SECRET NODIS October 6 1 9 6 9 ' TO Under The Secretary THROUGH FROM s s EA - SUBJECT i N e x tS t e p si nC h i n aP o l i c y 6 peg 1- - -ZJ Green Marshall Irw2 z -x I fi iJ ' _ ' I ' i _ I _ '' '% I ' i 3 Where a r e we now 1 The A d m i n i s t r a t i o n has i n d i c a t e d a w i l l i n g n e s s t o s e e kf r i e n d l i e r and more normal r e l a t i o n s w i t hP e k i n g and tbor i ntghCeh i n e soeu t o f t h e i rn t e r n a t i o n a l i s o l a t i o n and t o s e e them p l a y a more c o n s t r u c t i v e r o l e intheAsian community when t h e i r p o l i c i e s c h a n g e July 2 The P r e s i d e n t has e x p r e s s e dh i sg e n e r ailn t e r e s itn m o d i f y i n go u rt r a d ep o l i c yt o w a r dP e k i n g p r i v a t e l y through' NSDM 1 7 and i n h i s c o n v e r s a t i o n w i t h me on A i r F o r c e One l a t e J u l y w i t h Ambassador S t o e s s e l September 9 and p u b l i c l y t h r o u g h our r e l a x a t i o n o f t o u r i s t p u r c h a s e s goods o f Chinese 21 on ' ' 3 We h a v ep u b l i c l yr e p e a t e d l ye x p r e s s e do u rw i l l i n g n e s s t o renewour b i l a t e r a l t a l k s w i t h t h e C h i n e s e i n Warsaw or' e l s e w h e r e We a l s oe x p r e s s e dt h i sp o s i t i o n -p r i v a t e l y We h a v ef u r t h e ri n d i t ot h eC h i n e s ei n March t h i s y e a r c a t e d t h a t we will soon approach t h e C h i n e s e a g a i n o n t h i s issue theSecretary'sCanberraspeech The P r e s i d e n t h a s a u t h o r i z e d Ambassador S t o e s s e l t o s e e k an o p p o r t u n i t y t o c o n v e yt ot h eC h i n e s e charge' i n Warsaw t h eP r e s i d e n t ' s w i s ht od i s c u s s animprovement inlelations - I 4 We h a v es l i g h t l ym o d i f i e d our t r a v e l r e s t r i c t i o n s a p p l i c a b l e t o China i n J u l y b u t h a v e r e n e w e d t h e s e g e n e r a l r e s t r i c t i o n sf o ra n o t h e rs i x - m o n t h s u n t i l March 1 5 1 9 7 0 The S e c r e t a r y h a s howev er p r i v a t e l y s e n t t h e P r e s i d e n t a memorandum e n d o r s i n g a c o m p l e t e d r o p p i n g o f a l l t r a v e l r e s t r i c t i o n s a t an a p p r o p r i a t et i m e SECRET NODIS' Group 1 - Excludedfromautomatic downgrading and d e c l a s s i f i c a t i o n r - h n h n 0 h c 7J 'a SECRET NODIS - 2 5 The p o s i t i o n sd e s c r i b e di n 1 - 4 abovehavebeenwidely welcomed and a p p r o v e di nt h ep r e s s and byCongress We a r e aware o f no s i g n i f i c a n t p r e s s c r i t i c i s m whatsoever and of only isolated reservations by members o f C o n g r e s s I 6 We h a v ed e c i d e dp r i v a t e l yt ow i t h d r a w for budgetary have r e g u l a r l y r e a s o n s t h e two US Navydestroyerswhich future t h e ' f u n c t i o n s p a t r o l l e dt h e Taiwan S t r a i t I nt h e o f t h i s p a t r o l will be maintained by US s h i p s i n or t r a n s i t ingtheStraitareatotheextentSeventhFleetforcesare available The GRC h a sn o ty e tb e e ni n f o r m e do ft h i s iI I I 7 lVe h a v e' a p p a r e n t l ye i t h e rd i r e c t l y or i n d i r e c t l ye n c o u r a g e d a number o f o t h e r c o u n t r i e s t o c o n v e y t o the Chinese ourgeneralinterestin an improvement i n r e l a t i o n s and contacts' ''_' ' ThishasbeendonebythePakistanisjthe Cainbodians and the French t o ourknowledge and p o s s i b l y b y o t h e r s a3 w e l l 8 We haveencouragedseveral t o visit P e k i