Memorandum by Mr. R. Gordon Arneson 1 to the Under Secretary of State (Webb)

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Subject: East-West Trade.

I understand that the Secretary has requested that S/S supply through you appropriate documentation in order that he may study all aspects of the problem of East-West trade.2

This office and the staff of the Atomic Energy Commission have been seriously disturbed to note increasing evidence that Western European countries are not cooperating wholeheartedly to set up controls banning strategic exports to the Soviet bloc. The lack of progress made in selling a portion of the U.S. embargo list and the bulk of the U.S. restricted list presents an anomaly to MAP since Western Europe continues to supply large quantities of important industrial materials for development of Soviet military potential. Moreover, and of direct concern to this office, it is not unlikely that ability to secure these materials from the West enables the Soviets to proceed more rapidly with their atomic weapons program.

For the past two years we have carried on, in collaboration with the Atomic Energy Commission, a program to secure control of atomic energy items by other governments under policies and procedures: similar to those in effect in the United States. This program, by [Page 563] mutual agreement between the Department the ECA, was carried forth separate from the negotiations of ECA and the Department regarding military and strategic industrial items. The balance sheet after two years is:

Regarding atomic energy items, complete agreement in principle and establishment of controls of varying natures have been obtained from the Governments of Sweden, Norway, United Kingdom, Canada, France, Belgium, the Netherlands and Italy. The Allied High Commission for Germany has issued a law controlling atomic energy items and steps are now being taken to work out the necessary implementing regulations. Swiss officials have expressed informal concurrence with our objectives, but indicate it will take some time to develop official restrictive controls in view of neutrality concepts prevailing in Switzerland.
Regarding military and strategic industrial items, the major ECA countries have agreed to the major portion of the 1A embargo list, but there is great resistance to accepting a score or so of residual 1A items or to adopting quantitative controls over the several hundred items on the 1B strategic list.3 In addition, the export control mechanisms of these countries, with the possible exception of the U.K., are notoriously loose and ineffective. Germany presents a particularly difficult problem in this respect, with direct controls administered by local governmental officials and Allied supervision very inadequate.
The absence of effective administrative controls over all important industrial items impairs the effectiveness of the control mechanism over atomic energy items inasmuch as such operations as application procedures, license screening and customs surveillance are, to a great extent, common problems. Moreover, many items of importance in atomic energy development have general industrial application, thus requiring close scrutiny of the industrial lists to prevent shipments to undesirable destinations.
It is disturbing to note that the Department continues officially to adhere to the basic principles of export control policy established in December 1947, even though the entire political-military balance and timing vis-à-vis the USSR have been radically changed by atomic energy and other developments occurring since the Soviet atomic explosion of September 1949. One main principle stated as “security is best served by maintaining and increasing strength of the West relative to that of the East” is particularly vulnerable in view of the short time which may remain to improve the situation before the Russians are in a position to call the tune themselves.
I attach for your attention a memorandum by Mr. Frederick H. Warren, Chief of the Export Control Branch of the Atomic Energy Commission, on the strategic aspects of East-West trade (See Tab A).4 Mr. Warren, through participation in inter-agency export control committees, is conversant with policies and procedures in this field. I find quite persuasive his conclusion that the selective approach to the trade problem has been ineffective. However, I feel more direct action than a rehash of the scanty factual data available is called for in the present circumstances.
I am aware of the reasoning that to invoke an embargo on trade to the East would cause the Soviets to develop their own industrial plant to the point of complete self-sufficiency and that this would be undesirable. I think this is open to argument that: (a) the Soviets can in any event be expected to be working in the direction of self-sufficiency to the maximum extent of their present capabilities; and (b) instead of furthering self-sufficiency, we might cause them to be less self-sufficient for an important period of time by forcing them to divert important resources and manpower to construct new plant facilities to produce the items formerly acquired from the West.

R. Gordon Arneson
  1. Special Assistant to the Under Secretary of State for atomic energy policy.
  2. Documentation on United States policy regarding trade with the Soviet Union and Eastern Europe is scheduled for publication in volume iv.
  3. Lists “1A” and “1B” provided the basis for the atomic energy export control program. List “1A” consisted principally of items controlled under formal regulations issued publicly by the United States Atomic Energy Commission, while List “1B” contained items which had general industrial application but which also had applications in the atomic energy field. For text of the circular airgram of August 16, 1948, transmitting Lists “1A” and “1B” as they existed at that time to posts abroad, see Foreign Relations, 1948, vol. i, Part 2, p. 739. A circular airgram of March 10, 1950, transmitting updated versions of the lists is not printed.
  4. Not printed.