Taipei, 27 October 1971

773. Secret Austeo Priority

China Policy

After having strongly backed the US and inter alia shown our support for the ROC in the UN, we may now feel free to seek more flexibility in developing China policies. It may also seem desirable to appear to adjust appropriately to the UN outcome. The following points in regard to Taiwan may be relevant to your consideration of such questions.

2. Our most concrete interest here is our trade which is growing steadily, is soundly based and holds considerable promise. Sales of well over dollars Australia 40 million this year seem certain. We should seek not to disrupt their growth. Moreover, for the sake of this interest alone it would be preferable not to act in such a way as to shake economic confidence in Taiwan further. Timing of any action we might take would thus be important.

3. In principle, the political importance of an island where American, PRC and Japanese interests meet seems considerable. However, in my view, it is not such as to require an Australian political presence here, there could in fact be advantage in not being politically represented where those interests can clash. One immediate political interest may however be in not adding to the problems of the Americans, Japanese and other regional countries over China. American forward thinking on China may soon be more fully disclosed to us in Washington. Japan's future policies at this stage seem quite uncertain in the new circumstances, (but Japanese Embassy here is giving some thought to possible PRC reactions to any substantial Japanese gestures towards Peking). Thinking of other regional countries about Taiwan and ROC may be more defined by the time of the Sea Countries' Meeting on 25 November.

4. While I do not think JIO has yet been asked to assess the strategic importance of Taiwan to Australia, it does not seem a major factor, apart from any risk of a US/PRC clash, which the Americans obviously will be concerned to minimize.

5. The above considerations suggest that our interests in Taiwan might be adequately served by trade representation (desirably a Trade Commission) preferably with visa–issuing powers and a limited watching brief on political developments.

6. If we wished to change the form of our representation here, there could be advantage in making an early approach to the ROC. Although any change would be most unpalatable, the pragmatists here might well accept grudgingly and privately that, in all the circumstances, we had to make some adjustment and might in fact be relieved if we went no further. The Belgian Consulate General will now be closed and the Peruvian and Argentinian Embassies, if no others, are not expected to remain for long. The outcome of the UN vote, though not unexpected by the Government here, will probably condition it to accept further unavoidable changes in foreign relations.

7. Possible political changes within Taiwan will also need consideration. Japanese preliminary assessment here is that UN defeat will give impetus to moves towards an independent Taiwan which development Peking would resist more strenuously than continuation of status quo. We should avoid political involvement which could be construed as support for, or opposition to, an independent Taiwan. From this point of view also, a non–political mission might be preferable.

8. American Ambassador McConaughy has from time to time stressed to me that the United States intends to keep diplomatic representation in Taipei. It will presumably wish to avoid isolation and may well press countries with missions here to retain them. This comment would apply particularly to regional countries with long associations with the ROC, whose restructuring or withdrawal of representation could have considerable impact here and on Japan's policies. Washington would be better placed than we to assess American reaction to a possible change in our own representation on the lines indicated in para 5 above.

9. It seems to me such a change could be publicly presented as a realistic adjustment to new circumstances. The PRC might well read it as a further concrete gesture in its direction. While Peking would doubtless say that we must terminate all official representation in Taiwan before we could fully normalize relations with the mainland we could stand firm, for some time at least, in arguing that our representation in Taiwan was concerned solely with protecting concrete and non–political interests which we have no intention of abandoning. We could gain a little flexibility which we would not otherwise have in negotiations (in which we would be ill–advised to yield too many points too soon). In view of some possible US/PRC accommodation on the Taiwan question as a result of President Nixon's visit we should perhaps not rule out completely the possibility of the PRC being in time slightly flexible on the question of dual representation for practical purposes.

10. A change on the above lines would also, of course, enable us to maintain that we had not abandoned Taiwan unceremoniously. As stated earlier, timing and presentation would be important in order to minimize damage to our trade interests in particular and (if possible) to avoid contributing to loss of confidence and morale in Taiwan.

[NAA: A1838, 3107/38/18, xxii]