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NSSM 149/СӀЕРЭМ 21
March 10, 72
S
From: HAK and Peter M. Flanigan
To: SecState
SecTreas
SecDef
SecAgric
SecComm
DCI
US-PRC Trade
Pres has directed study of ways in which statement on trade in Joint
US-PRC Communique of Feb 28, 72 should be implemented.
Should address PRC attitudes and practices in conducting trade with
other countries, with special emphasis on countries with which PRC does
nothave diplo relations, and past trading patterns and specificcommoditie
which have constituted principal imports and exports of PRC. Should
examine pol aspects of PRC trading arrangements.
Consideration of followng means of facilitating trade should be consider
--ways in which USG can begin and facilitate exch of general trade
info and data between US and PRV; possible uses of our third-country
contact should be examined
--measures which USG can take to facilitate EXE contacts between
exporters and importers on both sides. Include exam of role which should
be playdd by USG and how it should relate to UR private individuals
and corporations
--effects of US-PRC trade O fChina COCOM differential
--effect of non-tariff and tariff barriers and claims settlement
roblem on US-PRC trade
--addl issues including estab of trade centers, exch of trade
dels, addl means of contact, other measures to facilitate trade.
To be conducted by ad hoc group chaired by Stte including reps of addees
and PA. Submit to CIEP RG and SRG by March 24, 72
DM 170/CIEPDM 7; DM 188, 195, 20#
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.
Memo for Haig
From: Jon Howe
June 9, 1972
S/NODIS/HOMER
#3556
Chiaa Trade DM
Attaches is joint DM and CIEODM which HAK signed and asked that you "get out
ASAP". CIEP concurs providing changes made in due dates for two reports.
Although there is remote possibility HAK wanted to have rapid response, mor
likely he overlooked need to change date. Originally memos toe be submitted
to Pres by June 10 (obviously OBE) and June 16. IEP
suggests slipping to June 23 and July 3 respectively. I concur.
If your agree, changes will be made andinstruction gotten out to bureaucracy
immediately. Presumbbly HAK has considered all aspects of this instruction
including tact that Chi would-shortly in Paris be given long memo re trade.
Imp menting cble already in clearance probess althoughChiAbm in Paris has not
yet returned. Presumably HAK does not want to "save" this "news, but I
thought you would want to consider again this aspects.
Note in HAIG writing: Dispatch. AH
Memo for HAK
From: John Holdridge/Robert Hormats
May 10, 1972
S/NODIS/HOMER
#3556
Implementation of SM 149 China Trade
As you requested at March 31 SRG meeting, State/Comm have prepared recoms
for "Action Program" for implementing SM 149 on trade with PRC. Also attached
are proposed nego instructions to be sent Amb Watson and draft memo to be given
Amb Huang.
Major problem with paper is that on balance tone of presentation to Chinese is
negative. Although paper recoms number of means of acilitating trade, it also
calls for our informing PRC--primarily in ememo for Huang--of myriad regs and
laws with which they will have to comply in order to trade with us. While we
agree certain of our rest rictions and legal constraints should be brought to
attention of PRC at this time, we should not overwhelm them. Question of settle-
ment of private claims should receive high priority, and it is also advisable
to inform Chi in near future of our textile proglem; however, not necessary
at this time to raise quetion of debts allegedly owed by China to Eximbank,
our restricionts on prob ibition of endangered animal species, antidumping
reg., etc.
Paper's recoms divided into: I. Actions, both unilat and re PRC, which we should
take within next three months; EE II. Action which should be taken three-six
months from now; III. Actions which should be taken six-twelve months from now.
IV. Actions which can be taken at any time.
Ia. Within next threemonths:
--notify PRC we are in process of forming private Sino-American Trade
Councilwhich will act as central clearing house for info and reserarch on PRC
trading practices for US businessmen.
--advise PRC of rangep of products which we will consider favorably for
Apdrt license applications Prepare list of goods whichChina might export to US.
Invite Chi to comment on lists and suggest additional items. Offer to provide
trade info to PRC and ask whether PRC would be willing to provide info to us.
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.
--amend transportation order T-2 to allow reciprocal port visits by
US and PRC vessels, thus accorind China same treatment presently accorded USSR.
(requires Pres action)
--present PRC memo otlining possible topics for future discussion including:
--settlement of private claims, increasingly important now that
direct trade is increasing
--scheduled air services between China and UA
--US import restrictions on textiles
--explanation of US restrictions and criteris for determining market
disruption and dumping, and procedures for handling these problems, and offer
to provide more detailed explanation
--industrial property protection issues.
