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Beginning in 1948, the rapid development of the civil war in China made the Truman administration face an urgent decision: whether to continue to implement the economic aid program formulated under the "China Aid Act of 1948" and continue to provide assistance to Pingjin, Shanghai and other recipient areas after the occupation by the Chinese Communists.
The Economic Cooperation Agency, which is in charge of US foreign economic assistance, answered in the affirmative.
1. "Differences" between the State Council and the Economic Cooperation Agency
In late November, Roger Reipham, the head of the China Bureau, sent a telegram to Paul Hoffman, the head of the General Administration, proposing that aid be distributed under certain conditions in areas occupied by Chinese communist forces until the original aid plan was completed. Hoffman couldn't agree more.
They argue that:
This will help to flaunt that US aid has "nothing to do with ideology" and show that the US government "truly cares about the welfare of the Chinese people," thereby saving the United States from losing its prestige in China, and it will also give the United States the opportunity to reach out to the "non-communist factions" in the liberated areas and encourage their "will to resist."
In their view, if the United States itself erected an iron curtain to isolate China, it would only promote the establishment of a "satellite relationship" between China and the Soviet Union and make the Chinese people more supportive of the Chinese Communist Party.
However, within the State Council system, only the consul general in Beiping, Coleb, agrees with the idea of the Economic Cooperation Agency.
Acting Secretary of State Lovett, after consulting with Butterworth, director of the Far East Division, Kennan, director of the Policy Design Office, and others, told Hoffman in person that it was not appropriate to provide supplies to areas controlled by the Chinese Communist Party, because it was not in line with the purpose of the 1948 China Aid Act.
Stuart Leiden said more bluntly that it is against the interests of the United States to help the CCP "weather the difficulties of the takeover."
The attitude of the State Department did not deter Hoffman. In early December, he revealed Reipham's proposal to a congressional committee overseeing foreign aid in order to garner political support, and the response was good.
He then traveled to China, where he declared to Chinese and foreign reporters in Shanghai on December 13 that the United States would continue to provide assistance if China established a coalition government that would allow "liberal institutions" to continue.
The State Department was quite annoyed by the news and hurriedly stated to the press that this remark represented only Hoffman's personal views. Acting Secretary of State Lovett also called embassies abroad to say that the administration had not changed its established policy of not aiding Communist-run countries.
Apparently at the suggestion of the State Department, Truman decided on December 31 that if any part of China was directly or indirectly controlled by the Communists, the Economic Cooperation Agency should immediately stop sending aid to that region.
Hoffman is trying to change that decision. On January 7, 1949, he had a heated argument with Acting Secretary of State Lovett and Butterworth, Director of the Far East Department of the U.S. Department of State.
He stressed that the United States should remain in China as much as possible and hinder "Russian rule" by showing friendship to the Chinese people. Lovett and Butterworth denounced this approach as unwise.
Butterworth made a fundamental concern for the State Department this way:
"As soon as the Communists assume the responsibility of governing China's important coastal areas, they will find themselves in great economic difficulties. These regions inevitably count on the West, as they depend on foreign trade for their livelihoods. ...... We should exacerbate the difficulties of the Communists as much as possible in order to promote a tendency to get closer to the West. ”
A week later, the disagreement between the State Department and the Economic Cooperation Agency was brought to a cabinet meeting chaired by Truman. Hoffman was invited to the meeting and made his own arguments, but the cabinet members unanimously agreed with Truman's decision.
On 19 January, the Cabinet reaffirmed the decision.
Truman said at the meeting:
"We must not take any compromising stance with the communist regime. ”
Telling is that this was the only debate among senior officials in the Truman administration about CCP policy before MacArthur's crushing defeat on the North Korean battlefield in late 1950.
Since Acheson became secretary of state, his policy of not sending supplies to the Economic Cooperation Agency to China's liberated areas has not changed in the slightest. In mid-April, Alan Griffin, deputy director of the agency's China branch, proposed a "flexible policy" for Shanghai, which was about to be occupied by the People's Liberation Army, so as not to paralyze the economy by stopping U.S. aid and thus completely lose the prestige of the United States in Shanghai.
However, the State Department ignored it. In Acheson's and Butterworth's view, the cessation of aid to Shanghai would allow the United States to significantly increase the amount of supplies it could provide to Taiwan.
