Memorandum of Conversation, by the Acting Adviser to the Division of Occupied Areas Economic Affairs (Koch)1

Participants: Willard L. Thorp, State (part of meeting)
C. Tyler Wood, State2
David K. Bruce, Ass’t Secretary of Commerce
Thomas C. Blaisdell, Jr., Director of OIT, Commerce (part of meeting)
George L. Bell, Ass’t Director of OIT, Commerce
J. M. George, Commerce
Jacques Reinstein, State3
Karl Anderson, State4
Willis C. Armstrong, State5
Henry Koch, State
[Page 525]


The meeting was called by Mr. Wood in order to obtain, if possible, a clearer understanding of the objectives of the various government agencies concerning possible economic warfare against the USSR and its satellites. The Ad Hoc Subcommittee of the Advisory Committee6 had been informed in a memorandum from Mr. Bruce, dated March 10, 1948,7 that the Committee was requested to study and make recommendations which could be submitted to the Cabinet by the Advisory Committee regarding procedures under which a peacetime economic warfare organization might function. These instructions resulted from a meeting between Secretaries Marshall, Harriman and Forrestal at which Mr. Forrestal requested that this matter be given immediate attention. Secretary Marshall in a separate memorandum8 to the Department had pointed out the importance of this problem and had stressed the same general lines as had Mr. Harriman.

statement of the problem

Mr. Bruce, in stating the position of the Department of Commerce, emphasized the necessity for studying and formulating a statement on the means available for economic warfare, including the proper organization setup. Mr. Wood stressed that, in his opinion, it was first necessary to determine what policy the government should follow regarding possible economic warfare and that a study should be made by an appropriate inter-governmental group concerning the value of peacetime economic warfare to the national security of the U.S.

After some discussion it was decided that Mr. Wood’s proposal was acceptable. There followed a consideration of the proper intergovernmental body to be used for this study and it was finally decided that it would be most expedient to use the machinery of the Ad Hoc Subcommittee of the Advisory Committee as this Committee had broad representation of the government agencies that would be concerned with this problem and that other agencies, such as Treasury Department and the Department of Justice, could be invited to send representatives.

discussion of objectives

During the course of the discussions it was brought out that the objective of the U.S. was to inflict the greatest economic injury to the USSR and its satellites and, at the same time, to minimize the damage to the U.S. and the Western Powers resulting from (a) probable Soviet retaliation, and (b) inability of the East to continue exports of certain supplies to the West. It was pointed out that there were [Page 526] many courses of action available short of complete embargo and sanctions and that the effect desired might well be better obtained by permitting selective trade to continue in order that the West, particularly the ERP nations, continue to obtain supplies, such as timber, coal and grains, from the East, especially during the current year. Mr. Blaisdell mentioned that it might be well to consider export commodities as a spectrum, the upper part of which would include atomic energy materials, implements of war, etc., which would be embargoed to the Soviet sphere and the lower half would include commodities which would be made freely available within normal volume limitation. Commodities in the middle of the spectrum could be used in various manners and might be employed as a weapon to obtain vital supplies from the East. The general feeling of the group was that prior to the time when the use of economic warfare might be advantageous to the security of the U.S., an interim period would exist during which bilateral agreements between the U.S. and the various Eastern countries might be negotiated under which considerable exchange of goods would be permitted.

Mr. Blaisdell expressed the thought that consideration should be given to positive political and scientific measures that should be instituted, not only to weaken our potential economies [enemies?] but also to encourage and strengthen our friendly nations and potential allies. The group believed that the ideas expressed in Mr. Blaisdell’s statement were sound but that the group was not concerned with those topics and should limit discussion to the subject at hand.

conclusion and recommendations

In order to forestall possible hasty action based upon an emotional approach by Congress or the Military Establishment fanned by certain articles appearing in the press, it was decided that a survey with recommendations should be immediately undertaken covering (A) The probable results of a complete cutoff in trade between the USSR and its satellites, and (1) the U.S.A., and (2) the U.S.A. and the Western World, and (B) selected trade which would be permitted between the U.S. and Eastern Europe. It was decided that the Ad Hoc Subcommittee should set up appropriate sub-working committees in order to complete a preliminary study by March 29. It was further decided that the Ad Hoc Subcommittee should consider the problem of obtaining the cooperation of other countries, particularly those countries participating in the ERP, in order to contribute to the security of the U.S. and the Western nations. Finally it was agreed that the Ad Hoc Subcommittee would study and make recommendations concerning the type of organization necessary to be established in the event of war.

Henry Koch
  1. This conversation was held in the office of Assistant Secretary of State Willard Thorp on March 16, 1948, from 10 a. m. to 12:30 p. m.
  2. Deputy to Assistant Secretary Thorp.
  3. Special Assistant to Assistant Secretary Thorp.
  4. Assistant Chief of the International Resources Division.
  5. Adviser on State Trading, Division of Commercial Policy.
  6. Regarding the Ad Hoc Subcommittee, see footnote 3 to the memorandum of March 9 by the Department of Commerce, supra.
  7. Not printed.
  8. Secretary Marshall’s memorandum has not been found.