China's own agricultural production is increasing rapidly. There are indications that the Chinese will discontinue purchases of U.S. grain after 1975.

China's exports to the United States have not received mostfavored-nation tariff treatment, a situation which aggravates to some degree the imbalance in trade. Chinese exports of toys, for example, have been subject to duties at a rate of 70 percent compared with 10.5 percent for most other nations; carpets 45 percent compared with 15 percent. The precise effect that most-favored-nation treatment would have on our trade with China is uncertain. Clearly, it will have very little impact on an imbalance of the current magnitude. The practical aspects, however, are not as important as the principle involved. Our policies in the 1950's acted to turn trade into a political instrument. In the process various laws were enacted to block and discriminate against trade with the People's Republic. Congress has now given the President authority to negotiate agreements to end this discrimination. Most-favored-nation tariff treatment is not a special favor; it has been a standard U.S. trading practice since the earliest days of the Republic. Failure to return to it at this time, whatever its economic effect, would amount to the continuance of a superfluous political irritant in Sino-U.S. relations.

The Jackson Amendment, relative to freedom of emigration, would appear to have little relevance to the Chinese-U.S. rapprochement. There is a considerable movement of people back and forth between the People's Republic and Hong Kong and then outward migration from the latter. China and Canada have reached an agreement which allows Chinese to join members of their families living in Canada and the possibility exists for a similar arrangement with the United States.

As for the question of frozen assets and blocked claims, there are private American claims against the People's Republic of about $197 million for property losses on the Mainland. Conversely, the Chinese claim that about $80 million in assets have been frozen in the United States since 1950. While this issue remains unresolved, it could constitute a substantial barrier to further normalization of economic relations. It precludes, for instance, direct banking and shipping relations and scheduled air service in the United States by China's airline, since Chinese property even temporarily in the United States could be subject to private legal attachment. Nevertheless, it should be noted that the Chinese do not appear overly concerned and are not now pressing for a quick solution.

EXCHANGES

Since the breaking of the logjam in U.S.-China relations, educational and cultural exchanges have become a major factor in reestablishing the ties between the American and the Chinese people. On this point, the Shanghai Communique stated:

The two sides agreed that it is desirable to broaden the understanding between the two peoples. To this end, they discussed specific areas in such fields as science, technology, culture, sports, and journalism, in which people-to-people contacts and exchanges

would be mutually beneficial. Each side undertakes to facilitate the further development of such contacts and exchanges.

A total of some 8,000 Americans have visited China since 1972, most of them of Chinese descent.1 The United States has sent to China under exchange arrangements specialists ranging from basketball teams to University presidents, a total of twenty delegations in all from 1972-1974. Chinese groups visiting this nation have included the Shengyang acrobatic troupe, journalists, agronomists and physicians.2 These exchanges have made a significant contribution to better understanding and improved relations between the two countries. China appears satisfied with the level and scope of the exchanges at the present time but has not ruled out an expansion "if in accord with the requirements of each side . .

As for tourism, at this point the demand is entirely one-sided. The Chinese Embassy in Ottawa and the Liaison Office in Washington have been flooded with applications for visits to China and, as indicated, only a very small number, primarily Americans of Chinese ancestry have received visas. There have also been some private visits by a variety of Americans-journalists, scientists, businessmen, educators and others. However, China shows no interest in tourism as a possible source of foreign exchange earnings. The only large group of Americans who have visited China in the category of tourists were those travelling to Kuang-chou (Canton) last Spring on the liners "France" and "Veendam," which stopped in Hong Kong for that purpose. China has very limited facilities such as hotels, interpreting services, automobile transportation, and other essentials of the tourist trade. While additional hotel space is being widely constructed, the expansion is primarily for handling Chinese travelers and foreigners who come to China for official or semi-official purposes. There is little indication that China is interested in tourism as a source of foreign exchange.

On two issues related to exchanges, the Chinese rule out visits by high-level Chinese officials to the United States and the establishment of permanent press offices because of the Taiwan problem. It was pointed out that there would be difficulties "in sending over high-level officials because of the presence in Washington of the Ambassador from Taiwan." The Chinese also say that the presence of accredited news representatives from Taiwan in Washington makes it impossible for the New China News Agency to have newsmen permanently assigned here. When asked about this kind of conflict in press representation at the U.N., the Foreign Minister said that China's press mission had taken the matter up with Secretary General Waldheim and the Taiwan Chinese "press was put out."

