Taipei, 24 April 1967

Secret

Sino-Australian Relations

Following the Prime Minister's recent visit to Taiwan,² I have the honour to review. the present state of Sino-Australian relations and to examine the basic considerations which will affect our future relations with the Republic of China.

2. As I have already reported to the Department, the Prime Minister's visit proved to be an unqualified success, and it marked the climax of a general improvement in relations which began with your own visit to this country last June. Our decision to establish an Embassy in Taipei was a great diplomatic success for the G.R.C., and this was reinforced by our unwavering support for the R.O.C. during the last U.N. General Assembly when other traditional friends of China were either working openly for a 'two China' solution (e.g. Canada) or were at least disposed to probe Peking's intentions on the representation issue (e.g. the Italian Resolution to which even the United States subscribed.)³ That a country as significant as Australia should remain firm while many other traditional friends were 'wobbling' was a source of great satisfaction to the G.R.C., and since these events coincided with my accreditation to Taipei, the timing proved to be most propitious.

3. Superficially, our relations with the G.R.C. could hardly be better. Both countries profess to be free and democratic (unfortunately in some respects the R.O.C. is neither); both maintain a firm anti-Communist posture; both are concerned with the threat of Communist expansionism in Asia (and no country is more anxious to do something about it than the R.O.C.); both countries are members of the U.N. and of many of its Specialised Agencies and are contributors of technical assistance to the less developed countries; both countries have expanding economies (albeit at very different levels of development); and both countries are currently examining the prospects for increased bi-lateral trade.

4. Against this background, the stage seems set for the development of even closer relations with the R.O.C., which in some respects may be regarded as one of Australia's staunchest friends in Asia. Even our trade with Peking, whilst regretted, has not been allowed to impair our relations, and no doubt the G.R.C.'s hope is that in time we will come to appreciate their view that even wheat must be regarded as a strategic export to the extent that it is used to maintain the fitness and efficiency of the People's Liberation Army rather than to relieve the lot of the suffering masses. Perhaps there is more substance in the claim that our wheat enables Peking to promote its exports of rice, which is precisely why the G.R.C. itself hopes to increase its purchase of Australian wheat.

5. In recent times, what might be termed the honeymoon period in Sino-Australian relations came to an end with our decision to recognise Outer Mongolia.⁴ This came as a great shock to the G.R.C., not only because of the decision itself, but also because of its implications. It was obvious that the G.R.C. did not believe that we were acting alone in this matter, and they were fearful lest it was a ballon d'essai launched in consultation with the United States and possibly Japan. (The Generalissimo is still haunted by the spectre of Yalta,⁵ and he is highly suspicious of any move which might contribute to a détente between Moscow and Washington, particularly one which is undertaken at the expense of China.)

6. The Foreign Minister's reaction to our decision was a good deal more restrained than was apparently the case with the Chinese Ambassador in Canberra, although both no doubt saw their personal future as possibly adversely affected by the decision. (Any reversal in foreign policy immediately gives rise to governmental and press speculation as to whether the particular set-back could have been avoided if the Foreign Ministry and its representatives abroad had been more active in promoting the interests and explaining the viewpoint of the G.R.C.)

7. Needless to say our Mongolian decision gave rise to numerous articles in the (Government controlled) press as to whether mere protests in Canberra were enough, and to hints that 'further measures' may be necessary. Our wheat sales to Communist China were also given prominence in the press whereas previously this subject had been avoided by both the press and the Government. It is a measure of the importance which the G.R.C. attached to the Prime Minister's visit that, (contrary to my own expectation), no reference to Mongolia was made by G.R.C. leaders in their discussions with Mr Holt. Nor was the subject of our trade with Mainland China referred to, although both topics were very much in their minds at the time. However, since the Prime Minister's visit the press, in reporting on the recently concluded conference of Chinese Ambassadors held in Taipei, has reverted to the theme that mere protests against our recognition of Mongolia are ineffective and implied that something more positive (presumably in the way of reprisals) is called for. The G.R.C's reaction to our decision on Mongolia although not unexpected is significant as revealing the brittleness of our relations with the R.O.C., and this suggests the need for an examination of the nature of the regime itself.

8. First and foremost, I think we must accept that the R.O.C. is a police state in which the trappings of democracy are observed, but in which there is no real freedom of speech, movement or association. There is no freedom from arbitrary arrest, and no organised political opposition to the G.R.C., for the simple reason that any such opposition would be regarded as treason. As a Taiwanese remarked to me the other day, even to discuss the events of February–March 1947 (when many thousands of Taiwanese were shot down in cold blood by K.M.T. troops) is forbidden. (For an eye witness account of the events in that period see 'Formosa Betrayed' by G.H. Kerr). No criticism of the Generalissimo or his policies is tolerated and the pervasiveness of the secret police (under the control of the President's son Chiang Ching-kuo) compares very favourably (if that is the word) with their counterparts in Communist regimes. Thus 'Free China' is neither free (except in the anti-Communist sense) nor is its juridical status as 'China' beyond question. It is an authoritarian (some would say reactionary) police state dedicated to the ultimate overthrow of the Peking regime by force.

