Both sides view bilateral trade as another area from which mutual benefits can be derived, and agree that economic relations based in 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 their two countries. The two sides agree that they will stay in contact through various channels, including the sending of a senior U.S. representative to Peking, from time to time for concrete consultations to further the normalization of relations between the two countries and continue to exchange views on issues of common interest. The two sides expressed the hope that the gains achieved during this visit would open up new prospects for the relations between the two countries. They believe that the normalization of relations between the two countries is not only in the interest of the Chinese and American peoples but also contributes to the relaxation of tension in Asia and the world. President Nixon, Mrs. Nixon, and the American party express their appreciation for the gracious hospitality shown by the government and people of the People's Republic of China. THE WHITE HOUSE COMMUNIQUE-UNITED STATES-PEOPLE'S REPUBLIC OF CHINA FEBRUARY 22, 1973. Dr. Henry A. Kissinger, Assistant to the U.S. President for National Security Affairs, visited the People's Republic of China from February 15 to February 19, 1973. He was accompanied by Herbert G. Klein, Alfred Le S. Jenkins, Richard T. Kennedy, John H. Holdridge, Winston Lord, Jonathan T. Howe, Richard Solomon, and Peter W. Rodman. Chairman Mao Tse-tung received Dr. Kissinger. Dr. Kissinger and members of his party held wide-ranging conversations with Premier Chou En-lai, Foreign Minister Chi Peng-fei, Vice Foreign Minister Chiao Kuan-hua, and other Chinese officials. Mr. Jenkins held parallel talks on technical subjects with Assistant Foreign Minister Chang Wen-chin. All these talks were conducted in an unconstrained atmosphere and were earnest, frank, and constructive. The two sides reviewed the development of relations between the two countries in the year that has passed since President Nixon's visit to the People's Republic of China and other issues of mutual concern. They reaffirmed the principles of the Joint Communique issued at Shanghai in February 1972 and their joint commitment to bring about a normalization of relations. They held that the progress that has been made during this period is beneficial to the people of their two countries. The two sides agreed that the time was appropriate for accelerating the normalization of relations. To this end, they undertook to broaden their contacts in all fields. They agreed on a concrete program of expanding trade as well as scientific, cultural, and other exchanges. To facilitate this process and to improve communications, it was agreed that in the near future each side will establish a liaison office in the capital of the other. Details will be worked out through existing channels. The two sides agreed that normalization of relations between the United States and the People's Republic of China will contribute to the relaxation of tension in Asia and in the world. Dr. Kissinger and his party expressed their deep appreciation for the warm hospitality extended to them. JOINT COMMUNIQUE-UNITED STATES-PEOPLE'S REPUBLIC OF CHINA PEKING, November 29, 1974. Dr. Henry A. Kissinger, U.S. Secretary of State and assistant to the President for National Security Affairs, visited the People's Reublic of China from November 25 through November 29, 1974. The Chinese and United States sides held frank, wide-ranging and mutually beneficial talks. They reaffirmed their unchanged commitment to the principles of the Shanghai Communique. The two governments agreed that President Gerald R. Ford would visit the People's Republic of China in 1975. II. Organization and function of China's foreign trade apparatus 536 536 The ministry of foreign trade. 538 The China council for the promotion of international trade. 539 Federal and State regulation. 579 Export-import bank credits, private financing, and the Johnson 579 VII. Facilitating commercial relations. 580 Bureau of East-West trade, U.S. Department of Commerce. 581 Office of PRC affairs, U.S. Department of State. 581 United States liaison office, Peking... 581 People's Republic of China Liaison Office National council for United States-China trade. VIII. Recommendations. Elements of a Sino-U.S. trade agreement Conditions precedent to MFN for China. Areas which merit congressional attention. IX. Summary and prognosis.. 581 582 582 582 585 593 593 594 APPENDIXES I. China's foreign trade corporations II. China's trade related agencies.. III. United States-People's Republic of China trade statistics. 596 597 599 *Mr. Theroux, a partner in the law firm of Baker & McKenzie, Washington, D.C., visited China six times between 1972 and 1975. He served 2 years as Vice President of the National Council for U.S.-China Trade. I. INTRODUCTION After nearly a quarter century of commercial estrangement, the United States and China are trading again. But the record of this trade over the last 3 years, and the current opportunities and obstacles, augur an uncertain growth in the level and the nature of Sino-American commerce. Since the Shanghai Communique of February 1972, trade volume. first bounded above ceilings forecast by the most optimistic analysts. It has now begun to fall back. Apprehensions that China would flood our markets with inexpensive goods have proven mistaken; expectations that China would be an inexhaustible market for American goods and know-how are proving illusory; and confidence that a common desire to do so would readily solve problems inherent when systems so different come together in commerce has been somewhat shaken. In the new United States-Sino commerce, traders on both sides have often learned that the achievement of a single step must begin with a journey of 10,000 miles. Difficulties are of course to be expected in the nascent United StatesChina trade. Aside from the fundamental principles of China's foreign trade, that it would be conducted on the basis of "equality and mutual benefit," and "helping to meet each other's needs," there are numerous business practices with which American businessmen cannot come to easy understanding, appreciation or agreement. The Chinese, too, face in the American entrepreneur, whether importer or exporter, a character for which contact with European traders has only partly prepared them. This paper is intended to summarize the principal agencies and instrumentalities on both sides which bear upon commerce between the two countries, to review legal and practical impediments to expanded trade, and to offer for consideration some suggestions for facilitation of bilateral trade more accelerated than the "step-by-step' progress to which both sides pledged themselves in the Joint Communique at Shanghai. Insofar as the following material reflects the actual experiences, achievements as well as frustrations, observed in Sino-U.S. trade, it is but a "worm's eye view," yet only by confronting the small realities can the two sides pursues an informed trade policy. II. ORGANIZATION AND FUNCTION OF CHINA'S Economic Plans and Foreign Trade Policy The most populous nation on earth has by far the fewest "businessmen." Foreign trade