400.119/6–2350
Paper Prepared in the Department of State1
Summary of “Review of United States Export Control Policy in Relation to East-West Trade”
The following is a brief summary of the subjects covered in the memorandum of this title. The memorandum itself is attached under Tab I.
[Page 151]I. Disagreements on policy arise out of differing views toward East-West Trade.
II. East-West European Trade is of substantial economic importance to Western Europe. Total loss of exports to the East would create serious economic problems, particularly in certain countries and in heavy industry. Loss of imports from the East would make it necessary for Western Europe to spend more dollars on essential raw materials. Loss to the Soviet Bloc of imports from Western Europe would not cripple but would slow down eastern industrialization.
Potential trade with China is of great importance to the recovery of Japan.
Complete cessation of trade with the Soviet Bloc would create damage to both sides but, considering the effect on unemployment and political factors, might be more costly to the West than to the East.
III. The effect of controls to date has not been spectacular and is limited largely to control of United States exports. Greatest damage has been to the satellites, whose industrialization program has been curtailed in important industries. The balance of advantage of controls to date is clearly with the West.
IV. The effect of complete acceptance of the United States proposals for parallel controls would be to reduce total Western European exports to Eastern Europe by about 25% and some $200 million and might be to deprive Western Europe of its most strategic raw material imports from the East and necessitate purchases in the dollar area. The further economic recovery of Japan would be hard hit.
Economically the Soviet Bloc might be hardest hit but the political repercussions in Europe and Japan make the balance debatable.
V. The present status of the negotiations with cooperating countries in Paris, the Secretary’s talks with Messrs. Schuman and Bevin and other recent exchanges, indicate that agreement will not be reached on a very substantial part of the expanded control program.
VI. The policy issues in the United States Government revolve around the questions of objective, of negotiating tactics and whether the United States should contract its own controls to the lower level of Western European controls. It is recommended that the existing objective and policies be maintained, that the United States cease to add items to the area of negotiating disagreement, and that German and Japanese controls be reduced to the Western European level upon conclusion of the present negotiations in Paris. The level of United States controls should also be decided after that time.
VII. Two specific licensing cases that have been submitted to the National Security Council and three other recently controversial [Page 152] cases, illustrating the policy differences among United States Government agencies, are described.2
- Sometime in mid-June, Secretary of State Acheson asked officers of the Department of State for a complete factual analysis of the problems of East-West trade control. The Office of the Assistant Secretary of State for Economic Affairs, in collaboration with the Department’s geographic bureaus, prepared a 25-page memorandum entitled “Review of United States Export Policy in Relation to East-West Trade,” a two-page summary printed here, and over 100 pages of supporting documentation and tables. The earliest version of the memorandum, which was apparently completed on or before June 23, was read by the Secretary of State and by Ambassador at Large Philip C. Jessup, the Department of State member of the National Security Council Consultants group. A meeting of principal Department of State officers with the Secretary of State on the question of East-West trade was scheduled for the afternoon of June 26 in advance of a National Security Council meeting on June 28 on the same subject in which President Truman was to have participated. Both meetings appear to have been indefinitely postponed as a result of the events attending the North Korean invasion of South Korea on June 25. Revision of the memorandum, which had not been formally cleared by the various geographic bureaus of the Department of State, continued into July and August. In connection with a rescheduled National Security Council meeting for August 24 on the subject of East-West trade, the memorandum was again referred to the Secretary of State. A full copy of the memorandum and its voluminous appendices, together with related papers, revisions, and commentaries, is included in the S/S–NSC Files, Lot 63 D 351, NSC 69 Series. Related documentation is included in the Department of State file 400.119 for 1950 and in the S/P–NSC Files, Lot 61 D 167, East-West Trade. Lot 61 D 167 is a serial file of memoranda relating to National Security Council questions for the years 1950–1961, as maintained by the Policy Planning Staff of the Department of State.↩
- The licensing cases under reference here involved Department of Defense proposals regarding the strategic rating of railroad transportation equipment and denial of licenses for equipment of an Austrian steel mill; see the memorandum of June 26 from the Joint Chiefs of Staff to the Secretary of Defense, infra. The three controversial cases referred to here involved proposals by the Department of Commerce to use pending licenses for the export of certain ball bearing manufacturing and steel fabricating machinery to the United Kingdom, Sweden, and Italy in obtaining assurances from those countries for cooperation in export control in some parallel cases. Both the Department of State and the Economic Cooperation Administration objected to use of the licenses as a bargaining weapon. Compromise procedures were worked out in connection with these latter three cases.↩