Current Economic Developments, Lot 70 D 467
Current Economic Developments
No. 187
Modified Application of Export Controls to Finland and Yugoslavia Recommended
The Department [of State] recently suggested to the interdepartmental committee established to advise the Secretary of Commerce on export procedures that a somewhat more favorable treatment in the application of export controls to Finland is justified since Finland cannot be considered within the bloc of Soviet-dominated states in the same sense as the other countries of eastern Europe. Our proposals for preferential treatment of Finnish applications have been generally accepted by the R Procedure Subcommittee, which advises Commerce on export license cases. Further interdepartmental discussions will be held before a firm and final decision is reached. We have also suggested to the advisory committee the adoption of expeditious handling of Yugoslav applications and a milder administrative interpretation of export policy toward Yugoslavia, but not as lenient as now prevails in the case of Finland. Even prior to the submission of our recommendations, applications from both countries had been given somewhat more favorable treatment than those of other countries more firmly in the Soviet bloc. Another modification of the export procedures has been the establishment of a new system of handling Austrian applications, which we hope will have the effect of expediting the clearance of Austrian cases with the screening authorities in Vienna.
Export License Procedure Since March 1, when the export procedure requiring individual licenses for all shipments to Europe became effective, all exports to the USSR and its satellites have been screened by the special advisory committee, composed of representatives of the Atomic Energy Commission, National Security Resources Board, National Military Establishment, and the Departments of State, Interior, Commerce, and Agriculture. In accordance with a Cabinet decision of March 26, 1948, the procedure, which was ostensibly instituted in order effectively to program exports essential to European recovery and to prevent an undue strain on the American economy, has been used increasingly as a means of controlling the export of certain key commodities which might be used in the development of the war potential of the Soviet Union and its satellites.
[Page 76]Department’s Position and Recommendations on Finland In requesting more favorable treatment for Finland, we pointed out that while Finland might be considered as being geographically within the area of eastern Europe, it is clear from economic, cultural and political points of view that Finland is a predominantly northern European country. The Finnish economy has maintained its traditional Scandinavian character, that is, a mixture of socialism and capitalism, plus cooperatives, with a trade orientation predominantly toward the west. It is in the interest of the US to support Finland in maintaining a satisfactory level of economic activity and a reasonable standard of living, thereby enabling Finland to retain a stable government with an orientation toward the west.
In support of the position that Finland should not be placed in the same category as the countries whose economic and political structures are designed to contribute to the Soviet war potential, we pointed out that it is the considered opinion of our, mission at Helsinki that the Finns would resist strongly any attempt by the USSR to interfere in the internal economy of Finland and that any Soviet attempt to incorporate Finland in the eastern bloc, either economically or politically, would meet resistance. Before the Russians can acquire the benefits of Finland’s economy, other than through fulfillment of recognized reparations obligations, overt action would be required. This might be the case in any of the ERP countries.
Also having a bearing on our decision is the fact that Finland is one of the countries with which we will soon open negotiations leading to a new trade agreement within the framework of the General Agreement on Tariffs and Trade; Finland was also active in the work of the UN Conference on Trade and Employment at which the Charter for an ITO was drawn up.
For purposes of administering export controls, we therefore proposed that Finland be regarded as falling in a special category, neither among the countries of the Soviet bloc nor among the group of countries participating in ERP. The specific recommendations, which we feel afford sufficient flexibility to adjust action on Finland should the necessity arise, include: 1) Class 1–B (restricted) cases should be approved as a general rule; 2) Class 1–A (prohibited) cases should be referred to Legation Helsinki’s screening committee for views as to end use, importance to the Finnish economy, and quantity; and 3) class 2 cases—those of indirect military significance or of considerable importance to the industrial potential—should be approved without reference to the subcommittee.
[Here follows a summary exposition of the Department of State’s evaluation of the Yugoslav situation. For detailed documentation on [Page 77] United States economic relations with Yugoslavia, including the relaxation of export controls, see pages 854 ff.]
. . . . . . . . . . . . . .