S/S–NSC Files, Lot 63 D 351. NSC 111 Series
Draft Report by the National Security Council1
NSC 111
An Interim General Exception Under Section 1302 of the Third Supplemental Appropriation Act, 1951 (NSC Determination No. 1)
i. background
1. Section 1302 of the Third Supplemental Appropriation Act, 1951 (Public Law 45, approved June 2, 1951), directs that no economic or [Page 1096] financial assistance shall be provided to any foreign country which, after 15 days following its enactment, exports or knowingly permits the export of certain named categories of commodities to the Soviet bloc during any period in which the Armed Forces of the United States are actively engaged in hostilities in carrying out a decision of the Security Council of the United Nations. In order to be eligible for economic or financial assistance each country must certify that after the prescribed period it has not exported or knowingly permitted the export of the prohibited items to the Soviet bloc.
2. Section 1302 requires that the Secretary of Defense certify to the Economic Cooperation Administrator a list of specified articles or commodities. The list in question was certified on June 4, 1951 and is attached as Appendix 1.
3. Section 1302 authorizes the National Security Council to make exceptions to its several provisions upon an official determination that such exceptions are in the security interest of the United States.
4. The terms of Section 1302 apply to a wide variety of economic and financial assistance programs. They pertain to loans and grants such as made by the Economic Cooperation Administration, to many Export-Import Bank loans (such as loans to various Latin American countries for the strengthening of basic industries or for expanding the production of strategic minerals), and to a variety of agricultural, health, and development and technical assistance projects carried on largely under the Point IV Program. In addition to general programs conducted under a broad authority granted by the Congress, they apply to a number of assistance measures authorized individually by specific legislation, such as those for the loan to Spain and for aid to Yugoslavia. The provisions of Section 1302 apply to some 60 countries receiving some form of economic assistance, even though it may be very limited in many cases. A list of countries receiving aid is attached as Appendix 2. In support of the various general and special assistance measures, the Congress has appropriated several billion dollars in recent years, largely with the security interests of the United States in view.
5. The evident objective of the legislation is to stop the flow to the Soviet bloc of commodities significant to the military potential of that area and by this means to strengthen the security of the free world. With this same objective in view, and in accordance with the terms of previous legislation,* the National Security Council has had extensive studies made of the trade between the countries which receive economic and financial assistance from the United States and the countries of the Soviet bloc. Moreover, during a period of more than two years the United States has had continuing discussions with the more important countries trading with the Soviet bloc for the purpose of obtaining [Page 1097] the establishment of effective controls over this trade. As a result, prohibitions have been established against the export to the Soviet bloc of a wide range of strategically important commodities. Necessarily, detailed information regarding these measures has not been and cannot be made public. However, the countries which have been cooperating in this effort do not control their exports as closely and completely as would be required to meet the provisions of Section 1302. Indeed, these and most other countries receiving economic or financial assistance have been and presumably are now exporting to the Soviet bloc some items appearing on the list certified by the Secretary of Defense.
6. It is doubtful whether it is possible for any system to be devised which would provide the necessary basis for current certifications under Section 1302. It would clearly be impossible within the time allotted. The mere mechanical processes of duplicating and transmitting the new and extensive list of commodities to foreign governments alone would exhaust the time period specified. Furthermore, the translation of the list, which involves, as experience in this field has shown, intricate problems of interpretation and definition of technical terms, requires considerable time. In addition to these processes, moreover, it would be necessary in all cases for new determinations to be reached, new export control regulations and procedures to be adopted, and effective administration provided for. Actually, in a number of countries new legislation would be necessary. Even if there were no political considerations or other such factors affecting the adoption of these controls by foreign countries, it would be impossible for them to meet the requirements of Section 1302 in the time provided. If placed in parallel circumstances, neither could the United States.
ii. problem
7. In the circumstances, therefore, the National Security Council must, in meeting its responsibilities under Section 1302, adopt one of the following three alternative decisions:
- a.
- Decide that the security interests of the United States would best he served by terminating or temporarily suspending aid to all recipient countries.
