Canberra, 18 July 1956

Secret

Policy toward Communist China and Possible Trade Representations

[matter omitted]

E. Recognition of Communist China

7. The Chinese Communists have laid down the following basis for recognition 'the C.P.R. may negotiate and establish diplomatic relations on the basis of equality, mutual benefit and mutual respect for territory and sovereignty, with foreign Governments which sever relations with the Kuomintang reactionaries and adopt a friendly attitude toward the C.P.R.'

8. To date 29 countries have recognised the C.P.R., including the United Kingdom, India, Pakistan and Ceylon. No conditions other than those listed above have been imposed by Peking and there has been no attempt to make recognition dependent on an acknowledgement of C.P.R. sovereignty over Formosa. In the case of the United Kingdom, however, the establishment of full diplomatic relations has been held up because of Chinese resentment at the United Kingdom attitude toward China's admission to the United Nations. The C.P.R. considers that those countries which have recognised it should actively support its claims for admission to the United Nations. United Kingdom membership of S.E.A.T.O. has also been criticised but in a more general context.

I. ARGUMENTS CONCERNING RECOGNITION

Australia has withheld recognition and opposed C.P.R. admission to the United Nations on the publicly stated grounds that China

(a) was branded an aggressor;

(b) has been an enemy in arms;

(c) has not behaved in accordance with accepted international practices.

On the other hand an armistice has existed in Korea for three years and is likely to continue. The 1950 act of aggression against the R.O.K. cannot under the circumstances be used indefinitely to justify non–recognition. Moreover China has of late eschewed overt military pressure in areas of tension and has at least been giving the appearance of having peaceful intentions.

Australian public opinion as reflected in the press would seem to favour recognition. The general feeling seems to be that it is becoming increasingly less desirable for Australia to be in a position where she has no direct contact with the government which effectively controls the mainland of China.

The argument against all this is that we regard our relations with China as part of our whole pattern of international relations. The crux of the matter is that the United States is strongly opposed to recognition not only on its own part but on the part of its Allies. We have been told by the United States Embassy that the United States would react very strongly if we were to recognise the C.P.R. The Canadians (whose position on this matter is very similar to our own) have been told that the United States would be greatly concerned at any move to extend recognition this presidential year.

II. OTHER CONSIDERATIONS

(a) If we recognise the Chinese People's Republic, it does not necessarily follow that we must support admission to the United Nations, though this should follow in due course. Should we indicate our desire to establish diplomatic relations with the C.P.R. we would have to expect pressure from Peking on this point. Peking would hardly be satisfied with anything less than full support for the seating of Communist China.

(b) We would have to withdraw recognition from the Nationalist Government on Formosa. Australian withdrawal of recognition is unlikely to affect our national interests to any serious degree. It would be yet another blow to the Nationalist Government, however, and would be of concern to the United States. Every withdrawal of recognition hastens the day when the United States must consider its own position, in the full knowledge that United States withdrawal of recognition would bring the issue of the future status of Formosa to a head.

(c) An increasing number of countries outside the United States orbit can be expected to react to present C.P.R. tactics by granting recognition. We should not leave our recognition too late. Moreover in order to derive the greatest possible political advantage from our recognition, we should recognise before C.P.R. admission to the United Nations. (The question of admission to the United Nations is discussed, together with the problem of the future status of Formosa, in a separate paper under preparation).

F. Proposal for Trade Representations in Peking

9. The question has been raised of our establishing some kind of trade representation in Peking, possibly in the form of a Trade Commission.

10. Chou En–lai expressed to Mr. Harry Menzies the hope that trade might be the bridge to the resumption of normal relations between our countries. Similarly when the Canadian Minister for Fisheries² was in Peking in September, 1955, the Chinese Deputy Foreign Minister³ told him that he hoped Canada would eventually recognise Communist China and that he 'thought as an exploratory move it might be wise to exchange cultural delegations, followed by the possible exchange of trade delegations'.