Within this categary there are two issues on which State and Comm differ:
MFN treatment for PRC
PRC (For Min Chi) raised mamter in Peking. State wishes to take cogni-
Z ance of PRC interests in MFN and offer to nego bilat agreement which would lead
to seeking legis to grant MFN status to PRC. Pros: responsive to PRC
inquiries; positive elemnt in developing trade relations; positive incentive
for PRC to settle private claims issue. Cons: Might make us appear over
anxious; legis reception uncertain; we haven not moved this far with Russians
who have been more insistent on this and are more important trading partner.
Comm recoms we make no mention of MFN in emo for Huang but instruct our Amb
to reply, if asked, that MFN should be subject for later dicussions after major
initial issues, such as claims, are resolved. Pros: Avoids appearance of
over eagerness; holds major sweetener in reserve. Cons: Not responseive to
PRC inquire; wuld leave memo to Huang largely negative in tone.
We belive neither option satisfactory. Premature to begin negos on MFN with
PRC without doing so with Sovs. We d not even have MFN with Romania, and
Cong is reluctant to move on our request for that. On other hand, to say
rothing would male it appear we were ignoring ForMin inquirey. We recom you
approve including in memo to PRC that we view MFN as subject for later discus-
sions. (Should not portray settlement of claims issue as quid for which we
owe China quo such as MFN. Settlement of claims problem should be portrayed
as being of mutual benefit, as it is.)
Settlement of Eximbank Debt
Eximbank asserts certan claims against PRC deriving from shipments of US goods
to China before PRC established in Oct 1949. It holds that until payments
aremade it cannot finance trade with PRC. Comm recoms that, if policy determina-
tion is made that debts are proper claims against PRC, this issue should be
inscribed in memo to Huang as one of subject for future disacussion. Pros:
Would permit early resolution of issues and determination whether Eximbank
financing would b available for US-PRC trade. Cons: Rases issue which is of
no current interest to PRC since it does not seek foreign financing at present;
could introduce as contentious issues other USG claims and PRC counter claims.
Saate recoms matter not be raised now, but that effect of ableged PRC failure
to repay exim debt on PRC eligibility for eximbank financing be considered
by National Advisory Council. Pros: would result in coord interagency determina-
tion on whether or not PRC eligible for Exim financing; permits considered
position on total USG claims against PRC' Cons: Runs risk of bringing wide
variety of agencies into decision-making process on what could be sentivie
matter uportant to our econ relations with PRC.
We reom we not raise matter with PRC at this time, since they have not asked
for Exim credits, but study matter. However, NAC, althogh usually forum for
studying financial issues of this type, is too large for task and fact of
study would quickly leak. Best means of handling would be to ask Tre asury to
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.
chair interagency cte to reviw problem.
Ib. Actions which USG should take unilat at this time:
--encourage US businessmen to invite their Chi counterparts to US
--begin review in NAC of alleged Chi delinquencies relative to Eximbank
--begin referring all businessmen wishing info on PRC trade to approp
office in Comm
--instruct AmConGen in Hong Kong to expand coop with Am Chof Comm
II. Near-term actions (3-6 months)
--announce formation of Sino-Am Trade Council. As one of first activite
it wold contact Chi Council for Promotion of Intl Trade re possibility of our
sending vanguard trade del to China. SATC would work in close coop withComm.
--initiate discussions of topics listed in memo to Hurag
--give Chi selective list of trade fairs in US and encourage attendance
--encourage SATC to organize trade exhibit in China
--invite PRC to hold trade exhibit in US.
III. Intermediate term actions (6-10 months)
--provide Comm and Agric asst to collective exhibitions by US firms in Chi
--seek through Paris to arrange for contact between US Commodity and
Credit Corp and PRC national cereals, oils and foodstuffs import and export
corp to explore possibility of grain sales.
IV. Actons which can be done at any time:
--explain to PRC that adequate end-use info required for all valid
export licenses cases by Comm
--ask PRC through Paris for details and procedral info on Chi trademark laws
--use AmConGen in HKto encourage specialized banking contacts to
facilitate trade with PRC (Treas reps wold act as liaison)
Comments
First issue is whether another SRG Meeting necessary. We do not think so.
Paper presents only two contentious issues to be decided, and we recom you make
those decision so that we can promptly begin our trade contacts with Chi in Paris.
