR, THAT IS AFTER MAKING A REQUEST
14 DAYS IN ADVANCE. SHOULD PRC-REGISTERED AIRCRAFT DESIRE
TO FLY TO OR OVER US TERRITORY THEY SHOULD INFORM THE US
GOVERNMENT AS FAR IN ADVANCE AS POSSIBLE OF THE DETAILS OF
THE FLIGHT. ADVANCE NOTIFICATION AND A SPECIAL PERMIT ARE
REQUIRED OF ALL AIRCRAFT REGISTERED IN A STATE WHICH IS
NOT A MEMBER OF THE INTERNATIONAL CIVIL AVIATION ORGANIZATION
{ICA0}. OUR UNDERSTANDING IS THAT THE PRC DOES NOT CONSIDER
ITSELF A MEMBER OF ICAO.
5. YOU SHOULD INFORM AMBASSADOR HUANG THAT WE ARE ABOUT TO
ENCOURAGE THE FORMATION OF A COUNCIL OF PROMIMENT BUSINESS-
MEN AND MANUFACTURERS DEDICATED TO THE PROMOTION OF US-PRC
TRADE. THE COUNCIL WILL BE IN TOUCH WITH THE CHINA COUNCIL
FOR THE PROMOTION OF INTERNATIONAL TRADE {CCPIT} AND MAY
WISH TO SPONSOR A VANGUARD TRADE DELEGATION OF PROMINENT
US BUSINESSMEN AND ONE OR MORE US GOVERNMENT REPRESENTATIVES
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3
VISIT
CHINESE FOREIGN TRADE CORPORATIONS, RESEARCH
INSTITUTES,
MARKETING AGENCIES AND TRADE FAIR AUTHORITIES
THE
PRC. WE WILL INFORM AMBASSADOR HUANG WHEN THE
COUNCIL
HAS BEEN FORMED AND WILL REQUEST HIS ASSISTANCE IN
TATING CONTACT BETWEEN IT AND THE CCPIT.
3/7
HAVE PREPARED A MEMORANDUM SETTING FORTH POSSIBLE
TOPICS FOR DISCUSSION IN PARIS BETWEEN YOU AND
BASSADOR HUANG OR YOUR REPRESENTATIVES. YOU SHOULD
THE MEMORANDUM, WHICH FOLLOWS SEPTEL, WITH HUANG,
INVOICATING THAT THESE ARE TOPICS WE BELIEVE IT DESIRABLE
DISCUSS LATER AT TIMES TO BE MUTUALLY AGREED. WE WOULD
L'ECLCOME
HIS COMMENTS AND THE PROPOSAL OF ADDITIONAL TOPICS
THE
CHINESE SIDE AFTER HE HAS HAD AN OPPORTUNITY TO
IT.
(THIS PARAGRAPH IS TO BE USED ONLY IF THE SUBJECT OF
IS
DROPPED FROM THE MEMORANDUM TO BE LEFT WITH
DOR HUANG } {RECOMMENDED BY COMMERCE, OPPOSED BY STATE}
:
AMBASSADOR HUANG ASKS ABOUT MOST FAVORED NATION {MFN}
FOR THE PRC, YOU SHOULD REPLY THAT MFN SHOULD BE A
FOR LATER DISCUSSIONS AFTER MAJOR INITIAL ISSUES,
PRIVATE CLAIMS, ARE RESOLVED.
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SUGGESTED TELEGRAM IMPLEMENTING NSSM-149
SECRET
ACTION: PARIS
NODIS/HOMER
FOR AMBASSADOR ONLY FROM THE SECRETARY
SUBJ: US-PRC - TRADE -- MEMORANDUM TO BE LEFT WITH
AMBASSADOR HUANG
REF: STATE
A. THE UNITED STATES NOTES THAT THERE ARE A NUMBER
OF HIGHLY TECHNICAL AND SPECIALIZED SUBJECTS RELATING TO
THE FACILITATION OF TRADE BETWEEN THE UNITED STATES AND
THE PEOPLE'S REPUBLIC OF CHINA WHICH COULD BE THE TOPIC
OF DISCUSSION IN PARIS AT TIMES TO BE DETERMINED BY
MUTUAL AGREEMENT.
