The China Threat: Memories, Myths, and Realities in the 1950s

Dwight Eisenhower came to the presidency with firm conservative Republican ideas about the role of trade and investment in U.S. foreign policy. He opposed government regulation and believed in the ability of business to resolve international conflict and make the world a more peaceful and prosperous place. Thus in inheriting a system of trade restrictions against the Communist bloc, Eisenhower faced a dilemma. He believed in fighting Communism on every front, but he considered the control regime in place onerous for U.S. friends, allies, and Americans. He would accordingly oppose efforts to strengthen prohibitions and refuse to penalize those countries whose economic future depended on liberalized trade rules. This clearly applied to trade with China, where the president openly supported liberalization of the international order even though he did not revolutionize American policy.

As fractious as United States relations with its allies sometimes grew over the Taiwan Strait crisis or UN admission, the allies considered trade a matter of greater moment and greater pain. The dispute over trade originated with efforts in the mid-1940s to restrict sensitive goods from flowing in quantity from the free world into the Soviet bloc. Washington found its views hard to sell until Moscow detonated its atomic bomb and Congress gave the Truman administration military aid funds that could be used as leverage for export controls.¹ To handle decisions on which items ought to be limited or prohibited, the United States, Canada, and members of the Organization for European Economic Cooperation established the Coordinating Committee of the Paris Consultative Group (COCOM) early in 1950.² But Europeans tended to view trade restrictions much differently than did resource-rich Americans. London, for one, had long protested against efforts to impede commercial exchange with the Soviet Union and Eastern Europe. The British worried about the strain imposed on their economy, whose dependence on the United States for raw materials was already high and which desperately needed additional markets.

The situation was further complicated by the unilateral American decision to embargo China on December 17, 1950—cutting off all trade, barring American ships from carrying goods to China, and freezing Chinese assets in the United States—in retaliation for its entry into the Korean War.³ Washington had urged free world trade controls on sales of strategic commodities to China beginning early in 1949 but had met considerable resistance. Sanctioning China made protection of Britain’s colonial outpost of Hong Kong more difficult and challenged amity among Commonwealth members who might well refuse to adhere to prohibitions. More generally, European governments tended to emphasize the political as much as the economic implications of trade barriers and argued that greater commercial contact would reduce international tensions and diminish the need for Communist bloc unity.⁴

The Korean War undermined opposition to American demands. The Europeans acceded in July 1950 to extension by COCOM of controls originally intended for the Soviet bloc in Europe to China and North Korea. Then, on May 18, 1951, the UN declared that a partial embargo would stay in effect until the end of the war in Korea.⁵ A wary American Congress, meanwhile, sought to strengthen the system by tying U.S. aid to observance of export restrictions. First in the Kem Amendment (1951) and later through the broader Mutual Defense Assistance Control Act (the Battle Act), provision of financial, economic, and military support to foreign states became contingent on adherence to the American trade agenda.

Washington’s terms seemed especially burdensome to the Japanese, who bitterly resented the expectation that they would accept anti-Chinese regulations stiffer than those required of their European competitors. Japan’s economic recovery from the devastation of the Pacific war had been accelerated by U.S. military procurement for the Korean theater, but Japanese government and business leaders firmly believed there would be no prosperity without trade with mainland China. They began to argue this case early in the American occupation, although Washington countered that trade would never reach the levels the Japanese anticipated and that if it did Japan would be dangerously dependent upon the Communist bloc. Japanese dismay in turn fueled the anxieties of American policymakers worried about China’s seductive power. As a result, the Truman administration instigated formation of a new offshoot of COCOM, the China Committee (CHINCOM), in order to embrace Tokyo, and insisted that CHINCOM impose restrictions more demanding than those of COCOM. At the same time, it also coerced the Japanese into signing a secret bilateral agreement elevating their actual controls well above CHINCOM levels.⁶ The Japanese had no choice but to acquiesce in Washington’s policy if they wanted rapid approval of the San Francisco peace treaty.