Also believe memo to Huang should be modified to effect following changes:
--indicate we recog PRC interest in MFN but see this as.subject for
later discussions
--place greater stress on necessity of beginning discussions in near
future onsettement of claims
--delete ref to alleged PRC failure to repay Eximbank debt
--remove ref to US prohibitions on "certain endangered animal species'
--remove ref to US antidumping regs
--remove for time being ref to cotton textile issue, but present it
to Chin in sëparate memo in next several weeks. (Amb Watson should indicate
orally we will do this soon. )
--approve general scenario submitted by State, but ask that no mention
be made to PRC of US changes in transportation regs at this time. Request that
approp documents be submitted to Pres SO that he may at time of his choosing
make approp determinations re travel and reciprocal ship visits. Would be
inapprop to move on this now when question of PRC shipping to NVN is so controversia
Attached is memo from you and Flanigan to approp agencies informing them of
decisions and how they should proceed.
Recom: Sign Joint DM
Reproduced at the Richard Nixon Presidential Library
Note ASSIFIED This document HAK has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
Memo for HAK
From: Winthrop Brown, Ch, IG/EA
S/NODIS/HOMER
April 24, 72
#3556
Implementation of NSSM 149
Attach State/Comm recoms for impeletion of SM 149 and proposed nego instructions
to Amb Watson.
Highlights MFN and Eximbank debt issues.
Port Securityg regs and T-2 must be amended before Amb can be auth to inform
Huang that US flag carriers auth to enter Chi and PRC carriers auth to enter US.
Endorse recom that T-2 be amendmeed to permit US flag ships and ac to visit PRC.
If US scheduled airlines with auth to serve PRC (PanAm, TWA and Northwest)
not restrained from approching PRC individually as soon as T-2 in amended,
PRC could play off one US airline against another in way that would be contrary
to overall US intersts.
To minimize, we recom that when T-2 is amendmended, such action be accompanied
by public statement that eventual establish of scheduled services would be
subject to US-PRC intergov discussions. Urge that State be given advance notice
of T-2 amendment SO that we can instruct sehceuled Airlines not to approach PRC
bout esta scheduled services until auth to do so.
Memo for HAK
From: Holdridge/Hormats
May 8, 1972
#2463
Differential Treatment of PRC in COCOM List Review Negos
COCOM is presently reviewing items which it restricts for sale to Comm
countries. An ineragency paper asks for Pres decision on our position in that
review. Japan has repeatedly urged that COCOM eliminate the "China differ-
ential" which results in stricter appliction of COCOM controls on exports to
PRC than on exports to USSR or EE. During first phase of present review 15
of 45 "differential" items have been removed entirely from COCOM control or
from "China differential" status.
There is agreement in princile among agencies that we should reduce "differential"
as much aspossible. However, DD DOD feels items should be eliminated on item-
by-item basis and argues that there are two items which should be retained
for embargo to China alone--helium liquidation equipment and containers for
transportation of liquified gases. Several other COCOM members--with Japan
in forefront--plus State, Comm and NASA favor deletion of all "differential"
items from COCOM list and rejection of principle of "China differential"
Two options
Option A: Adopt general principle of termination of differential treatment
for PRC in COCOM
Option B: Deal with "China differential" on item-by-item bsis, with view to
retention of small number of "hard-core items for embargo to China alone.
Pros and cons of each set forth in propoed memo to Pres.
On balance TE we reom Pres approve A. Peter Flanigan concurs. This would put us
in position od advocating equal treatment for USSR and PRC in COCOM and remove
a Nother barrier to trade Reproduced at the Richard Nixon Presidential Library are itess on which we and
DECLASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
other COCOM countries agree require retention of "differential" this șhould be
done in form of "disguised differential"
Two suboptions:
--to retain through "disguised differential" the two items which DOD
wishes to haven included on COCOM list for embargo to PRC along, or
--to remove these items from embargoedlist
Arguments in favor of 2 are that these items can be purchased by PRC from USSR
and EE, to which they are not embargoes under COCOM, and that other COCOM
nations believe rationale for restricging their export to PRC--on grounds that
they contribute to Chi rocket tech--is weak. DOD, which favors 1, argues that
while items may be available in EE, amounts in which they would be available
to PRC are not-adequate; it is incorrett to assume such specialized items
would be made easily available by these countries to PRC; and that Japan might
not object strenuously to retention of controls on these items if most other
"differential" items are decontrolled.
We recom Pres approve 1. These items--if any "differential" is to be retained--
are logical candidates. However, because our cae of retention of these items
on list is weak and our holding out for includion might cause friction in our
relations with other COCOM countries and make coop with exx them in other
aspects of COCOM negos more difficult, we recom US not hold to this position if
it means open confrontation with other ∞ COM countries.
Recom: SIgn memo for Pres
Memo for Pres
From: SecState Rogers
March 20, 1972
G
#2463
State's views as cited above.
Memo for HAK
From: Ted Eliot
March 20, 1972
C
#2463
Options paper.
