Foreign Relations of the United States, 1951, National Security Affairs; Foreign Economic Policy, Volume I

S/P–NSC Files, Lot 62 D 1, NSC 94 Series

Memorandum by the Special Committee on East–West Trade to the National Security Council¹

secret

[Washington, May 16, 1951.]

Trade Between the Soviet Bloc and Sweden and Switzerland

(NSC Determination No. 2)

1. NSC 94/1,² approved December 21, 1950, called for examination of the trade relations between Soviet bloc and non-Soviet bloc countries, particularly those receiving U.S. economic and financial assistance, and directed the Special Committee on East–West Trade to make recommendations to the Council wherever the security interests of the United States may be involved, in particular, as described by Public Law 843, Section 1304 (The Cannon Amendment).

2. The Special Committee on East–West Trade has made an examination of the trade between the Soviet bloc (including China) and Sweden and Switzerland. Accordingly, the Special Committee recommends that the National Security Council:

a. Note the following determinations:

(1) Sweden:

(a) Sweden has always had close trade relationships with the countries now within the Soviet bloc. Eastern Europe has normally provided Sweden with important quantities of agricultural and industrial raw material as well as textiles, iron and steel and machinery. Especially vital to the Swedish economy has been, and is today, the large quantity of coal and coke obtained from Poland. In maintaining its present trade relationships with Eastern European countries, Sweden is motivated by (a) the necessity of obtaining raw materials vital to the operation of its economy, (b) the desirability of obtaining certain goods for soft currency which are unobtainable elsewhere, or obtainable only for hard currency, (c) the desire to recover claims arising out of nationalization of private Swedish assets in several of the Eastern European countries, (d) the desire to find markets for goods not readily saleable in other areas, (e) the desire to avoid worsening the political-military status in Scandinavia and the Baltic area.

In pursuing this policy, Sweden has in the past shipped significant quantities of bearings and relatively small amounts of other strategic commodities to the Soviet bloc. In return, Sweden has received commodities essential to it including such commodities as manganese.

(b) In recent trade negotiations with members of the Soviet bloc, Sweden has shown a willingness to cut the export of strategic goods. The United States, the U.K. and France, on behalf of the Paris Consultative Group, are now carrying on discussions with Sweden to obtain its adherence to the International Lists. Considerable progress has been made especially in the field of bearings. In addition, Sweden has given the United States assurances that no export licenses will be granted to transship strategic items for which Swedish import licenses have been issued. In connection with discussions concerning U.S. export licenses currently pending, Sweden is giving assurances against the export of specific strategic items regardless of source. The Department of State will report progress in these discussions as required by NSC 91/1³ and 104/2.⁴

(c) Sweden has received no direct grant assistance from the United States, but has received loans and conditional ECA grant assistance. Sweden is a member of the European Payments Union where it currently has a relatively small debtor position. Sweden does not contemplate requesting any direct financial aid from the United States during the coming fiscal year.

(2) Switzerland:

(a) Switzerland’s direct trade with the Soviet bloc during the post war period has been about 6% of its total trade and this percentage is declining. Swiss exports to the Soviet bloc have included a significant percentage of strategic items. Imports from the bloc are composed mainly of agricultural items and coal and some capital equipment. Traditionally, Switzerland has been an important entrepot center for international trade including the trade of the bloc.

(b) The extent to which Switzerland will agree to control its exports to the Soviet bloc will not be known until its answer to the U.S. request under NSC 104/2 is received. Meanwhile, no List 1 or 1A goods will be licensed for export from the United States to Switzerland except for certain presently pending cases where the United States Government has definite information that the specific type of goods in question is not being exported or re-exported from Switzerland. Re-export of goods imported into Switzerland is now forbidden by the Swiss Government for all imports against which a Swiss blue import certificate has been issued. The United States requires these certificates for all exports to Switzerland and the Paris Consultative Committee has agreed to require such certificates for List 1 and 2 exports to Switzerland. The Department of State will report progress in the negotiations with Switzerland as required by NSC 91/1 and 104/2.

(c) Switzerland receives no direct ECA aid and, although a member of the European Payments Union, occupies a strong creditor position in that organization.

b. In view of the determinations in a above, agree that action to terminate U.S. economic and financial assistance to Sweden and Switzerland is not called for at present by reason of the status of the trade between those countries and the Soviet bloc.

c. Direct the Special Committee on East–West Trade:

(1) To continue its examination of trade between Sweden and Switzerland and the Soviet bloc.

(2) To scrutinize particularly the entrepot trade of Switzerland with the view to making any necessary recommendations for action promptly to the National Security Council.⁵

1. The source text was circulated to members of the National Security Council with a covering memorandum by Executive Secretary James S. Lay which noted that the memorandum had the concurrence of the Senior NSC Staff.
2. Foreign Relations, 1950, vol. iv, p. 249.
3. Dated November 17, 1950; printed in Foreign Relations, 1950, vol. iv, p. 227.
4. Dated April 4, p. 1059.
5. During its 92d Meeting on May 23, the National Security Council noted that the Senior NSC Staff had withdrawn the source text from Council consideration in light of the passage by Congress of Section 1302 of the Third Supplemental Appropriations Bill of 1951. The Council then discussed the problems involved in implementing Section 1302. (NSC Record of Action 479, May 23; S/S–NSC (Miscellaneous) Files, Lot 66 D 95, Record of Actions–1951)