We are living today in the presence of a vast propaganda drive on the part of the Communist-controlled nations designed to confuse and befuddle all our thinking. By the employment of the most skillful propaganda techniques, Communism attempts to make us think that black is white, that falsehood is truth, that cold war is gentle peace, and that political evil is the path to sweet liberalism. If this sounds fantastic, we have only to recall the frequent instances in the last two decades when we have been deceived. In the case of China alone this period has seen many of the American people being successively sold such incredible myths as (1) that Chinese Communists are not Communists at all but just liberal "agrarian reformers"; (2) that Mao Tse-tung and his group are ready to follow in the footsteps of Tito; (3) that Soviet Russia is secretly afraid of Red China and that they will surely break their alliance; and (4) that Red China really wants to become a peaceful nation and that if America will only admit it to the United Nations and end all trade restrictions, Red China will become a good neighbor.
Each of these hoaxes has come to us bearing the unmistakable stamp of the Communist propaganda brain. So wide of the truth are they that no one but a professional propagandist could have thought them up. And yet, each of them, in turn, has been trustfully received by well-meaning men and women in the free world, and repeated as actual truth. Each has had the demoralizing effect that Moscow and Peiping had planned. Each has confused and divided free world opinion at a time when unbroken unity against Communism was desperately needed.
As the wartime director of information for China, I myself have been in close contact with the twists and turns of Communist propaganda for many years. Great as is my detestation of Communism, I cannot help but admire the consummate skill with which its propagandists have repeatedly confounded the free world nations.
The tragedy of the situation is that some of us have not even yet learned our lesson. We are still grasping at unreal straws in our attitudes toward Red China. We are still living in a clouded cuckoo land of wishful thinking when it comes to Far East policy. President Eisenhower, Vice President Nixon, Secretary Dulles, Admiral Radford and other molders of American foreign policy have shown a reassuring attitude of realism and firmness in confronting Asian policy. But below this top level of American national life, there are wide areas of public opinion in which confusion still prevails. There are still hopeful souls who continue to believe that the Chinese Communist leopard can change its spots overnight, and become a peaceful member of the world community. They are still being hoaxed by the Red propagandists.
I propose to speak briefly tonight about another myth about Red China which has received extremely wide currency in the United States and throughout the free world. I refer to the myth of Red China trade. It is a myth which appears in various forms. In its most frequent version, it runs somewhat as follows: Red China, with its huge population, is a vast untapped market for Western products. Today, the American policy of trade controls and non-recognition of Red China is barring this promising market to its traders. Therefore, it is argued, let us restore relations with Red China and admit it to the family of nations. The implication is that the West will profit richly from such a change of policy.
It is impossible to exaggerate the shrewdness of this propaganda appeal. The American people are a great business nation. American business enterprise has conquered many economic frontiers, and the American people are justly proud of it. The idea of creating a vast new market for American goods among China's millions staggers the imagination. Back in Ute distant twenties, the author, Carl Crow, wrote a book which was widely read at the time, "Four Hundred Million Customers". The idea of opening up Asia economically has long captured the imagination of the more adventurous of American businessmen. Red China is touching upon a sensitive American nerve when it talks China trade.
There have already been important reactions to this propaganda gambit. Perhaps the most significant was that of Mr. Henry Ford II who, in a recent speech in San Francisco, advanced the guarded suggestion that we have been wrong in restricting trade with Red China. Another is that of Mr. Ernest T. Weir, chairman of the National Steel Corporation, who told a business audience last December that "normal trade relationship will have to be reestablished." Yet another is that of Mr. James P. Warburg, a well-known writer and financier, who would go so far as to take Taiwan away from the Republic of China and place it under United Nations trusteeship. There in no longer a solidarity of American business leaders in favor of the Red China embargo.
Let us digress briefly for a moment to consider the origin of the American China trade restriction policy. A small amount of trade between the United States and Red China developed during the years 1949 and 1950, after the Communist seizure of power. This was increased by the triangular trade between the United States and Hongkong in commodities that were then transshipped to Red China.
In December, 1950, after the treacherous Red Chinese attack on the United Nations forces in Korea, this trade was ended by the declaration of an outright embargo on American trade and financial transactions with mainland China. Through negotiation with 15 other free nations, notably Britain, they were persuaded to establish a partial embargo, covering items of commodities which were of military value. In the meantime, the United States Government promulgated certain measures of financial control by virtue of The First War Power Act, 1941, and of the Trading With the Enemy Act of 1917, as amended.
Although there has been come relaxation of the embargo elsewhere, the embargo, so far as the United States is concerned, is still operative and strictly enforced.
In addition, there are many other states, members of the United Nations, which are enforcing an embargo in accordance with United Nations resolutions designed to deny contributions to the military strength of the forces opposing the United Nations in Korea. In this connection it should be pointed out that the Communist regime on the mainland of China was declared by the United Nations to have been engaged in aggression, and it was for this reason that the United Nations had passed "additional measures" to be employed to meet the aggression in Korea. In other words, the embargo against the Peiping regime is a kind of sanction, which should be scrupulously enforced.