Eisenhower, Dulles, and Treasury Secretary Humphrey agreed that Japan really would not, in the long term, develop and prosper without the raw materials and markets of northern China. Indeed, the president asserted that even in the short run Japan ought to be permitted a limited amount of trade with Communist China. Japan, he believed, could not sustain an industrial recovery without mainland iron and coal.⁷ To his diary he asserted, “I believe that the effort to dam up permanently the natural currents of trade, particularly between such areas as Japan and the neighboring Asian mainland, will be defeated.”⁸

Thus the president proved understanding when the Japanese legislature confronted the administration on July 30, 1953, with a unanimous resolution demanding that the China differential be eliminated and barriers be reduced to COCOM levels, if not below. He rejected the idea purveyed by China Lobby types like Representative Walter Judd (R-MN) that commercial connections would lead to the Communization of Japan.⁹ Rather than risking subversion of Japan, trade with China, he thought, would allow Tokyo to exert a democratizing influence among the Chinese and relieve their complete dependence upon Moscow. Further, and not to be ignored, Sino-Japanese trade would lighten the Japanese burden on the American taxpayer, who was providing significant aid to Tokyo because of stiff trade controls.¹⁰

Eisenhower accepted the idea of informal Sino-Japanese negotiations. A 300-strong Dietman’s League for the Promotion of Sino-Japanese Trade, formed in 1949 in the Japanese legislature, launched the talks in September1953. The talks yielded a barter agreement calling for a permanent Chinese trade mission in Japan. So popular was the trade issue that political forces in the country opposed to Prime Minister Yoshida Shigeru seized it to embarrass the government and ultimately help oust him.¹¹ In March 1954, the NSC finally terminated the reviled bilateral agreement but insisted that Tokyo gradually decrease its controls to the level observed by other CHINCOM members.¹²

Although Tokyo welcomed the change, business interests argued that it did not go far enough. European merchants, the Japanese asserted, circumvented the CHINCOM prohibitions by selling goods to the Soviets at the lesser COCOM levels, and these materials were then transshipped to China. Since Japanese companies could not do the same, they were incurring losses and being replaced in traditional and natural markets.¹³ American trade policy, therefore, was not preventing China from obtaining CHINCOM goods, but it was straining free world relations.¹⁴

This became especially apparent as the approaching Korean War armistice eliminated the grounds for conformity on trade policy. Eager to reopen trade with China—and under considerable domestic pressure to do so¹⁵—allied governments balked at American proposals that sanctions continue if armistice negotiations proved inconclusive.¹⁶ Washington’s reluctance to permit sales of pharmaceuticals, including antibiotics and sulfonamides, appeared insensitive and insupportable to many Europeans.¹⁷ Objections, in particular, to treating China more harshly than the Soviet Union animated governments in Britain, France, West Germany, Portugal, Norway, and Denmark.¹⁸ Aggravating the situation, Senator Joseph McCarthy attacked various European governments for violating trade prohibitions.¹⁹ And the Chinese alluded to shipments of strategic goods in British bottoms, hoping to inflame Anglo-American suspicion and distrust.²⁰ State Department officers invariably found themselves caught between charges from abroad that the United States demanded too much and complaints at home that it asked too little.²¹

Some restrictions seemed embarrassing. In Hong Kong the U.S. consulate received an inquiry from Washington regarding the oversupply of prophylactic rubbers to the colony. Wasn’t it true that the excess was being used by Chinese soldiers in Korea to keep their rifle barrels dry? Ultimately the Pentagon approved the embargo infringement, however, since the condoms would, it was found, corrode the rifles and help win the war.²² Similarly, officials in Hong Kong were told that “if… [a chicken] egg had been hatched in Communist China,” the resulting chicken was a Communist product when it entered Hong Kong. But “if the chicken… is brought across the border into Hong Kong live and lays the egg on the Hong Kong side,” asked the Hong Kong consulate, “is that then a communist product?”²³ Or as one diplomat noted in August 1954, if the United States could not be represented at the World Poultry Congress when Communist Chinese delegates also attended, would there be any international meetings to which Americans could go?²⁴ Then there were pandas. In July 1958, the U.S. government barred the only giant panda in the West from entering the country—an event that probably would have been hugely popular—because the high price of exhibiting the animal would enrich Beijing.²⁵

