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

450.6031/5–1150

Memorandum by the Associate Chief of the Economic Resources and Security Staff (Armstrong)¹

secret

[ Paris ?, undated.]

Report on Tripartite Discussion on 1B Proposals May 8–9, 1950, Paris

In accordance with instructions contained in the Department’s telegram No. 1861, April 27, 1950, to Paris, repeated to London as No. 1936, United States representatives met with the British and French delegations on May 8² at the French Foreign Office and on May 9 at the Office of the British Delegation to the OEEC. The French Delegation included Mr. de Rose³ and Mr. Fouchet⁴ of the Foreign Office, and Major Massignac from the military staff of the French Council of Ministers. The British group included Mr. Coulson⁵ and Mr. Turpin⁶ of the British Delegation to the OEEC, Mr. Elkington⁷ and Mr. Brown⁸ of the Board of Trade, and Mr. Gresswell⁹ of the Ministry of Defense. The United States group was headed by Mr. E. M. Martin,¹⁰ Director of the Office of European Regional Affairs, Department of State, and included Willis C. Armstrong,¹¹ Associate Chief of Economic Resources and Security Staff, Department of State, Mr. Nat B. King, First Secretary of the American Embassy, Paris, Mr. J. M. George, Assistant to the Director of the Office of International Trade, Department of Commerce, Mr. Joseph Todd, Second Secretary, American Embassy, London, and Admiral Marcy M. Dupré, Representative of the Munitions Board attached to the Office of the Special Representative of the Economic Cooperation Administration. Mr. Martin acted as United States spokesman at the May 8 meeting, and Mr. Armstrong at the May 9 meeting, in Mr. Martin’s absence.

The United States was asked to open with a general Statement of the problem, and began by stating that we feel the final solution to the 1B problem is a technical matter for decision by experts, but that the outcome of the discussion is dependent on and will be determined by the spirit in which the matter is approached. We had come to the meeting to talk about spirit and general attitude, and not to consider technical points. We think our 1B list is the best we could devise but we admit it’s not perfect and we are prepared to reach agreement on what it should contain. We have no final views on how items should be treated but we do have certain proposals to discuss.

We said we were anxious that work proceed on the basis of real Allied interests in the present world situation, which is either a cold war or a hot peace. It is in our mutual interest, in order to avoid a hot war, to engage in a program for increasing our strength as it compares to Soviet strength. Our success in the cold war is dependent on this. Our position is that there is a contest of power in the world and we wish to settle it peacefully and believe we can do so only through strength. At the same time, we think the USSR wants to avoid a hot war, but we can be mistaken, and incidents can arise which get beyond control. We must therefore be prepared for such an eventuality. Some of our mutual problems in the western world arise from the fact that we are trying to conduct a successful cold war and simultaneously prepare for the eventuality of a hot war, and the two courses do not always call for the same measures. We must therefore have a flexible approach, and we should not exclude the possibility of a Soviet initiative in a hot war, which might begin in five or perhaps ten years.

We think it essential to build our strength on these strategic assumptions and we can all agree to them, but still draw diverse conclusions.

If a hot war is five or ten years away, and we are waging a cold war, it becomes more important to keep basic production equipment away from the Soviets than to deprive them of strategic military equipment. Then we would advance, Soviet Union would be retarded, and military equipment given now would be obsolete if the hot war came at the end of the period. But we might get into hot war sooner, and therefore we prohibit arms shipments. We are therefore deeply concerned with general industrial equipment as well as military goods.

We are not seeking just to weaken USSR economy, but to weaken its power relative to that of the West. We must build economic strength and stability in the Western world as a prerequisite to success in the cold war. It is of real importance for us to prevent immediate accretions to Soviet power, and also to deal with basic Soviet strength. If we have power, we can in effect dictate our terms to the Soviet Union, and if the Soviets recognize our preponderant power they will settle. If a war should decide the contest of strength, it would be the third or fourth year of the war before a decision is clear.

