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

S/S–NSC Files: Lot 63 D 351: NSC 69 Series

Memorandum by the Secretary of Commerce (Sawyer) to the National Security Council ¹

top secret

Washington, June 8, 1950.

Subject: Strategic Eating of Railroad Transportation Equipment

1. The Commerce Department, together with the Advisory Committee on Requirements, has reviewed the strategic importance of railroad transportation equipment to the Soviet Orbit at the request of the Department of Defense that such equipment be given embargo treatment. Agreement has been reached on the strategic importance of the transport network in the Soviet Orbit and on an embargo rating for electric, Diesel and Diesel-electric locomotives, railway signals and specialized parts for both of these sets of equipment.

However, serious differences still exist, particularly between the Departments of State and Defense, on the strategic importance of steam locomotives, freight cars and steel rails for the Soviet bloc. In view of the foreign policy and security questions raised, the National Security Council is asked to review the issues and establish the policy on the strategic rating of railroad transportation equipment. To assist in this review, detailed statements containing pertinent data on the strategic evaluation of railway equipment and rails are presented in Attachments 1 and 2. (OC Document No. 352.2, Revised, and OC Document No. 352.1.²)

2. The Department of State, with the support of ECA, has recommended that steam locomotives, freight cars and steel rails should continue to be rated 1B on the following grounds:

(a) State intelligence sources estimate that the trade in the subject rail items is small and that the demand from the Soviet bloc is negligible in relation to their total requirements. Therefore, an embargo of such rail equipment would not create a critical situation in the transportation network of the Soviet bloc and would probably not seriously affect Soviet war potential.

(b) The embargo of this rail equipment would become a precedent for the embargo of the entire transportation field, if there is no need to establish Soviet bloc dependency on outside sources for more than insignificant quantities. This proposal, if accepted, would also affect the entire steel field, including products no longer under export control, because of the simplicity of rail production and the ease of shifting steel production among various rolled products.

(c) The addition of this new field of equipment for embargo would impede progress in negotiations for parallel action by making other countries feel that there is no end to U.S. requests for curtailment of their trade. This move would widen the serious discrepancy which already exists between U.S. export policy and that of other countries, particularly the U.K. It would also jeopardize the negotiations now going on for the purpose of reaching agreement on export controls to the Far East.

(d) Extension of the embargo list would directly interfere with East-West trade and in this way impede European recovery and hurt U.S. interests. Western Europe has moved from the production phase to the recovery phase which requires expansion of trade. In trade items, such as those under discussion, Western European economies are complementary with Eastern Europe. There is, for example, a reverse flow of railroad cars from Hungary and Czechoslovakia to OEEC countries for which the West exchanges axles as partial payment. Additional restrictions would cause economic damage in the West, as well as political difficulties in consequence of increasing unemployment.

The position of the State Department, which is concurred in by the Economic Cooperation Administration, is presented in Attachment 3. (OC Document No. 352.6.³)

3. The Department of Defense, with the support of the Central Intelligence Agency and the Atomic Energy Commission, has recommended that steam locomotives, freight cars and steel rails should be given embargo treatment on the following grounds:

(a) Defense intelligence sources estimate that there is a very critical shortage of transportation equipment in the Soviet Orbit as a result of the destruction wrought by the war and of the delayed rehabilitation programs which they have put into effect. Steam locomotives are substitutes for the other types of locomotives which are agreed for 1A; freight cars have created local and short-term bottlenecks in transport due to shortage and condition; and railway trackage is a factor in current congestion, delays, and accidents, due to poor and inadequate trackage and the poor weight and maintenance of rails. This is significant when account is taken of the importance of railroads to the Soviet economy, which is responsible for 85 percent of the total freight. Therefore, an embargo of rail equipment would maintain a critical situation in the transportation network of the Soviet bloc.

(b) Major construction is in progress in the Soviet bloc rail network intended primarily for strategic modernization and extension of the rail system for military purposes. Further, it is increasingly difficult to distinguish between military and civilian uses of the transport network and to disassociate the needs of the Soviet bloc from those of Communist China. Finally, any extension of the transport network of the Soviet bloc, supported by imports from the West, might be used directly to enable the expansion of atomic energy facilities.

(c) The Defense position does not require a showing of Soviet bloc dependency on outside sources for important quantities of transportation equipment because transportation forms a vital strategic element in the war potential. The strategic situation is such that any shipment would be incompatible with our national interests.

The position of the Defense Department is presented in Attachment 4. (OC Document No. 352.1, Supplement 1.⁴)

1. This memorandum was circulated to the National Security Council under cover of a memorandum of June 9 by National Security Council Acting Executive Secretary S. Everett Gleason, not printed, which observed that in accordance with the request of the Secretary of Commerce for an early review of the problem by the Council, this memorandum had been placed on the agenda of the Council’s next regular meeting scheduled for June 15. This memorandum and other aspects of the East-West trade control problem were not, in fact, taken up by the National Security Council until August 24; for the record of actions taken at that meeting, see p. 179.
2. The documents under reference here, reports dated April 14 and April 4, respectively, to the Operating Committee from various committee task groups, are not printed.
3. The document under reference here, dated April 17, is not printed.
4. Not printed.