n g 9 We haveemphasizedthat ChiRep p o l i c y t h i s y e a r here a r e t h e C h i n e s e members o f Congresstoattempt we do n o t i n t e n d t o changeour now 1 The C h i n e s e b e g a n t h e y e a r w i t h a s e r i e s o f extremely strongattacksagainsttheAdmirdstration ingeneral and t h e P r e s i d e n ts p e c i g i c a l l y As t h ey e a rh a sp r o g r e s s e d t h e s e attackshavebeensubstantiallyattenuated Pekingtreated a very low key and'ignored the the President's Asian visit in S e c r e t a r y ' st r i p The Chinesehavenot commented p u b l i c l y o n either of the speeches on China p o l i c y made by the Under S e c r e t a r y or t h e S e c r e t a r y or on o u r t r a d e and t r a v e l moves i n J u l y I n t he p a 2 tt h e yc o n s i s t e n t l yh a v e denouncedsuch In t h e i r f i r s t g e n e r a l i z e d commentary on US-China gestures 1 T w e n t i e t hA n n i v e r s a r y relations just prior to the October c e l e b r a t i o n s t h e Chines e r e i t e r a t e di n a v e r yl o w kew t h e i r position that the US h a s a l w a y s b e e n h o s t i l e t o C h i n a h a s i n and i s t h e a r c h t h e past threatenedChina occupiesTaiwan i m p e r i a l i s t enemy The a r t i c l ea l s oi n c l u d e s a r a r er e f e r e n c e t D t h ec o n t i n u a t i o no ft h e US t r a d e embargo The a r t i c l e ' o m i t t e d or t o c u r r e n t o r f u t u r e US allreferencestothePresident China p o l i c y and c o n t a i n e d n o s t r o n g v i t u p e r a t i v e l a n g u a g e 2 P r i v a t e l y t h eC h i n e s eh a v et o l d a number 'of f o r e i g n e r s US p o l i c y towardChina is t h a t t h e y are a w a r e o f t h e f a c t t h a t under r e v i e wi nW a s h i n g t o n T h e yh a v ep r i v a t e l yn o t e dt h e t r a d e and t r a v e l movesashavingbeen made in t h e c o n t e x t o f 1 1 SECRET NODIS I t h i sr e v i e wb u th a v es a i dt h e s ea r ei n s u f f i c i e n t Theyhave c o n t i n u e d t o emphasizethat some move r e l a t i n g t o Taiwan i s 'necessarybuthaveconveyedmixedsignalsas'tothescopeof some responsefromPeking Some t h e US move r e q u i r e dt oe v o k e r e p o r t sh a v es u g g e s t e dP e k i n gi ss e e k i n go n l y some symbolic g e s t u r e such as a minor troop withdrawal from Taiwan or o f t h ep a t r o ls h i p si nt h e Taiwan S t r a i t O t h e rr e p o r t sh a v e f o c u s s e d on P e k i n g ' s l a r g e o b j e c t i v e s o f c o m p l e t e US withdrawal from Taiwan 3 P r i v a t e l y t h r o u g h Chou E n - l a i t o the'FrenchAmbassador Pekinghasalsoexpressed an o b j e c t i v e and r a t h e r s y m p a t h e t i c v i e w o f US p o l i c y t o w a r d t h e S i n o - S o v i e t d i s p u t e n o t i n g t h a t t h e US has not attempted to take advantage o f i t or t r i e d t o worsen i t and t h a t t h e US c l e a r l y d o e s ' n o t s e e ' a S i n o - S o v i e t war as i n i t s i n t e r e s t Chou has a l s oi n d i c a t e d t h a tt h e q u e s t i o n o f renewedSino-US t a l k s i s complicated preswnab'ly 'by domesticproblems We h a v es e n s e dt h a tt h e r eh a sb e e n an US o v e r t h e internal Chinese debate over policy toward the l a s t y e a r and p a r t i c u l a r l y i n r e c e n t months While a l l t h i s any c l e a r i n d i c a t i o n o f a major i s s t i l l very far-removed from s h i f t i n Chinesepolicytowardthe US i t suggests a s l i g h t s o f t e n i n g of t h e