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

460.509/6–2051

Memorandum by the Deputy Assistant Secretary of State for Economic Affairs (Linder) to the Secretary of State ¹

confidential

[Washington,] June 20, 1951.

Developments Under the Kem Amendment and Program for Future Action

Actions taken to date

The Bill containing the Kem Amendment was signed by the President on June 2, The signature was accompanied by a critical message stating that the sweeping provisions of the Amendment would require the National Security Council to make broad use of the exception provisions (Annex A).²

The list of items which other countries would be required to embargo “under the Kem Amendment as a condition of aid was certified by the Secretary of Defense to the Administrator of the Economic Cooperation Administration on June 5. In his letter Secretary Marshall pointed out that the commodities enumerated on the list varied in their strategic importance in trade to the Soviet bloc and that only a portion of the items have been regarded by this Government as of primary strategic importance.

During the week of June 11 the Department called in the representatives of all foreign countries receiving aid—except Ethiopia, Iran and Syria—and asked them whether their governments could meet the requirements of the Kem Amendment before the deadline of June 18 provided for in the Bill. The foreign representatives were provided with a copy of the Kem Amendment, the President’s message, and a press release issued by the ECA describing in general terms the scope of the embargo list certified by the Secretary of Defense. It was explained that copies of the list were not yet available but would be transmitted as promptly as possible.

The representatives of the following countries indicated that their governments would probably be willing to meet the requirements of the Kem Amendment: Spain, Portugal, Yugoslavia, Iceland, Ireland, Formosa, South Korea, Thailand, Philippines, Israel, Liberia, Costa Rica, Haiti, Honduras, the Dominican Republic and Nicaragua. In expressing this view, however, the representatives of some of the countries, which have been trading with the Soviet bloc, may not have fully appreciated the scope of the lists of items proscribed by the Amendment.

The representatives of the other countries stated either that their governments probably would not be able to certify or that no reply could be given until the list had been received and the matter had been given full consideration by the appropriate governmental authorities.

On June 14 the National Security Council approved a general interim exception under the Kem Amendment which temporarily excepted all countries from the provisions of the Amendment pending an examination of the situation of each country. The National Security Council also made special country exceptions for Norway and Austria. These exceptions were transmitted to the six committees of the Congress referred to in the Kem Amendment and were published by the White House on June 15. A copy of the interim general exception, together with the list certified by the Secretary of Defense, is attached as Annex B.³

Immediately prior to the submission of the NSC exceptions to Congress, Messrs. Thorp, Bissell, Porter and Leddy met with the Subcommittee on Economic and Social Affairs of the Senate Foreign Relations Committee. Senators George, Connally and McMahon were present. Mr. Thorp outlined the general scope of the Kem Amendment, explained the need for exceptions, and described the NSC action in general terms. He also summarized the actions that we have taken with respect to foreign governments so far. The presentation was, on the whole, well received and at the close of the meeting Senator Connally remarked that the Committee wanted to be helpful on this and was fully aware of the necessity for maintaining flexibility in the administration of the Amendment.

Over the weekend following publication of the NSC exceptions Senators Kem, Wherry and Cain issued statements declaring that the action by the NSC was a clear circumvention of the intent of the Kem Amendment. This was disputed by Congressman Cannon, who said that it was the understanding of the House that action of this kind would have to be taken (a similar statement was also made by Senator McKellar who had been chairman of the Conference Committee). He referred to his remarks in the House at the time of passage of the Kem Amendment when he stated that the Amendment would have to be interpreted broadly and administered flexibly. Editorial comment in the Sunday papers on the statements by Kem, Wherry and Cain appeared only in the New York Times and the Washington Post. Both editorials were favorable to the Administration. A very sympathetic article by Felix Belair quoting liberally from the general and specific exceptions appeared in last Saturday’s New York Times.

Program for future action

Our program for future action should consist of three elements: (1) negotiations with other governments, particularly in Western Europe, to achieve a further tightening of East-West trade controls; (2) the development of a public relations program designed to gain wider public understanding of the nature of the East-West trade problem and the deficiencies of the Kem Amendment; and (3) a plan of action to obtain intelligent legislation on this subject.

Negotiations with other governments

The list certified by the Secretary of Defense will be transmitted to other governments this week. Following transmission we should initiate programs in each of the four geographical areas as follows:

• Western Europe. In Western Europe our object should be to obtain agreement by the Western European governments to embargo shipment to the Soviet bloc of all items of primary strategic significance which are also embargoed by the United States and to establish tighter quantitative controls over items of secondary strategic significance. Quantitative controls over items of secondary strategic significance should take the form of (a) the establishment of zero quotas, (b) percentage cutbacks, or (c) agreement not to ship the item concerned except under trade agreements providing a balance of advantage to the West. Such action if taken by the Western European governments would not of course fully satisfy the sweeping provisions of the Kem Amendment. It would, however, make much easier the job of defending the NSC exceptions for each country which will be submitted to the Congress.
• We should also clarify the status of the present Western European embargo on the shipment of arms, ammunition and implements of war. It is believed that there are variations in the coverage of the munitions lists of the various countries and we should try to make all such lists at least as extensive as our own.
• Latin America. About the time the Kem Amendment passed the Congress we instructed our missions in the other American Republics to request the other governments concerned to adopt security export controls completely parallel to our own. This action was taken pursuant to a resolution on economic defense adopted at the recent consultation of American Ministers held in Washington. The institution of extensive export control systems in the other American Republics may take some time. Therefore we should now move promptly to ask the other American Republics to institute selective embargoes on those items of real significance. They have already taken such action in a number of cases (e.g. petroleum, henequen and copper) but additional items should be brought under control promptly. If this is done the security significance of Latin America’s trade with the Soviet bloc will be negligible.
• The Near East and Far East. In these areas separate programs should be formulated for the different countries. In certain cases it will be possible for us to get fairly complete cooperation. In others it will be extremely difficult to do so. Where a reasonable degree of cooperation is not forthcoming serious consideration may have to be given to the termination of economic and financial assistance.

