Foreign Service Despatch from Walter McConaughy to Department of State

8 AIR POUCH Security FOREIGN SERVICE DESPATCH 846g.2321/1-2452 XR 446g.119 FROM: HONG KONG Desp. No. 1530 : DEPARTMENT OF STATE January 24, 1952 REF : Congentel 2175, January 14, 1952 del EVIFE oli 58 :Action I Dept For Dept: COMM N REP FE OLI E mi Rec'd FEB 21 F Other TAIPEI PUSAN Use Only: O GOOM! DPA MSA FRB TAR DMPA EPS Subject: RAW COTTON FOR HONG KONG Reference is made to the Consulate General's telegram 2175 of January 14, 1952, reporting that the Hong Kong Government had stated that it was unable to accept the conditions under which the US was prepared to export US raw cotton to Hong Kong, as outlined in the Department's telegram 1960 of November 13, 1951. The government stated that the guarantees suggested by the US were unacceptable for reasons explained to GIT by Mr. A. G. Clarke, then Hong Kong Director of Commerce and Industry, when he visited Wash- ington for talks in January, 1951. The Hong Kong Government stated that it was prepared to certify that US raw cotton would not be re-exported to China either as raw cotton or as the sole or substan- tial constituent of any textiles fabricated in Hong Kong and that terms of this guarantee were said to be outlined in an Aide-Memoire transmitted by the British Embassy in Washington to the Department during February, 1951. (Queried later as to the percentage the government contemplated by the reference "substantial constituent", no local official appeared competent or willing to comment.) without giving any indication that it was prepared to discuss pro- posals alternative to the general proposals said to have been included in the reference Aide-Tencire, the government concluded its reply to the Consulate General by expressing the hope that the US would reconsider the matter and see its way clear to supplying raw cotton to Hong Kong spinning mills. A copy of the Hong Kong Government's letter dated January 8, 1952 is attached (Enclosure No.1). Because the fact that the US has not licensed raw cotton for shipment to Hong Kong mills since December 3, 1950 has provoked considerable adverse criticism by the Economic officials of the Hong Kong Government and expressions of keen disappointment by the Governor and the Colonial Secretary, and because the press has frequently featured stories implying that the industry's problems could be attributed to the US restrictions, the Consulate General has devoted much time to endeavoring to bring about some agreement which would result in US raw cotton being licensed for Hong Kong. FEB 8 1952 DECLASSIFIED E.O. 12065, Sec. 3-402 Halph Hunt/ctp/n1 State Dept. Guidelines, March 6, 1982 Security By DEB NLT, Date 4-10 85 2 I P