In fact, the goal of undermining China’s economic development motivated much of the trade sanctions regime. Although ideologically committed to the Soviet bloc and to self-sufficiency, China found its growth circumscribed by the loss of the U.S. trading relationship, not only sacrificing direct trade with the United States but also, and more significantly, losing dollar earnings and remittances that reduced what China could purchase abroad by perhaps $130–$150 million annually. In 1954, for example, the China differential cost Beijing 5 percent of potential imports while the U.S. embargo added another 10 percent.²⁶ So, although China would have reoriented its commercial relationships even without Western restrictions, these added significant strain.

In partial compensation, the Chinese Communists found it possible to use the iniquitous trade controls to try to weaken the Western alliance. As part of their 1953 peace offensive aimed at Japan, Chinese leaders asserted that economic crisis in the West prompted the United States to force purchase of expensive American commodities rather than cheaper Chinese goods.²⁷ People’s China observed in July 1954 how assiduously capitalist states were competing for access to the China market.²⁸ Beijing pressed London continually for relaxation of controls to expedite overall progress in establishment of diplomatic contacts. When eventually Britain announced its unilateral abrogation of the COCOM-CHINCOM differential, Chinese news media gave the decision great play and celebrated London’s defiance of American policies.²⁹

To President Eisenhower, challenges to free world unity vitiated many of the benefits that isolating China provided. As NATO commander, he had recognized the need to seek approval or, at least, acceptance by allied governments of American policies. As president, he found Chinese affairs especially divisive. Not only did U.S. policies depart significantly from those followed by allied states, but they also tended to appear draconian, reckless, and frightening.

Eisenhower, therefore, turned to concessions on trade to placate foreign critics. An embargo, he reasoned, ought to apply solely to war materiel, beyond which unimpeded trade would be in everyone’s interests. Moreover, the president preferred to define strategic goods narrowly, allowing Indonesia, Malaya, and Burma, for instance, to sell rubber to the Communist Chinese.³⁰ As early as 1953, at an NSC meeting, he explicitly disparaged economic warfare policies inherited from the Korean War period. Eisenhower insisted it was “crazy” to “waste” talented manpower on enforcing such trade sanctions.³¹ He contended that by strengthening the economies of the free world nations, commerce would do as much for American security, if not more, than military preparedness.

Applying this analysis to the China situation, Eisenhower lamented the domestic political constraints that made a general lifting of trade restrictions against the Chinese impossible. “The trouble,” he complained to the NSC in April 1954, “was that so many members of Congress want to crucify anyone who argues in favor of permitting any kind of trade between the free nations and Communist China.” This appeared shortsighted both because of the fiscal and economic benefits of trade and because he believed in “trade as a means of weakening the bonds between Soviet Russia and Communist China.” Further, raising psychological warfare, which historians have increasingly called a key aspect of Eisenhower’s approach to foreign affairs, Ike asserted that trade would be an effective weapon, giving the populace incentives to rise up against their Communist overlords.³² Moreover, he told the NSC that he “could not refrain from reemphasizing the invariable difficulties the United States stored up for itself by telling other nations they should not trade with Communist China.”³³

Eisenhower subscribed to the view that the Soviet Union would not, and probably could not, meet all of China’s needs. Hardliners in his administration, including Admiral Radford, Allen Dulles, and Charles E. Wilson, argued that the United States ought to try to force China to rely on Soviet largesse. Chinese enthusiasm for the alignment would quickly be punctured by the reality of Moscow’s backward technology, shortage of goods, and stinginess. Even if the Soviets transshipped Western supplies to China, the costs and the strain on carrying capacity would be enormous.³⁴ As a result, China’s modernization would be slowed and growth in some areas rendered impossible. The burden of an impoverished China would, moreover, hamper Soviet development.