- b.
- Decide that the security interests of the United States would best he served by determining at this time that the aid presently being extended to recipient countries should be continued without modification.
- c.
- Decide, on an interim basis, that the aid to all recipient countries should be continued while further intensive efforts are being made to strengthen the export controls of recipient countries, and pending the completion of a reexamination of the varying situations of individual countries in the light of the requirements of Section 1302.
iii. examination of alternatives
8. First Alternative
a. To adopt the first of the three stated alternatives, that is, to terminate or suspend aid to all countries, would be to ignore the commanding importance of the purpose of our foreign aid programs. The purpose of economic and financial assistance to friendly countries is to strengthen the individual and collective defenses of the free world, to develop their resources in the interest of their security and independence and the national interest of the United States, and to facilitate the effective participation of these countries in collective security arrangements. In some countries the aid is assisting the construction of industrial facilities required to produce weapons for defense. In others it assists the development of mineral resources needed for stockpiles and for immediate consumption by ourselves and our allies. In still others it assists in withstanding internal and external threats to independence. A blanket termination of aid would, in short, jeopardize the security of the United States and indeed, the security of the whole free world.
b. Suspension of aid pending a full reexamination of the position of particular countries or areas in relation to the new legislation might appear, on the surface, to be free of the defects cited in a above. It would appear not to question the importance of the aid programs nor to prejudge the case as to individual countries receiving aid. It has the aspect of a deliberate and judicious approach. In reality, however, the suspension of aid, equally with outright termination of aid, would call directly into question not only the validity of the major object for which aid is extended, but also the integrity of our partners in the free world and the integrity and steadiness of purpose of the United States. The importance of the main object is surely not open to question. The integrity of our partners has been demonstrated by their cooperation in many fields. The steadfastness and good faith of the United States must not be subject to question.
c. There remain gaps and defects in controls over the movement of strategic commodities to the Soviet bloc, some of which are serious. However, if in the face of what has been accomplished and in disregard of the cooperation already achieved, we were to suspend aid, our own reliability would be called into question and we would threaten both the will and the capacity of our associates to maintain the controls they now have. And we would do this without any apparent basis or justification for such treatment.
d. The National Security Council rejects this alternative.
9. Second Alternative
a. To adopt the second alternative suggested above, that is, to continue aid without modification, would be to indicate that the National Security Council is satisfied with the measures now being taken by [Page 1099] countries currently receiving assistance from the United States to limit and curtail their trade with the Soviet bloc. This is definitely not the case.
b. There have been features about the trade of various countries with the Soviet bloc which have caused the United States concern. We have not hesitated to express this concern and energetically to seek correction of its causes. As a result of the negotiations thus initiated, the trade of the free countries with the Soviet bloc has been brought under a degree of control which, despite some remaining points of weakness, is impressive. Canada maintains a control system and follows control policies closely in line with those of the United States. Controls in Japan and the Philippines are likewise essentially parallel to those of the United States. The countries of Latin America, which export only a limited number of commodities, primarily raw materials, which have strategic significance, already have arrested exports to the Soviet bloc of most of these materials and have shown full willingness to cooperate in these and other measures of economic defense and security. In addition, as a result of the resolution recently adopted by the United Nations, trade between many other countries and Communist China will be prohibited in respect to arms, ammunition, implements of war, petroleum, atomic energy materials, transportation equipment of strategic value and items used in the production of arms, ammunition and implements of war.
c. It is the countries of Western Europe, however, in which the matter of controls over trade with the Soviet bloc is of the highest continuing importance. This is the area in which the problems of proximity to the Soviet bloc and of dependence upon supplies obtained in trade with the Soviet bloc present themselves in the most acute form. It is the area, also, in which maximum strength is most critically needed. Most of the countries of Western Europe have maintained for some time an embargo upon the shipment of arms, ammunition and implements of war and atomic energy materials to the Soviet bloc. Even before the outbreak of hostilities in Korea, they had extended this embargo to cover a significant number of other goods which, though not military weapons, are nevertheless, considered to be of high strategic importance. Since Korea, the embargo has been further extended to cover most of the goods which the United States regards as of primary strategic significance. In addition, quantitative limitations have been imposed upon the movement of a considerable range of other goods.