WE WOULD WELCOME AN OPPORTUNITY FOR DISCUSSION AT A
LATER DATE OF THE FOLLOWING SUBJECTS IN PARTICULAR:
1. SETTLEMENT OF PRIVATE CLAIMS BETWEEN THE TWO
COUNTRIES.
WE RECALL THAT SECRETARY OF STATE ROGERS RAISED THIS
ISSUE IN INFORMAL CONVERSATION WITH MINISTER OF FOREIGN
AFFAIRS CHI P'ENG-FEI IN PEKING AND THAT THE MINISTER
INDICATED THAT THIS WAS A MATTER WHICH COULD BE DISCUSSED
BY THE TWO SIDES. WE REMAIN CONCERNED THAT PRIVATE
CLAIMANTS MAY ATTEMPT TO ATTACH CHINESE COMMERCIAL
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PROPERTY OR SHIPS WHICH COME WITHIN THE JURISDICTION OF
U.S. COURTS BY BRINGING LAWSUITS AS TRADE DEVELOPS
BETWEEN OUR TWO COUNTRIES. WE WOULD BE UNABLE TO
PREVENT SUCH SUITS DESPITE THE ADVERSE IMPACT THAT THEY
WOULD HAVE ON THE PROGRESSIVE DEVELOPMENT OF MUTUALLY
BENEFICIAL TRADE BETWEEN THE US AND CHINA. IN THESE
CIRCUMSTANCES WE BELIEVE THAT OUR TWO COUNTRIES SHOULD
NEGOTIATE AN EQUITABLE SETTLEMENT OF PRIVATE CLAIMS
BEFORE TRADE REACHES DIMENSIONS WHICH MIGHT PROMPT A
CLAIMANT TO INITIATE A COURT SUIT. SUCH A SETTLEMENT
WOULD SIGNIFICANTLY FACILITATE THE LONG-TERM GROWTH OF
TRADE BETWEEN OUR TWO COUNTRIES.
2. SCHEDULED AIR SERVICE BETWEEN THE TWO COUNTRIES.
ONE OBVIOUS WAY OF FACILITATING TRADE WOULD BE TO
INAUGURATE SCHEDULED AIR SERVICE BETWEEN THE UNITED STATES
AND THE PEOPLE'S REPUBLIC OF CHINA. ACTION BY THE U.S.
CIVIL AVIATION BOARD WOULD BE NECESSARY TO DETERMINE WHICH
U.S. AIRLINE WOULD BE AUTHORIZED TO SERVE AIR ROUTES WHICH
MIGHT BE ESTABLISHED BY MUTUAL AGREEMENT BETWEEN OUR TWO
COUNTRIES. WE WOULD WELCOME AN EXPRESSION OF THE CHINESE
VIEW ON INAUGURATION OF RECIPROCAL SCHEDULED AIR SERVICE.
3. N.B. STATE RECOMMENDS INCLUSION OF FOLLOWING
PARAGRAPH {"A"}. COMMERCE OPPOSES THIS TEXT AND PROPOSES
SUBSTITUTION OF ANOTHER PARAGRAPH {"B"}, WHICH STATE
OPPOSES. THE REASONS FOR THESE POSITIONS ARE GIVEN IN
THE TRANSMITTING MEMORANDUM.
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{"A"} "IN THE TALKS IN PEKING THE CHINESE SIDE RAISED THE
ISSUE OF MOST FAVORED NATION STATUS AND THE EFFECT THAT
THE LACK OF IT WOULD HAVE ON THE DEVELOPMENT OF TRADE
RELATIONS BETWEEN OUR TWO COUNTRIES. THE US SIDE NOTED
THAT SUCH STATUS IS CUSTOMARILY CONFERRED AFTER NEGOTIATION
OF A BILATERAL AGREEMENT AND THAT SPECIAL LEGISLATION MUST
BE SOUGHT FROM THE U.S. CONGRESS IN ORDER TO CONFER MOST
FAVORED NATION STATUS UPON SOCIALIST STATES. AT PRESENT
ONLY POLAND AND YUGOSLAVIA HAVE SUCH STATUS AMONG EASTERN
EUROPEAN STATES, AND LEGISLATION IS PENDING IN CONGRESS
TO GRANT MOST FAVORED NATION STATUS TO ROMANIA. WE WOULD
BE PREPARED TO ENTER NEGOTIATIONS ON MFN WITH THE PEOPLE'S
REPUBLIC OF CHINA AT A MUTUALLY CONVENIENT TIME."