The president, by contrast, preferred a strategy of inducement to one of punishment. “Trade is the strongest weapon of the diplomat and it should be used more,” he argued. It was nonsense to condemn such trade as “traitorous” for it would “weaken the Russian hold” on dependent countries.³⁵ He received support in that regard even from strident anti-Communists like his vice president, Richard Nixon, and Treasury Secretary Humphrey as well as the chairman of the Council on Foreign Economic Policy (CFEP), Clarence Randall. Mao’s dedication to industrializing China and lifting its people out of poverty could be used to emphasize the advantage of good relations with the West. At the same time, a less confrontational policy would eliminate major sources of tension between Washington and leaders in Tokyo and Europe. As he would do by sending emissaries to Taipei, Eisenhower deployed hardliners, his Joint Chiefs of Staff particularly, to sell a flexible trade policy to Congress as a national security measure.³⁶

Rather than a bold frontal assault on the issue, however, the president pursued a cautious approach that distinguished between altering American policy and modifying reactions to the policies of allied governments. He made no effort to eliminate the embargo, although he thought that it was misguided. First he quietly shifted Washington’s stance to meet the needs of friendly states regarding trade with Moscow and Eastern Europe. In the wake of the Korean armistice and the Geneva conference settlement on Indochina, the administration exchanged reductions in anti-Soviet/East European restrictions for French and British agreement to continue full-strength curbs on China. Eisenhower argued to Churchill that allied security would be jeopardized as would his own domestic political welfare if decontrol went too far or too fast.³⁷ Movement on China would follow but only slowly because his government was so divided on the issue. In fact, with the outbreak of the Taiwan Strait crisis, further progress became all but impossible domestically.

The United States, however, had little choice. At a November meeting of Economic Defense Officers in Paris, the American representative found member nations agreeing that Washington’s inflexibility had isolated the U.S. government. Continuing in this direction was “undermining our ability to exert leadership in other matters,” he reported. By December 1954, NSC 5429/5 acknowledged that strict standards might have to be jettisoned if they became too divisive.³⁸ U.S. allies were already circumventing controls by requesting exemptions from CHINCOM and often not waiting for approval before shipping goods.³⁹ Japan’s Hatoyama Ichiro government, inaugurated in December 1954, for instance, initiated a new multidirectional diplomacy that sought to better relations with Moscow and Beijing. Although the prime minister, under American pressure, relinquished hopes of establishing de facto diplomatic relations, he welcomed a Chinese trade mission to Tokyo. Hatoyama privately assured the Dietman’s League that he would support a new barter agreement—an assurance that leaked and triggered considerable dismay among American officials.⁴⁰ Just days before, NSC 5516/1 had warned of “serious friction” developing between the United States and Japan because of China policy.⁴¹

Similarly, the British, having improved their political and economic relations with the People’s Republic beginning at the Geneva Conference in 1954, were no longer willing to wait for liberalization. In December 1955, London informed Washington that it planned unilaterally to remove items from the CHINCOM list that could be traded under COCOM.⁴² The United States might be able to forego markets for ideological reasons, but neither Britain’s businessmen nor its balance-of-payments situation gave London that luxury. Criticism from the press, the public, and interest groups, often articulated in Parliament, made defiance of Washington more palatable.⁴³ Additionally, given the shortness of war in the nuclear age, Britain’s military dismissed as obsolete the concept of controlling trade to prevent an adversary stockpiling goods. London also rejected suggestions that changes should be deferred until the United States had an opportunity to use trade controls as leverage in the newly launched Geneva ambassadorial talks with Beijing. Confidence that Washington actually wanted to improve relations with the Chinese was not high in the Foreign Office.⁴⁴

U.S. military officers reacted angrily to the British move. Believing that American soldiers carried a disproportionate burden in the Pacific on behalf of the entire Western alliance, they argued that allied governments ought to defer to Washington on economic defense policies. Instead they saw London as “cynically embracing a lawless enemy” in defiance of Washington despite “the vast expenditure of U.S. money and energy” devoted to rescuing Britain’s economy and protecting its security. To Admiral Radford, this selfishness, so typical of the British, would have catastrophic results:

Apocalyptic rhetoric from Radford paralleled other expressions of concern from government officials. Typically, the Defense Department directed the Far East Economic Defense Working Group to construct a convincing case for retention of controls even though by September 1955 that position had been all but lost and the United States needed a plan for relaxation.⁴⁶ In December, responding to Britain’s unilateral renunciation of CHINCOM, Director of the Office of Chinese Affairs Walter McConaughy sought to coerce the first secretary at the embassy with a warning that Washington would have to tighten its own controls on Hong Kong to prevent development of new loopholes in supply of strategic goods. Assistant Secretary Walter Robertson also reported hopefully to Dulles that Britain had overestimated the support it would get from CHINCOM states.⁴⁷

These American attempts to preserve the status quo were doomed, however, and neither Eisenhower nor Dulles would sanction a fight to save the existing embargo structure. Eisenhower steadfastly believed that U.S. trade policy lacked consistency and logic in sanctioning China more severely than the Soviet Union, which constituted a far more serious threat. Moreover, he argued that “the history of the world… proved that if you try to dam up international trade, the dam ultimately bursts and the flood overwhelms you.”⁴⁸ He noted in his diary that he favored “removing all restrictions on all trade with the Reds… [except for] a few of our types of machinery.”⁴⁹ His frustration with government personnel, including cabinet officials, who stymied much needed change through delay, grew.⁵⁰ The barriers they sought to erect against China, he complained, “were actually hurting ourselves and our allies,” especially given existing agricultural and industrial surpluses.

Meanwhile, Dulles, who had long worried about “the good will of our allies,” told the president that change had become vital because differences over the control system had gone well beyond the divisiveness feared in NSC 5429/5 and trade controls teetered on the edge of total disintegration. London and Paris warned that COCOM might crumble under unrelenting American pressure, and even the Italian and Turkish governments, which had long supported Washington, were wrestling with their own disgruntled businessmen.⁵¹ Dulles suggested, in instructions to Ambassador U. Alexis Johnson, who was conducting the ambassadorial talks, that the Chinese position on trade policies might be fruitfully explored if that would create an incentive regarding renunciation of force in the Taiwan Straits.⁵²

Disagreement among and within government agencies made the way forward more difficult for Eisenhower and Dulles. The United Nations Affairs staff recognized as early as February 1953 that “the small psychological and economic benefits to be derived from a strengthening of the United Nations embargo are outweighed by the difficulties of obtaining it and the doubtfulness of enforcing it.”⁵³ Interagency intelligence, moreover, estimated that “nothing short of a naval blockade, coupled with bombardment of communications, would seriously reduce communist military capabilities or even seriously affect the Chinese economy.”⁵⁴ Officials in the State Department’s Far Eastern bureau, however, dismissed Dulles’s thoughts on liberalizing trade policies as too radical. The NSC stalled, urging that the issue be discussed yet again in upcoming Anglo-American summit meetings. The Department of Defense pushed hard and often for tougher measures. Treasury, the Foreign Operations Administration, and the CIA agreed that modification of controls should be resisted. When in January 1956 Eisenhower directed the CFEP to study a list of goods that London wanted to decontrol, he had in hand council recommendations that restrictions be strengthened, not weakened.⁵⁵ Over the following months, the Departments of State, Defense, Treasury, and Commerce and the International Cooperation Administration (ICA) labored to preserve the “maximum feasible differential,” although State, Commerce, and the ICA grudgingly conceded some validity to London’s position.⁵⁶

At the same time, on Capitol Hill conservative members of Congress from both parties threatened to target foreign aid programs if the administration did not find a way to obstruct decontrol. The loudest complaints arose in the Senate Permanent Subcommittee on Investigation into East-West Trade, where John McClellan (D-AK), Joseph McCarthy (R-WI), Henry M. Jackson (D-WA), and Stuart Symington (D-MO) denounced the administration for not telling the American people that the nation’s allies were shipping strategic materials to the Communist bloc. Both William Knowland (RCA) and John Vorys (R-OH) wrote to Dulles to warn of dire consequences should the secretary do nothing.