As a result of the Bermuda meetings, the United States has agreed to enter a meeting in Paris in May this year to reconsider certain items of trade which are now prohibited to be exported to areas under the control of the Chinese Communists. Britain and Japan have been particularly insistent upon a softening of restrictions. But the American embargo, with its outright ban on United States-Red China trade, will continue. Secretary of Commerce Sinclair Weeks, speaking for the Administration, declared on April 4 that there is no present intention by the United States to end the embargo.
The effects of this deprivation of Western goods to Red China have been sweeping. It has kept iron and steel, copper, rubber, aluminum, chemicals, machinery, electrical goods and other commodities essential to the development of a powerful war industry out of Communist hands. It has prevented the quick industrialization of China which was at the top of the Moscow plans in 1949 when the Communists took China. It has kept the Red Chinese economy in a precarious condition of dependence upon the slow trickle of Russian and Iron Curtain imports, and upon uncertain smuggling operations and evasions of the embargo. It has undoubtedly set back the Communist World War III timetable by many years. Without the embargo, there can be little question that the few remaining footholds of freedom in East Asia would now be in the gravest danger of being wiped out. If the West still has time through SEATO to intervene effectively in East Asia, thanks are due primarily to the embargo.
To contemplate the termination of the embargo while Red China is still committed to an arrogant, aggressive policy in Asia would be the counsel of folly. Nevertheless, an increasing chorus of voices in the United States, in Britain and in Japan are urging such a step.
What are the arguments which are being advanced by those who urge renewed Western trade with Red China?
First of all, this proposal is based upon the fixed belief that mainland China is a great untapped market for the products of Western and Japanese industries. Glowing pictures are drawn of 600,000,000 Chinese eagerly buying the fruits of Western production.
Such a picture is grotesquely contrary to the facts.
Red China has made conspicuous gestures as a potential buyer by red carpet entertainment of successive delegations of Japanese, British, West German and other businessmen. It has participated expensively in international fairs. It has carried on high-powered economic propaganda. But this has been little more than a stage play. The sad fact remains that unless the West loans Red China the money with which to finance its orders, Red China can buy absurdly little from the outside world within the foreseeable future. Big China trade is a propaganda phantom.
Let us look at some statistics.
Even before the triumph of Communism, China was not too promising a market for Western trade. In 1947, the free world sold to the Republic of China commodities of a total value of U. S. $451,031,000. In 1948, its exports to China aggregated U. S. $211,028,000.
With the advent of Communism, for the last calendar year before the imposition of the embargo, free world trade with Red China was U. S. $452,100,000. This had dwindled to U. S. $313,100,000 in 1955.
When we bear in mind that the United States alone exports annually to the various nations goods and services totaling approximately $20,000,000,000, these Red China trade totals fall into their proper place as an insignificant fraction of the total world picture. Even were the embargo removed, the stake of the United States in Red China is absurdly small. And to secure this crumb of trade for its allies, the United States would have to make political concessions to Red China which would stultify its whole Asia position. It isn't worth it.
Actually, Westerners who have attempted to make a profit from trade with Red China have had a very difficult time of it. The FOA Report to Congress of Enforcement of the Mutual Defense Assistance Control Act for 1953 described some of the roadblocks which the Chinese Communists throw in the way of traders as follows:
"When the Chinese Communists sell, they demand a confirmed letter of credit in the hands of their own bank before they will ship the goods. They present a Communist Chinese Government Certificate of Inspection against which the buyer has no recourse if he finds-weeks or months later-that the quality of the goods is below specifications…... One who sells to Communist China is asked to follow a very different set of rules. He ships his goods and waits until they have arrived in Communist China, have been inspected by Communist Chinese Government inspectors, and are in the hands of the buyers, before he can collect his money. In the meantime, he extends credit without interest, immobilizing the capital he had invested in the cargo, freight and insurance, and is forced to accept claims resulting from inspection of his goods in Communist China."
The truth is, Red China is neither prepared to handle world trade, nor is it seriously interested in it, except as a bargaining point in its political maneuverings. Were the embargo lifted, the Communist purchases for which it was able to spare foreign exchange would be almost exclusively in the category of war goods, and equipment for war goods plants. As such, they would serve to swell Red China's war potential, to be used against the very nations which sold it. It would not establish a mutually advantageous interchange of goods and services, which must be the basis of any worthwhile foreign trade policy.
A second argument which is brought forth by proponents of more trade with Red China is that liberalized Western trade would wean Red China from Russian influence and alignment. Those who present such an argument show little knowledge of the hard actualities of Moscow-Peiping relationships.