in China is a monopoly of the state, and is conducted principally through eight foreign trade corporations (FTC's). Neither manufacturing units nor end-user entities in China conclude contracts with foreign individuals or firms; instead, the FTC's act as their agents in both import and export transactions. This is the first and most important fact to be grasped by American firms interested in doing business with China. The FTC's carry out a trade plan under the guidance of the Ministry of Foreign Trade, aided in part by the China Council for the Pro motion of International Trade (CCPIT). In addition to headquarters. at Peking, the Foreign Trade Ministry maintains local bureaus in major Chinese cities, and the FTC's and the CCPIT likewise have local branches and offices in certain major cities. The ultimate blueprint and authority for the import and export contracts executed by the FTC's are China's national economic plans. Peking's Fourth Five-Year Plan continues through 1975; the Fifth Five-Year Plan begins in 1976. In his speech to the Fourth National People's Congress in January 1975, Premier Chou En-lai announced that the Fourth Five-Year Plan would be fulfilled, and that the State Council would formulate "a long-range Ten-Year Plan, Five-Year Plans, and Annual Plans" in order "to accomplish the comprehensive modernization of agriculture, industry, national defense, and science and technology before the end of the century." More than a few American businessmen have been puzzled by the fact that the elaborate import and export plans developed by the Chinese, like China's Five-Year Plans, are State secrets. No substantive details of these plans are ever released, and general plan outlines can only be divined by very close attention to official statements and policy pronouncements emanating from Peking and, to some extent, by analysis of trade and business data made public by China's trading partners. The official report of the Tenth Party Congress, for example, contained not one sentence on the subject of foreign trade, and officially reported production and trade achievements are invariably expressed in percentage increase rather than absolute terms. It may be understandable that Peking is reluctant, for strategic reasons, to publish import and export plans, but foreign businessmen point out that at least a selective release of import needs, or an invitation to submit proposals and bids, and announcements of goods available for export, could enable the Chinese to buy and sell at more favorable prices and terms. Among the most recent major statements of China's foreign trade policy appeared in an article by Trade Minister Li Chiang appearing in the periodical China's Foreign Trade. This publication, resurrected in 1974 after a long absence, appears in several languages and is, therefore, obviously intended for foreign consumption. The lead article, by the Minister of Foreign Trade, offers a good illustration of China's reluctance to publish trade data. Import and export volume is discussed not in absolute terms, but as percentages of base years for which no Chinese-source data exist. Thus, for example, total export-import volume for 1973 is reported to be "2.5 times that of 1965” with exports 2.50 times greater and imports at 2.45 times higher than in 1965. Trade Minister Li's article is also instructive for the broad policy guides it sets forth. In the absence of other kinds of information, American businessmen are wise to heed these general remarks, which not only embody current trade principles, but which, despite intentional ambiguity, do illuminate the factors at work influencing the trade policymakers. Li quotes from the pronouncement of Mao Tsetung almost invariably cited in official statements about China's trade: The Chinese people wish to have friendly cooperation with the people of all countries and to resume and expand international trade in order to develop production and promote economic prosperity. 51-174 O 75 - 35 In pursuing international trade, China seeks "to learn from other countries' merits and obtain necessary materials, equipment, and techniques through exchange." As if to anticipate and deflect criticism from elements at home fearful of undue dependence on the outside world, Li explains that this "is an implementation of the principle of making foreign things serve China, and combining learning with inventing in order to add to our ability to build socialism independently and with the initiative in our own hands through self-reliance to speed up the pace of our socialist construction. Facts prove," Li states, "that foreign trade is necessary to the development of our national economy." The justification for foreign trade thus established, Li emphasizes that the New China will not succumb to the encroachments of foreign enterprise which afflicted old China: We resolutely oppose the policy of plundering the natural resources of other countries, dominating their national economies and interfering in their internal affairs * * * socialist China will never try to attract foreign capital or exploit domestic or foreign natural resources in conjunction with other countries. She will never go in for joint management with foreign countries, still less grovel for foreign loans. But, while China will adhere to the policy of maintaining independence, keeping the initiative in its own hands and relying on its own efforts in socialist construction, "under no circumstances does (this) mean pursuing a 'closed-door' policy." This principle was reaffirmed at the National People's Congress in January 1975. The Chinese, in trade as in other matters, unhesitatingly concede "shortcomings and deficiencies," acknowledge that theirs is a "developing country, as yet backward in many fields." Assuring the outside. world of a determination to broaden foreign trade, the Trade Minister has offered exporters to China the assurance that "China's imports will be increased," and holds out to importers the expectation that "we will gradually be able to export more and better goods to meet the requirements of the people of other countries." Responding to criticisms which Americans, and no doubt others, have made about current Chinese export goods, pledges are more and more frequently found in Chinese statements to increase the quantity, quality, packing, packaging, designs, and varieties of such products. The Ministry of Foreign Trade Under the supervision of the Staff Office of Finance and Trade of the State Council, the Ministry of Foreign Trade formulates an overall import and export plan to be used as a basis for specific planning by the FTC's and other agencies with collateral foreign trade responsibilities. After review and approval by the Trade Ministry of their specific import-export plans, the FTC's carry out, under Ministry supervision, their individual trade plans. The job of the Ministry of Trade cannot be an easy one. China, like the United States, is not by tradition or by need a trading nation. Trade occupies only a small fraction of its gross national product. Aside from some limited trade undertaken to achieve foreign policy goals, the motivation to trade is essentially limited to the need to generate foreign exchange sufficient to finance needed agricultural and |