Foreign Relations of the United States, 1950, Central and Eastern Europe; The Soviet Union, Volume IV

450.6031/4–2650

The Secretary of State to Certain Diplomatic Offices ¹

secret

Washington, April 26, 1950.

Sirs: There are transmitted herewith a summary account of recent meetings held in Paris by the countries cooperating with the United States in the application of security controls over exports to Eastern Europe, as well as certain documents relating to the meetings.² This report may be of assistance to the mission in understanding the nature of the security trade controls now in effect in the United States and Western Europe. Examination of this report will illustrate also some of the practical difficulties encountered by this Government in developing, by its own action and the parallel actions of other like-minded governments, an effective program for the control of strategic commodity exports to the Soviet sphere.

The present system of controls over exports to Eastern Europe is considerably more advanced in the United States than in countries of Western Europe. As indicated by the results of the Paris meetings, there has been slow but steady progress toward a full western embargo of the most strategic exports to Eastern Europe. Now, or in the immediate future, these controls will approximate in scope our own 1–A list. The question of limitative controls over 1–B goods has been introduced, but has not been discussed in more than rudimentary fashion by the cooperating group. It is clear that a more extensive system of controls, namely, those designed to affect not merely the development but the present operation of eastern economics, is not a practical possibility until at least the cooperating countries agree upon an effective program for limitative control of exports in categories of general industrial goods that would be roughly comparable to our own restrictions over commodities on the 1B list. Experience to date would seem to indicate that the developmnt of such a joint program in the near future is likely to depend, not only upon United States policy decisions, but also upon the response of Western European countries to the economic dilemma of East-West trade. On the other hand, experience to date has also shown that Western European countries have made and are making considerable progress in formulating a joint program of control over exports to Eastern Europe of goods that have a clear-cut strategic and military significance, even when the imposition of such controls involves to some extent the sacrifice of national trade interests.

As the mission is aware, the economic security program of the United States since March 1948 has involved both (1) our own system of export licensing controls and (2) our negotiations with Western European countries for parallel controls over their own exports, in so far as these countries have been prepared to put such controls in effect.

Prior to March 1948, individual validated licenses were required in the United States for the export of short supply commodities to all destinations. Beginning March 1, 1948, individual licenses were required for the export of all commodities to European destinations. The intention of this arrangement, the so-called “R Procedure”, was to permit the screening of strategic exports to Eastern Europe. To assist in the fulfillment of this objective, a 1–A list of items to be embargoed and a 1–B list of items whose export should be severely restricted were developed. A “GRO” list of items which would be exported on general license without requiring an individual validated license was also gradually enlarged.

In August 1949, the system was revised to require individual export licenses only for a specific list of items published in the Positive List, all other commodities being freely exportable under general license. The Positive List includes, without of course specifically identifying them, the items on the 1–A and 1–B lists, as well as a few remaining short supply items and some items formerly classified strategically as Class 2. The latter are being reviewed with the intention that they shall either be eliminated from the Positive List or retained on the list with a higher strategic classification of 1–B. All 1–A items and short supply items require licenses for shipment to all destinations. Categories containing 1–B items generally require licenses for shipment to the “R” area only, which has now been extended to include all destinations outside the Western Hemisphere.

The United States 1–A list (see enclosure³) as presently defined includes some 167 items which fall into one of the following categories:

(a) Materials or equipment which are designed or used principally for the production and/or development of arms, ammunition and implements of war.

(b) Materials or equipment which would contribute significantly to the war potential of the Soviet bloc where the items incorporate advanced technology or unique technological know-how. It applies only to goods sufficiently important to the war potential of the Soviet bloc that the absence of an embargo would permit a significant advance in Soviet bloc technology over its present level of development.

(c) Materials or equipment which would contribute significantly to the war potential of the Soviet bloc in that the items, if embargoed, would maintain or create a critical deficiency in the war potential of the Soviet bloc.

Goods on the Munitions List (Presidential Proclamation 2776⁴) are also considered 1–A for control purposes. The United States 1–B list (see enclosure 2⁵) consists of some 300 items and includes materials and equipment which, if shipped in substantial quantities, may contribute to the war potential of the Soviet bloc to so great an extent that only reasonably small quantities of such material or equipment should be permitted to move to the Soviet bloc.

As the Mission is also aware, United States efforts to reach agreement on parallel export control policies, with the countries of Western Europe, were initiated in implementation of section 117 (d) of the Economic Recovery Act. The establishment of parallel controls was believed to be a more practicable method of carrying out the intent of this section than complete reliance on end-use check of Economic Cooperation Administration financed materials. During 1948 and much of 1949, this program was carried forward by means of bilateral negotiations between the United States and OEEC countries, and within a relatively short period agreement was reached in principle with all OEEC producers of strategic commodities except Sweden and Switzerland. These latter countries apply certain restrictions over exports to Eastern Europe, but have preferred to maintain their own system of security controls.