i r p o s i t i o n a s compared w i t h a y e a r a g o I 4 The ChinesecontinuetoholdtwoAmericans incommunicado svha we r e p i c k e d - u p l a s t F e b r u a r y f o r a l l e g e d l y s a i l i n g i n Chinesewatersenroute from HongKong t o Macao They also holdsixotherAmericans incluaing'twomilitarypilots from the Viet-Nam war What c o u l d we do n e x t 1 Trade P o l i c x We a r ec u r r e n t l yp r e p a r i n g a recommendation for t h eP r e s i d e n t w s l l e n a b l e us t o d e a l w i t h t h e u n b l o c k i n g o f t h e Bank B e l g ea c c o u n tb yT r e a s u r y T h i sp r o p o s a li sb e i n g p r e p a r e da tt h er e q u e s to fD e p u t y Under S e c r e t a r y Samuels w i t h theconcurrence ofthe Under S e c r e t a r y and we b e l i e v e t h e - S e c r e t a r y as w e l l We h a v e s t r o n g l y u r g e d t h a t such a move b e made as p a r t o f a more g e n e r a l p o l i c y a c t i o n We i n t e n d t h e r e fore to propose a m o d i f i c a t i o n o f FAC t o embrace a wide-range of r e g u l a t i o n s i n v o l v i n g t h e e x t r a t e r r i t o r i a l a s p e c t s o f c u r r e n t US t r a d ep o l i c yt o w a r d P e k i n g T h i si n c l u d e s a u n b l o c k i n g of letter-of-creditaccountsheldby banks b removing o f FAC r e s t r i c t i o n s on A m e r i c a ns u b s i d i a r i e sa b r o a d c r e m o v i n g o f on anapproachwhich SECRET NODIS SECRET NODIS - e 4 - d I S $ FAC r e s t r i c t i o n s on t h i r d - c o u n t r y t r a d i n g a c t i v i t i e s o f American f i r m s i n v o l v i n g p o s s i b l e p r e s u m p t i v e C h i n e s e g o o d s and d anend t o c u r r e n t POL b u n k e r i n g r e s t r i c t i o n s ' We arealsoconsidering a p r o p o s a l t h a t all r e s t r i c t i o n s on t h e i m p o r t a t i o n o f Chinese antiques and o b j e c t s d ' a r t i n t o t h e US beended We understandthat Under S e c r e t a r yV o l k e r and Mr P e t t y i n T r e a s u r y a r e p r e p a r e d t o d i r e c t t h e i r s t a f f s t o studythelegal and admildstrativerequirementsforimplementing such a program 2 A f o l l o w - u p s e r i e s o f measures r e l a t i n g t o t r a d e p o l i c y measures include a generaladoption o f theremainderofthe l i s t e d in NSDM 17 l e a d i n g e v e n t u a l l y t o t h e e l i m i n a t i o n o f exporttradecontrols down t o t h e l e v e l o f t h a t w i t h t h e S o v i e tU n i o n We w o u l da l s op r o p o s e a g e n e r a ls e t t l e m e n to f ' or else- o u t s t a n d i n gc l a i m s and debtstotheChinese at Warsaw _ _ _ - where I 4 3 -- 1 Travkl We b e l i e v e - t h a t a l l t r a v e l r e s t r i c t i o n s s h o u l d b e d r o p p e d a ss o o na st h i si sp r a c t i c a b l e a st h eS e c r e t a r y recommended t o t h eP r e s i d e n t C u r r e n tr e g u l a t i o n se n a b l e us t o d 0 t h i s a t any time without waiting until the end o f t h e s p e c i f i c p e r i o d for w h i c ht h er e s t r i c t i o n sh a v eb e e ne x t e n d e d We c o n t i n u e t o f e e l however that this should be an across the-b0ar d a c t i o n j u s t i f i e d o nt h el e g a lc o n s i d e r a t i o n si n v o l v e d D e p e n d i n g on t h ec u r r e n t stateof'negotiationsinViet-Nan we c o u l d announceour i n t e n t i o n t o do so even b e f o r e the end of 1 9 6 9 4 'Warsaw Contacts We recommend t h a t we attempt t ou s et h eo p p o r t u n i t yp r e s e n t e d