Eisenhower, however, was irritated by the rigidity of conservatives like Secretary of Commerce Sinclair Weeks, who opposed the president’s expansive view of trade. On April 26, 1956, Ike determined that negotiations with London and Tokyo would begin. He even told the National Security Council that he felt the administration had in the past been too worried about congressional views on free trade issues. But this did not expedite the policymaking process.

Dulles’s disinterest in economic affairs led him to abdicate responsibility for the issue to Walter Robertson. The secretary did this knowing the department was split and that Robertson opposed any change. Robertson had put his opposition quite baldly, writing to Dulles that the British view was “a position without principle.”⁵⁷ But it is not clear that Dulles intended to scuttle relaxation. At the NSC meeting of April 5, 1956, he advocated, not for the first time, that surplus American agricultural commodities be sold to the Soviet bloc, and he emphatically rejected a suggestion by the Defense Department that Washington try to stop Britain’s relaxation through threats of an agonizing reappraisal of Anglo-American relations.⁵⁸

Whatever the motive, deliberations moved slowly. The Economic Defense Advisory Committee (EDAC) tried an abortive initiative to reach a common level of controls, eliminating not just the CHINCOM differential but also that between the United States and its allies.⁵⁹ When a policy finally did emerge in NSC 5704/1, the United States had, for the first time, made real concessions, accepting trade in all but the most sensitive items. COCOM members nevertheless dismissed Washington’s effort as too little, too late.⁶⁰

That Eisenhower did not intercede to ensure a more reasonable and productive outcome reflected his concern with domestic political pressures and the higher priority he accorded to economic warfare in the Middle East and Latin America. As historian Burton Kaufman notes, the rising tide of Arab nationalism and the growing preoccupation with Communist challenges to the Western Hemisphere distracted Eisenhower from East Asia.⁶¹ The Suez Canal crisis of the summer and autumn of 1956, moreover, severely strained the Western alliance and made concessions to the British and French on the China trade differential less palatable. Some American officials, in fact, expected chastened British and French foreign ministries to abandon their insistence on trade liberalization and were disappointed when efforts to placate the United States did not eliminate the chronic trade problem.⁶²

On the domestic front, the president faced a reelection campaign, making it seem unwise to challenge bipartisan opposition in Congress. Eisenhower was especially concerned about attacks on his most important security programs. Therefore, he did not provide intellectual leadership, retreating to an amalgam of vacillation and inflexibility. As the New York Times lamented, American China trade policies were too emotional.⁶³

Indeed, Eisenhower, by this time, would have preferred ending U.S. adherence to the China differential, not just approving abandonment by Europe and Japan. It seemed clear that the differential had not slowed China’s growth and exceptions were multiplying. Moreover, whereas the Sino-Soviet alignment had not been undermined, the Tokyo-Washington alliance was under serious strain. At the NSC, he lamented shortsightedness regarding the U.S. economy, declaring, “if we do not propose to put severe obstacles in the way of our allies trading with Communist China, it seemed… rather foolish to put such obstacles in the way of our own trade with Communist China.”⁶⁴ Elsewhere the president remarked that “the Yankee… is a fine trader, and we got to be a great country by trade.” It was irrational to abandon that advantage.⁶⁵

At the Bermuda summit in late March 1957, the British returned to the fray by arguing yet again that current policies were indefensible. The British foreign minister offered continued support on keeping China out of the United Nations in exchange for United States acquiescence on the trade issue. There had been some 200 questions raised in Parliament as to why London concurred in a system that sanctioned China more severely than the Soviet Union. Much as Prime Minister Harold Macmillan wanted to restore pre-Suez friendship, he could go no further.⁶⁶

Unexpectedly, the president and his advisors got considerable backing from Congress. In the Senate, an influential group including majority leader Lyndon Johnson (D-TX), prompted by business and agricultural interests, let the president know that they were amenable to relaxing the China embargo.⁶⁷ Competition from low-cost Japanese textile factories led some southern state representatives to advocate Japanese sales to the Chinese, while they and others recognized that increasing overall trade with the PRC would reduce the levels of assistance Washington had to provide to Tokyo.⁶⁸ Eisenhower accordingly approved implementation of the NSC recommendations, which seemed daring in Washington even as they proved too modest for Europe.