Public relations program

It is understood that Mr. Barrett has been given the responsibility, in cooperation with E, for developing a wider public understanding of the issues involved in the East-West trade problem. Several channels are available for this purpose:

1. The publication of factual materials by the Administration. The preparation of such materials in the Department had already been started before the passage of the Kem Amendment and will be speeded up. Work in this field by the Economic Cooperation Administration would also be useful.

2. Publication of the NSC country exceptions. Interdepartmental arrangements have been made for the drafting of individual country exceptions which should come before the NSC at the rate of three or four a week. Every effort is being made to draft these exceptions in a form that can be published and m a manner which will bring out as fully as possible the reasons why the continuation of aid to the countries concerned is essential in the security interests of the United States even though that country is unable to take the full action envisaged by the Kem Amendment.

3. Congressional hearings. Congressional hearings on East-West trade matters should provide an opportunity for Administration witnesses to hammer home the essential points on which Congressional and public understanding is required. Such hearings are likely to take place in one or more of the six committees to which the NSC exceptions are submitted, in the committees considering the foreign aid bill, and in the Special Subcommittee on East-West Trade of the House Foreign Affairs Committee (the Battle Committee). During these hearings there should be close coordination among the Department, ECA, Commerce and Defense to assure general consistency of Administration testimony.

4. The Committee on the Present Danger, the National Planning Association and the Committee on Economic Development. The Department has already established liaison with the Committee on the Present Danger and the National Planning Association in regard to East-West trade matters. It is hoped that the three organizations will be able to agree on a policy statement regarding the problem and our objectives and on a study in some detail of the facts of the problem. We have agreed to supply the committee staff with all available public material on the subject and selected confidential papers. It is hoped that the committee’s report oil the foreign aid bill will contain statements on East-West trade which will help us in obtaining more favorable legislation.

5. In addition discussions are to be held with various industrialists, several of whom have been called by Ambassador Cowan, and with labor representatives who will be reached through Mr. Berger in Mr. Harriman’s office. The P area will assist in enlisting the support of various public groups.

New legislation

In his message on the Kem Amendment the President urged the Congress to give prompt consideration to the passage of more workable legislation. It is believed that the Battle Bill now being considered by a Special Subcommittee of the House Committee on Foreign Affairs may offer the most promising opportunity to achieve this objective.

The Battle Subcommittee has issued a report on East-West trade which in general is satisfactory. Congressman Battle has provided the Department, ECA, Commerce and Defense with a confidential print of his Bill. While the Battle Bill as it now stands is not adequate and would be worse than the Kem Amendment, we believe from our conversations with Congressman Battle that it can be substantially improved and that Congressman Battle is anxious both to assure Administration support and to get workable legislation.

In its present form the Battle Bill has the following deficiencies:

(a) The embargo list, while shorter than the Kem list, is still too long and would cover many items not of primary strategic significance.

(b) No provision is made for exceptions. Failure of a foreign country to embargo each and every item in the Battle Bill would require termination of aid.

(c) Power to terminate aid would be given to a subordinate officer of the Government rather than to the President.

(d) The United States would be required to propose in the United Nations an embargo against the Soviet bloc similar to that now being worked out for Communist China. This would put us in the position of naming the USSR as an aggressor.

The Battle Bill also provides for the termination of military as well as economic aid, and unless the defects cited above are remedied this provision would be most dangerous. However we are reasonably certain of reaching a satisfactory agreement with Congressman Battle with points (a) and (d), above, and believe we can convince him of the necessity for modifying the mandatory requirement cited in point (b).

The Department, ECA, Commerce and Defense have agreed on a revised version of the Battle Bill (Annex C).⁴ This revised draft was handed informally to a member of Mr. Battle’s staff June 19. The four agencies will send letters of comment to Chairman Richards today which will indicate the specific points which require revision in the view of the Administration but will not formally submit the textual changes. It is our belief that Mr. Battle would prefer to have these changes originate with the Subcommittee rather than with the Administration.

It is possible that as a result of the statements by Senators Kem, Wherry and Cain an effort will be made to eliminate the exception provisions of the Kem Amendment in connection with additional supplemental appropriation bills. We should be prepared for this eventuality while continuing to work on permanent legislation with the Battle Subcommittee.

1. Drafted by Leddy.
2. Not printed.
3. Not printed.
4. Not printed.