ECONOMIC NORMALIZATION: SINO-AMERICAN TRADE RELATIONS FROM 1969 TO 1980 by MIN SONG (Under the Direction of William W. Stueck) ABSTRACT My dissertation examines Sino-American trade relations in the 1970s. In December 1950, the United States imposed a total embargo on China after China entered the Korean War. On April 14, 1971, it announced an end to that embargo. Trade then resumed between the two countries without full diplomatic relations between the two governments. During this decade Sino-American trade witnessed a sudden surge, then setbacks, and eventual normalization. By January 1980, the United States and China had entered a trade agreement and granted mutual Most Favored Nation (MFN) status, thus completing economic normalization a year after the normalization of diplomatic relations. Sino-American economic normalization was significant to the development of Sino- American relations, the transformation of Chinese economy, and the unfolding of the Cold War. The resumption of Sino-American trade opened an opportunity for the two countries to move beyond the expedient cooperation against the Soviet Union and develop an interdependent and enduring relationship. During the 1970s, American and Chinese business communities managed to build an infrastructure to sustain Sino-American economic exchange. Without the groundwork laid in the decade, the fast growth of Sino-American trade in the last thirty years would have been unimaginable. Given that China was in the midst of the xenophobic Cultural Revolution until late 1976, China’s positive response to American businessmen was intriguing. Despite the heated anti- imperialist/capitalist propaganda in China, a few Chinese leaders battled with the left wing of the government and expanded China’s trade with the capitalist countries. With increasing contacts with the West, China began to adopt many customary international trade practices. As Deng Xiaoping commented, these experiments with foreign trade were predecessors to China’s opening up and economic reforms after the Cultural Revolution. America’s economic engagement added the momentum in China to end the Cultural Revolution and start a new era of opening-up and economic reform. China’s switch from a command economy to a market economy was a critical victory for the United States in the Cold War. INDEX WORDS: United States, People’s Republic of China, Trade, Cultural Revolution, Reform and Opening-up, Cold War, Most Favored Nation, National Council for U.S.-China Trade ECONOMIC NORMALIZATION: SINO-AMERICAN TRADE RELATIONS FROM 1969 TO 1980 by MIN SONG B.A., Renmin University of China, China, 1999 M.A., Renmin University of China, China, 2002 A Dissertation Submitted to the Graduate Faculty of The University of Georgia in Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY ATHENS, GEORGIA 2009 © 2009 Min Song All Rights Reserved ECONOMIC NORMALIZATION: SINO-AMERICAN TRADE RELATIONS FROM 1969 TO 1980 by MIN SONG Major Professor: William W. Stueck Committee: Ari Levine Karl Friday Paul Sutter Chen Jian Electronic Version Approved: Maureen Grasso Dean of the Graduate School The University of Georgia August 2009 iv DEDICATION I dedicated this dissertation to my mother, whose unconditional love carried me through all the way. Han Jun v ACKNOWLEDGEMENTS This work could have never been accomplished without those have given me their full support. Special thanks go to my major advisor and my mentor Dr. William Stueck, who has always believed in me and helped me through every step of my studies. He painstakingly spent his time making sure that I did the best work that I could do. Much of my gratitude must be also given to Dr. Chen Jian for helping me focus my work on what would eventually become my dissertation. Many thanks go to Dr. Ari Levine because one of my initial graduate level classes taught by him would eventually lead to my interest in focusing on Chinese economic history. Thanks also go to Dr. Paul Sutter and Dr. Karl Friday, whose constructive suggestions have greatly helped shape the final form of my dissertation. Special thanks also go to Professor Shen Zhihua for his continuous help since my graduate studies in China. Many thanks go to my dear friends at the University of Georgia, who made Georgia my second home. A special note of thanks goes to Jason, Jim, Steve, Boram, and Zhang Rui. I also thank the staff at the History Department of the University of Georgia, especially Laurie and Vici. Very special thanks go to Dr. Ted Katner, who was the first reader, editor, and critic of my dissertation. Also thank his beautiful hometown of Macon, Georgia, where I completed the majority of my dissertation. I would like to extend my deepest gratitude to my mother, whose unconditional love and support gave