In May 1957, London declared it would unilaterally dispense with the China differential. Although the president complied with Dulles’s advice and asked Macmillan to desist, he privately assured Macmillan that he understood London’s view that “the commercial interests of our two countries are not at all alike,” that Britain “live[s] by exports—and by exports alone.”⁶⁹

Eisenhower could not join the British by eliminating America’s own harsh controls, but he could and did reject calls from the JCS and the Department of Defense for sanctions against Britain. The president refused to withhold intelligence and/or nuclear cooperation, block assets in the United States, apply diplomatic and economic pressures upon British colonies, or support Spanish claims on Gibraltar. The president also rebuffed demands that NATO take COCOM’s place in policy enforcement so that security would overrule commercial imperatives.⁷⁰ Further, he made his personal opposition to the differential clear to the press.

London’s assault on the control system helped Tokyo in its efforts to diminish restrictions on trade with China. Officials could pretend reluctance to defy Washington but nevertheless align their trade policies with those of Britain, as Norway, Denmark, Portugal, the Netherlands, Belgium, and France were doing. To improve their trade posture further, businessmen and the occasional government representative talked about exchanging permanent trade offices with the Chinese in spite of the de facto recognition that such a step would accord.⁷¹ In the early weeks of 1958, a fourth, “private,” Sino-Japanese trade agreement included certain diplomatic privileges for Chinese trade representatives, including the flying of the PRC flag over their proposed Tokyo office.⁷²

Word of this concession drew a furious response from Chiang Kai-shek. He could understand the desire to carry on commercial relations with mainland China, however misguided, because Japan needed raw materials and markets. But flag flying could not be countenanced and would require that Taipei break diplomatic relations with Tokyo. Washington quietly urged Chiang to refrain and Japan to rethink loss of a valuable commercial partner. Ultimately, under intense American pressure, the Japanese government reneged on the flag provision.⁷³ When a PRC flag subsequently sustained damage at a postage stamp exhibit in Nagasaki and the perpetrators were not punished, Beijing angrily suspended economic and cultural exchanges with Japan.⁷⁴

By 1958, it had nevertheless become clear that the United States was progressively more isolated in COCOM and that Washington’s position risked an open rupture in the Western alliance. COCOM members had jettisoned the CHINCOM list and sharply reduced restrictions against the European Soviet bloc in the spring of 1957. U.S. representatives fought a rearguard action motivated in part by Defense Department objections that strategic items of military and technological utility would now reach Communist destinations.

Eisenhower, however, declared trade and strategic issues separable. The military, he believed, could not render expert advice on commercial questions. Given the corrosive effects of American intransigence, he insisted that the United States response avoid extremes in the interests of broader harmony.⁷⁵ Eisenhower also realized that, although his military remained largely intransigent, other parts of the government had, by 1958, moved closer to his position on the embargo.

Dulles, for instance, having fluctuated in his views of economic warfare, had concluded that restraints had not had much effect on China, nor had the relaxation of prohibitions engendered a broad expansion of trade. By contrast, controls had had a negative impact on friends and allies. The United States, he told the NSC, should not rely on economic sanctions as a tool of diplomacy.⁷⁶

Coupled with Eisenhower’s refusal to oppose reduction in European and Japanese trade barriers against the Communist Chinese came the president’s decision to permit Canadian subsidiaries of American companies to trade with China. Canada had long been an unhappy hostage to American attitudes on trade with, and recognition of, the Communist authorities in Beijing.⁷⁷ In 1958, when Canada began to experience economic difficulties, American interference in Canadian business suddenly appeared intolerable. The Ford Motor Company of Canada, for instance, having been approached by Chinese trade agents with a potential order of 1, 000 cars, had to refuse because of the U.S. Trading with the Enemy Act. To Canadians, however, Ford’s response rankled, testifying to the abject dependence of their economy and security on a nation with very different priorities.⁷⁸ Dulles felt the Canadians were playing politics with the issue and naively ignoring Chinese attempts to damage relations between Ottawa and Washington. Nevertheless, during a July trip to Canada, Eisenhower and Dulles assured the prime minister that an exception could be made for the Ford export deal.⁷⁹