Red China will not break away from Soviet Russia because its economy is bound to that of Russia by unbreakable ties of mutual interest. Under the Red China Russia agreement of 1930, Russia committed herself to credits for Red China in the amount of U. S. $1,500,000,000 to be extended over a period of five years, at the nominal interest of only 1 per cent. Even before the end of this five-year period, at the Mikoyan Chou conference in 1956 in Peiping, Russia pledged an additional U. S. $350,000,000 to Red China, bringing the total of grants to more than U. S. $2,000,000,000.
This direct aid has been supplemented by the development of an extensive barter trade with Soviet Russia and with the satellite States. This trade now constitutes 80 per cent of the total exports and Imports of Red China. What is left is only 20 per cent of trade to be divided among the free nations. It will be seen that Red China has already reconstituted its' economy upon interlinked economic relationships with the Communist world. It has worked out a national balance, upon the basis of this trade, which enables it to make considerable capital investments in its pretentious Five Year Plan. To imagine that Red China would upset these present economic relationships which are sustained by every urge of its Communist ideology, to gamble upon the chance of Western trade, is little more than wishful thinking. We cannot lure Red China away from Soviet Russia by lifting the embargo. But we can critically weaken our own defenses against Red Chinese aggression by such an ill-considered step.
It was the German military philosopher, Clausewitz, who wrote:
"Disarm your enemy in peace by diplomacy and trade, if you would conquer him more readily on the field of battle."
Soviet Russia and Red China cynically use the Red trade lure as a means of dividing their opponents and of unbalancing their foreign policy. The hope of trade profits is always an irresistible lure to minorities in the camp of their opponents who are willing to take reckless chances on the future security of their country. The irony of it all is that, like "fool's gold", such phantom trade never pays off in final dollars and cents.
Another argument which has influenced some Americans to favor trade relations with Red China is the economic plight of Japan. The United States has pumped over five billion dollars into Japan since the end of the war to rehabilitate its economy. It is argued that Japan can only become self-supporting if it is permitted to trade freely with Communist-controlled China. This argument is attractive to Americans who are weary of the annual foreign aid subsidies which go to Japan.
The fallacy in the argument is that, even with unlimited trade with mainland China, Japan could not hope to make up the gap in its economy which is now plugged up by American aid. Last year (1956) Japanese exports to Red China were U. S. $62,157,000. The figure might be increased to U. S. $100,000,000 with the removal of all trade restrictions. But even this figure—and I have leaned over backwards to give the trade proponents the benefit of the doubt—is only a small part of Japan's total exports which, in 1956, were U. S. $2,402,000,000. Japanese imports from Red China in 1956 were U. S. $56,974,000, and total imports for the year were U. S. $2,470,000,000.
Simply stated, Japanese exports to Red China in 1956 occupied only two and half per cent of its total exports, and Japanese imports from Red China in 1956 occupied only a little more than two per cent of its total imports.
Japan's real markets, which are essential to her existence as an exporting nation, are in Southeast Asia. Here Red China is appearing as a cut-throat competitor, forcing its goods upon buyers through the Chinese traders, in those regions, at below-Japanese production cost prices. Japanese businessmen rightly apprehend that Red China is primarily interested in trade with Japan only as a means of securing capital goods to build up its own industries. Once this is done, Red China will be able to supply its own needs, and its purchases from Japan will diminish. Thus, there is no actual solution for the problem of Japanese trade with Red China.
The attempt to build up a picture of Red China trade possibilities by citing the figures of Japanese trade in the pre-Pearl Harbor period is misleading. At that time, Japan controlled Manchuria, or the Chinese Three Eastern Provinces. Extensive trade with these Japanese-exploited regions was inevitable. It is a different picture with Communism ruling the Chinese mainland provinces.
May I quote two paragraphs from an editorial of the "Wall Street Journal" under the date of April 25, 1957, entitled "Chinese Molehill" to support my contention that the prospect of trade with Red China even after the lifting of the ban is very poor.
"Banker Chen, of Communist China, has poured some ice-water on the hopes of British, Japanese, German and other businessmen long bedazzled by the thought of vast trade behind the Bamboo Curtain.
"Asked by our Mr. Gemmill how much Red China would buy if there were no trade restrictions, Mr. Chen replied: 'Not nearly as much as everybody seems to expect.'"
We cannot escape the conclusion, as we look behind the surface arguments, that free world trade with Red China is a political trap and a snare. It is a proposal which will aid only Red China. It can be attained at a political cost which can be ruinous to the free world.
While world conquest remains the unchanging goal of the Communists, whether in Moscow or Peiping, the free world will make a disastrous mistake to do anything which will increase their war-making potential. Unrestricted trade with Red China would have that certain effect. President Eisenhower and his colleagues have wisely recognized this fact. They should have the sup port of a united public opinion in maintaining that American position.
------------------------------------------------------------------------------------
Editor's Note—This is the text of an address delivered by Dr. Hollington K. Tong. Ambassador of the Re public of China to the United States, before St. Louis Council on WorId Affairs, St. Louis, Missouri, on May 4, 1957.