In early May, the British Foreign Office proposed to circumvent legal obstacles by transferring some of the ECA supplies to another agency, which would supply them to Shanghai. However, this proposal was immediately rejected by the US State Department.
In early August, Jessop, a close associate of Acheson, stressed to the press how the United States would carry out its plan to aid China, saying that the US Government's policy was, and still is, "to help the Nationalist Government, not to help the Communists."
2. "Sanctions" or trade?
After the Economic Cooperation Agency was ordered not to provide assistance to the liberated areas of China, Lai Puhan naturally considered the following issues:
"How can the United States do its best to maintain as many contacts as possible in Communist-controlled China through other channels, and how can we do what we can do to prevent the Iron Curtain from falling and maintain American engagement with the people of those regions?"
In his view, commerce has become the main means available in this regard, and the US Government should encourage American businessmen to trade with the liberated areas of China, and should not impose any export restrictions except for military supplies and goods of a truly strategic nature.
The State Department shares Reiphan's thinking on retaining U.S. influence through trade. Butterworth, director of the Far East Division, told the British Embassy in the United States in early February 1949:
The decision on the activities of the Economic Cooperation Agency in China does not mean severing economic ties with CCP-controlled areas, but only indicates that such ties should be conducted through private commercial channels, and that trade is the most appropriate means of maintaining contacts between China and the West, and that it may strengthen "the resistance of local Chinese forces to Soviet control."
At the end of February, the State Council submitted a report on trade policy toward China (Document No. 41 of the National Security Committee), which was approved by the President on March 3.
The document argues that the United States should deepen Sino-Soviet tensions by restoring "general economic relations" with China, mainly trade relations, and eventually lead to an "independent CCP regime."
Not only that, but it was also about the rapid revival of Japan, which was under American occupation.
"Tough trade with China will make it difficult, if not impossible, to rebuild Japan's trade with North China and Manchuria, and thus create prospects for the United States to prop up the Japanese economy indefinitely. ”
Finally, the continued existence of U.S. private enterprises in China will depend to some extent on whether trade with China is allowed.
However, concerns about "ultimately strengthening China's communist regime" have a greater impact on U.S. policy.
Therefore, contrary to Repham's view, the NSC's Document No. 41 calls for strict control of trade with China.
Such controls include embargoes on military equipment and all other goods directly used for military purposes, strict restrictions on the export of non-military strategic goods, and the requirement that all exports to China be licensed by the Ministry of Commerce for approval or prohibition on the basis of "strategic considerations."
As a matter of fact, the types of non-military strategic materials are very extensive, including a variety of machine tools, precision instruments and instruments, electronic equipment, motor vehicles and carriages, chemical products and equipment, steel, non-ferrous metals, power generation and transmission equipment, petroleum products, and so on.
NSC Document 41 stresses that this control is only the bare minimum and that it can demonstrate to the Chinese Communist Party that the United States can and intends to "treat China's foreign trade very harshly" up to "political-economic warfare" when the CCP is determined to pursue a policy that undermines U.S. strategic interests.
In order to effectively enforce the restrictions, the document calls for the cooperation of the rest of the Western world, as well as the private sector in the United States, to ensure that the Chinese Communist Party cannot obtain supplies from other controllable sources without severe restrictions.
3. A conspiracy to win over Britain to sanction New China
In this regard, as on the issue of recognition, the US government is most concerned about the attitude of the United Kingdom.
Britain is the largest exporter to China outside the United States, and has the ability to provide large quantities of capital goods, and Hong Kong under British governance has always played the role of a transit point for Western trade with China.
Without the cooperation of the United Kingdom, it will be difficult for the United States to achieve its goal of trade restrictions.
In late March, the State Council informed the British Embassy of the spirit of the NSC's Document No. 41 and the methods of controlling exports to China, and asked the UK to take the same measures, especially to strictly restrict Hong Kong's exports to Chinese mainland.
However, Britain is reluctant to do so. More than two months ago, the British Embassy demonstrated in detail to the State Department the importance of trade with China to Britain, and explained that the prospects for trade between Western countries and New China are not bleak.
In early April, the British Foreign Office issued a preliminary reply to the US request, emphasizing that Britain would maintain trade and other economic interests in areas controlled by the Chinese Communist Party as much as possible, and asked the United States not to exert economic pressure on the CCP until "the Communists begin to take real actions against foreign economic interests."