One third of our 1B list consists of items which we generally do not ship at all to the USSR. The people of the U.S. do not wish these goods to go, as they have a very vivid memory of scrap iron shipments to Japan and do not wish to have material fired back at the West. Control by the U.S. alone may in a measure be effective, but it is obviously more effective if combined controls are used.

The United States also feels it needs to have goods under control as a precautionary measure for use if required. There are many indications of Soviet intentions of driving us out of Soviet areas. We are out of Bulgaria, and similar developments may be occurring in Czechoslovakia. We have no special illusions about the effectiveness of economic blockade, but controls would perhaps be useful if some kind of a blockade situation should be developed.

We also think the USSR is coming to a position in which trade between the satellites and Western Europe will come under effective USSR control and we cite the decline in bilateral agreements as evidence. Controls will therefore be useful in obtaining what Western European countries need from Eastern Europe. We are anxious that East-West trade yield genuine proceeds to the West, and with respect to our own trade we do not think that machine tools are a good exchange for furs and other luxury goods we receive from the East.

We think that security is of great importance in the world situation, and we know that the economic effects of security measures are also important. At this point the question of relative security must be considered. We recognize that additional controls mean new administrative problems, but we think it important to decide what we want to do, and then to find means of solving administrative problems. We should therefore not be stymied by the fear of administrative difficulties, which should be no harder than those arising under the North Atlantic Treaty. Therefore, we ask for: 1) control of items listed in our 1B program; 2) a review of the 1B list with the idea of controlling the items in such a way as to maximize the economic and security advantages of the West; and 3) the application of control measures appropriate for these objectives. We think there are four means of control: 1) embargo; 2) advance clearance of items approved; 3) quota control; 4) exchange of information.

The United Kingdom responded with the remark that the U.S. statement was very useful and that the U.K. was in general agreement with most of what was said. They pointed out that we have been working multilaterally for about six months and have made considerable progress, that the U.K. has attached great importance to the security aspects of trade, and that the machinery is beginning to work. The U.K. considers that progress to date is in a comparatively limited field, and that the new proposals of the U.S. go further than is possible. The U.K. favors a consolidation of the present controls rather than an expansion. They fear that we get “dangerously into the realm” of economic warfare, which may under present circumstances be the right thing to do but which is not U.K. policy at this time. Expansion would also have serious economic consequences for Europe as a whole, which transcend the selfish considerations of each government. The OEEC has recognized the economic value of East-West trade, and Mr. Harriman has endorsed such trade as of value in restoring viability to Western Europe. An extension of controls might snowball into a very elaborate system. Admittedly the West needs to increase its strength, but too severe a program may cause it to lose strength through lack of access to essential raw materials and foodstuffs. The bargaining power of Western Europe would be decreased if increased controls were established, and the level of trade might be frozen at too low a point.

The U.K. contends that when an item is identified as having direct strategic importance, this outweighs the importance of trade in the item. This, however, does not mean that the concept of strategic importance can properly be extended to ordinary commercial uses or the basic importance of items for the industrial plant of Eastern Europe. The U.K. thinks we should select key items in minimum numbers and control them effectively. It is not U.K. policy to set up a complicated international organization to deal with these problems.

The French said there was no difficulty in adoption of war material controls, but difficulties began when there were differences of opinion as to strategic character. The French delegate spoke frankly of his reasons for apprehension. First cited was an admittedly minor commercial consideration, in which France calculated it had already suffered a five to six billion franc loss on the basis of List I. If the U.S. proposals are adopted, the French trade loss might represent an additional four billion francs, making a total of one third of French trade with Eastern Europe. France agrees that security must come first, but economics cannot be ignored. Under these restricted conditions, trade agreements cannot be concluded. France, for example, did not sign a trade agreement with the USSR because it was obligated to refuse to supply tankers. Pipe and tubing raise the same question, but France has agreed to put these on List I. France recognizes that if it had not been for U.S. aid, its trade with Eastern Europe would have to be larger. Compensation for the French investments in Eastern Europe which have been nationalized can be obtained only through trade.