In the latter part of 1949, these bilateral negotiations between the United States and the various OEEC countries were supplanted by multilateral negotiations among all western countries cooperating on security controls. Joint economic discussions of this type have been logically, although not in any way formally, related to intergovernmental discussions on western security and defense problems during this same year. It had become apparent, also, that individual countries were reluctant to embargo the export of specific items to Eastern Europe unless they received adequate assurance that other OEEC countries were enforcing a similar export embargo. For this purpose, it was necessary to have consultation among all countries concerned and multilateral agreement on the exact details of the whole security control program. Consultation, as in the October 1949 meeting in Paris,⁶ was at first on an informal basis and without the participation of the United States. At this time, the consultation among European countries had focused on a specific “Anglo-French” list,⁷ proposed for joint embargo, and the United States was invited to participate in further discussion of the list during November.⁸ At the November 1949 and again at the January 1950 meetings, cooperating countries have continued to formulate the specific content and the specific methods of implementing our joint security program, as indicated below:

Organization of the group—The November meeting was attended by representatives of Belgium, France, Italy, The Netherlands, the United Kingdom, and the United States, with Danish and Norwegian observers in attendance. The January meeting was attended by representatives from these countries and also by Danish, Norwegian and Canadian representatives. An observer from the United States High Commissioner’s Office in Western Germany was also in the United States delegation. At the end of the November meeting, the recommendation went forward to the Governments concerned that their representatives should continue to meet, as an advisory group, to consider matters arising from an agreed policy of security trade controls and to provide for the exchange of whatever information would be necessary to this end. The January meeting recommended that expert representatives of the group should remain continuously in Paris for implementation of security controls, and that the heads of delegations should meet quarterly to consider matters of policy.

Implementation of Controls—After the November meeting, the heads of delegations recommended to their Governments that an embargo be placed on exports to Eastern Europe of items included in the specific list under discussion. At the January meeting, the delegates of Belgium, Canada, France, Italy, The Netherlands, Norway and the United States reported that their Governments were prepared to put into immediate application the recommended embargo list, in so far as this was not already being done. A similar assurance was given by the United Kingdom on the understanding that the restrictions would be applied equally by all Participating Countries.

The Embargo List—Preparation of the embargo list has involved numerous technical discussions, relating the commodity definitions of the United States 1–A list to the European trade classifications of the Anglo-French list. The United States has also requested the addition of many 1–A items to the A–F list. On the other hand, some categories of the A–F list are more inclusive than the U.S. 1–A list, or represent U.S. 1–B items. Depending upon the outcome of further negotiations, adoption of the A–F list as it now stands may require additions to the U.S. 1–A list.

Negotiation of the agreed embargo list in both the November and January meetings has proceeded by stages:

1. When agreement was reached that an item should be placed under export embargo by all cooperating countries, the item was included in List I.

2. When it was agreed that the item has significant strategic importance, but not all countries were prepared to place it under export embargo, the item was placed in List II (for quantitative control). The countries then agreed to restrict their exports to Eastern Europe to quantities considered reasonable and to pool information on their exports of these items, as a safeguard against excessive exports in the aggregate of items appearing on List II.

3. When negotiations did not result in complete agreement among cooperating countries on the treatment of a specific item, it was placed in List III, for further consideration by the group. After additional study, it was to be incorporated in List I or List II, or to be redefined.

The United States 1–A list now contains 167 items.^* The A–F list, as revised, is not directly comparable to the U.S. 1–A list in numbers of items, without considerable analysis. At the present time, the coverage of the A–F list, including Lists I, II, and III and the items still under discussion, approximates the coverage of the U.S. 1–A list. However, until all items under discussion (List III and others) or subject to quantitative controls (List II) are placed in List I, it cannot be said that the trade controls to which cooperating countries are now committed are as broad or as severe as the U.S. controls over all 1–A items. Progress in the development of identical controls is, however, very substantial.

At the November meeting, cooperating countries discussed 143 items, recommended 128 items for List I,^† one item for List II, and reserved for further discussion the remaining 14 items. At that time, the United States proposed that 35 additional items be included in List I. At the January meeting cooperating countries discussed a total of 177 items, plus the general categories of electronics and chemicals equipment. At the conclusion of this meeting, List I had been increased to 144 items (by the addition of 12 items from the U.S. proposal, and 6 items from List III, while 2 items were down-graded from List I to List II); List II was expanded to 6 items (by transfers from List III of the November meeting); and List III now totalled 27 items (4 carried over from the November meeting and 23 of the U.S. proposed additions). Further technical discussion of electronics and chemical equipment items was scheduled for a special intergovernmental meeting, originally set for February, and now to be in March and April.

Transit Trade—At the November meeting, delegates agreed to recommend to their Governments the formulation of a system of security controls over goods in transit. Suggested were (1) investigation of the final destination of strategic goods by the exporting country prior to issuance of an export license, and (2) exchange of information within the group on the movement of security items in transit through each of the countries concerned. It was recognized that supervision of security goods in transit would need to apply not only to commodity movements through member countries, and through free zones and free ports, but also, by some informal arrangement, to movements through Sweden, Switzerland, and any other countries that might be concerned.