{COMMERCE RECOMMENDS INCLUSION OF THE FOLLOWING TEXT;
STATE OPPOSES-SEE ABOVE.
{"B"} "SETTLEMENT OF EXPORT-IMPORT BANK CLAIMS AGAINST
THE PRC.
"ONE WAY OF FACILITATING TRADE WOULD BE THROUGH
UTILIZATION OF FINANCING UNDER FAVORABLE TERMS EXTENDED BY
THE EXPORT-IMPORT BANK. EXPORT-IMPORT BANK CANNOT EXTEND
SUCH CREDIT AT PRESENT BECAUSE IT DOES NOT HAVE LEGAL
AUTHORITY TO DO so. THERE IS ALSO THE PROBLEM OF OUTSTANDING
BALANCES ON FOUR CATEGORIES OF EXPORT-IMPORT BANK FINANCING
PROVIDED CHINA BEFORE THE FOUNDING OF THE PRC: CARGO VESSELS;
GENERATING EQUIPMENT AND ENGINEERING SERVICES; RAILWAY REPAIR
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MATERIALS, AND EQUIPMENT FOR COAL MINING. WE BELIEVE THAT
THE PRC HAS ENJOYED THE USE OF THESE ITEMS. WE WOULD BE
WILLING TO SEEK LEGISLATION ENABLING THE EXPORT-IMPORT
BANK TO EXTEND FINANCING TO TRADE BETWEEN OUR COUNTRIES
PROVIDED A SATISFACTORY SETTLEMENT ON THESE OUTSTANDING
BALANCES IS ACHIEVED.
4. THE PROBLEM OF INDUSTRIAL PROTECTION.
WE NOTE THAT THE PEOPLE'S REPUBLIC OF CHINA, UNLIKE
THE USSR AND SOME OTHER SOCIALIST STATES, IS NOT A
SIGNATORY OF INTERNATIONAL CONVENTION FOR THE PROTECTION
OF INDUSTRIAL PROPERTY {PARIS UNION}. NEVERTHELESS, WE ARE
PREPARED TO FACILITATE CHINESE REGISTRATION OF TRADEMARKS
AND PATENTS IN ACCORDANCE WITH OUR LAWS AND REGULATIONS.
WE WOULD WELCOME RECIPROCAL TREATMENT FOR OUR CITIZENS BY
THE PEOPLE'S REPUBLIC OF CHINA.
B. THE UNITED STATES ALSO WISHES TO INFORM THE
PEOPLE'S REPUBLIC OF CHINA OF LONG-STANDING RESTRICTIONS
IMPOSED BY LEGISLATION OR INTERNATIONAL AGREEMENT UPON
CERTAIN KINDS OF IMPORTS INTO THE UNITED STATES. THEY ARE
DESCRIBED IN THE ATTACHED ANNEX TO THIS MEMORANDUM. SHOULD
THE CHINESE SIDE so DESIRE, WE WOULD BE PLEASED TO EXPLAIN
THESE IN DETAIL.
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SUGGESTED TELEGRAM IMPLEMENTING NSSM-149
SECRET
ACTION: AMEMBASSY PARIS
STATE
NODIS/HOMER
FOR AMBASSADOR ONLY FROM THE SECRETARY
SUBJ: US-PRC TRADE -- MEMORANDUM TO BE LEFT WITH AMBASSADOR
HUANG - ANNEX
REF: STATE
1. RESTRICTIONS ON THE IMPORTATION OF COTTON TEXTILES.
THE UNITED STATES REGULATES IMPORTS OF COTTON TEXTILES
IN ACCORDANCE WITH THE PROVISIONS OF THE LONG-TERM ARRANGE-
MENT REGARDING INTERNATIONAL TRADE IN COTTON TEXTILES {LTA},
SIGNED AT GENEVA ON FEBRUARY 9, 1962 AND EXTENDED TO
SEPTEMBER 30, 1973.