******
Memo for Pres
From: SecDef Laird
5-9-72
C
#3973
Def views.
Memo for SecState
SecDef
S ec Comm
Dir, NASA
From: HAK and Peter M. Flanigan
June 12, 1972
C
#2463
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.
Differential Treatment of PRC in COCOM List Review Negos
Pres has considered memo submitted by State and your positions on subject.
Has decided:
--In review now taking place in COCOM, US should adopt as general
principle termination of differential treatment for PRC as basis for development
of US nego position. In event there are particular items which we and other
COCOM countries agree should be treated on differential basis, we should
endeavor to apply concept of "disguised differential" as described in memo
submitted by State.
--In event other COCOM nations agree to concept of "disguised differ-
ential" on particular items in COCOM negos, we should attempt to retain "Disgui-
sed differential" for helium léquefication equipment and containers for transpor
tation of liquefied gases. If, however, our holding to this position engenders
confrontation with other CO COM countries, we should accept removal of these
items from "disguised differential" category.
Memo for Pres
From: HAK and Flanigan
June 9, 1972
C
#50788, 2463
COCOM presently reviewing items which it restricts for sale to Comm countries.
Major issue is "China differential" which results in stricter application of
COCOM controls on exports of 30 items to PRC than to USSR or EE.
Agencies agree in principle that we should reduce "differential" as much as
possible. However, DOD feels items should be eiminated on item-by-item bsis
and that helium liquifiction equipment and containers for transport of lique-
fied gases should be retained for embargo to China alone. Several other COCOM
members, particularly Japan--plus State, Comm and NASA, favor deletion of all
"differential" items from COCOM ist and rejection of "China differential"
principle.
Two options:
A. Adopt general principle of termination of differential treatment for PRC
in COCOM. ros: Consistent with our equal treatment of PRC and USSR on US
export controls; benefits our relations with PRC; enables us to agree with
Japan on issue important to her. Cons: Establishes principle of equality when
we. recog there is greater likelihood of diversion of certain items to mil
uses in PRC than in USSR; decreases our flex to agree to relaxation of controls
on items for USSR and EE beçause such items would then necessariýy have to be
œcontrolled for China.
B. Retain China "differential" on item-by-item basis. However, differential
would not be applied explicitly but would be disguised by attaching two conditions
to export of hard-core items: a) determination by exporting gov that item
could not reasonably be used for strat purposes, and b) certification by
importing country that item would be used for peaceful purposes. Although
theseconditions would not apply only to PRC, its inbility to comply woulc mean
that these few items could not be exported by COCOM members to PRC. Pros
and Cons are reverse of those under A.
On balánce, I recom A--push for removal of "China differential" as matterof
general prinžiple. If, hoeer, there are a few items on which we and other
COCOM countries agree require retention of "differential" this should be in
form of "disguised differential". In latter case, other nations' support for
retaining "differential" would absolve us of total responsibility for its
maintenance. And, real effect of "differential" on PRC is not sifniciant.
Recom: you approve Reproduced at the Richard Nixon Presidential Library nciple differential trea tment
ASSIFIED This document has been reviewed pursuant to Executive Order 13526 and has been determined to be declassified.
in COCOM for PRC while attempting to apply "disguised differential" to those
few items wich we and other COCOM members agree should be treated on differ-
ential basis. We would attempt to retain gas transportation equipment and
helium separators on China "differential" list as DOD proposes, but would not
hold to this position at risk of confrontation with other COCOM countries.
RN initialled Approve
Dispprove, prefer B (deal with differential on item-by-item basis while
attempting to place such "disguised differential" on these items--include the
gas transport equipment and helium separators--on which we believe differential
should be maintained.
Memo for HAK
From: EctExecSecMiller
July 7, 1972
S/NODIS/HOMER
#5386
Attaches draft cable to Paris for clearance implementint proposals of SM 149,
modified per DM 170 and to taken account of discussions on trade during
"connterpart meetings" in Peking June 19-23.
Memo for HAK
CC Flanigan
From: SecTreas George P. Shultz
July 13, 1972
S
#5499
Inresp nse to request in DM 170, enclosed is report on interagency committee
composed of reps of State, Comm, Eximbank and Treas. Outlines possible
ourses of action from point of view of effect of debss on lending to PRC
but does not recom a policy. I wold like to discuss with you theimportant
policy implications of possible Exi bank lending to PRC.
Conclusions
1. debts exist as valid receivables of Eximbank--i.e. they represent
credits disbursed and not repaid or therwise settled.