In order not to offend the United States too much, it said that an embargo on military supplies could be considered, but this must be premised on concerted action by other Western countries. In the more than two months since then, the United States has been unable to get any clear support from the United Kingdom, despite repeated persuasions.
Beginning on 21 June, representatives of the US State Department and Commerce Department held consultations with British government officials in London on trade issues with China.
As a result, Britain agreed to embargo military supplies, excluding Hong Kong and Singapore's transshipment trade with Chinese mainland in this regard, unless countries such as France, the Netherlands, and their East Asian possessions did the same.
As for the export of non-military strategic goods to China, with the exception of petroleum products, Britain refuses to impose restrictions.
Acheson was so dissatisfied with this that he asked the British embassy in Britain to warn the British Foreign Office that Britain's attitude would deprive the West of its most important means of protecting its interests in China and the Far East.
However, instead of changing its stance, the British government submitted a diplomatic memorandum to the US State Department in mid-September, criticizing the guiding ideology of US policy and saying that it was futile to use trade as a political weapon against the Communists.
At the same time, Acheson and Bevin were in Washington for talks, and restrictions on exports to China were among the issues.
The talks did not bring Britain closer to the United States in this respect, and Acheson had to admit that the differences between the two countries were difficult to bridge.
4. The U.S. "Oil Embargo" on New China
In the more than half a year since the US National Security Council's Document No. 41 was formulated, the situation in China has developed considerably. The Chinese Communist Party declared a "one-sidedness" and set out to purge U.S. interests in China, while the Kuomintang began an armed blockade of liberated southeastern coastal ports in late June in an effort to economically suffocate the new regime.
These factors prompted Truman to switch to a comprehensive embargo and attack New China with an out-and-out economic war. In late August, Rusk told people that the president was rapidly moving toward a new policy toward the Chinese Communist Party that would lead to the abandonment of the arguments of the National Security Committee's Document 41. Sure enough, at a cabinet meeting on September 16, Truman said the document was outdated and should be revised.
However, the State Department does not approve of the revision, the main reason for which is that the United States is already severely restricting exports to China, and a stricter policy is unnecessary.
At the same time, it reiterated the practical reasons why limited trade should be allowed, saying that if the United States and Japan under occupation unilaterally embargo non-military strategic goods, the CCP would still be able to take them from the Western European market, and the West's incompetence and division would be exposed as a result, and Japan's economic revival would be hindered as a result.
As a result, not only was Document No. 41 of the National Security Committee not revised, but the policies set out therein were affirmed in the programmatic decision-making document on East Asia at the end of the year.
Indeed, in practice, the US policy of limited exports to China on non-military strategic goods is very different from the embargo. The most striking example of this is the extremely severe restrictions on the export of petroleum products to China.
As early as December 1948, the State Department demanded that the American oil companies reduce their oil storage in Shanghai to a minimum, and tried to get the British oil companies to do the same, so that Shanghai would be severely short of oil after the occupation of the People's Liberation Army.
As a result, oil destined for Shanghai was relocated to places such as Hong Kong and Taiwan. By the end of April 1949, Shanghai's fuel oil storage was only enough for 27 days.
In March 1949, when the authorities concerned in the liberated areas tried to buy a batch of kerosene and gasoline for automobiles from several British and American oil companies, the US State Department immediately asked the US companies to keep the sales volume as low as possible. It then notified oil companies of its policy of restricting the sale of petroleum products to CCP-controlled areas, requiring that the sales should not exceed the minimum amount required for civilian consumption in order to prevent them from being "stored, used for military or transshipment" by the CCP.
In June, the State Department instructed Texaco to refuse to enter into a long-term oil supply contract with the Chinese Communist Party, and through the British Foreign Office, to urge Anglo-Iranian Oil to do the same. By late August, short-term fuel supply contracts had also been blocked by the State Council.
The severe restrictions imposed by the US government have caused the export of petroleum products to China to plummet.
According to the U.S. Department of Commerce:
Compared with 1948, in 1949, exports of gasoline for automobiles to China decreased by 94 percent, kerosene exports to China decreased by 99 percent, exports of diesel and other fuel oils to China decreased by 93 percent, and exports of industrial lubricants to China also decreased by 93 percent.