THE LTA IS A MULTILATERAL ARRANGEMENT IN WHICH 30 OF
THE WORLD'S LEADING COTTON TEXTILE IMPORTING AND EXPORTING
COUNTRIES PARTICIPATE. NEGOTIATED UNDER THE AUSPICES OF
THE GENERAL AGREEMENT ON TARIFFS AND TRADE {GATT}, IT ALLOWS
THE UNITED STATES AND OTHER IMPORTING COUNTRIES TO LIMIT
COTTON TEXTILE IMPORTS IN ORDER TO PREVENT DISRUPTION OF
THEIR DOMESTIC MARKETS, AND ALSO ASSURES EXPORTING COUNTRIES
OF THE OPPORTUNITY FOR ORDERLY GROWTH IN THEIR COTTON
TEXTILE EXPORTS. IN ITS ADMINISTRATION OF THIS ARRANGE-
MENT, THE US DEFINES AS COTTON TEXTILES THOSE ITEMS IN WHICH
COTTON IS THE CHIEF FIBER BY VALUE. THESE TEXTILES ARE
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CLASSIFIED INTO 64 CATEGORIES.
ARTICLE 3 OF THE LTA AUTHORIZES PARTICIPATING COUNTRIES
WHICH ARE COTTON TEXTILE IMPORTERS TO REQUEST CONSTRAINTS
ON EXPORTS OF PRODUCTS FROM PARTICIPATING SUPPLIER COUNTRIES;
AND ARTICLE 6 {C} ENVISAGES A SIMILAR ACTION AGAINST NON-
PARTICIPANTS IN ORDER TO ASSURE EQUITY FOR PARTICIPATING
SUPPLIER COUNTRIES. IN OTHER WORDS, THE LTA ENVISAGES,
AND THE EFFECTIVE MAINTENANCE OF THE PROGRAM REQUIRES,
THAT IMPORTS FROM NON-PARTICIPANTS BE SUBJECT TO LIMITATIONS
so AS TO PREVENT DISCRIMINATION AGAINST PARTICIPANT SUPPLIERS.
UNDER THE TERMS OF THE LTA, THE US HAS MOVED TO REGULATE
IMPORTS OF COTTON TEXTILES INTO THE US MARKET. UNDER
ARTICLE 4 THERE ARE CURRENTLY IN EFFECT 30 BILATERAL GOVERN-
MENT TO GOVERNMENT AGREEMENTS. IN ADDITION, 10 ARTICLE 3
ACTIONS ARE OUTSTANDING WITH REGARD TO IMPORTS OF COTTON
TEXTILES FROM EIGHT OTHER SUPPLYING COUNTRIES. THESE
ACTIONS HAVE BEEN TAKEN IN ORDER TO PREVENT DISRUPTION OF
THE US TEXTILE MARKET BY IMPORTS OF COTTON TEXTILES FROM
FOREIGN SUPPLIERS.
IN DETERMINING WHETHER THE MARKET IS DISRUPTED OR
THREATENED WITH DISRUPTION TOTAL IMPORTS FROM ALL COUNTRIES
MUST BE TAKEN INTO ACCOUNT; AND WE MUST DEAL WITH HISTORIC
SUPPLIERS WHO ASK WHY THEIR EXPORTS SHOULD BE CONTROLLED
WHILE NEWCOMERS ARE PERMITTED TO GAIN A FOOTHOLD IN THE
US.
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UNDER EXISTING POLICY THE US MAY BE REQUIRED, OUT OF
CONSIDERATION OF EQUITY FOR ITS TRADITIONAL SUPPLIERS, TO
LIMIT ITS IMPORTS OF COTTON TEXTILES FROM THE PEOPLE'S
REPUBLIC OF CHINA IN ORDER TO AVOID THE THREAT OF DISRUPTION
OF ITS DOMESTIC MARKET, AND TO PERMIT THE ORDERLY DEVELOP-
MENT OF BILATERAL TRADE ON A MUTUALLY BENEFICIAL BASIS.
2. RESTRICTIONS ON IMPORTATION OF CERTAIN KINDS OF
MEAT.
