261 Noel-Baker to Australian Government

Cablegram H333 LONDON, 5 July 1949, 8.30 p.m.

SECRET

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.

1 It advised that US representives were visiting London on 20 June to make known their proposals on controlling the export of strategic materials to Communist China and to discuss UK co- operation.

2 Organisation for European Economic Co-operation.

[AA:A1838/2, 494/30/1, i]