In accordance with the President’s directive on the assignment of
responsibilities for economic defense under NSC 104/2 and the memorandum of agreement between the
Secretary of State and the Administrator of the Mutual Defense
Assistance Control Act, there is submitted herewith the sixth progress
report on NSC 104/2.5 It is requested that this be circulated to the
members of the Council for their information.
Appendix II7
RESEARCH AND INTELLIGENCE FOR ECONOMIC DEFENSE
There are two principal tasks of the intelligence and research
underlying the operations and policy formulation of economic
defense. [Page 397] One is the task
of appraising the overall relative economic capabilities and
vulnerabilities of the Soviet bloc and the West in terms of economic
defense measures and programs; this is a long range problem of large
dimensions. The other task is that of keeping close and continuous
touch with current East-West trade patterns and practices and
economic developments within the Soviet bloc and the West; this is
essential to provide the basic facts on specific relative
vulnerabilities for purposes of current economic defense operations
and negotiations.
The drafts prepared in connection with the proposed National
Intelligence Estimate (NIE) 59
represent a systematic attempt to appraise the relative overall
vulnerabilities of the Free World and the Soviet bloc. It is clear,
however, that the materials available for any accurate appraisal of
specific Soviet bloc vulnerabilities are still meager. Furthermore,
the analysis of such materials is still in a very early stage of
development, and much more work is needed in this important area.
Meanwhile, the demands for basic trade analysis and other data
needed for day-to-day operations continue to be insistent and
continue on the increase. The problem is to plan the work for both
the short-run or current operating and policy needs and the broader,
longer run needs so as to achieve the maximum benefit for the
East-West trade program.
The progress made in recent months in the fields of shipping and
foreign trade intelligence for economic defense backstopping is
summarized below.
There has been a notable increase in attention given to shipping
intelligence, and a number of papers on this subject have been
prepared; considerable work remains to be done, however. Included in
this effort has been the joint development with the British of an
agreed intelligence estimate of the facts concerning trade with
Communist China, including the volume of trade and the number and
capacity of vessels engaged in the trade.
A second area in which progress has been made in the past several
months is the preparation of commodity studies of strategic items
entering into East-West trade. In connection with the work of the
OIT technical task groups, (see Title II
Activities in body of report) CIA and the Department of State prepared, and
Intelligence Advisory Committee (IAC) agencies have to some extent reviewed, commodity
analyses of a number of International List II and III items. A few
of these studies, on lead, pyrites, electrical machinery, marine
boilers and tires and tubes, represented comprehensive analyses. An
intensive study of rubber has also been in progress. A great many
others, although not comprehensive, represented very considerable
efforts in the utilization of available data. The work was extensive
and, though not exhaustive because of the time element and competing
priorities, represents an important step forward. It is hoped that
by the end of 1953 comprehensive analyses will be available on the
requirements, production, and [Page 398] trade of the Soviet bloc in each of the major
items considered to be of important strategic value to the bloc,
particularly those items subject to less-than-embargo control.
The companion project to the commodity studies was initiated early in
1952, and is a series of country-by-country studies analyzing the
trade relations between the principal Western European countries and
the important Soviet bloc countries with which they trade. Work on
these analyses has only begun. The analyses are needed in policy
planning on “decreasing reliance” and in implementing the Battle
Act, and are aimed at affording policy officers a better factual
background in gauging the bargaining positions of the individual
countries trading with the Soviet bloc. The analyses would also
serve to uncover prospective difficulties before they have come to a
head. Given more time, it is sometimes possible to avoid the
shipment of strategic goods by a Western country without prejudicing
its economic and political position. This intelligence need in the
trade field was stressed in the fourth progress report on NSC 104/2.8
To date, two comprehensive bilateral trade studies have been
prepared, and three others are in process. These studies involve
considerable expenditure of man-hours, but the results justify more
work in this field.
In addition to the above analyses, The Department of Commerce has
been pursuing two projects in the compilation of trade statistics,
in accordance with interdepartmental arrangements made early in
1952. One is the compilation, from published and supplementary trade
material, of the trade of each of the significant Free World
countries with the Soviet bloc, by country and commodity. Useful
reference tables have been issued quarterly on many of these
countries and, on others, less frequently. The second part of the
project is the collation of classified data which the individual
COCOM countries submit monthly on their exports (or licenses granted
for export) to the Soviet bloc of items included in the
International Lists. The Department of Commerce summaries provide
data from which the trends and pattern of this trade can be more
readily discerned in certain cases and from which answers to
specific commodity or country problems can be developed with much
less effort than was formerly required in dealing with the
individual monthly reports. This work, which marks an important
initial step in the development of the needed statistical base, is
being reviewed in an interagency committee.
The Intelligence Working Group (IWG) established under EDAC–IAC sponsorship was quite active in the
second half of 1952. [Page 399] The
IWG has provided closer working relationships between the
intelligence agencies, on one hand, and the policy and operating
sections, on the other, with the latter able to indicate directly
their needs and to assist in providing necessary background for the
work they initiate. Although there is inevitably room for
considerable improvement in the treatment of specific problems, the
IWG is improving intelligence support of economic defense policy and
operations. One of its most significant current projects is the
establishment of a unit which will collate the extensive data now
being received on Soviet bloc procurement efforts, particularly
those efforts which involve evasions of Western economic security
controls. The details of the project are not yet fully worked out,
but it has been approved in principle.
In conclusion, there should be mentioned the general problem of
disseminating National Intelligence to foreign Governments and
international bodies. One difficulty which has impeded United States
negotiations on economic defense matters could be eliminated by
establishing a better procedure so that our negotiators might use
the material contained in intelligence documents to maximum
advantage. Such use of intelligence is inhibited by the pervasive
difficulty of ensuring that security is maintained in the course of
using such material. This problem should be explored to determine
whether amendments to pertinent NSC
directives and other regulations would be desirable.