SEVERAL ACTS OF CONGRESS REQUIRE THE U. S. SECRETARY
OF AGRICULTURE TO ASSUME THE RESPONSIBILITY FOR PROTECTING
THE UNITED STATES AGAINST DISEASES OF FOREIGN ORIGIN.
THE ACT OF JUNE 17, 1930, CONTAINS AN ABSOLUTE PRO-
HIBITION AGAINST THE IMPORTATION INTO THE UNITED STATES OF
DOMESTIC RUMINANTS OR SWINE AND FRESH, CHILLED, OR FROZEN
MEAT OF ALL RUMINANTS OR SWINE FROM COUNTRIES DECLARED TO
BE INFECTED WITH FOOT-AND-MOUTH DISEASE OR RINDERPEST.
ONCE SUCH DECLARATION IS MADE, NO GOVERNMENTAL AGENCY HAS
ANY DISCRETIONARY AUTHORITY AND THE PROHIBITION IS ABSOLUTE.
BOTH FOOT-AND-MOUTH DISEASE AND RINDERPEST ARE BELIEVED TO
EXIST IN THE PEOPLE'S REPUBLIC OF CHINA.
IN ADDITION TO THE PROHIBITORY STATUTE, THERE ARE A
NUMBER OF OTHER ACTS OF CONGRESS WHICH PROVIDE THE SECRETARY
OF AGRICULTURE WITH THE AUTHORITY AND RESPONSIBILITY FOR
ESTABLISHING RESTRICTIONS APPLICABLE TO THE IMPORTATION OF
ANIMALS OR ANIMAL PRODUCTS THAT MIGHT TRANSMIT DISEASES OF
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LIVESTOCK AND POULTRY. THE DEPARTMENT'S CURRENT IMPORT
RESTRICTIONS ARE APPLICABLE TO CATTLE, SHEEP, GOATS, OTHER
RUMINANTS, SWINE {INCLUDING DOMESTIC HOGS AND ALL VARIETIES
OF WILD HOGS}, HORSES {INCLUDING MULES, BURROS, ZEBRAS},
DOGS TO BE USED AROUND LIVESTOCK, AND POULTRY {CHICKENS,
DUCKS, GEESE, SWANS, TURKEYS, PIGEONS, DOVES, PHEASANTS,
GROUSE, PARTRIDGES, QUAIL, GUINEA FOWL, PEAFOWL, AND
HATCHING EGGS FROM THESE BIRDS}. RECENTLY PSITTACINE
BIRDS AND GREATER AND LESSER HILL MYNAH BIRDS HAVE BEEN
ADDED TO THE RESTRICTED LIST BECAUSE OF NEWCASTLE DISEASE.
OTHER ANIMAL PRODUCTS ARE POTENTIALLY ELIGIBLE BUT
ALL ARE REQUIRED TO BE CONSIGNED TO SPECIFICALLY APPROVED
ESTABLISHMENTS FOR FURTHER TREATMENT OR PROCESSING. MEAT
PRODUCTS, FULLY COOKED BY A COMMERCIAL METHOD AND PROPERLY
CANNED MAY BE PERMITTED ENTRY INSOFAR AS ANIMAL HEALTH IS
CONCERNED; HOWEVER, SUCH PRODUCTS ARE SUBJECT TO GOVERNMENT
MEAT INSPECTION REQUIREMENTS.
THE MEAT AND POULTRY INSPECTION PROGRAM OF THE U. S.
DEPARTMENT OF AGRICULTURE ADMINISTERS LAWS AND REGULATIONS
GOVERNING INSPECTION REQUIREMENTS FOR ALL FORMS OF RED MEAT
AND POULTRY PRODUCTS INCLUDING CANNED PRODUCTS BUT EXCLUDING
MEAT OF RABBITS, GAME BIRDS AND WILD ANIMALS. TO MEET
THESE REQUIREMENTS A FOREIGN MEAT EXPORTING COUNTRY MUST:
1} APPLY, THROUGH DIPLOMATIC CHANNELS, FOR OFFICIAL
RECOGNITION OF THEIR SYSTEM OF EXPORT MEAT INSPECTION
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2} PROVIDE, AT THE TIME OF APPLICATION, COPIES OF LAWS
AND REGULATIONS WHICH WILL GOVERN ACTIVITIES IN THE PLANTS
HANDLING PRODUCT FOR EXPORT
3} AFTER IT HAS BEEN DETERMINED THAT THE APPLICABLE
LAWS AND REGULATIONS CORRESPOND TO U. S. STANDARDS, INVITE
A TEAM OF U. S. DEPARTMENT OF AGRICULTURE EXPERTS TO PERFORM
ON-SITE INSPECTION OF THE SYSTEM IN OPERATION.