11. It will be recalled that in the course of negotiations between Japanese commercial and industrial representatives on the on�e hand and Chinese trade officials on the other, the question of an exchange of official trade representatives was raised. The idea was not acceptable to the Japanese Government, however, and was dropped. Also before Egypt granted formal recognition to the C.P.R. she sent a Trade Commissioner and an Assistant to Peking.

TRADE REPRESENTATION AND RECOGNITION

12. We are not in possession of any information that would point to the likelihood of the C.P.R. attempting to apply a false interpretation to a move to establish trade representation in Peking. It has been part of Chinese Communist policy of late to seek to cultivate every possible kind of contact with other countries, both those which recognise and those which do not. Of countries in the latter category there have been more visitors to China from Japan than from anywhere else. The Trade Agreement, which is renegotiated each year, and the Fisheries Agreement, depend for their implementations on Japanese Government sanction but Peking has never attempted to make anything more of this than is there. On the contrary, the Chinese still appeal for a normalization of relations. Of the other non–recognising countries, Cambodia and Chile both have trade agreements with Peking and these have been treated purely for what they are.

13. On the other hand, however, the C.P.R. no doubt takes private satisfaction from the signing of agreements and the growth of exchanges with other countries and considers these as steps along the road to eventual recognition.

I. Value of such Representations

The Australian Trade Commissioner in Hong Kong considers that in the absence of recognition a trade representative in Peking could be of little value at present. This advice is based on the considered opinion in Hong Kong that Government trade representatives of a country have little hope of achieving any real results in trade promotion unless their country is willing to enter into some type of bilateral agreement with the Communist Government.

Mr. H. Menzies considers we should take advantage of our favourable position in the Chinese market in the immediate future. He states that a Trade Commissioner could work directly with the Ministry of Foreign Trade and its attached corporations more freely than could a commercial counsellor.

II. General Arguments

It is thus not clear that such representation would serve a useful purpose. If this could be proved the following general arguments might be advanced in support of the move

(a) exchange of trade representatives is distinct from diplomatic recognition;

(b) the trade envisaged is essentially non–strategic and there could thus be no pressure, as there is in Japan, for easing of cocom or chincom restrictions;

(c) the status of Formosa is in no way at issue;

(d) the C.P.R. has effective control over the mainland of China and it is, therefore, logical to deal, on matters affecting trade, with the mainland, with the Import and Export Corporation in Peking;

(e) we are no longer engaged in hostilities with Communist China.

III. Political Objections

(a) Notwithstanding the logic of the above arguments there would be criticism on the grounds that we had taken a step toward recognition. The United States in particular could be expected to react strongly. Particularly if there were some doubt as to the practical economic justification for the representation, but even if this could be fully established, the proposed representations would in practice be likely to affect our relations with the United States to almost the same adverse degree as recognition itself.

(b) In view of the great importance which will attach to our eventual diplomatic representation in Peking it would seem undesirable to begin there with a trade representative who, whatever limitations were placed on his functions would inevitably be drawn into political contacts.

G. Recommendations

14. It is accordingly recommended that:–

1. we advise against any suggestion to establish trade representations [sic] in advance of recognition;

2. we encourage� the development of trade contacts by individual businessmen and visits by reputable businessmen either alone or in groups;

3. we decide in principle to recognise the Central People's Government as the lawful government of China, defined as comprising the mainland and the offshore islands, excluding Formosa and the Pescadores;

4. we take no steps to recognise before the United States presidential elections;

5. meanwhile we discuss with Canada and New Zealand plans to extend recognition shortly after the elections and the nature of our approach, possibly jointly with Canada and New Zealand, to the United States in which we would explain our position.

[NAA: Al838, 3107/38/1, ii]

1 A. H. Loomes, Assistant Secretary, Pacific and Americas Branch, Department of External Affairs.

2 James Sinclair.

3 Chang Wen-tien.