9. This, of course, is not to deny the progressive aspects of the regime particularly in the economic field. The most spectacular achievement in this sector is the Government's land reform policy which has resulted in about 90 per cent peasant ownership of Taiwan's arable land. (Even here, however, one needs to bear in mind that the people dispossessed by the land reform programme were Taiwanese, not Mainlanders, and this has led at least one writer to speculate whether the programme was originally designed to weaken the economic base of the Taiwanese middle class which at that time was predominantly agrarian. Be that as it may, there is no doubt that the land reform programme has been an unqualified success, and that the compensation paid to former Taiwanese landlords has enabled them to acquire a considerable stake in Taiwan's industrial development through their holdings in Taiwan's government-owned corporations.) Assisted by over one billion U.S. dollars in economic aid, spectacular gains have also been achieved in other sectors such as GNP, trade, investment and industrial production. Considerable progress has also been made in such fields as education and public health, although official statistics tend to obscure the fact that, under the Japanese, Taiwan enjoyed such economic benefits as a high literacy rate, good communications, a stable economy, self-sufficiency in agriculture and a measure of well-being which was already high by Asian standards. Nevertheless, the G.R.C.'s achievements in the economic field are remarkable, and in recent years much credit for this is due to the active and able Minister for Economic Affairs (Mr K.T. Li), and his senior advisers, who give the impression that they are more concerned to ensure Taiwan's economic success than (unlike some of their colleagues in other Ministries) to indulge in daydreams about recovering the mainland.

10. In this situation what should be Australia's posture towards the R.O.C.? In attempting to answer this question we should bear in mind that in the G.R.C.'s eyes, Australia's main significance is the influence we exercise with our friends and allies and particularly with the United States. This emerged very clearly during the course of the Prime Minister's visit when the President made a great effort to persuade Mr Holt of the justice of his cause to recover the mainland. Whilst one can understand and sympathise with the President's dedication to the fulfilment of his 18-year-old dream, it carries with it some obvious dangers, and it is on this basic point that our respective policies diverge. Our policy is to work for a détente, and ultimately for an accommodation with Mainland China; the G.R.C.'s aim is the regime's overthrow. To achieve this, the G.R.C. is prepared to risk (indeed in its criticism of U.S. policy in Vietnam, which it regards as too 'soft', one has the impression that it is seeking to promote) a military confrontation between the United States and Communist China. At the same time the President claims that the China problem can only be solved by the Chinese people themselves, and that all the G.R.C. needs from the Americans is logistic support for an attack on the mainland. Fortunately, United States officials are well aware of the implications of 'logistic support.' Once committed to supporting a mainland operation, the United States would either have to see it though (with all that that implies) or risk another Bay of Pigs. Consequently, the American military aid programme to the R.O.C. has always been confined to defensive equipment so that the United States can continue to exercise an effective veto over any G.R.C. military adventures.

11. Contrary to President Chiang's hopes, our influence in Washington will presumably be used to support the maintenance of a de facto 'two Chinas' policy, which leaves open the ultimate question of Taiwan's future, either as a separate identity or as a province of China. The outcome will no doubt partly depend on the nature of the post-Mao regime on the mainland, and also on the post-Chiang regime on Taiwan. No compromise appears likely in the President's lifetime, and so the basic contradiction in our policy must remain, namely our diplomatic support for the R.O.C. as the only legitimate government of China, i.e. ostensibly a 'one China' solution, coupled with our recognition of the dangers inherent in any solution which resulted in a future accommodation between Peking and Taipei. This contradiction is likely from time to time to impose strains on Sino-Australian relations, particularly if and when it becomes possible to reach some semblance of normality in our relations with Mainland China. (One cannot, of course, entirely exclude the possibility of a future political association with Japan. Most older Taiwanese retain nostalgic memories of life under the Japanese but, apart from economic and cultural ties, I would be inclined to assume that political realities, and their Han ancestry, will keep the Taiwanese within the Chinese orbit, whether or not they ultimately achieve independence or a measure of autonomy.)

12. Meanwhile our interest seems to lie in maintaining the status quo, both for strategic and political reasons. So long as Peking persists in its present policies, the R.O.C.'s armed forces (which are effectively immobilising considerable elements of the P.L.A. in the Fukien area) represent an important strategic factor in the West's containment policy. The R.O.C. also represents an alternative focus of loyalty for the overseas Chinese. Our political support for the R.O.C., however, should not blind us to the unsavoury features of K.M. T. rule, but rather should it⁶ be based on the hope that ultimately the Taiwanese people will achieve by peaceful means a political voice in their country's affairs commensurate with their numerical majority and economic status.

[NAA: A1838, 519/3/l, ix]

1 F.B. Cooper, Australian Ambassador to the ROC.

2 Harold Holt, who replaced Menzies as Prime Minister on 26 January 1966, visited the ROC from 4–6 April 1967. His discussion with Chiang Kai-shek on 6 November was, as the record notes, 'devoted mainly to the situation in Mainland China'. It was also observed that: 'the President, despite his age, was neither feeble nor showing signs of senility. He gave the impression of a dedicated but stubborn old man living in the past and rather out of touch with the realities of the world situation, who saw in China's present turmoil perhaps the last chance to realise his long-cherished dream of a return to the Mainland. The musty atmosphere of the meeting was shown by the fact that two of his advisers, including the Chief of the Army Staff, slept throughout most of the discussion although it took place between 10.30 and 11.30 in the morning'.

3 Italy co-sponsored a six-power draft resolution, submitted to the General Assembly on 21 November 1966, which, by the operative part of its text, sought to establish a committee that would explore the representation question and in 1967 present recommendations to the Assembly for a solution. The resolution was defeated by a vote of 34 in favour to 62 against (Australia), with 25 abstentions.

4 Hasluck announced this decision on 28 February. Outer Mongolia was generally regarded as a satellite of the Soviet Union.

5 At the Yalta Conference of February 1945, the leaders of the United States, the United Kingdom and the USSR made agreements on Japanese holdings in China–agreements that China later claimed to have occurred in violation of its sovereignty.

6 The words 'should it' should presumably read 'it should'.