IF AT THIS POINT THE U. S. DEPARTMENT OF AGRICULTURE'S
FINDINGS ARE FAVORABLE, THE FOREIGN EXPORTING NATION CAN
BE AUTHORIZED TO SHIP MEAT AND/OR POULTRY TO THE UNITED
STATES. IN CONNECTION WITH THE REQUIREMENTS OF THE MEAT
AND POULTRY INSPECTION PROGRAM, U. S. INSPECTORS USUALLY
VISIT "APPROVED" FOREIGN PLANTS FOUR TIMES ANNUALLY.
THE MEAT IMPORT ACT OF 1964 REQUIRES THE PRESIDENT TO
LIMIT IMPORTS OF FRESH, CHILLED OR FROZEN BEEF AND VEAL ,
MUTTON AND GOAT MEAT. THE LAW ESTABLISHES A FORMULA, BASED
ON THE RELATIONSHIP BETWEEN IMPORTS AND DOMESTIC COMMERCIAL
PRODUCTION, FOR PROCLAIMING A QUOTA WHEN ESTIMATED IMPORTS
EXCEED TRIGGER LEVELS. WHEN MEAT IMPORTS APPROACHED THE
TRIGGER LEVEL IN 1968, A VOLUNTARY MEAT EXPORT RESTRAINT
PROGRAM WAS ADOPTED WITH THE MAJOR SUPPLYING COUNTRIES
AGREEING TO LIMIT EXPORTS TO THE UNITED STATES TO SPECIFIC
LEVELS TO AVOID THE NEED TO IMPOSE AN IMPORT QUOTA.
VOLUNTARY RESTRAINTS ARE STILL IN EFFECT. PROVISIONS CAN
BE MADE FOR NEW SUPPLIERS.
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3. RESTRICTION ON IMPORTATION OF CERTAIN KINDS OF FURS.
CURRENT U.S. TARIFF LEGISLATION PROHIBITS IMPORTATION
FROM EITHER CHINA OR THE USSR OF SEVEN KINDS OF SKINS:
ERMINE, FOX, KOLINSKY, MARTEN, MINK, MUSKRAT AND WEASEL,
RAW OR NOT DRESSED OR DRESSED. THE PROHIBITION DOES NOT
APPLY TO GARMENTS MANUFACTURED FROM SUCH SKINS.
4. PROHIBITION OF IMPORTATION OF CERTAIN ENDANGERED
ANIMAL SPECIES.
THE DEPARTMENT OF INTERIOR HAS THE AUTHORITY TO
PROHIBIT THE IMPORTATION OF THE SKINS OR OTHER PRODUCTS OF
CERTAIN SPECIES OF ANIMALS WHICH ARE ON THE ENDANGERED
SPECIES LIST FOR PURPOSES OTHER THAN PROPAGATION AND
ESSENTIAL SCIENTIFIC PURPOSES. CERTAIN ANIMALS ON THE
PROHIBITED LIST, SUCH AS THE DOUC LANGUR AND THE WILD YAK,
ARE NATIVE TO CHINA - THE SIBERIAN TIGER MAY ALSO SOON BE
LISTED AS AN ENDANGERED SPECIES.
5. ANTI-DUMPING REGULATIONS. THE ANTIDUMPING ACT OF
1921 {19 U.S.C. 160} PROVIDES A REMEDY AGAINST INJURY DUE
TO UNFAIR PRICING BY FOREIGN SUPPLIERS IN THE U.S. MARKET.
SALES AT LESS-THAN-FAIR VALUE {LTFV} ARE GENERALLY
CONSIDERED TO OCCUR WHEN A PRODUCT IS SOLD FOR EXPORT TO
THE UNITED STATES AT A PRICE {I.E., U.S. PURCHASE PRICE}
LOWER THAN THE SELLER CHARGES IN HIS HOME MARKET, AFTER
ADJUSTMENTS HAVE BEEN MADE FOR CIRCUMSTANCES OF SALE,
DIFFERENCES IN QUANTITIES, AND DIFFERENCES IN THE MERCHANDISE
COMPARED.