Cited as an example of how the Taiwan problem arises to inhibit the unfolding of U.S.-China relations was the controversy concerning the planned press preview of the Chinese Archeological Exhibition at the National Gallery of Art in Washington. "This," it was pointed

1 One of these visitors was President Ford who, as House Minority Leader, went to China in 1972.

2 Lists of specialists from both countries and of the U.S. Members of Congress who have visited China under bilateral arrangements are shown in appendixes E and F.

out. "is only a small example. Until the Taiwan question is resolved, these issues will always crop up."

SUMMARY

There has been progress since the Shanghai Communique in restoring ties between the Chinese people and people of this nation. We now communicate with each other officially through our respective Liaison Offices. The mutual learning process has begun anew with Americans visiting China to look, learn, and share their knowledge and Americans welcoming Chinese delegations of athletes, entertainers, scientists, and others. In a period of only three years, the United States has become China's second largest trading partner, although the trade is grossly imbalanced in terms of an excess of U.S. exports over imports.

The United States is no longer involved in fighting on the Asian mainland and other sources of frictions with China throughout the Pacific appear to have been eased. Small, but symbolic, steps in the direction of rapprochement have been taken, such as the repeal of the Formosa Resolution by the Congress.

These steps have led to a plateau where we are now confronted with a last major hurdle to normalization, that is, the question of Taiwan. The Chinese view on both sides is that Taiwan is an integral part of China. That view is recognized by U.S. policy as expressed in the Shanghai communique. On that basis, the Chinese contend that the presence of U.S. military forces on Taiwan and U.S. defense and diplomatic arrangements with the Chinese authorities on the island is an unwarranted interference in Chinese internal affairs. We have not challenged that contention. As a matter of official policy, we have temporized. We have yet to face the Taiwan issue, but if full normalization is to return in Sino-U.S. relations, as it has in the relations of a hundred other nations with China, this issue will have to be met. As it is now, our official relations with the nation containing one-quarter of the world's people, are conducted by means of Liaison Offices in the two countries. They add up to something less than our formal relationship with a small country in Eastern Europe.

III. China's Foreign Policy

The half-way house at which the Sino-U.S. rapprochment has stopped makes it difficult to relate the policies of the two countries at other points where they intersect, notably in the Western Pacific. In this connection, I made every effort to clarify my understanding of Chinese foreign policies especially with regard to other Asian nations.

JAPAN

Though there are great disparities in their economic situations, deep differences in socio-political systems and variances in attitudes toward

1 At the request of the National League of Families of American Prisoners and Missing in Southeast Asia, I raised one other point with Chinese officials. Called to their attention was the absence of information on Lt. Joseph P. Dunn, Petty Officer Reuben B. Harris, and Petty Officer Kenneth W. Pugh, who according to a League representative, were shot down near the Chinese border during the Vietnam war. I asked, as well, for China's assistance wherever possible in obtaining an accounting for missing Americans in that war. The Chinese were prepared to carry out an investigation if they were thought to be in China, "but if they are in North Vietnam or Laos this is not in the scope of our country, we cannot do anything."

certain international questions, Sino-Japanese relations have markedly improved since mid-1972. Despite memories of Japan's military and political role in China in the first half of this century, there appear to be no issues on a bilateral level which interfere with the development of normal relations between the two countries. The problem of Taiwan, for example, where Japanese economic interests are very extensive has been resolved as noted below in a manner acceptable to both. The Nixon initiative in opening the door to U.S.-China contact precipitated the visit to China in September 1972 of the Japanese Prime Minister, Kakuei Tanaka. There followed, promptly, the establishment of diplomatic ties between the two countries. In this connection, both governments made significant concessions. The Japanese recognized the People's Republic as the sole legitimate government of China and stated that it "fully understood" China's position that Taiwan was an inseparable part of the People's Republic of China. Whereupon the Japanese broke relations with Taiwan but have continued to trade and to maintain contact through an unofficial organization on that island. Subsequently, the Japanese signed several agreements with the Chinese, including an air transport agreement in April 1974. For its part, the People's Republic of China did not raise the question of reparations with Japan and has placed no obstacles in the way of continued Japanese trade with Taiwan where Japan has substantial investments.

