ORR/CIA VIEWS CONCERNING THE RECONSIDERATION OF INTERNATIONAL TRADE CONTROLS AGAINST COMMUNIST CHINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01203A000100090007-9
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 9, 2016
• Document Release Date: August 4, 1998
• Sequence Number: 7
• Publication Date: January 14, 1955
• Content Type: REPORT

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a.s
14 January 1955
2 CIA Views Concerning the Reconsideration of
39 iss 1 Tx a CoUTM- s C ist f'hiaas,
1. PnSkBroMnd of CIA In rest In Ws Problem
e AC Executive Committee, as of 17 December 1954, requested this A envy
to discuss criteria which would, elicit adequate intelligence to meet objec-
tive-, in supra of a reconsideration of the China list. This request was
reiterated in a letter dated 22 December 1954 from the Deputy }director, MDAC,
to the A2,RR.
T experience of this Agency indicates a close relationship between the
criteria employed in a list rev ew and, the effectiveness of the intelligence
which is introduced. A new set of Attributes and modifying Standards was
adopted by EDAC in October 1953 to which the Central lutelligence Agency
repr aentat:Lve was unable to agree.* The view was expressed that these criteria
would impair the effectiveness of the intelligence contribution in support of
US negotiations, end that a substantial der ading of ccamDdities could be
expected.
With these criteria in effect, the burden of proof was placed in large
part upon intelligence to establish that the list commodities met the specified
attributes. In sane cases this required, Bloc information which was not at
ha ; in sons cases it required data on the Bloc which was not even available
on American industries. The net effect of the exercise was the substantial
d n3r g of . important its which might have been held if the
attributes bad not unrealistically required very detailed intelligence to
ED mutes for the meeting of 22 October 1953.
T
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support their retention.
permit adequate economic justification for the retention of its on
the Chime List (or their deletion) it is suggested that consideration be given
to the views contained in the following sections.
11. = tiM. ?e Re,1.Mti,Xe~ off ecti as of Differs On-
The u~ai~t Chin, ~red r tie ~~esn ~o~r.~et Bl?c?~.
Intelligence Advisory Coi ittee (IAC) estimates that China is able to
import f the European Bloc those c ties, including transshipped Western
goods, required for a rapid expansion of military strength and industrial out-
put. Thus, commo&itiee embargoed against China which save not embargoed against
the rest of the Bloc are supplied to China either out of Bloc production or
through trahient or reexport of Western goods. The major effect of the
differential controls is not one of denial, but rather one of increasing the
coats and difficulties of procurement.* For these reasons, the application
of differential controls against Ccmmunist China are largely ineffective.
III. I~ai ~~?
The IAC also believes that; (a) if the US maintained its present complete
embargo on both imports and exports, the foreign exchange advantages which the
Chinese might otherwise gain would be reduced by roughly one-half; (b) if the
-5) US maintained only a ban on imports from and remittances to China, the potential
gains in foreign a cabarge to China would be reduced by about the same proportion;
e (c) if the US maintained only a ban on exports to China the Chinese could
procure equivalent c ties elsewhere at only slightly increased costs, and
could spend in other countries the dollars earned by exports to the US.*
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IV. 2&1L ? scions wed on Certain AssuMtions as to US Ae itti
Jitjqj- La loans i n do q
MaxgsiOns
1m`hile the limited effectiveness of differential controls covering Communist
Chins, and the European Soviet Bloc are clearly recognized as outlined in II
above, it is assumed in the following paragraphs that the US policy in its
International negotiations win require discussion of commodities for inclusion
on a China list supplementary to present COC ! controls against the European
Soviet Bloc.
A. It is assumed that the present COCCI lists will apply to C st
China just as they do to the European Bloc except where in conflict with a new
supple atsl list, in which case items on lists II and III similar to items
under Esbargo categories on a China supplemental list would also be embargoed.
In this case the principal problem will be to determine which categories of
items should be on this supplemental list.
B. It is suggested that the quotas currently assigned under International
List II not be increased. The European Bloc has been in a position to procure
goods for China which are subject to quotas under ILII. The present quotas
are in fact in operation against the whole Bloc (including China) at the present
C. It is suggested that the following approach be employed in the deter-
mination of items whose export to Communist Crhina should be prohibited or
controlled.
1. In applying criteria for the selection of categories of items for
control, the position of the entire Bloc with respect to these commodities
should be considered. Unless the supply situation within the whole Bloc is
3.
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taken into consideration, it is obvious that the European Bloc can and will
supply Items to China not in abort supply in the European Bloc.
