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 Joint Chiefs of Staff to the Secretary of Defense (Johnson)¹

top secret

Washington, 26 June 1950.

Subject: East (Soviet Orbit)-West Trade

1. The Joint Chiefs of Staff have recently considered certain facts in connection with the problem of adequate Western control of East (Soviet orbit)-West trade, in particularly the following aspects.

2. A recent naval intelligence report sets forth that, in the opinion of qualified United States observers in Moscow, the dependence of the USSR on Western trade has long been under-estimated. Further, Western observers who have knowledge of conditions in Soviet industry are generally agreed that if the United States were able to establish an effective economic “iron curtain” it would result in the Russian economy’s grinding to a stop within a period of five to ten years, and before that time the internal conditions in the USSR would become serious.

3. The Director, Office of International Trade Policy, Department of State, indicated in a report of 20 April 1950,² that only fair progress has been made in securing acceptance and adherence by North Atlantic Treaty (NAT) countries of existing U.S. export regulations.

4. The Secretary of Commerce, in NSC 69,³ set forth that:

a. The strategic advantages accruing to the Soviet bloc from East-West trade are exceeding at an increasingly disproportionate rate, its benefits to Western European economic recovery.

b. The United States should proceed at the highest level with its efforts to persuade European countries to adopt export controls to a degree commensurate with those presently imposed upon American enterprises.

5. On this same subject the Joint Chiefs of Staff by memorandum for the Secretary of Defense, dated 9 May, stated inter alia that:

a. “U.S. should take the initiative without delay and attempt to reach an agreement with the Western powers on export controls designed to avoid significant contributions to the war potential of the Soviet bloc,”

b. Such controls “should be concerted and firm with respect to security items and concerted, flexible, and capable of adjustment with respect to non-security items. …”

6. The Secretary of State in consonance with the foregoing emphasized, during the recent meetings with the Foreign Ministers of Great Britain and France and with the NAT Council, the importance which the United States attaches to common action in the field of security export controls.

7. In this connection current U.S. export control regulations are inadequate in that they do not preclude the chartering of U.S. flag shipping to transport strategic goods to and from Communist-controlled ports. The case of the U.S.-registered tankers Kettleman Hills and St. Christopher, wherein both the cargoes and ships were specifically on the prohibited lists of exports, is an example.

8. In addition to the need for effective agreement on multilateral export controls on strategic materials, there is a lack of adequate import and shipping restrictions which permits unrestricted use of U.S. ports by Soviet flag shipping and the accumulation by the Eastern bloc of dollar and sterling credits. This lack of adequate shipping controls also provides a potential military danger.

9. The USSR insures control over its commerce (including ship operations) by requiring all foreign agencies to conduct their Soviet business, and Soviet agencies to conduct their foreign business, through the Ministry of Trade representatives. These representatives are established throughout the world as an integrated part of USSR embassies (Amtorg in the U.S.). Soviet satellite countries achieve essentially the same control through their central Ministries of Trade.

10. Western countries, adhering to the doctrine of “free trade”, have exercised administrative limited control over foreign trade only to insure compliance with regulations concerning health, immigration, export licenses, manifest of cargoes and similar recognized restrictions. Retaliation, for what in effect is USSR denial of Western shipping to ports under Soviet control, can be legally exercised solely by an act of reciprocity through executive directive pursuant to the Shipping Act of 1886⁴ (Appendix⁵). On the other hand, refusal to receive Western shipping can, however, be attributed by the Soviets to economic reasons and thus provide little basis for U.S. directives based on reciprocity.

11. There are, as pointed out in the foregoing paragraphs, serious defects in Western control of East-West trade. These defects could be greatly lessened by a broad over-all export-import program which included:

a. Effective control of the operation of Western flag shipping from foreign ports;

b. Strengthening of Western import regulations; and

c. Limiting the number of Western ports available to Soviet flag shipping.

12. In view of the above, particularly as it affects the national security, the Joint Chiefs of Staff recommend that the National Security Council consider the foregoing factors in connection with the determination of the over-all United States policy on trade with the Soviet bloc.

For the Joint Chiefs of Staff:

Omar N. Bradley

Chairman Joint Chiefs of Staff

1. The source text was circulated to the National Security Council on August 15 under cover of a memorandum by James S. Lay, Jr., Executive Secretary of the Council. Lay explained that the memorandum was submitted to the Council at the request of the Secretary of Defense. The memorandum was scheduled to be taken up by the National Security Council in conjunction with Council consideration of document NSC 69/1, August 21, p. 163, which was then being prepared by the Council Staff.
2. The report under reference here has not been further identified.
3. See Secretary of Commerce Sawyer’s letter of April 25 to Executive Secretary Lay, p. 83.
4. Act of June 19, 1886, Chapter 421, Section 17, 24 Stat. 82.
5. The appendix, an extract from the Shipping Act of 1886, is not printed here.