2. they are state obligations of China validly entered into by its gov
3. In light of letter of May 11, 1961, Eximbank agreed "to forbear
and take no action re remaining balance of indebtedness of ROC until such time
as matter may be opened for discussion " these debts are not now in default.
However, Eximbank could as legal matter place ROC in default by opening issue
for dicsussions and demanding repayment.
4. Eximbank appars never to have released ROC from these obligations
and ROC has recog their validity.
5. In event of US recog of PRC as successor gov to gov of ROC, Eximbank
would have clear legal basis for holding PRC respnsible for these debts.
6. In event of less than full succession by PRC (e.g. US recog PRC
in addition to ROC) there wold be no clear legal basis for PRC liability,
although there are precedents for division of financial responsibility for debts
7. As matter of law, Exmbak entitled to look to ROK for payment and US
has option to make no claim against PRC. In this case debts would not consti-
tute an obstacle to Eximbank lending to PRC.
8. Should policy decision be made to look to PRC for repayment, there
are precedents which would support ХИКИХ request to PRC for agreement to
assume debts on theory that mainald benefitted from utilization of loans.
However, our non-recog of PRC would militate against PRC acceptance of respon-
sibility for loans. Should claim be made aginst PRC and should PRC refuse
repayment, furure Exi bank lending to PRC would raise questions. PRC, in any
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.
ement, could not be "in default" until there had been formal demand for
repayment and demand had been refused by PRC. Even if PRC were considered
in default, this would not as legal matter prevent Exi bank lending to PRC
although it would be contrary to long-standing policy of Eximbank and NAC.
9
9.. Middle course between 7 and 8 would be to seek PRC acceptance of
responsibility on benefit-of-use theory, without holding PRC in default. Under
this course, Eximbank default policy would not constitute impediment to lending
to PRC.
Any future policy deterination on issue of responsibility for Eximbank debts
must take into account followig factors:
1. Eximbank lons are among number of ROC debts to USG which have
been in suspense since at least 1961; any decisions re Eximbank lans will have
inevitable implications for resolution of larger quetion of ROK debt to USG
and to USG claims, both public and private against PRC.
2. We could seek PRC agreement to assume debt oglibations as descirbed
in para 9 without changing our recog policy or our support for ROK intl position
but any such agreement could raise quetions about RO claim to legitimacy
3. Any decision on settlement of thse debts will lave implications for
potential delinquiencies in other areas.
Memo for HAK
From: Richard L. Sneider, Ch, AdHoc Interdepartmental Group
Feb 15, 1972
S/NODIS/HOMER
#899
Implmentation of SM 149
Status report with recoms from State/Comm on implementions of SM 149,
as requested in DM 170, for further steps which might be taken to facilitate
trade between US and PRC.
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.
NSDM 170 /CIEPDM 7
June 8, 1972
HAK; Peter M. Flanigan
S/NODIS/HOMER
US-PRC Trade
SecState
SecTreas
SecDef
SecAgric
SecComm
DCI
Pres has reviewed memo from State, with Domm, of April 24 and response
to NSSM 149 by Ad Hoc Geoup of March 24. Has approved recommndations
for actions over next three months contained in April 24 memo for
proceeding to implement statement on trade in Shanghai communique
with following modifications:
Memo for Ambassador Huang should indicate that we recognize PRC's
interest in MFN but view this as subject for later discussion.
-Alleged PRC failure to repay Exinbank debt should not be raised
with PRC ar this time. Interagency committee chaired by Treasury should
examine question and effect on PRC eleigibility for Eximbank financing,
and submit report to Pres by July 3.
-Memo for Ama sador Huang should place greater stress on necessity
of beginning discussion AX in near future on settlement of claims issue.
-References to cotton textile issue and to US anti-dumping regs
and US xxxxxx prohibitions on imports of "certain engangered animal
species " should be removed from memo for Huang. These matters should
be dealt with in separate memos to be presented to Huang within rext
several weeks. In oral presentation, Amb. Watson should indicate that
we ***** intend to provide PRC with such memos shortly. Memos on these
subjects ako together with recoms as to timiig of presentation should
be submitted to Pres by June 23.
--No mention should be made to PRC at this time of possi ble US
changesin transportation regs. State, in cooprezation with other
appropriate agencies, should submit to Pres asap documents necessary
to review US regs re reciprocal visits by ships and aircraft, Draft
statement announcing such decisions as well as statement indiation
indicating that eventual establishment of scheduled air services wluld
be subject to US-PRV inter-Governmental discussions sxxx SEXIXEX should
also be submitted.
Re recommendations for longer term steps, Prs has deferred decision
and requests that they be resubmitted with propos ed memoranda where
appropriate, and specific recommendations as to timing.
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.