On May 23, 1959, the New York Times reported that after “weeks of solemn deliberation” the U.S. government had decided to let four containers of frozen shrimp from “Red China” pass into the United States on their way to Canada.
Certainly U.S.-China relations have traveled a long way since 1959, as the late historian Nancy Bernkopf Tucker documented in her book “The China Threat.” But to some extent, the debate inside the Trump administration as it wages its trade war with China mirrors the shrimp and soy sauce battles joined by the Eisenhower administration. How should the United States deal with China? How much should it trade with China? What’s the purpose of trade with China? Should it deal with China alone or in a united front with its allies?
Eisenhower inherited the trade embargo on China, which Washington slapped on Beijing during the Korean War. Under U.S. pressure, Western European allies agreed to establish the Coordinating Committee of the Paris Consultative Group, known as COCOM, to limit trade with the Communist bloc. While significant commerce was permitted with the Soviet Union, China was under tighter restrictions, called the China differential. Despite complaints from U.S. allies, especially the British who wanted firms in Hong Kong to be allowed to do business with China, and the Japanese, who looked at trade with China trade as a way to rebuild following their defeat in World War II, Congress made U.S. aid to these still-battle-ravaged nations contingent on their adherence to the American policy.
Still, Eisenhower was not happy with this situation, telling one National Security Council meeting as early as 1953 that it was “crazy” to “waste” resources enforcing the embargo. Declassified documents and Tucker’s research show that the president believed that trade with China could help wean Beijing off of its unhealthy attachment to the Soviet Union and even to its Communist principles. He also held that the embargo on China was doing less damage to Beijing and more damage to U.S. alliances in Asia and Western Europe. As the former Supreme Allied Commander in World War II, Eisenhower knew the importance of allies. Finally, Eisenhower had some sympathy with Japanese businessmen and he observed that if Japan could trade with China, it would ultimately lighten the burden on U.S. taxpayers who were footing the bill for rebuilding Japan.
In this, the 34th president’s views are echoed today in the belief that full-on engagement with China will ultimately produce a better China and that dealing with China is best done with America’s allies. Inside the Trump administration, Treasury Secretary Steven Mnuchin and some in the State Department generally still hold to this view.
Making the opposing argument in the 1950s were Secretary of State John Foster Dulles and his brother, Allen, who ran the CIA. They sought to isolate China and were happy to squeeze allies. Japan had already been forced to sign a secret agreement under the Truman administration to limit its trade with China even below levels approved by COCOM. Their argument was that the more China was forced to rely on the Soviet Union, the more pressure would be placed on the relationship between Moscow and Beijing and the more the Soviet economy would buckle under the weight of having to support comrades in Beijing.
The Dulles brothers and others did not believe that U.S. trade would end up changing China for the better. Instead, they maintained, commerce with China would only strengthen the Communist regime. Those views resonate today among those in the Trump administration who contend that the United States should do less business with Beijing, accept less investment from Chinese companies and begin what just a few years ago was considered impossible (remember Chimerica?): decoupling the U.S. economy from China’s. In the White House, trade adviser Peter Navarro, U.S. Trade Representative Robert Lighthizer and some in the National Security Council hew closely to this position.
What’s interesting also is that despite the disagreements within the Trump administration over the goals of its trade war with China – to change China or just to disengage – up to this point they have generally agreed on tactics. And those tactics are to stress the economic relationship with China at every possible turn.
Still, what happened to the Eisenhower administration’s China policy is instructive. By 1953, the worldwide economic embargo that the United States had tried to impose on China began to leak. In 1954, Tokyo struck a barter agreement with Beijing and the National Security Council ended the secret bilateral agreement under which Japan had promised even tighter economic sanctions on China.
With an armistice in the Korean War, Germany, Portugal, Norway, Britain and Denmark began complaining to the United States that there was no reason to maintain the China differential. Soon after, the United States signaled its approval for Malaysia and Burma to sell China rubber even though it had military uses. In May 1957, London announced that it would unilaterally stop abiding by the China differential and treat China the same as the Soviet Union.
The Defense Department recommended tariffs on British products, but Eisenhower wouldn’t have it. In 1958, Chinese representatives opened up a trade mission in Tokyo. Subsidiaries of U.S. businesses in other countries, such as the Ford Motor Co. of Canada, along with American agricultural interests began pressing the administration to let them trade with China. By then Chinese shrimp and soy sauce had begun wriggling over the border with Canada, and Eisenhower backed the idea of ending the embargo, at least for other countries.
Two things prevented him. First, he lacked the political capital to do so. Second, and this is important in light of potential Chinese responses to the trade war in the future, Chinese forces began shelling Taiwanese territory, making any outreach to China impossible. That would fall to his vice president, Richard Nixon, who did so after he won the presidency in 1968.