More important, however, is the security of West against Soviet aggression. France considers List I embargo, or additions thereto, as a reply to the hostile policy of the Soviet Union and as a matter of legitimate defense. If, however, the U.S. wishes to go further and we should act against basic Soviet industrial power, then logic leads us to a total economic blockade because in the USSR military objectives have priority in the economic field. France is not ready to go along with such a blockade because it would aggravate the cold war. This does not mean that France rejects that 1B proposal, but if the U.S. thinks the 1B proposal leads to a blockade, this is beyond the competence of the French delegation and therefore there must be conversations at a higher level.

In response, we said that we could see what worried the British and the French and that we did not intend a blockade. We said that we have had our policy for two years, have defended it as essential to our security interests, in GATT and ECOSOC and the General Assembly, and have been supported by other nations in our interpretation. We did not consider the proposed controls as economic warfare, but as a legitimate defense against Soviet aggression. We think that the USSR probably is of the opinion we are now doing what we are talking about, and we are sure the Soviet Union examines everything they ship from a strategic standpoint. Therefore, the concept is neither different nor new. Modern warfare means that industrial potential is war potential. In bombing Japan we considered primarily industrial and not military targets.

We said we did not see how increased formal controls on trade with the East diminishes the bargaining power of the West. We said further that the second question was one of the severity with which we exercised controls. We think our criteria for key items are good, and we emphasize the importance of industrial prototype, unique technology, and advanced machinery. We said we could not prove it, but we felt that Eastern countries spend what they are able to earn in foreign trade and that this would continue in the future, regardless of the nature of western controls. The autarchy drive does represent some possible diminution in Eastern trade and a possible shift in types of purchases. We said we were of course very gratified at the progress made in six months in establishing an embargo list, and we hoped that progress would be continued in approaching the 1B problem.

The U.K. asked if the 1B proposals attempt to form a blockade, and pointed out that there is a considerable difference between Western European and United States interest in items on the 1B list. The items would normally be sold much more by Western Europe than by the United States.

The French said they did not think the proposals implied blockade, but that if we try to prevent basic development of the USSR we might be led to a blockade. The French Government does not refuse to consider the 1B proposals, and thinks a certain number of 1B items are suitable for inclusion in Lists I and II, but there is a risk in being involved in a policy leading to a blockade, which the French Government is not yet willing to take.

We pointed out that our formal controls covered only one third to one fourth of the total commodity area, that we recognize it is not easy to draw a line as to what is strategic, but that we nevertheless would like to have our proposals examined and see how far countries are willing to go.

The U.K. said that if we examined the 1B list in CoCom we should need to agree upon what criteria would apply. The French pointed out that if we tackle the 1B list without agreement on basic principles, we will have the same difficulties we have experienced to date. The U.S. proposed that we agree on criteria as to what is strategic, then on the items which should be controlled in some fashion, then on methods of control to be applied. We said further that the licensing policy to be followed internationally should be based on the effect it would have on the relative strength of the East and the West. We added that we were disturbed over the possibility that the East might cut off trade at some point.

The U.K. said that prior consultation and quota concepts present difficulties, but that the U.K. could select the 1B items which qualify for embargo, and others which should be watched. If excessive shipments of watch items took place, the group could deal with the problem, but methods might have to vary with the commodity. We pointed out that the present List II concept includes self-limiting control as well as watching.

The French said they know of shipments to the East because of exchange control regulations, but that sometimes the information is not sufficiently precise.

The U.S. then proposed that we agree to discuss what we mean by strategic, then review the 1B list to see on first reading where items might fall, and then review types of control. We said we were most anxious to proceed as far as we could in the areas in which agreement was possible and to identify areas where further technical discussion may be necessary. We said we were prepared to offer our strategic definitions, to answer questions about items on the 1B list, and to explore on a sampling basis our reasons for proposing various types of control.

