Foreign Relations of the United States, 1949, Eastern Europe; The Soviet Union, Volume V

840.50 Recovery/1–1949: Telegram

The Minister in Switzerland (Vincent) to the Acting Secretary of State

secret

Bern, January 19, 1949—6 p. m.

96. Reference my 1693 December 17 last.¹ I called on Zehnder yesterday at his request to receive Swiss Government views re East-West trade. Substance Swiss position follows.

Lists 1A, 1B,² include practically all items featured Swiss exports Eastern Europe. Elimination these exports would destroy mutual basis this trade. US list arms, ammunitions, implements war basic to Switzerland’s arms export control program and Zehnder notes similarity to Swedish arms control list. Previous division in Swiss Government on arms export control policy (Legtel 1624 December 7 last³) has now been resolved in favor Federal Political Departments position that restrictive policy be continued.

In light above, Zehnder requested us drop lists 1A, 1B, as basis discussions in favor other methods permitting Switzerland achieve through autonomous policy substantial portion objectives outlined previous conversation. Zehnder sees such possibility in three-point program encompassing: (1) transit trade, (2) control arms exports, including prohibition exports to Eastern European countries items on US arms list and possibility extension list to include other items important development war potential and; (3) general reduction trade with Eastern Europe, with restriction in so far as practicable exports of items contributing war potential. Zehnder commented on three points as follows:

(1) Transit trade through Switzerland to Eastern Europe considerable worry to US as it is to Switzerland which has no desire harbor firms supported by funds obscure sources whose sole purpose purchase goods ostensibly for use Switzerland, but which never enter this country. Considering this trade inimical Switzerland’s best interests and good name, government prepared cooperate American Legation in any case with respect with [which?] US Government has suspicion or doubt. While Legation contact will probably be through Division Commerce, Government will make use of Comite de Surveillance which has competent staff experienced such problems during last war.

(2) Arms control: government considering two alternative methods implement decision restrict exports (a) flat prohibition with government authorized grant exceptions, (b) licensing control. Federal Political Department advocates “(a) above but Zehnder confident either method will enable government continue prevent exports, including items US arms list and will offer opportunity inclusion other items important to expansion war potential Eastern Europe.

(3) Trade with Eastern Europe has not developed satisfactorily and Swiss now insist on absolute reciprocity in value goods exchanged, surplus Swiss imports being permitted only in cases where and to extent that Eastern European countries need Swiss francs to discharge obligations due Swiss creditors. No credits will be extended in future, no free Swiss francs will accumulate to credit Eastern European countries through bilateral trading agreements, imports will be confined in essentials and exports of war potential goods will be restricted to degree import requirements permit. In this connection, Zehnder remarked Soviets, who pay and are paid in hard currency, insisting on microscopic balance.

I inquired whether distinction had been made between lists 1A and 1B in determining impact on Swiss exports and pointed out 1A of greater importance, and that being restricted to items for most part designed primarily for development war potential, particularly true of machinery list specifically cited by Zehnder, examination would probably reveal that relatively small percentage these items included Swiss exports Eastern Europe.

Zehnder then stressed viewpoint Switzerland could not adopt program which exposed government charge permitting US intervene Swiss trade policy, i.e., adopt program sponsored by US and that only possibilities Swiss cooperation lie within limits of an “autonomous” program, i.e., one developed by Swiss to achieve their objectives; that program it outlined December 16 is a US program was evident from discussions among OEEC representatives Paris and from fact that in Sweden and other OEEC countries discussions initiated by ECA mission chiefs; but that procedure involved three-point program referred to above would permit Swiss in practice to achieve objectives shared with US through method preserving “autonomy”.

In response these remarks I pointed out

(1) Action US Government vis-à-vis with Switzerland this matter could not be construed as intervention, but merely constituted exchange information which might prove useful Swiss in development autonomous program as:

(a) Upon instructions my government I had requested former meeting Zehnder to inform Swiss government action US taking towards objective Switzerland might share.

(b) Lists 1A and 1B left with Zehnder only after he expressed interest in having them and hence subsequent discussion based on this indication Swiss interest.

I stressed fact that in first conversation I had made clear fact I was presenting program for information his government.

(2) US Government attached great political importance East-West trade and carefully kept this subject out of OEEC. US cooperating all nations which share our objectives, including Canada and possibly other members British Commonwealth in addition OEEC countries. While ECA mission chiefs had definite responsibility this subject, chiefs diplomatic missions had no less responsibility and in some OEEC countries bore burden discussions, prominent role played ECA representatives other countries natural development from fact they frequently better informed technically.

Referring US negotiations other countries, Zehnder remarked that in every instance, latter were endeavoring alter lists meet their own requirements, and that in no case had any country accepted lists 1A and 1B. To contrary, he was surprised note that in recent agreements Italy and UK had undertaken export Soviet Union and Poland respectively commodities substantially increasing their military potential. While Switzerland did not wish always to be last, it would logically have same justification hold back as countries contemplating association with US in Atlantic Pact.

Was pointed out 1B items not embargoed to which Zehnder replied, Italy appeared to be exporting 1A items.

Zehnder raised question secrecy these discussions, specifically inquiring whether there would be congressional presentation of status discussions. After I assured him that there would be no public reference in US to these discussions, he remarked that public knowledge thereof would force Swiss government to deny flatly any intention cooperating. Before departing, I reiterated fact that although lists 1A and 1B were associated as part of one feature of US policy, in fact they were separate as 1A of much greater importance and expressed belief that Swiss, in practice might find 1A useful in application their autonomous program designed achieve objectives we share.

Sent Paris Torep 67, pouched Department as 96.

Vincent

1. Not printed. In it Minister John Carter Vincent reported that East-West trade discussions had been initiated on December 16, 1948 with Dr. Alfred Zehnder, Under Secretary (or Chief of Political Affairs) of the Swiss Federal Political Department. Zehnder indicated that Switzerland was following a general policy and procedure similar to that adopted by the United States. Zehnder stated that the Swiss Government appreciated and shared the United States objectives in the matter and approached the problem along similar lines, but he pointed out that Switzerland’s traditional policy of neutrality necessitated different methods of achieving those objectives (840.50 Recovery/12–1748).
2. Under the United States program adopted in 1948 for the control for security reasons of exports to the Soviet Union and Eastern Europe, commodities which, by their nature or because they could be readily converted, were of direct military significance or importance in the manufacture of munitions, and those commodities of the highest significance the denial of which would affect strategic sectors of the Soviet economy were designated Class 1. Commodities in Class 1 were enumerated on two lists. List 1–A consisted of equipment and material items designed primarily for or primarily used in the production of munitions or very importantly contributing to the war potential of the Soviet Union and its Eastern European satellites. These items were completely prohibited from export. List 1–A was revised periodically by the Advisory Committee on Requirements. As of February 1, 1949, List 1–A included 163 items: 42 types of metal-working machinery, 11 types of petroleum products, 4 types of petroleum industry equipment, 2 types of coal industry equipment, 4 types of transportation equipment, 6 types of steel mill products, 11 types of nonferroas metals, 18 chemicals and chemical products, 12 types of chemical industry equipment, 40 types of precision instruments, scientific apparatus, and electronic testing equipment, and 13 miscellaneous items. List 1–B comprised additional commodities of great importance to the Soviet war potential whose export was restricted but not completely embargoed.
3. Not printed; it reported that the Swiss Federal Council had decided to renew provisionally the existing Swiss arms export prohibitions (854.243/12–748).