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THE ANTIDUMPING ACT REQUIRES THE SECRETARY OF THE
TREASURY TO ISSUE A DUMPING FINDING IMPOSING AN ADDITIONAL
DUTY WHENEVER TWO CRITERIA ARE MET: FIRST, THAT A CLASS
OR KIND OF FOREIGN MERCHANDISE IS BEING, OR IS LIKELY TO
BE, SOLD IN THE UNITED STATES AT LESS-THAN-FAIR VALUE
{LTFV}; AND SECOND, THAT AN INDUSTRY IN THE UNITED STATES
IS BEING OR IS LIKELY TO BE INJURED, OR IS PREVENTED FROM
BEING ESTABLISHED, BY REASON OF THE IMPORTATION OF SUCH
MERCHANDISE INTO THE UNITED STATES. DETERMINATION OF LTFV
SALES IS MADE BY THE SECRETARY OF THE TREASURY, WHILE
DETERMINATION OF INJURY IS MADE BY THE TARIFF COMMISSION.
THE CRITERIA FOR DETERMINING WHETHER IMPORTED PRODUCTS
ARE BEING SOLD AT LTFV IN THE U.S. MARKET ARE ESTABLISHED
BY REGULATIONS PROMULGATED BY THE SECRETARY OF THE TREASURY
{19CFR, PART 153}. FOR PURPOSES OF MAKING A FAIR VALUE
COMPARISON WITH THE U.S. PURCHASE PRICE, FOREIGN MARKET
VALUE MAY BE MEASURED IN SEVERAL WAYS. USUALLY, FOREIGN
MARKET VALUE IS THE PRICE CHARGED FOR HOME CONSUMPTION IN
THE EXPORTING COUNTRY. HOWEVER, IF THE QUANTITY SOLD IN
THE HOME MARKET IS so SMALL IN RELATION TO THE QUANTITY
EXPORTED TO COUNTRIES OTHER THAN THE UNITED STATES AS TO
BE AN INADEQUATE BASIS FOR COMPARISON WITH U.S. IMPORTS,
THEN THE FOREIGN MARKET VALUE IS BASED ON THE PRICE OF
SALES IN THOSE OTHER COUNTRIES. IF THESE TWO METHODS ARE
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INADEQUATE, A "CONSTRUCTED VALUE" BASED ON THE COST OF
PRODUCTION IS USED. IN THE CASE OF GOODS FROM COMMUNIST
COUNTRIES, WHICH MAY NOT BE PRICED ON THE BASIS OF
PRODUCTION COSTS, FAIR VALUE IS OFTEN BASED ON THE SALES
PRICE OF SIMILAR GOODS SOLD BY OTHER COUNTRIES.
THE U.S. PURCHASE PRICE IS CALCULATED AT THE U.S.
IMPORTER'S NET EX-FACTORY PURCHASE PRICE WHENEVER THE
BUYER AND SELLER ARE UNRELATED. IF THE U.S. BUYER IS A
SUBSIDIARY OR OTHERWISE RELATED TO THE FOREIGN SELLER,
THEN THE U.S. PURCHASE PRICE IS USUALLY CALCULATED FROM
THE PRICE CHARGED TO UNRELATED U.S. PURCHASERS.
IF THE SECRETARY OF THE TREASURY FINDS SALES AT LESS-
THAN-FAIR VALUE AND IF THE TARIFF COMMISSION FINDS INJURY,
THEN A SPECIAL DUMPING DUTY--GENERALLY EQUAL TO THE
DIFFERENCE BETWEEN THE HIGHER FOREIGN MARKET VALUE AND THE
LOWER U.S. PRICE PURCHASE--IS LEVIED ON THE IMPORTS IN
QUESTION.