This was generally accepted, and we circulated at the May 9 session our 1A and 1B definitions and also a statement of “area of commodity coverage” contained in ACR document 48.3. The U.K. also presented suggested definitions for List I and List II, and the May 9 meeting was devoted to a discussion of definitions and justifications for the inclusion of various types of items. Agreement was reached as to the method of work in CoCom next week. All three delegations recognized that there were differences of degree in the definitions and criteria governing strategic significance. Nevertheless, it appears on careful scrutiny that the definitions of the U.S. and the U.K. are not as far apart as was expected, and therefore we agreed that on the basis of each country’s own criteria, an examination of the 1B list for inclusion on Lists I and II could be constructive. We therefore negotiated an agreement with the British and French concerning the manner in which we would try to guide CoCom activity. This agreement is as follows:

1. CoCom will examine the 1B List and place items in Lists I or II, using present List II criteria (unilateral limitation and exchange of information).

2. Items not agreed for Lists I or II will fall into List III (items held for further consideration).

3. U.S. proposals for methods to be applied to List II items (prior consultation, quota control) will be temporarily held in abeyance until the review of List 1B is completed, but will be discussed by CoCom, which will report the results of the discussions to the Consultative Group.

4. CoCom will also report to the Consultative Group the results of its scrutiny of the 1B List.

Comment: We think this is the best possible outcome of the tripartite discussions, as it results in an actual review of the 1B List on the basis of the present List II criteria. The U.S. cause is best advanced at this stage by obtaining agreement to apply List I or List II treatment to a maximum number of 1B items, with the clear understanding that the U.S. proposals for prior consultation or quota control will receive consideration in the Consultative Group or on a government-to-government basis. It is not possible, in our judgment, to obtain a new agreement at this stage on these two methods of handling List II, and if we wait until agreement is reached we will have lost much time and effort which can now be well spent in adding 1B items to Lists I and II, thus insuring a broader control base than we now have. We mentioned informally that the Secretary had expressed to Mr. Schuman the broad political and strategic importance of reaching agreement on trade controls, and also referred to the possibility that the Secretary would raise the issue with Mr. Bevin.¹² We think our exposition of policy, definitions, criteria, examples, and intentions has done much to dispel the apprehension felt by the French and British, and we have the right to expect a constructive approach to the 1B list on the part of both governments. We do not see any other constructive result which could have been achieved in these meetings in the light of all relevant circumstances.

[Willis C. Armstrong]

1. The source text was transmitted to the Department of State as an enclosure to despatch 1053, May 11, from Paris, not printed. The Department subsequently circularized the text of the memorandum to the other Missions in Europe.
2. Telegram 1861 not printed; regarding the convening of the meetings reported upon here, see footnote 4, p. 96.
3. François de Tricornot de Rose, Deputy Director for Economic and Financial Affairs, French Foreign Ministry.
4. Jacques Fouchet, in the Office of Economic and Financial Affairs, French Foreign Ministry.
5. John E. Coulson, Deputy to the Permanent British Representative on the Organization for European Economic Cooperation.
6. James A. Turpin, First Secretary of the British Delegation to the Organization for European Economic Cooperation; British Representative on the Coordinating Committee.
7. Reginald L. Elkington, Controller, Export Licensing Branch, British Board of Trade.
8. Cyril Maxwell Palmer Brown, Assistant Secretary of State, Commercial Relations and Exports Department, British Board of Trade.
9. H. Gresswell, Assistant Secretary of State, British Ministry of Defence.
10. Mr. Martin was accompanying Secretary of State Acheson who made a stopover in Paris on May 8 on his way to London for the Tripartite Ministerial Meetings, May 11–13.
11. Mr. Armstrong, and presumably also Mr. George, were on a visit to Paris in connection with East-West trade problems.
12. Regarding Secretary Acheson’s meetings with Schuman and Bevin, see Martin’s memorandum, infra.