The following is a reconsideration of the advantages and disadvantages of the withdrawal of recognition from the Nationalist Government of China prepared after seeing the personal and confidential letter of May 30t which Mr. Wrong sent to you to record a conversation he had had with Messrs. Walter Lippmann and Herbert Elliston.

2. Continued recognition of the Chinese Nationalist Government by a majority of the Western powers undoubtedly serves as an irritant to the Central People's Gov­ernment and contributes to its suspicion that the long-run objective of those powers is to reinstate Chiang Kai-shek in China. This suspicion can only have been rein­forced by MacArthur's statements about transforming the Pacific into a peaceful (i.e., American) lake and the stepping-up of United States assistance to the Nation­alist Government.

3. The combination of continued recognition and the physical location of Nation­alist forces on Formosa is particularly explosive with its implication from the Chi­nese point of view of intervention in the Chinese civil war. Withdrawal of recognition from the Nationalist Government might serve to allay Peking's suspi-cions on this point to a certain degree, especially if it were accompanied by some expression of intention on the part of the United States not to maintain a hold on Formosa in perpetuity, an expression which could also carry the implication that the way was being cleared for recognition of the Central People's Government and for the representation of that government in the United Nations.

4. To have substantial practical effect, withdrawal of recognition by Canada from the Chinese Nationalist Government should be accompanied or followed by similar action on the part of other western governments. The maximum effect, of course, would only accrue if such action were also taken by the United States. In their discussion at dinner Messrs. Lippmann and Elliston appeared to think that with­drawal of recognition by Canada might serve a useful purpose by encouraging moderate opinion in the United States to support similar action by their govern­ment. It is to be noted, however, that this suggestion was qualified by the consider­ation that recognition should not be withdrawn immediately but only when there seemed to be a real prospect of a Korean settlement. It would also be advisable to take such a step only after consultation with the United States government. Mr. Wrong has not recently consulted that government but could easily do so informally.

5. The basis of Walter Lippmann's editorial which was enclosed with Mr. Wrong's letter was that peace in the Far East is indivisible, that it is not possible to seek peace with China in Korea while waging war against China elsewhere. The withdrawal of recognition from the Nationalist Government, if this thesis is accepted, therefore would have significance in Chinese eyes only if there was the implication that the United States would be willing to see Formosa reunited with the mainland of China in the near future. The Central People's Government would not be inclined to accept an arrangement in which the United States "neutralized" Formosa, even if that neutralization extended beyond the present military neutrali­zation (which is not in fact very effective as a restraint on the Nationalists) to include political neutralization by withdrawal of recognition from Chiang Kai-shek. Neutralization of Formosa, no matter how complete, implies aggression in Chinese eyes if it is done by the United States alone. While, therefore, withdrawal of recog­nition from the Nationalist Government by the United States is desirable, it is use­ful only if it indicates a willingness to treat with the Central People's Government on a basis of equality and not from a pedestal of moral superiority.

6. The same argument applies to the proposal to accompany withdrawal of recog­nition from the Nationalist Government by support for further sanctions against China. If it is accepted that peace in the Far East is indivisible and that it is impos­sible to wage war on China in one field while trying to make peace with it in another, then it would be unwise to make a bargain of this nature, especially as the end result might well be to leave us in the position of lending our support to United States suggestions for additional sanctions while failing to secure United States support for withdrawal of recognition from the Nationalist Government.

7. If recognition were withdrawn from the Nationalist Government of China, we should not have to alter our current policy in voting on the question of Chinese representation in the United Nations. Our current practice is as follows:

(a) In organizations which are competent to take decisions on the matter

(i) we support motions for postponement provided that no specific time limit is

fixed; or

(ii) if the substantive question is voted on, we abstain.

(b) In subsidiary bodies of United Nations organs and of the Specialized Agen­cies we support motions of non-competence or, if necessary, oppose motions designed to alter the present representation of China in such bodies.

8. The legal considerations in connection with the withdrawal of recognition from the Nationalist Government without simultaneous recognition of the Central Peo­ple's Government are attached as appendix "A".

A.D.P. H[EENEY]

[APPENDICE A/APPENDIX A]

SECRET

Legal Considerations

1. Having met the objective conditions prescribed by international law; effective control of the national territory, obedience of the bulk of the population and a rea­sonable prospect of permanency; the Chinese Communist Government has quali­fied for recognition as the de jure government of China. Conversely the Chinese Nationalist Government is not, according to international law, entitled to continued recognition as the Government of China.

2. Withdrawal of recognition of a government may be expressly communicated but it is usually implied in the recognition of a new authority. Instances are very rare where withdrawal of recognition from one authority has not been accompanied by the recognition of a new authority as the government of the state concerned. The only definite case on record appears to be the United States Government's with­drawal of recognition of the Government of Nicaragua in 1856, without recogniz­ing a new authority. The reason given was that it was not clear which authority was actually in control. In 1942 Canada (but not the United Kingdom or the United States) withdrew recognition of the Vichy Government without at the same time extending recognition to any other authority in France. This is not a useful prece­dent, however, since all of France was, to all intents and purposes under the de facto control of Germany.

3. It would be paradoxical not to recognize a government of China while continu­ing to recognize the existence of the Chinese state, since a condition of the recogni­tion of a state is that it possess an independent government. Furthermore, the withdrawal of recognition of the Nationalist Government combined with continued non-recognition of the Communist Government would have the effect of depriving the Chinese state to a substantial extent, vis-a-vis Canada, of its status under inter­national law. In view, however, of the very limited nature of relations between China and Canada this would have very little practical effect.

4. Withdrawal of de jure recognition of the Nationalist Government without rec­ognizing the Peking Government in substitution would create a situation wherein in fact the Peking Government would control the Chinese mainland and the Nation­alist Government, Formosa. The question of de facto recognition of these govern­ments as opposed to de jure recognition, need not, it is suggested, be the subject of any announcement or political decision at this time. It is unlikely, but nevertheless possible, that the situation could arise where Canadian courts would seek a state­ment from the Government as to which of the Chinese governments is the de facto government in a particular area. If such an event arose, it is submitted that the certificate should be given in accordance with the facts.

5. Withdrawal of recognition of the Nationalist Government gives rise to several other considerations:

(a) Chinese indebtedness to Canada amounts to approximately $50,000,000, $35,000,000 of which represents the value of military equipment supplied to the Nationalist Government. It is doubtful whether the Nationalist Government would liquidate this debt even if recognition were not withdrawn;

(b) A loan of $13,000,000 by Canadian banks to the Ming Sung Company of China is guaranteed jointly by the Canadian and Chinese Nationalist Governments. Withdrawal of recognition of the Nationalist Government would leave the Cana­dian Government the sole guarantor of this debt;

(c) The Canadian Government would have to assume responsibility for safe­guarding Chinese property in Canada which, according to information available, consists of real estate in Vancouver and Ottawa.

6. In view of the fact that recognition is popularly misconceived as connoting approval, it might be desirable to emphasize that the withdrawal of recognition of the Nationalist Government, if it should be decided upon, is not based upon disap­proval of that Government but upon the fact that it no longer governs China. With­drawal of recognition of the Nationalist Government will not, in the absence of an intention to do so, imply recognition of the Communist Government.⁷

⁷Note marginale :/Marginal note:
Mr. Heeney - Mr. Pearson wanted to thank you and the drafters for this memorandum. He does not think any action can be taken now; but this weighing of the pros & cons may be very useful in the future. D.V. LeP[an] 15 June 1951.