In fact, others shared the desire of Ford and Canada to secure concessions from the United States. American subsidiaries in several nations wanted authorization to fill PRC orders. As Eisenhower and Dulles observed to the NSC, the Canadian exception had not led to large Chinese orders since Beijing had really just seen the subsidiary connection as a way to score political points. Once Washington had conceded, these suppliers became less appealing. But although the president and secretary favored relaxing the ban, they agreed to delay in the face of broader NSC opposition.⁸⁰

Eisenhower’s sensitivity to Canada’s plight led to further relaxation the following year on prohibitions against transportation of Red Chinese goods, specifically frozen shrimp and soy sauce, across American soil between two Canadian destinations. Trucking companies and the Canadian press attacked American regulations as unreasonable, the Toronto Globe and Mail remarking in an editorial, titled “The Perils of Soya Sauce,” that never before had Chinese food been seen as a national security menace.⁸¹ Passions ran so high that Canadians called for retaliation against American shipments across Canada to Alaska or between Detroit and Buffalo. Ultimately, after what the New York Times called “weeks of solemn deliberation,” the United States agreed to let the Communist shrimp through. The State Department convinced Treasury officials that Washington was being made to look ridiculous and that U.S.-Canadian relations were being needlessly strained.⁸²

So Eisenhower maintained highly visible trade barriers for the United States in self-defense, while he quietly conceded on controls governing allied trade. Sensitive to Congress and what he took to be public opinion, he did not, in fact, confront the pressure of, nor could he hide behind pleas from, business circles regarding the conduct of trade with China. Such commerce seemed inherently unstable and probably unprofitable. In 1948, just prior to the Communist takeover, U.S. exports to China had reached only $240 million or 2 percent of all exports. Imports from China totaled $117 million or, again, 2 percent.⁸³ Only a small sector of the business community yearned for the China market, such as producers of items using hog bristles—for example, makers of paint and hair brushes—as well as export-import firms.⁸⁴ Sporadic interest from car manufacturers or the president of the U.S. Chamber of Commerce did not suffice to cause a reconsideration of policy.⁸⁵ The intelligence and research staff at the State Department dismissed the likelihood that big or even medium-size businesses would have much interest in the China market.⁸⁶ Moreover, strongly anti-Communist unions insisted that it was “beneath the dignity of free American workers to handle goods produced by slave labor.”⁸⁷

Public opinion, on the other hand, should have strengthened Eisenhower’s resolve. At the beginning of the administration, the public appeared staunchly opposed to commercial relations with China, registering poll results of 83 percent against trade to 14 percent in favor of it. Thereafter opinion fluctuated, but by 1957 the State Department noted a trend in the direction of favoring trade so long as war materials were barred. Even the British relaxed and refused to worry about Committee of One Million accusations of “arming… Red China a la Japan before Pearl Harbor.”⁸⁸

Eisenhower understood that although China suffered under the trade control regimes promoted by the United States, Washington incurred almost as much damage. Trade prohibitions undermined the economic recovery of friends and allies, complicating and straining America’s foreign relations. Efforts at isolating the Chinese economically added to the tax burden of American voters. Although dependency had the potential to widen Sino-Soviet differences, Eisenhower believed that making Beijing rely exclusively on Moscow would most likely strengthen their unwelcome alliance. He insisted that the contacts resulting from economic interaction with the free world would moderate Communist behavior on the mainland.

Accordingly, commerce became the main area of flexibility for an administration seeking an improved environment inside China, between Washington and Beijing, and between the United States and its allies. The president failed to take a strong leadership role on changing U.S. embargo practices. Instead he adopted a less dangerous policy of supporting and assisting the relaxation of rules that handicapped other nations as well as protecting those governments from American retribution.