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ACTION:
PARIS
NODIS/HOMER
SUBJ: COMMODITIES FOR EXPORT TO THE PRC
THE FOLLOWING GENERAL CATEGORIES OF COMMODITIES MADE OR
GROWN IN THE UNITED STATES APPEAR TO OFFER THE BEST POTENTIAL
FOR EXPORT TO THE PRC, SUBJECT TO FULL INFORMATION ON END
USE FOR THOSE COMMODITIES REQUIRING VALIDATED LICENSES.
WHEAT AND GRAINS
RUBBER AND RUBBER PRODUCTS, NATURAL AND SYNTHETIC
SYNTHETIC TEXTILES
MOST METALS AND SEMIFABRICATED METAL PRODUCTS
FERTILIZERS
MOST CHEMICALS
PHARMACEUTICAL AND MEDICINAL PRODUCTS
MINING MACHINERY
MOST PETROLEUM EXPLORATION, DRILLING, AND PRODUCTION
EQUIPMENT FOR SHALLOW TO MEDIUM DEPTHS
TEXTILE MACHINERY
FOOD INDUSTRY MACHINERY, AND OTHER MACHINES TO MANUFACTURE
A WIDE RANGE OF CONSUMER GOODS
SECRET
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
SECRET
2
ROLLING MILLS, MANY TYPES
REFRIGERATION AND AIR CONDITIONING EQUIPMENT
PLASTICS MANUFACTURING AND FABRICATING EQUIPMENT
MOST INDUSTRIAL PROCESS CONTROL EQUIPMENT
MANY TYPES OF MACHINE TOOLS
AGRICULTURAL MACHINERY
ENGINES, GASOLINE AND DIESEL, MOST TYPES
TELEVISION AND RADIO EQUIPMENT, HOME AND STUDIO TYPES
ELECTRONIC COMPONENTS, MANY TYPES
ELECTRONIC TEST EQUIPMENT, MANY TYPES
OFFICE EQUIPMENT AND MACHINES
SOME ELECTRONIC COMPUTERS
ELECTRIC GENERATION AND TRANSMISSION EQUIPMENT
EARTH MOVING AND CONSTRUCTION EQUIPMENT
AUTOMOTIVE EQUIPMENT, INCLUDING MOST TRUCKS, CARS, BUSES, ETC.
RAILWAY EQUIPMENT, FIXED AND ROLLING
CIVIL AIRCRAFT, INCLUDING AVIONICS AND FLIGHT CONTROL
EQUIPMENT ESSENTIAL TO SAFETY
GROUND AVIATION ELECTRONIC EQUIPMENT NEEDED F.O.R SAFETY,
SEVERAL TYPES
LABORATORY INSTRUMENTS, MANY TYPES
PHYSICAL PROPERTIES TESTING EQUIPMENT, MANY TYPES
CAMERAS, PROJECTORS AND OPTICAL EQUIPMENT OF MOST COMMERCIAL
TYPES
TECHNOLOGY FOR MANUFACTURING A WIDE VARIETY OF CONSUMER
GOODS AND COMMON INDUSTRIAL PRODUCTS
Reproduced at the Richard Nixor Presidential Library DECLASSIFIED
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
MO DA
MO DA HR
NSC CORRESPONDENCE PROFILE
424
42418
3556
HOLDRIDGE
LOG IN/OUT ONLY
TO: PRES
FROM: ELIOT
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Made with
SUBJECT:
PRC
REFERENCE: S/S
OTHER
NOT XEROXED
APP'TS: PRES
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INTERNAL ROUTING AND DISTRIBUTION
ACTION REQUIRED
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EUROPE/CANADA
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REFER TO STATE
(
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UNITED NATIONS
ANY ACTION NECESSARY
(
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ECONOMIC
(Pune)
x
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(
)
SCIENTIFIC
DUE DATE:
LR PLANNING
COMMENTS: (Including (4/28) SpecialInstructions)
PROGRAM ANALYSIS
NSC PLANNING
x
CONGRESSIONAL
DATE
FROM
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INTERNAL/INTERIM ROUTING
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COPIES: (AS MARKED ABOVE)
DATE
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SA,
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SPECIAL DISPOSITION COMMENTS:
WHC
SUSPENSE CY ATTACHED: YES
NO
SUBF
Reproduced at the Richard Nixon Presidential Library DECLASSIFIED
* GPO: 1972-455-927
This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.