Memorandum by the Assistant Secretary of State for Economic Affairs (Thorp) to the Director of the Planning Staff of the Bureau of European Affairs (Labouisse)2
Commerce Proposal for Increasing Export Controls
I know you are familiar with the proposal of the Department of Commerce to require licenses on all shipments to the Soviet Union and the European satellites, and to deny most of the licenses requested. This proposal was originally considered in the Advisory Committee two weeks ago, and at the insistence of ECA and State was placed before the NSC by Commerce. The NSC document is No. 102 of January 19.3 The NSC Staff decided that the proposal should go before the Special NSC Committee on East-West Trade, and a meeting was accordingly held on January 24.
The purpose of the discussion was to see if the divergent views of the various agencies could be composed, so that a joint recommendation could be made to the NSC, which is supposed to consider the item at its meeting on January 31.
At the meeting I took the position that the State Department is in general sympathetic with the proposal to require licenses on all shipments moving to the European Soviet bloc from the United States, because it is useful for the government to know in advance what shipments are moving, or what the Soviet countries intend to buy. I pointed out however that it would be understandably difficult for licensing officers in the Department of Commerce formally to approve the shipment of an item not on the Positive List, and that it would be a natural inclination for them to wish to deny it. Thus it seemed that if our policy was to be one of not restricting trade in these relatively non-strategic items, it was obvious that a clear set of criteria would be necessary for the guidance of the licensing officers.
I went on to point out that there was no particular concern in the States Department as to the scope or composition of United States trade with the Soviet bloc, since it was already inconsequential, and since the requirement of licensing could be explained as a necessary precaution for security reasons. I said that it was much more important, however, to take account of the impact of this proposal upon[Page 1010]the area of control where we now are focusing our major concern—i.e. Western Europe. I said that it was highly important that we continue our efforts to obtain the maximum measure of parallel action by Western European countries, and that it must be recalled that our approach has been on a selective control basis in which we have sought embargo of 1–A items and embargo on quantitative control of 1–B items. We have repeatedly told the Europeans that our objective is not a total embargo, nor economic warfare in the broad sense. I informed the committee that it was difficult to see how the Commerce proposal, as contained in NSC 102, could be construed as anything but a near embargo, and that the mere announcement of licensing would cause apprehension among the Europeans, who would expect shortly to be approached by us with a proposal for full embargo. I said that it seemed to us that this possibility might endanger the success of our efforts for parallel action on the selective basis, and that the disparity between United States and Western European controls which this would set up would create a considerable pressure for such parallel action.
I also pointed out that the Commerce proposal which in effect obliterated the distinction (admittedly now rather a formal one) between the treatment of 1–A items and that accorded to 1-B items, would mean serious difficulties for ECA in its administration of Section 117 (d), and would raise serious questions concerning the extent to which the United States permits exports of 1–A and 1–B items to Western European countries when these countries have not adopted identical controls.
I concluded my presentation of our position by stating that the Department is preparing recommendations for the President, in response to his letter of December 28, concerning a good many aspects of the problem of economic relations between the Western world and the Soviet bloc, and that it was to be expected that our recommendations would cover the problems of United States licensing control, parallel action, 117 (d), and export policy towards the Western Europeans. I suggested that in view of this project, which would presumably be presented to the NSC for consideration, the Commerce proposal might be deferred for the time being until the NSC had a chance to examine the proposal covering the entire field, so that an integrated policy could be developed.
ECA supported our position and went further to criticize vigorously the substance of the Commerce proposal, pointing out that no reasonable security purpose was served by additional licensing requirements, that the actual trade is insignificant and that the impact upon our major effort (controls by Europeans) might be serious. The representative of the NSRB staff said that he was prepared to await the[Page 1011]completion of the State Department project, and the representative of ODM also concurred.
The Commerce Department maintained its position of insisting upon the adoption of its proposal now, and was supported in this position by Defense, Agriculture, and a representative of the Joint Chiefs of Staff. The Defense Department felt that the Commerce proposal did not go far enough in embargoing shipments, and felt that all shipments except the so-called negative list should automatically be denied, and that all shipments, including the negative list, should be denied for shipment to Vladivostok.
The Treasury Department representative said that he was concerned over the need for financial controls over Soviet bloc assets to parallel licensing controls which might be established, and that he felt that if the Commerce proposal were to be adopted, it should be accompanied by Treasury financial measures. I should add that I had included in my presentation a statement to the effect that we were considering in our project the problem of imposing financial controls, and that we would probably have some recommendations on this subject. The Treasury position therefore in effect corresponded to ours, although the Treasury representative indicated at the end of the meeting that he would feel it necessary to file a paper on financial controls if the Commerce proposal is considered at NSC next week.
A representative of Mr. Harriman’s office4 was present and said that he favored delay until the State project is completed. A CIA representative was present, but said nothing.
The Chairman made an effort to develop some phraseology which would represent an agreed position in the committee, but nothing he suggested was agreeable to all agencies, and thus the proposal will go on to the NSC without any recommendation from the committee.
There was one other item on the agenda of the committee, required in connection with the Cannon amendment. In accordance with NSC 94/1 of December 21 the Special Committee is required to make recommendations to the NSC concerning the trade with the Soviet bloc of countries receiving United States economic and financial assistance. The committee had before it reports on the trade of Latin America, Africa, and the Middle Eastern countries, and agreed to report to the Council that on the basis of available facts, no action to terminate United States financial assistance to any of the countries seemed to be called for. The Commerce Department prepared the studies, and proposed the action of the committee. The exact language is to be drafted by State and Commerce. There was no substantive discussion of any consequence, although it is clear that some work needs to[Page 1012]be done on specific shipments from such countries as Turkey, Portugal, the Belgian Congo, Egypt, etc.
I am attaching herewith a memorandum, dated January 23, from Mr. Armstrong in ER, which deals with the Commerce proposal in regard to licensing.5
- Serial file of memoranda relating to National Security Council questions for the years 1950–1961, as maintained by the Policy Planning Staff.↩
- Drafted by Willis C. Armstrong, Associate Chief of the Economic Resources and Security Staff, for Henry R. Labouisse who, in addition to his position as Director of the Policy Planning Staff, was also designated as the Department of State officer in charge of policies and programs concerning United States international economic activities. (Letter by Secretary of State Acheson to Secretary of Defense Marshall, January 9; 800.00/1–951)↩
- Ante, p. 1000.↩
- W. Averell Harriman, Special Assistant to the President.↩
- Not printed; it contained recommendations concerning a position to be taken by the Department of State on NSC 102. The recommendations from Armstrong were the same as those summarized in the source text.↩