Canberra, 9 October 1970

Restricted

Trade with Communist China: Opposition Attack

Some heat was generated in Parliament late last week by an attack mounted by Mr. Whitlam ¹ against the Government over its allowing the export of iron, steel and zinc to Mainland China. The point of the attack was that recorded exports of over 12,000 tons of iron and steel scrap and 14,000 tons of refined zinc in the last financial year increased the capacity of Hanoi and the Vietcong forces to wage war against Australian and allied forces by the Chinese supply of rifles, mortars and ammunition which may have been manufactured from Australian materials.

2. On 30th September a question was directed by Mr. Whitlam to Mr. McEwen, followed by another from Mr. Whitlam to Mr. Swartz,² with one also by Mr. Barnard³ to Mr. Peacock.⁴ We briefed the Acting Minister to give a fuller answer, as promised, the next day, but again on 1st October Mr. Whitlam asked a question of Mr. McEwen, who replied along the lines of Government policy as advised to you in the Parliamentary report telegram sent to you.

3. The relevant Hansard extracts are attached. ⁵

4. Also attached are samples of press reports which show the extent to which the issue was blown up.

5. Your attention is drawn to the issue as you may wish to give consideration to whether you, or perhaps the Prime Minister (which may be more suitable given that you were away and a number of Ministers have a direct interest in last week's attack) should issue a more detailed statement. This could clear the air, especially by way of underlining how trifling are Australia's exports of iron, steel, zinc and the like in Communist China's overall imports of such items, and in relation to the exports of Germany, Japan, and the United Kingdom for example.

6. Government policy on restricting trade with Communist China in items of possible strategic significance is well established. In addition to being guided by the COCOM list (of items by which NATO countries and Japan control strategic materials to Sino-Soviet countries), we observe controls over a far greater range of items on the 'China Differential' list applying to Asian Communist regimes.

7. Cabinet last considered exports to Mainland China (and North Korea) in detail in 1967, when, in its decision 311 of 2nd May, 1967, it agreed that it could not look with equanimity on the rate of growth of steel exports to Communist China (29,000 tons in 1965/66 and 38,000 tons in 1966/67). Measures to curtail steel exports have applied since then. Administratively, departments observe an upper limit of 30,000 tons on iron and steel and non-ferrous metal exports per annum to Communist China in interpretation of the Government decision.

8. Our exports of iron and steel, including scrap, remain a minute part of Communist China's imports of these products. It happens that during 1969170, due to Electrolytic Zinc's expanded capacity, zinc has featured in trade with China, 14,000 tons being approved. Here again, this is minor in China's overall import picture, and the care in applying the Australian policy is shown by Mr. Freeth's acceptance of a recommendation on 18th October last approving only 6,000 of a 12,000 ton application by Electrolytic Zinc.

9. Tables are attached showing approvals and non-approvals of metals to Communist China in recent years, our exports to that country and iron and steel and non-ferrous metals, and the comparable trade figures for OECD countries, including Japan.

10. A draft of a possible Ministerial, or Prime Ministerial, statement on the issue is attached also.

11. It is recommended that you give consideration to whether a Government statement of policy along the lines of the attached should be made.⁶

K.C.O. Shann

Deputy Secretary

[NAA: Al838, 714/3/2, xiv]

1 E.G. Whitlam, Leader of the Australian Federal Parliamentary Labor Party and of the Opposition.

2 R.W.C. Swartz, Minister for National Development and Acting Minister for External Affairs.

3 L.H. Barnard, Deputy Leader of the Opposition.

4 A.S. Peacock, Minister for the Army and Minister Assisting the Prime Minister.

5 None of the attachments to the Document are published.

6 An annotation by McMahon dated 12 October reads: 'Mr Shann. I do not think it would be prudent for the Prime Minister to make a P.M.S. Please let me have a review which can be submitted to P.M. or Cabinet if required'.