Following President Nixon’s historic opening to Beijing in February of 1972, the United States engaged in an ongoing rapprochement—a rebuilding of relations—with China. Surveying the international landscape, America’s leaders found clear strategic benefits in such rapprochement. China had taken a hard stance against the Soviet Union during the profound deterioration of Sino-Soviet relations in the 1950s, culminating in the Sino-Soviet split of 1960. Nixon and his National Security Advisor, Henry Kissinger, thought that opening to the Chinese could facilitate the short-term benefit of a withdrawal from the Vietnam War as well as the long-term benefit of gaining the Chinese as a counterweight to the Soviets in the Cold War struggle.
Trade, in this drama, initially played a marginal role in the minds of top US policymakers. In 1972, Henry Kissinger concluded, “the maximum amount of bilateral trade between us”— the United States and China—“even if we make great efforts, is infinitesimal in terms of our total economy.” Kissinger had good reason to be skeptical of trade. China in 1972, then emerging from years of devastation under the Great Leap Forward and in an ongoing Cultural Revolution, had an average per capita income of around $100 USD. Its economy remained mostly rural-agrarian. Mao Zedong opposed foreign trade, foreign investment, and sought autarky for ideological and historical reasons. China’s upheavals in the mid-1970s seemed to make it a uniquely unstable and impenetrable market for American business.
Despite the incredibly long odds of bilateral trade, skepticism did not translate into fatalism. Trade remained an interesting possibility as a method of promoting ties between the United States and China. An important institutional obstacle that Nixon first addressed was America’s ongoing embargo of China’s economy. After China had sent troops into North Korea to repel the US Army in the Korean War, President Truman had broken all relations and had imposed a strict embargo against trading with China, in December of 1950. For two decades, the United States and China exchanged only nominal amounts of goods, and in some years, actually had no bilateral trade. As Nixon opened to China, he began to repair the legal frameworks of trade that had been severed since 1950. Nixon relaxed some of Truman’s restrictions by ending the travel ban against visiting the mainland and by mostly abolishing the embargo on US-China trade, excepting certain strategic items.
Though Nixon considered trade a minor economic factor, it could still be of diplomatic significance in cultivating new ties with the Chinese. Perhaps trade, even if lacking in major economic importance, could still be of political and diplomatic importance in increasing bilateral connections. A House of Representatives mission to China in mid-1972 endorsed this conclusion. House Majority Leader Hale Boggs and then-House Minority Leader Gerald Ford wrote in their post-trip debriefing that “though diplomatic ties with China may be a condition precedent to any dramatic increase in the range and volume of goods traded, this is not to say that some significant trade cannot occur before that event. Obviously, trade itself can play an important part in bringing about diplomatic ties.” As the rapprochement went on, the government became progressively more interested in bilateral trade, as well as in ways to circumvent the grave challenges to a Sino-American economic relationship.
As it became clear that traditional methods of stimulating bilateral trade—treaties, foreign investment, economic liberalization—were of little immediate help in the atypical Sino-US relationship, the US government turned to non-traditional proposals. One such idea was a nominally private commercial trading organization. To this end, the Departments of State and Commerce, with the direct approval of Nixon and Kissinger, began to build a private, non-governmental organization, the National Council, to focus on promoting US-China trade and on spreading basic information about the Chinese economy. By May of 1973, the executive branch had handed off its creation to the private sector, nominating Westinghouse Electric’s chairman, Donald Burnham, as the first chairman of the National Council. In a relatively rapid ascendancy, the Council grew to include over two hundred major American corporations within the year.
The Council, however, embraced important roles outside of bilateral trade advocacy. By design, for a short period in the 1970s, it also acted as a diplomatic ‘go-between’ group for Washington and Beijing. Under the veil of its private, non-governmental status, the US government used the Council to promote official American diplomatic positions to the Chinese. At a time when the Chinese, due to intense dissatisfaction over Washington’s continued recognition of Chiang Kai-shek’s Nationalist government in Taiwan, occasionally refused to meet with American diplomats, the Council, as an ostensibly non-partisan organization, could take up backchannel negotiations where formal talks had broken off. Such backchannel diplomacy was especially useful in the era after Nixon’s opening in 1972 but before the formal resumption of Sino-American diplomatic relations in January of 1979. In practice, the Council proved effective in such diplomacy, as Kissinger himself recognized in an enthusiastic letter to its Board of Directors in 1973. At a time when the United States and China had shown friendly overtures but had not yet re-established their formal ties, the Council’s “alternative forms of representation” helped mitigate the difficulties of formal diplomacy.
The Council’s importance in actually facilitating early bilateral trade transactions also cannot be understated. Indeed, its ‘go-between’ functions applied with equal force in rekindling Sino-US economic exchanges, due in part to the complexities of trading with Maoist China. Until 1978, China’s foreign trade was monopolized under a bureaucracy of governmentally-run Foreign Trade Corporations (FTCs). Buying and selling with the FTCs was a complex and exclusive process, creating the need for the Council’s sophisticated ‘middleman’ operations. By directly coordinating the early contacts of American businesses and China’s FTCs, the Council facilitated some of the first business transactions after Nixon’s 1972 opening.
The Council’s litany of other functions cemented its importance to early bilateral trade. It staffed an office at the Canton Trade Fair in Guangzhou (then China’s major outlet for foreign trade), providing key services to American traders in China. It published the industry-standard magazine on the Chinese economy, the U.S. China Business Review, that was well-received not only in American business circles but was also sought by Chinese diplomats for its accuracy and comprehensiveness. The Council held conferences and established an Academic Advisory Board that spread “basic information” about the Chinese economy at a time when such information was at a premium. While China’s trade remained deeply enigmatic—not only because of Mao’s policies, but also because of the two-decade cut-off in cultural and economic contacts—the Council provided essential insights into Sino-American trade.
(excerpted from introduction)