Prior to the January meeting, these recommendations generally were accepted by member governments as the basis for further study of the transit problem. At the January meeting, Belgian and United States representatives presented their own proposals on supervision of transit trade, but delegates from other countries indicated their need for further time to study these proposals.

Special Problem Areas—Discussion at these meetings gave recognition to the fact that certain countries represented special problems in the formulation and implementation of a security control program. As noted above, mention of Sweden and Switzerland entered into discussion of transit trade. However, the delegates at the January meeting also stressed the importance of obtaining assurance that Sweden and Switzerland would themselves take parallel action on any embargo list, in as much as these countries are important suppliers of many items figuring on the list.

A representative of the United States High Commissioner circulated among the delegates a statement on the current status of export controls in Western Germany. The delegates to the January meeting emphasized that these controls should be fully coordinated with those applied by other Western European countries, not only because Germany is a large producer of security items but because of the special difficulties introduced by the existence of an inter-zonal trade.

With reference to Finland and Yugoslavia, the United States delegates indicated the nature of our own export policies which permit exports of 1–A items to these countries under certain conditions. At the January meeting, the United States delegates recommended that cooperating countries coordinate their policies on permitted exceptions for Finland and Yugoslavia. The United States suggested that the proposed Consultative Group be used as a means of developing parallel policies and exchanging information on trade with Yugoslavia and Finland. The Group might also be used for the purpose of group consultation before final approval is given by any one country for exports in some important categories of goods.⁹

Topics for Further Discussion—The coordinating committee commenced meeting in Paris in February. It will continue to discuss the matters raised in the January meeting of the Consultative Group, and will work toward a further meeting of that Group perhaps in April. It will, of course, be necessary to continue discussion of details heretofore unresolved including, as indicated above, (1) the organization of the Group, (2) the specific items on the embargo list, (3) methods of controlling transit trade and (4) coordination of treatment accorded Yugoslavia and Finland. In addition, the United States representative proposed that the U.S. 1–B list be used as a basis for further study and discussion by the Group, looking toward the establishment of limitative controls over additional items. The United States representative also circulated a statement concerning the procedure now in force in the U.S. for controlling the export of technological know-how and information. The January meeting did not discuss security controls over exports to China.

The foregoing has indicated that many problems remain unresolved in the formulation of a joint security program. In the Department’s view, however, these multilateral discussions have made real progress to date and it can now be stated that Western European trade security programs in general form an important adjunct to our own program.

Very truly yours,

For the Secretary of State:

Winthrop G. Brown

Director, Office of International Trade Policy

1. This circular instruction was sent to the Embassies in Belgrade, Helsinki, Moscow, Praha, and Warsaw and to the Legations in Bucharest and Budapest.
2. None of the documents under reference here are printed. Regarding the meetings of the Consultative Group in Paris in January 1950, see telegrams Repto 212, January 13, and Repto 325, January 18, both from Paris, pp. 67 and 69.
3. Not printed. List 1–A of January 1950 included 40 items of metalworking machinery; 15 petroleum and petroleum equipment items; 1 coal equipment item; 4 items of transportation equipment; 6 steel mill products; 12 nonferrous metals; 31 chemicals and chemical equipment items; 42 precision, scientific, and electronic equipment items; and 16 miscellaneous items.
4. On March 26, 1948, President Truman issued Proclamation No. 2776 redefining and expanding export controls over arms, ammunition, and implements of war. For the text, see 13 Federal Register 1623.
5. Not printed; it indicated the items on List 1–B as of February 1, 1950.
6. Representatives from Belgium, France, Italy, the Netherlands, the United Kingdom, and the United States met in Paris from October 12 to 14 to review in detail those export commodities currently controlled by the countries represented and to seek agreement on a common security export control policy. The meetings of these representatives, later known as the Consultative Group, was reported upon in telegram Repto 6884, October 15, 1949, from Paris; for text, see Foreign Relations, 1949, vol. v, p. 150.
7. During the meetings referred to in footnote 6, above, British and French Representatives introduced an “Anglo-French list” of exports subject to security control.
8. Regarding the meetings under reference here, see footnotes 2 and 3, p. 67.
9. The original A–F list did not include many 1–A items in the categories of electronics and chemical equipment, as well as about 40 other commodities on the U.S. 1–A list. The A–F list, even at the present time, includes items that are on the U.S. Munitions List and on the 1–B list; has counted one category of the U.S. 1–A list as 10 individual items; and has counted as one item 11 categories of the U.S. 1–A list. [Footnote in the source text.]
10. Counting armaments machinery as 10 separate items, according to U.S. 1–A definition. [Footnote in the source text.]
9. Regarding Coordinating Committee decisions with respect to Yugoslavia and Finland, see footnotes 6 and 7, pp. 70 and 71.