Source: U.S. Department of Commerce. Historical Statistics of the United States: Colonial Times to 1937, and Supplements, Washington: Government Printing Office, 1960.

Initial PRC Relations

During 1950, the first full year of the People's Republic of China, two-way trade totaled $191 million with China exporting almost three times as much as she imported; the U.S. share of China's total trade was 22.5 percent in that year. Trade dropped precipitously in 1951, however, as a result of the Korean War. When Chinese troops entered that conflict, President Truman declared a national emergency on December 14, 1950. Acting under authority of section 5(b) of the Trading with the Enemy Act of 1917, the Secretary of the Treasury issued the Foreign Assets Control Regulations on December 17, 1950. At the same time the Department of Commerce embargoed all American exports to China under authority of the Export Control Act of

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1949. These actions immediately eliminated all U.S. exports to China. Pursuant to the Defense Production Act of 1950 the Department of Commerce issued Transportation Orders T-1 and T-2 which prohibited U.S. carriers from calling at the PRC and prohibited all U.S.-flag air or sea carriers from transporting or loading any cargo ultimately destined for the PRC. Bunkering of vessels calling or having called at Chinese ports was also prohibited. Shortly after the U.S. actions, by a decree of December 29, 1950, the PRC assumed control over all U.S. property in China.

On these somber notes, all relations between the two countries came to a virtual standstill although some Chinese imports continued to reach the United States until 1953.

C. COMMERCIAL RELATIONS: RESTORED

American Initiatives

By 1969 an ever larger number of Americans both in and out of government recognized the growing desirability of normalizing relations with the PRC. Greater world recognition of China's place was clearly evidenced by closer UN votes on the admission of the PRC. The increasingly pragmatic foreign policy and foreign trade policy practiced by the Chinese did much to foster such attitudes.

In a move implementing the Administration's decision to initiate a relaxation of tensions and to facilitate the development of peaceful contacts with China, the U.S. announced on July 21, 1969 that American tourists and American residents abroad would be permitted to purchase up to $100 worth of goods originating in the PRC. Six categories of U.S. citizens would have passports automatically validated for travel to China: members of Congress, journalists, professional teachers, scholars with post graduate degrees and students in colleges and universities, scientists and medical doctors, and American Red Cross representatives.

In a further step, the United States announced on December 9, 1969, that commercial regulations affecting trade with PRC would be relaxed to permit foreign subsidiaries and affiliates of American firms to trade in nonstrategic goods with China. The requirement that U.S. firms or banks engaged in third-country trade obtain certificates of origin where goods or commodities are of "presumptive Chinese origin" was eliminated, although such goods would still require origin certificates on goods for shipment to the United States.

The $100 limit was removed on purchases of Chinese goods by Americans for noncommercial use and the requirement to limit such imports to "accompanied baggage" was dropped. At the time, the U.S. announcement said the changes in commercial regulations complemented the political desire to improve relations with China. Commencing in August, the bunkering of free world ships carrying nonstrategic goods to the PRC with petroleum products of non-U.S. origin was allowed.

On March 16, 1970, the United States commenced validation of American passports for travel to the PRC for any legitimate reason. In April, the President authorized shipment of American-made components in nonstrategic, foreign-manufactured goods. In the first significant transaction following this relaxation the U.S. Government,

in July 1970, authorized the use of General Motors' engines in trucks built by Perlini of Italy for export to China. Commencing in August, the bunkering of free world ships carrying nonstrategic goods to the PRC with petroleum products of non-U.S. origin was allowed. At the end of 1970 in a policy statement, President Nixon said on December 10:

We are going to continue the initiative that I have begun-an initiative of relaxing trade and travel restrictions and attempting to open channels of communication with the People's Republic of China.

The Department of State announced the removal of all restrictions on travel by Americans to China on March 15, 1971. The first signal that Peking recognized the U.S. initiatives came on April 7, 1971, when Peking invited the American table tennis team to visit China.

End of the Embargo

On April 14, 1971, the President announced his intention of relaxing the 21-year-old embargo, saying that he had asked for a list of items of a nonstrategic nature which could be placed under general license for direct export to China; he also requested other changes in regulations affecting trade.

In a variety of regulatory changes in response to the President's April request, the Treasury Department on May 7, 1971, announced the issuance of a general license removing all controls on the use of dollars or dollar instrumentalities in transactions with the PRC and its nationals. These changes did not pertain to the blocked Chinese assets. The Treasury's Foreign Assets Control Regulations were amended to remove prohibition against American-controlled, foreignflag vessels calling at PRC ports. U.S. oil companies abroad were now authorized to sell fuel to or bunker vessels owned or controlled by the PRC, except vessels going to or from North Korea, North Vietnam, or Cuba.

A joint Department of Transportation and Department of Commerce release of May 7 modified Transportation Order T-2 to permit. U.S. carriers to transport commodities authorized for consignment. to the PRC to non-PRC ports.

On June 10, 1971 the President announced, as one of the first broad steps in the termination of the embargo to the PRC, a long list of nonstrategic U.S. commodities that might be exported to China under general license, that is, without specific authorization from the Department of Commerce. The list included: most farm, fish, and forestry products; tobacco; fertilizers; coal; selected chemicals; rubber; textiles; certain metals; agricultural, industrial, and office equipment; household appliances; electrical apparatus in general industrial or commercial use; certain electronic and communications equipment; certain automotive and consumer goods. Commodities not on this list would be considered for specific licensing consistent with U.S. national security requirements. The same action modified the Foreign Assets Control Regulations to permit imports from the PRC to enter under general license, subject to the tariff rates generally applicable to goods from most Communist countries. Regulations against the import of the seven fur skins prohibited entry by the Trade Agreements Extension Act of 1951 were not changed, however.

