Bureau of Economic Affairs Files: Lot 54 D 361
Current Economic Developments
No. 178
Progress in East-West Trade Negotiations
Negotiations for the control for security reasons of exports from OEEC countries to the Soviet orbit, which have been initiated with a number of the ERP countries, have resulted in each instance in agreement in principle with US policies, and in some cases in substantial agreement on measures to be undertaken. Under the direction of Ambassador Harriman, acting for ECA and State, negotiations were begun with the UK early in September and have been followed by discussions with several of the ERP participating countries.
In these negotiations an effort is being made to obtain agreement to prohibit the export of all items on our 1–A list (munitions, including aircraft, plus equipment and material items designed primarily for or used primarily in production of munitions or contributing importantly to the war potential of the USSR and its satellites). With respect to 1–B items—those of great importance to the war potential of the Soviet orbit, but subject to export limitation to eastern Europe rather than complete embargo—an attempt is being made to obtain agreement of the participating countries to reduce continuing exports of these items to eastern Europe, to provide the US with periodic information on these exports to the Soviet orbit, and to prohibit the export of items that involve important western scientific and technological advances which could be used as prototypes by eastern Europe.
As was expected, developments which have arisen in discussions with the participating countries have led to slight modification of original US policy. For example, initially it was proposed that limited lists be presented each OEEC country, excluding such 1–A and 1–B items as would not be produced for export by the economy involved. The various countries to whom these lists have been turned over for consideration, however, began to consult among themselves, and the value of uniform treatment became evident. At present, the policy is to inform participating countries that full lists exist and to make them available after the adjournment of UN General Assembly’s Economic and Financial Committee, which has been considering the question of “discrimination in international trade”, raised by the Polish delegation.
The question of inviting Dominion participation is under discussion between State and ECA. During the Commonwealth Conference, recently [Page 586] held in London, the British brought up the question of possible advice to the Dominions concerning export control policies. The British have been informed that, although there is no objection to the UK government discussing the problem with the Dominions, it is our position that negotiations with the Dominions should be undertaken directly by the US. We have asked the British not to make the lists available to the Dominions, at least until they have been made available in full to the OEEC countries and have suggested that the British inform us of any action which they take vis-à-vis the Dominions in order that our approach to them may be appropriately modified. Canada is the only Dominion with which the US has undertaken any discussion. As a result of Canadian initiative in asking for the prohibited and restricted lists and in suggesting the possibility of cooperative action, informal conversations were held and the Department, feeling that Canada occupies a very special position with respect to US export controls in general, made the lists available. It has not yet been decided by the Department and ECA whether to attempt to negotiate a full agreement with the other Dominions. ECA recognizes that this is primarily a problem for the Department because the Dominions are not participating in OEEC and are not technically subject to provisions of Recovery Program legislation.
Following is the progress in negotiations with participating countries as reported to the Department to date:
United Kingdom. The UK government has assured us that it subscribes in principle to the program and has indicated its willingness to be of assistance in sponsoring the program with other participating countries. The British have given assurance that all shipments of articles on the 1–A list are being prevented by administrative action pending a final analysis of the lists. They have submitted specific suggestions concerning the 1–A list, involving some deletions and modifications and some expansion of categories. These specific suggestions are being studied at the present time. The British have also informed us that implementation of the program will require additions to their positive list, which will necessitate parliamentary action.
France. A limited list has been presented to the French government, which has indicated agreement in principle with the policy and has promised a detailed evaluation of the lists presented. A first perusal of the lists did not lead to any complaints on the part of the French. For several months the French government has sought the opinion of the ECA Mission in France and the Embassy concerning “questionable” transactions.
Italy. Embassy Rome reports that satisfactory commitments have been secured from the Italian government. The government has expressed its willingness to cooperate fully in the program, and has undertaken to revise its export controls so that 1–A shipments may be [Page 587] stopped and data furnished concerning 1–B shipments. The Italian government, which has been under considerable pressure from the USSR in the negotiation of a trade and reparations agreement, has been anxious to secure favorable consideration by the US of its special problems, including that of meeting Soviet requests for ships of Italian construction. ECA and State have undertaken to recognize as fully as possible the economic and political problems which Italy faces in making trade agreements with the USSR and the satellites. Conversations with the Italians have made it clear that 1–A restrictions should not be so great as to impede the possibility of a substantial trade agreement with the Soviet Union.
Scandinavian Countries. The Norwegian government has agreed to the objectives of US policy and has promised to exclude 1–A items in future transactions. It is, however, seeking special consideration for certain items in the 1–A category which Norway has in the past exported to eastern countries in relatively limited quantities. The Swedish government has apparently promised in principle to cooperate in the policy, on the condition that complete secrecy be maintained. Swedish officials are engaged in studying the lists of 1–A and 1–B commodities which appear to figure in potential Swedish exports to eastern Europe. The importance of eastern trade to Sweden, the limited ECA assistance to that country, and the traditional Swedish policy of neutrality make negotiations with Sweden difficult. Denmark has indicated full support for the program, but no concrete data concerning negotiations are as yet available.
Austria. The Austrian government has indicated that it is in complete agreement with US policies and that its controls over foreign trade are adequate to implement the policies adopted.
Benelux. The Netherlands government has indicated agreement in principle, and is engaged in studying the problems involved. No report on negotiations with Belgium-Luxembourg has been made available.
Switzerland. The problem has been explored with our representatives in Switzerland, but no negotiations with the Swiss have been undertaken to date. In view of Switzerland’s refusal to sign the ERP bilateral, and in the light of Swiss activity in re-export trade, negotiations are expected to be difficult, with little likelihood of success. There is some optimism, however, that agreement can be reached on a very limited number of items, probably including all munitions.
Western Germany. The position of the US as an occupying power in western Germany makes it possible to implement the policy without any major difficulties.
Greece, Turkey, Eire, Portugal, Iceland. No negotiations have been undertaken with these countries, primarily because of the nature of their export trade. No difficulty is anticipated in reaching agreement.
Related Problems. The Department of Commerce has undertaken [Page 588] to ask the cooperation of selected countries in the enforcement of US export controls, insofar as violated by US citizens. This problem, although related to the above policy, is being handled in an entirely separate manner. US policy towards aviation matters involving the USSR and its satellites is closely related to east-west trade negotiations. Aviation policy involves an attempt to get agreement from all western European countries that they will not sell equipment or furnish service to eastern airplanes. Inasmuch as all aviation equipment is on the 1–A list, the negotiations with western countries have been handled jointly with the ECA and as a part of the ECA program. Recently, however, it was agreed that discussions on aviation policy will proceed separately, with the Embassies conducting negotiations. The ECA Missions will take account of this in their negotiations.
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