Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

320. Memorandum From the Department of State Executive Secretary (Brubeck) to the President’s Special Assistant for National Security Affairs (Bundy)⁰

Washington, December 4, 1962.

SUBJECT

• Revision of U.S. Economic Defense Policy—NSC 5704/3

Under cover of a memorandum dated October 24 to Assistant Secretary Johnson,¹ Mr. Kaysen transmitted a copy of a memorandum directed to you from Under Secretary Fowler of the Treasury commenting on the proposed revision of Paragraph 11 of NSC 5704/3 recommended in my memorandum of September 17.² We still consider the proposed revision of Paragraph 11 to be in accordance with the National Security Council Record of Action 2455 of July 17, and urge it be promptly circulated as an amendment to NSC 5704/3.

Under Secretary Fowler’s memorandum suggests that the United States should make “a more vigorous approach to our Allies for a more effective [and he makes clear, a more comprehensive]³ multilateral economic defense program” and that the revision of NSC 5704/3 should reflect this objective. Under Secretary Fowler’s viewpoint is based in part on the amended Section 2 of the Export Control Act (the so-called Javits Amendment).

Secretary Rusk has dealt specifically with the issue of a new approach to our Allies for a broadened control program and with the interpretation of the amendment to Section 2 of the Export Control Act. I am enclosing for your information and for use at your discretion with Under Secretary Fowler copies of relevant letters from Secretary Rusk to Secretary Hodges and to Senator Keating concerning these points.⁴

In summary, these letters set forth a Department position along the following lines. The annual review of the international strategic lists in the Coordinating Committee (COCOM) is the principal means of carrying out the intent of Congress that the United States should “formulate, reformulate, and apply such [export]controls to the maximum extent possible in cooperation with all nations with which the United States has defense treaty commitments.” Any consideration of an expanded multilateral export control program of the comprehensive nature described by Mr. Fowler must take account of the basic non-negotiability of such proposals in the absence of a very much worsened international climate. The lines of development in East-West relations growing from the Cuban confrontation seem today even less likely to support a broad new economic warfare approach than was the case in early September when Secretary Rusk dealt with this question in his letter to Secretary Hodges. With respect to the more explicit requirement in the amendment to Section 2 of the Export Control Act that the United States should “formulate a unified commercial and trading policy to be observed by the non-Communist nations”, the Department has proposed and transmitted initially to Commerce for comment under cover of the Secretary’s letter to Secretary Hodges of September 5 a draft “Code of Fair Practices in International Trade”.

It should be recognized that progress has been made, to the extent warranted by the circumstances and practicable at the time, on all the four points enumerated by Mr. Fowler on pages four and five of his memorandum, even though they have not been presented in an over-all package program. We do have a coordinated program with our Allies for the utilization of economic sanctions in the event of blockage of access to Berlin and with respect to Cuba, even though these measures may not be as extensive as we would prefer. (Indeed, Mr. Fowler himself performed a valuable service in handling the four power negotiations in Paris and Washington last year on Berlin countermeasures.) We do have an agreement developed in NATO which lays the basis for the limitation of sales of large diameter pipe to the Soviet bloc. We have discussed in NATO the problem of Soviet oil sales and NATO countries have agreed to a policy of caution and restraint with respect to imports of Soviet oil. We also have in NATO a recognized opening to discuss other commodity problems that may involve questions of excessive dependence on bloc materials or supplies. We have over the years made a very great effort to obtain recognition of the United States position on the extension of credits to the Soviet bloc, and have an agreed system of reporting, periodic review and discussion in NATO. It is surely fair to say that the entire array of our efforts to enlist cooperation from our Allies in aid programs for less developed countries represents the kind of effort at “preventing, countering, checking or minimizing Sino-Soviet bloc economic penetration and subversion of uncommitted or less developed countries” which Mr. Fowler mentions in his third point. There is also an established program in NATO for periodic review and discussion of the Soviet economic offensive, an arrangement which makes possible the discussion of potential danger spots. Finally, there is agreement to discuss in ECONAD the kind of program concerning trade with the Soviet bloc visualized in Mr. Fowler’s fourth point, and this Department’s draft trade code looks in the direction of developing a United States position for such a discussion.

The achievement of the kind of comprehensive program outlined by Mr. Fowler would depend upon gaining the full support of our Allies. Since there are very real differences on their part with both the underlying policy justification and details of such a program, we believe our best course is to continue to pursue more limited objectives. We would conclude, therefore, that the NSC policy, amended as we have suggested, will for the present continue to provide an adequate basis for our efforts in the economic defense area.

William H. Brubeck⁵

0. Source: Kennedy Library, National Security Files, Kaysen Series, Trade Policy, East-West Trade Policy Subjects, East-West 4/63-7/63. Secret.
1. Not printed. (Ibid.)
2. Reference is to a memorandum from Fowler to Bundy, October 23. (Ibid.) The September 17 memorandum from Brubeck to Bundy proposed revision of NSC 5704/3 identical to the text in enclosure 1 to Rusk’s July 16 memorandum to the NSC, Document 311. (Kennedy Library, National Security Files, Departments and Agencies, Department of State, 9/17/62-9/30/62)
3. All brackets are in the source text.
4. Reference is to two letters from Rusk to Hodges, September 5; see Document 317 and footnote 3 thereto; and to a letter from Rusk to Keating, August 28, not printed.
5. Printed from a copy that bears this typed signature above which are unidentified handwritten initials.