On July 15, 1971, President Nixon announced plans to visit China at a date prior to May 1972. On October 25, 1971 the United Nations voted to seat the People's Republic of China.

In a major series of changes affecting trade, the President announced on February 14, 1972, on the eve of his departure for China, a decision to accord the PRC for export control purposes the same treatment applicable to the U.S.S.R. and certain East European countries. The same action also removed U.S. controls on the export to the PRC of foreign products manufactured with technical data of U.S.-origin to the same level.

On February 14, it was also announced that the President had directed further changes in the Foreign Assets Control Regulations to China. The regulation requiring U.S.-controlled firms in COCOM countries (the NATO countries, minus Iceland, plus Japan) to obtain a Treasury license, in addition to a host country license, for the export of strategic goods to the PRC was removed. Also eliminated was a similar requirement that U.S.-controlled firms abroad obtain prior Treasury licenses for the export of foreign technology to the PRC.

The Shanghai Communique

The visit of President Nixon to Peking in February 1972 and the Shanghai Communique issued at the conclusion of the visit on February 28 visibly demonstrated that initiatives by the United States in 1969, 1970, and 1971 to begin the process of normalizing relations had produced concrete results. The Shanghai Communique remains the foundation of U.S. policy toward the PRC today (full text at end of article).

Regarding commercial relations the Communique said:

Both sides view bilateral trade as another area from which mutual benefits can be derived, and agree that economic relations based on equality and mutual benefit are in the interest of the peoples of the two countries. They agree to facilitate the progressive development of trade between the two countries.

Attendance by Americans at the Chinese Export Commodities Fair in Canton in the spring and fall of 1972 was tangible evidence of the evolving commercial relationship. A significant amount of trade during 1972, discussed in section E, was further evidence of the sincere desire of both the United States and China to give substance to the renewed relationship.

On November 22, 1972, the Transportation Order T-2 was further modified to permit U.S. air carriers and ships to visit PRC ports. Another substantial advance in normalizing relations occurred at the time of Mr. Kissinger's visit to Peking in February 1973. The two countries agreed to accelerate the pace of normalization and to broaden contacts in all fields, including trade (joint communique of February 28 at end of article). To facilitate this process each side agreed to establish a "Liaison Office" in the capital of the other.

By June 1, 1973, both the U.S. Liaison Office in Peking and the PRC Liaison Office in Washington had opened for business. Performing most functions of an embassy, both Liaison Offices contain commercial officers to assist businessmen and promote trade. Since opening in 1973, commercial staffs in both offices have been enlarged.

In yet another step designed to encourage commercial relations between the two countries, the wholly private National Council for U.S.

China Trade was created on March 22, 1973 with the encouragement of the White House and the Departments of State and Commerce, and with the cooperation of the PRC Liaison Office.

During the balance of 1973 and 1974, continued improvement in commercial relations was marked by rising trade, by visits of more and more American businessmen to China, both to the Canton Fair and to the foreign trade corporation offices in Peking, and by visits of a few Chinese groups, usually for training purposes to plants of American firms with which they had contracts. In one case, a Chinese commercial group visited U.S. plants to survey prospects for buying plant and equipment. The journey of the National Council to China in November 1973 marked the first visit of a broadly based, commercially oriented American group to China in more than 20 years. Further commercial exchanges occurred in 1975 with the visit to the United States of a textile study group in February and March 1975, and a visit to the PRC by a San Francisco Chamber of Commerce mission in May; several other exchanges are scheduled. There have been no exchanges of trade exhibitions.

Secretary of State Kissinger made another trip to Peking in November 1974. Both sides reaffirmed the principles of the Shanghai Communique, and announced that President Ford would visit the PRC in 1975 (joint communique of November 29 at end of article).

While United States-China trade will be off in 1975 owing to the steep decline in agricultural purchases by the Chinese, the commercial relationship, adhering to the principles of the Shanghai Communique, has made notable advances in the 3 years since President Nixon's visit.

D. CHINESE FOREIGN TRADE POLICY

From the Chinese viewpoint, trade during the 150 years prior to the Revolution had been imposed on China by foreign nations through armed force and unequal treaties. Foreign traders, with support from their governments, dumped goods in China, unfairly seized Chinese industrial materials, and exported capital from China. China's important trading ports, customs, finance, insurance, and navigation were dominated by foreigners. Frustration over the prolonged political interference and economic exploitation resulted in many abortive attempts to remove the foreign presence. Trade was seen by the Chinese as a key element by which foreigners controlled their country.

It is not surprising, therefore, to find Mao Tse-tung saying on the eve of the Revolution that "the restoration and development of the national economy of the people's republic would be impossible without a policy of controlling foreign trade." The implication here that restoration of the economy could not be achieved without foreign trade is worth noting. After its founding in 1949, the PRC pursued a policy of total state control over all instrumentalities of foreign trade. Stateowned foreign trade corporations were established and a series of measures adopted to handle the import and export of various commodities, the issuance of import and export permits, the settlement of tariffs, the prohibition of smuggling, control over foreign exchange, the inspection and testing of imports and exports, and the registration of foreign traders and rules for them to follow.