CONTROL OF EXPORTS OF STRATEGIC MATERIALS TO COMMUNIST CHINA

My telegram No. 279 dated 15th June. [1] Discussions with United
States representatives have now been concluded. In addition to
weapons and military items, the export of which from the United
Kingdom and British Colonial territories in the Far East are
already stopped, the United States representatives proposed that
we should join them in controlling the export to China (including
Formosa and the whole of Korea) of-
(1) Goods of strategic importance (i.e. list 1 A goods) the export
of which to Eastern Europe we are now in general preventing, and
which, since April have been subject to export licensing to all
destinations except the Commonwealth, United States and C.E.E.C.

[2] countries). It was not the United States intention that au
licenses for these goods should be refused as they are refused for
Russia and Satellite countries) but that we should adopt a policy
of ex-post facto consultation where licenses were granted and of
general check on what is exported.

(2) Certain other goods of particular importance to the Chinese
economy, especially petroleum products, essential types of mining
and power generating equipment, certain essential transportation
equipment and also possibly steel working equipment, chemicals and
metal working machinery. The United States ideas on this list were
not final, but they suggested the same treatment as for (1).

2. The United States representatives suggested that control might
be applied in the first instance by the United States, the United
Kingdom, Hong Kong and Singapore to be expanded progressively by
intergovernmental negotiation to other Governments including
O.E.E.C. countries and their Far Eastern dependencies. The United
States are already controlling exports from Japan and they are
confident that controls could be put on exports from South Korea.

The Philippines and Macao would also need consideration; control
at the original source might best meet the Macao trans-shipment
problem. The United States have in mind not only possible trans-
shipment of goods from communist China to Russia, but also the
need of bargaining power which could be used with Chinese
communist authorities.

3. We again drew the attention of the United States
representatives to serious difficulties on our side which briefly
amounted to:

(a) The difficulty, both administrative and political of imposing
fresh controls.

(b) Doubts about the concept of controls as a political bargaining
counter, about the effect on the Chinese communist authorities of
imposing them (the Americans were thinking of publicising their
imposition to bring home to the communists their dependence on our
trade) and about the effect of such action on our established
commercial interests in China.

(c) The undesirability of imposing controls which were ineffective
because incomplete. Action by the United Kingdom, United States,
Hong Kong and Singapore alone would certainly lead to re-routing
of exports and damage to our entrepots (Hong Kong in particular).

4. The United States officials have now left to discuss the
question in other European countries. We entered into no
commitments and are now giving the matter further consideration.