2. In applying criteria for the selection of coin odities for control,
it is proposed that insofar as possible this be done on the basis of camcnodity
categories rather than individual commodities. The reasons for this proposal
are as follows :
a. Intelligence inforntion concerning China's economic require-
ments for and precise uses of individual commodities is very scarce and in the
absence of this information it is doubtful that satisfactory economic justi?
fication could be presented for the retention of many individual items on
control lists. On the other hand, intelligence information is available in
sufficient quantity to enable economic analysis of the effect of denial of
broad c ty categories.
b. A further complicating factor in the selection for denial (and
subsequent enforcement) of individual commodities is the possibility of subs
stitution of one type of item for another in the s category if too precise
city definition is used. This would be true particularly in regard to
ChIms whose primary needs are for general purpose machinery rather than
specialized types. For this reason alone, the selection of individual commodities
for denial rather than commodity categories would make any precise economic
intelligence support virtually impossible. The broader the denial of categories
? of c ties the more difficult, costly and inefficient would be the Chinese
problezi of adjustment to achieve the same economic goals.
c. If the broad commodity category listings were adopted, it would
probably 'ma'ke it much easier to administer and enforce a China list because
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there would be blanket embargoes which would prohibit the licensing and ship-
mert of all types of a listed commodity without the necessity for minute
c Lion of specifications.
3. Under the assumption that the US policy embodied in uSC 166/4
as it relates to economic defense controls will remain the same, it is
proposed that the following criterion be adopted in considering items for
embargo to C ist China:
pose categories of commodities which would contribute signifi?
cantor to the industrial and military growth of China, provided that either
of the two following conditions prevail:
a. That these categories of commodities are in short supply in
the Soviet Bloc (including China), or
b. That these categories of c ties are in short supply in
Communist Chit, and by reason of cost, weight, transportability, etc., would
be difficult to procure from other Soviet Bloc countries.
V. A. Tentative ?CIA Evaluation of the Categories of Items Eow M the
China Spec ial List and IL II and in that Might be Retained for
k~bardxo tbader the Above Criteria
1. Electric Power and GeneratLmg
Rapid development of the electric paver industry is essential to
the continued growth of the Chinese economy. It has one of the highest
priorities in economic planning in both China and the USSR. the supply of
such equipment is not adequate to meet both sets of plans easily. Trans-
portation of much electrical equipment is costly, particularly if accomplished
overland. The electrical manufacturing industry in the Bloc (save for East
Germany) is not as efficient as sim1lar industries in the West.
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"," a ~%-~T
2. Cenerel atrial F ui. t
Because of the present relatively undeveloped nature of the
Chinese economy, there is a great need for nearly all types of general
industrial equipment. Many Industrial jobs are performed in an inefficient
or wasteful manner because of the absence of suitable equipment. This
general category is also in short supply in the Bloc as a hole and substantial
quantities are imported from the West by Europe Bloc countries for their
own needs.
3. Trans Ezu~tt
Like electric power, the continued development of the transporta-
tion induetr r is essential ;to the continued growth of the Chinese economy.
It also has one of the highest priorities in Chinese economic planning. Domestic
Chinese prodiction is not dequate to supply all of China's needs. Because
of a differ ce in railroa4 gauge, much of the Soviet equipment, which is al-
ready in. tight supply, would not be useful to the Chinese without extensive
modi2ication.
4. Electronic and Precision Instruments
This general category is essential to any complex industrial develop-
meat, particularly that designed to support military power. This category is
also in abort supply throughout the Bloc, and the small. Bloc electronics
industry is a high cost producer.
" S ? Metsal.se Minerals and Manufactures (including copper)
C st China needs a wide range of metals in varying fors.
This need will, ,aw as the econort j develops. Many of these metals and metal
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C 1W
manufacturers would be used in categories covered above or in services such
as comrunications which are extremely important to the future growth of the
economy. Most of the items in this category are in short supply in the Bloc
or are produced at high cost.
B. Tentative ORn/CIA Evaluation of the Categories of Items Nov on the
rtinued
1. ~Beteelworking 3C$3?n
All significant items are now on Ib I and II. The remainder are
produced in adequate quantity in the Bloc at low cost and easily transportable.
2. C ca1. and Petroleuan Enuimment
All significant items are now on n I and II. The remainder are
produced in adequate quantity in the Bloc at low cost and easily transportable.
3. CtaeanicaC. and Petroleums Products
All significant items are now on IL I and. II. The remainder are
produced in adequate quantity in the Bloc and easily transportable.
4. Rubber Rubber Products
Available in part from non.COC?MI sources or from Bloc production.
Easily transportable.
5. Miscellaneous
Relatively u nportaut items or items which are produced in
adequate quantity in the Bloc and easily transportable.
?6?
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