bythewithdrawalofthetwoTaiwanStraitPatrolvessels to improvetheatmospherefor US-ChiCom t a l k s i n Warsaw or e l s e where We will b ep r e g e n t i n g a recommendationthat assuming no change i s made i n o u r p r e s e n t d e c i s i o n f o l l o w i n g t h e r e a c t i o n o f P r e s i d e n tC h i a n g we a r r a n g ef o rt h eC h i n e s et ob er e l i a b l y i n f o r m e do ft h e US move through a CIA contact i n Hong Kong We would-not i n d i c a t e t h a t t h e m o v e - i n v o l v e - - a n y t h i n gmore than a Chinese t o budgetary s h i f t e v e n i n t h i s contact but allow the draw t h e i r own c o n c l u s i o n s We wouldthen time a renewedapproach t o Pekingthroughliarsaw t o a l l o w our p r o p o s a l f o r n e w ' t a l k s t o be r e a d ' i n t h e c o n t e x t o f whateversymbolicsignificancePeking ' may r e a d i n t o t h e T a i w a n S t r Q i t s h i p move If t h i s may p r o v i d e for f a c e o p p o r t u n i t i e s t o r e n e w c o n t a c t s t h i s may p r o v i d e t h e SECRET NODIS - 5 - y '' neededpush We wouldhopethischainof as p o s s i b l e a f t e r an approximatedate o f theregularpatrol I moves beginas s o o n issetfordiscontinuance 5 A t Warsaw we c o u l da g a i ns u g g e s tm e e t i n g si n each o t h e r s ' embassies or a s h i f tt o ' a n o t h e rc i t y O s l o Copenhagen H e l s i n k i B e r n A l g i e r s e t c 6 M i l i t a r y Moves We c o u l d c o n s i d e r w h e t h e r some o f t h e US forces which have b e e n b u i l t - u p on Taiwan in connection with the Viet-Nam war O f p a r t i c u l a rr e l e v a n c e may b et h e C - 1 3 5 mightbestaged-down t a n k e r s a t CCK A i r b a s e w h i c h w i t h t h e i r cTews and s e r v i c e and maintenance personnel increase the US m i l i t a r y p r e s e n c e on Taiwanby 4-5 000 I n any e v e n t we shouldconsiderremoving theseforces assoon astheyarenotactuallyrequiredforVietNam purposes We c o u l da l s o - - r e v i e wt h en e e df o rt h es t a n d - b y f i g h t e r u n i t w h i c h has been on s t r i p - a l e r t a t T a i n a n s i n c e May a p o s s i b l e ChiCommove a g a i n s t a this year in connection with US r e c o n n a i s s a n c e a i r c r a f t S i n c e t h e c l o s e s t p o i n t ' o f a p p r o a c h to the Chinese mainland by reconnaissance aircraft is now g e n e r a l l y o v e r 75 m i l e s and s i n c e t h e C h i n e s e n e v e r t h r e a t e n US reconnaissance aircraft in the Taiwan S t r a i t a r e a e v e n when t h e y f l y c l o s e r t h a n t h i s wemay wish t o c o n s i d e r w i t h d r a w i n g o u r --strip alert- aircraft to Clark Field We understand CINCPAC has recommended t h a t we do t h i s i n any e v e n t - 7 We h a v e d i s c u s s e d w i t h t h e - W h i t e House t h e Z e a s i b i l i t y o f a study of international organizations with a view to reassessmembership t o i n c l u d e n g US p o l i c y t o w a r d u n i v e r s a l i t y o f Peking'smembership i n non-UN a f f i l i a t e d t e c h n i c a l and s c i e n t i f i c o r g a n i 5 a t i o n sa sw e l l a st h ep o s s i b i l i t y o f extending t o i n c l u d e P e k i n gi nc e r t a i nV i e t - N a ms p e c i a l i z e da g e n c i e s We understand t h e r e i s some White House i n t e r e s t and thisshouldbepursued f u r t h e r w i t h I O and the White House s t a f f c cc _ c_ ' - Mr Pedersen Mr Cargo Mr EA ROC - Mr Shoesmith S C S PC SiPc EA ACA PHRreisberg lgr '