me comfort and strength. Many, many thanks go to my dearest friends from my childhood and college, Qiu Zhen, Li Jiao, Wan Ke, Qiu Yuxia, Yang Wei, Wang Qin, Gu Yuan, Miao Xiu Wen. They did everything they could to help me with my research in China. A special vi note of thanks goes to Cai Liang, whose unfailing support helped me through many confusions and frustrations. I would like to thank the Gerald R. Ford Foundation, the Society for Historians of American Foreign Relations (SHAFR), and the History Department of the University of Georgia for their generous financial support for my research. A special note of thanks goes to archivist Helmi Raaska at the Gerald R. Ford Library. Many, many thanks to SHAFR—without its Dissertation Completion Fellowship, this work could not have been completed the way it is now. vii TABLE OF CONTENTS Page ACKNOWLEDGEMENTS .............................................................................................................v ABBREVIATIONS ..................................................................................................................... viii INTRODUCTION ...........................................................................................................................1 CHAPTER 1 From Total Embargo to Economic Engagement, 1969-1972 ......................................16 2 China’s Shopping Spree, 1972-1974 ...........................................................................71 3 Regularizing Sino-American Trade, 1972-1974 ........................................................124 4 The Trying Time, 1974-1977 .....................................................................................187 POSTSCRIPT AND CONCLUSION ..........................................................................................240 BIBLIOGRAPHY ........................................................................................................................267 viii ABBREVIATIONS AIA American Importer Association CCP Chinese Communist Party CCPIT China Council for the Promotion of International Trade CIA Central Intelligence Agency COCOM Coordinating Committee COMSAT Communications Satellite Corporation MACHIMPEX China National Machinery Import and Export Corporation MFN Most Favored Nation NCUSCT National Council for U.S.-China Trade NSC National Security Council PRC People’s Republic of China RCA RCA Global Communications ROC Republic of China TECHIMPORT China National Technical Import Corporation UN United Nations USG U.S. Government USSR The Union of Soviet Socialist Republics 1 INTRODUCTION This dissertation examines Sino-American trade relations from 1969 to 1980. In 1969, the United States began to relax its nineteen-year long total embargo on the People’s Republic of China (PRC).1 Two years later, it announced an end to that embargo. During the 1970s, Sino- American trade volume fluctuated greatly. It began with $5.0 million in 1971, reached $933.8 million in 1974, and then plummeted to $337.3 million in 1976. In1978, it topped one billion dollars, which doubled in 1979.2 By 1980 the two countries had entered a trade agreement and granted each other Most Favored Nation (MFN) status. 2400 2200 Total Trade 2000 U.S. Exports 1800 U.S. Imports 1600 1400 1200 1000 800 600 400 200 0 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Sino-American Trade Volume Changes in the 1970s (million in dollars)3 1 The United States imposed a total embargo on China in response to China’s intervention in the Korean War. For fine narratives of the Korean War, see William Stueck, Rethinking the Korean War: A New Diplomatic and Strategic History (Princeton: Princeton University Press, 2002); and Chen Jian, China’s Road to the Korean War: The Making of the Sino-American Confrontation (New York: Columbia University Press, 1994). 2 Information Office of the State Council Of the People's Republic of China, On Sino-US Trade Balance (Beijing, 1997) http://english.people.com.cn/whitepaper/ See also Library of Congress, A Country Study: China (Washington, 1987) http://lcweb2.loc.gov/cgi-bin/query/r?frd/cstdy:@field(DOCID+cn0007) 3 John W. De Pauw, U.S.-Chinese Trade Negotiations (New York: Praeger, 1982), 5. De Pauw’s data is from U.S., Department of Commerce, Highlights of Exports and Imports, FT-990 series (Washington, D.C.: Government Printing Office, 1970-1980). 2 This dissertation attempts to explain those fluctuations and explore the significance of Sino-American trade to the development of Sino-American relations, the transformation of the PRC from a self-isolated to an open country, and the unfolding of the Cold War. First, the resumption of Sino-American trade opened an opportunity for the two countries to move beyond the expedient cooperation against the