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

S/S–NSC Files, Lot 63 D 351, NSC 104–Memoranda

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

secret

[Washington,] August 28, 1951.

Subject: Export of Automotive Parts via Denmark for Poland

Problem:

Denmark remains committed under 1949–1950 and 1950–1951 trade agreements to export to Poland $1,342,000 of United States manufactured automotive and light truck parts, which have not been delivered because the United States has not approved necessary export licenses. Poland has made the continued delivery of coal to Denmark directly contingent upon the delivery of automotive spare parts by Denmark. The Danes have requested from the United States approval of a General Motors application for $210,250 currently pending in the Department of Commerce and an assurance that if orders can be placed by Denmark in the United States for the remaining parts, licenses will be granted.

Discussion:

If this case were considered strictly on its economic and strategic merits, it would be clear that the approval of automotive parts by the United States would be in the national interest for the following reasons:

1. Automotive and light truck parts are on neither the international embargo list nor the international quantitative control list. They are on the United States list of items of secondary strategic significance (the United States II B List). Passenger cars and light trucks of 5 tons and under, in which such parts would be used, are not on the international lists nor even on the United States Positive List.

2. These parts are for the servicing of vehicles already in Poland which have reached that country from the General Motors and Ford subsidiaries in Europe. The General Motors Company has stated that the light truck parts in question are not directly interchangeable with spare parts for heavy trucks.

3. The shortage of coal in Western Europe has caused Denmark to be heavily dependent upon Polish coal. Of Denmark’s total coal requirements of 4,200,000 tons for 1951, 2,000,000 tons were scheduled for delivery by Poland, the remainder from the United States, the United Kingdom and other Western sources. As a result of a 50 percent cut in monthly coal deliveries from Poland, there will be a shortfall in Denmark of over 600,000 tons by the end of 1951. There is no prospect of making up this shortfall from the United States or other Western sources prior to the end of the year.

4. Inability of Denmark to provide automotive parts may lead to renewed Polish pressure for delivery of cargo vessels, which are of greater strategic importance than parts and appear on the United States embargo list.

5. The Danes have in the past obtained parts from the United States which were in turn shipped to Poland under agreements for delivery of coal. In 1948 the United States exported $693,271 of replacement parts to Denmark and in 1949, $1,877,076. The Danes entered into their commitment for delivery of parts in the 1950–1951 agreement reluctantly and in the hope that they might be able to avoid delivery of the parts.

6. This case is the type which was provided for in NSC 104/2² (United States Policies and Programs in the Economic Field which may Affect the War Potential of the Soviet Bloc). Paragraph 6 a of NSC 104/2 provides that United States export licenses for Western European countries should be denied “only if the effectiveness of such action in reducing export of the items from the Coordinating Committee country to the Soviet bloc would be of greater significance to the security interests of the United States than the significance of the adverse effects of the denial upon the Coordinating Committee country concerned”. NSC 104/2 provides further that in considering the adverse effects on Western Europe of denial of United States licenses, the United States should consider “the need for strengthening the Western European economy and defense program, and the need for maintaining the cooperation of Western European governments in the common defense effort”.

7. Action to deny parts to Denmark without any prospect of providing substitute supplies of coal would jeopardize continued Danish cooperation in the Paris Coordinating Committee and in the North Atlantic Treaty Organization.

The discussion of this case in the Senior Staff of the National Security Council indicated quite clearly, however, that the crucial consideration is not the economic necessity of Denmark nor the high strategic importance of the automotive parts to Poland. The crucial consideration is the domestic political situation.

Neither the Commerce nor Defense Departments is prepared to permit the export of automotive parts from the United States to Poland via Denmark since the United States would not at present permit the export directly from the United States to Poland of such parts. This attitude of course completely ignores the relative advantage to Denmark resulting from receipt of coal and other products from Poland.

The Defense Department is also apprehensive that public knowledge of the approval of parts in this transaction would reflect unfavorably on the chances of the Battle Bill. However, one of the advantages of the Battle Bill over the Kem Amendment is the recognition of need for flexibility to permit transactions between East and West when there is net advantage to the West.

Thus, the Defense and Commerce Departments believe that discussion of the case in the National Security Council and approval by the President of any action to permit the export of automotive parts to Denmark is necessary prior to action by the Secretary of Commerce.

Recommendation:

It is recommended that the “Conclusion” of the Report³ on Export of Automotive Parts via Denmark for Poland be supported. It is believed that the point to be emphasized in support of this position is the fact that the net advantage in terms of economic benefit and of continued defense cooperation by Denmark favors approval of the transaction, and that NSC 104/2 was intended to provide sufficient licensing flexibility to permit approval of such exceptional cases as this one. It should be made clear that in giving assurance to the Danes of willingness to permit the approval of the full quantity of parts, the Department would emphasize that the Danes should deliver such parts to Poland in the minimum quantities consistent with assuring continued deliveries of coal.⁴

1. Drafted by Wright.
2. April 4, p. 1059.
3. Supra.
4. At the 101st Meeting of the National Security Council on August 29, the report and its recommendation (supra) were presented to the President and the issues involved were discussed. The President decided to authorize the Secretary of State to give the Danish Government assurances regarding the export of automobile parts which it requested and to instruct the Secretary of Commerce to grant the license application for $210,250 and further licenses in the amount of $1,132,000 when and if such applications are made by General Motors or Ford Motors. The Secretaries of Commerce and the Treasury, the Administrator for Economic Cooperation, and the Director of Defense Mobilization joined the Council in their discussion of this subject. (NSC Record of Action 540, August 29; S/S–NSC Files, Lot 66 D 95, Record of Actions–1951)