Beginning in January 1950, the U.S. Department of Commerce stopped issuing export licenses to China for most refined oils. Immediately after the outbreak of the Korean War, the State Department ordered to stop the sale of any petroleum products to China. The situation is similar with regard to other non-military strategic goods.
5. The "diplomatic war" behind the "trade war"
Document No. 41 of the US National Security Council envisages that "in the field of economic relations with China, the United States has the most effective weapon against the Chinese communist regime."
One of the uses of this weapon is to try to force the Chinese Communist Party to change its policy toward former U.S. consular personnel in China. In early February 1949, Cabot, the consul general in Shanghai, telegraphed Acheson and said that the CCP had a great desire for trade with the United States, and as long as it was shown that such trade could only be carried out after the approval of the American consul, the CCP had to recognize their official status.
At that time, the US merchant ship "President Fillmore" was about to sail into the port of Tianjin, and Cabot advocated giving it a try, and the State Department adopted this strategy, instigating the "President Fillmore" to ask the Tianjin Military Management Commission to allow the US consul to perform "normal functions" related to the ship's business, otherwise it would not unload cargo in Tianjin. In the end, however, the "President Fillmore" did not listen to the State Department and became the first foreign merchant ship to enter the port to unload cargo after the liberation of Tianjin.
Then, Robert Smith, the consul general in Tianjin, advocated refusing to guarantee the consignment note for the export goods to the United States loaded in Tianjin, and using this practice to interrupt the export business of Tianjin Port to the United States to force the Chinese Communists to recognize his official status.
Acheson hesitated this time, fearing that the CCP would think that the United States was engaged in economic warfare, which would make it difficult to achieve the purpose of the NSC's Document No. 41.
Despite this, he instructed Smith to use this to claim the right to communicate in cipher.
However, the fact that the liberated areas were able to continue exporting to the United States through Hong Kong alone made it impossible for the State Department to achieve its goals.
In early April, Acheson told the embassy and major consulates in China that it would be unwise to seek recognition of U.S. consuls with direct and overt trade restrictions at this time.
But not long after, the U.S. government couldn't help but do such an unwise thing.
At the end of April, Yao Yilin, Minister of Industry and Commerce of the North China People's Government, sent people to meet with the US Consul General in Beiping, Coleb, and proposed to exchange goods with Japan, which was under US occupation.
After receiving the report, the State Council decided to take advantage of the desire of the Chinese Communist Party to carry out Sino-Japanese trade. In early May, the War Department conveyed to MacArthur the State Department's request to allow trade as a means of "maximizing the benefits of foreign interests in China, and especially to normalize the American consular function, which the Communists now refuse to respect on important occasions."
In particular, the State Department hoped that MacArthur would use the trade negotiations to get the Chinese Communist Party to deal with American consular officers in China so that they could gain all sorts of official privileges.
Subsequently, the State Council's consul general in Beiping, Keleb, told the Chinese communists that the "League Headquarters" in Tokyo was considering exchanging copper wires for soybeans in Northeast China, and that the Chinese communists should provide relevant information to them through Wald, the consul general in Shenyang. This was clearly an attempt to exert political pressure on trade issues to change the house arrest situation of Wald and his subordinates.
Although the Tokyo "League" approved a number of Sino-Japanese transactions in July out of the need to restore Japan's economy as soon as possible, when the State Council was studying a Sino-Japanese exchange trade proposal in November, the head of the Far Eastern Affairs Department still strongly advocated using this to force China to release Wald and others.
The Truman administration's severe restrictions reduced U.S. exports to China to very low levels.
According to the U.S. Department of Commerce:
The total value of exports to China fell from $273.4 million in 1948 to $82.6 million in 1949 and to $33 million from January to August 1950. Most of the exports in the latter two years were "almost strategic" cotton.
It should be noted that the Chinese Communist Party has not imposed corresponding restrictions. In contrast to the sharp decline in U.S. exports to China, China's exports to the U.S. remained largely stable before the outbreak of the Korean War, and significantly surpassed U.S. exports to China in 1949 and the first half of 1950. Not only that, China has supplied a large number of strategic materials such as tungsten, tin, and tung oil to the United States.
This contrast reflects not only the relative position of China and the United States in trade at the time, but also two diametrically opposed policies regarding the interrelationship between politics and economics.
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