d. These results have not been achieved by coercion. They have been brought about by a cooperative approach to a mutually acceptable solution for a common problem. Further progress can best be gained by continuing this approach. There remain, as has been stated, serious gaps and defects in the controls of recipient countries over the [Page 1100] movement of strategic commodities. Every effort must be taken to repair these gaps and defects. The National Security Council can neither ignore nor condone these deficiencies and shortcomings, as would be implied if it were to adopt the second alternative suggested above.
e. The National Security Council therefore rejects this alternative as not compatible with the security interest of the United States.
10. Third Alternative
a. The third alternative, that is, the continuation of United States economic and financial assistance, while an immediate reexamination is made of the situation with respect to each country, is judged by the National Security Council to be most in accord with the security interest of the United States. This course will maintain the strength of the free world to the important degree to which it depends on assistance from the United States originally granted with that object in view. This course avoids the coercive approach of terminating assistance, whether temporarily or finally, before full examination of each case. No nation can be expected to adopt under pressure another country’s controls even when it is in accord with the general objective of those controls. This course avoids the kind of action which could force some nations to a determined neutrality and might force others to adopt such a course as an alternative to their present cooperation. It offers the opportunity to achieve those additional results in respect to controls on trade with the Soviet bloc which are desired. It is our intention vigorously to seek the establishment of additional controls. We believe we can be successful in this regard.
iv. determination
11. The National Security Council, in view of the foregoing considerations, determines that it would be to the security interest of the United States to make a general interim exception from the provisions of Section 1302 for all countries now receiving economic and financial assistance from the United States. This interim exception will be superseded as rapidly as possible by determinations of the National Security Council in respect to specific countries or areas in the light of the most recent information concerning their position.
v. instructions
12. The National Security Council notes that the responsible executive departments and agencies of the U.S. Government have agreed to continue and intensify their efforts toward the correction of existing deficiencies in the controls of countries receiving United States economic or financial assistance over exports of strategic commodities to the Soviet bloc.
13. The National Security Council directs its Special Committee on East-West Trade, with such assistance as may be required from the [Page 1101] departments and agencies concerned, to complete as rapidly as possible the studies needed by the Council to determine:
- a.
- Whether the country concerned has met the requirements of Section 1302 with respect to its controls over trade with the Soviet bloc.
- b.
- Whether, in the absence of compliance with the requirements of
Section 1302:
- (1)
- It is in the security interest of the United States that the interim exception be withdrawn and assistance terminated; or
- (2)
- It is in the security interest of the United States, in the light of all considerations, that assistance be continued and the interim exception replaced by a specific exception.
14. The National Security Council directs its Executive Secretary to declassify and transmit this Council document as the National Security Council’s report to the committees of Congress named in Section 1302.
[Page 1102]- The source text, along with a cover sheet and a note by Executive Secretary Lay, was circulated to members of the National Security Council as NSC 111. Lay’s note explained that the draft report was prepared jointly by the Senior NSC Staff and the Special Committee on East-West Trade and was scheduled for consideration by the Council at its next regularly scheduled meeting on June 13. For information concerning this June 13 meeting, see the editorial note, p. 1108.↩
- Section 1304, Public Law 843. [Footnote in the source text.]↩
- During its 97th Meeting on July 18, the National Security Council agreed to amend Appendix 2 to NSC 111 by removing Canada from its list of countries receiving United States economic or financial assistance. The Council determined that the Export-Import Bank loan under review was made in connection with operations in which the United States had practically the entire interest, thereby resulting in the conclusion that Canada did not receive assistance as contemplated by Section 1302. (Memorandum by Executive Secretary Lay, July 18, S/S–NSC Files, Lot 63 D 351, NSC 111–Kem Amendments.)↩