The total trade between Japan and China reached approximately $2 billion in 1973.2 China is increasing its level of exports of petroleum to Japan. While the 5 million tons exported in 1974 will fill only a small part of Japan's needs, exports of crude are due to be increased over the next few years. How far they can go in meeting a significant portion of Japan's requirements is problematical. Whatever the size, however, they should prove to be an important earner of exchange for China, and, hence, a lubricant in the expansion of Sino-Japanese trade.

The current Chinese view of Soviet military concentrations along the border areas of Northeast China is that they are aimed primarily at U.S. forces in and around Japan and secondarily at China and Japan. Although the Chinese are basically opposed to the stationing of foreign troops in other countries, under present circumstances and conditions, the issue of the continued U.S. military presence in Japan is not being pressed. On the contrary, it is suggested that Japan and the United States should maintain close relations.

INDOCHINA

China remains critical of aspects of U.S. policy in Indochina, notwithstanding the termination of the direct military involvement in

1 The air transport agreement has been a source of some difficulty for Japan which acceded to the Chinese request that China Airlines from Taiwan not be considered as a carrier representing a state and that the flag marks of the aircraft belonging to Talwan not be recognized as representing a national flag. Japan's action caused the Taiwan authorities to halt flights between Japan and Taiwan by both Japan Air Lines and their own China Airlines.

Recently, however, China asked Japanese suppliers for a delay in the delivery of 160,000 tons of urea fertilizer and 60,000 tons of ammonium sulphate which had been scheduled for November and December 1974. Additionally, China is reported to have asked a delay in payments for six months on a steel purchase from Japan which was to be delivered in the same period. These actions are in line with China's basic and long-standing foreign trade policy of attempting to keep some balance between purchases and sales.

Vietnam. In this connection, as in others, the word "messy" occurs as a description of the execution of a policy after the concept has been soundly designed. China appears content for the present, however, to see a continuation of two Vietnams, left to work out relations between themselves in line with the Paris Peace Agreement.

The People's Republic has satisfactory relations with the current unified government of Laos. There are several factors which tend to sustain this state of affairs. The Chinese have championed Laotian neutrality and independence since the first Geneva Conference in 1954. They have also provided aid to the Laotians, notably in the form of a road network which is gradually being extended southward from the Chinese border. It is reported that promises have also been made to provide such much needed commodities as rice, gasoline and cement.

With regard to Cambodia, China's position is clear. The government headed by Prince Sihanouk is fully supported as the only authentic and legitimate authority in that country. It regards that government, not as one in exile but as present on Cambodian soil in the form of the unified Cambodian resistance. Here again, U.S. support for the Lon Nol Government and the effort to promote a coalition through that medium is regarded as a "messy" policy unrelated to the realities of the Cambodian situation. From the Chinese viewpoint, a unified, neutral Cambodia is an essential to neutral and independent states in a stabilized Indo-China and the intervention of the United States in Cambodia is seen as a factor which only tends to prolong the conflict.

THAILAND

The basic Chinese principle of opposition to stationing foreign troops in other lands is also applied to Thailand. That principle does not translate, however, into an active insistence at this time that the U.S. withdraw from Thailand. As the Chinese see it, that is a problem for the United States and Thailand.

Actually the Chinese have moved to improve relations with the latter country. General principles of future trade were agreed on when the Thai deputy Foreign Minister visited Peking in 1973. A contract was signed for the delivery to Thailand of 50,000 tons of diesel oil. From the Thai side, however, a number of considerations such as concern over the large Chinese minority in Thailand, estimated to be as many as 4 million, and the inability of the Thai Government to obtain National Assembly repeal of the decree forbidding trade with China have slowed the normalization of relations. Nevertheless, the process is under way.

SOUTH ASIA

There were no expressions of anxiety on the part of the Chinese leaders over the Indian detonation, recently, of a nuclear device. Indian. policy toward the buffer states between China and India, such as Bhutan, Nepal, and Sikkim, however, does give rise to Chinese concern since these states have ethnic, cultural and historic links with China as well as with India. It is conceivable that an activist Indian Hlayan border policy, together with close Indian cooperation with

iet Union, could be seen as posing a threat to Chinese security