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 Under Secretary of State (Webb)¹

top secret

[Washington,] September 11, 1951.

Subject: Attached Letter from Mr. Lovett to Mr. Foster:² Export of U.S. Automotive Parts via Denmark for Poland

Problem:

1. Mr. Lovett in his letter of September 6, 1951 to Mr. Foster (Tab A) proposes, in effect, that for domestic political reasons some means be found to make unnecessary implementation of the National Security Council’s decision No. 540 of August 29.³ This decision by the President authorized (a) the Department of State to give assurances to Denmark that the United States was prepared to authorize the export of automotive parts for Danish re-export to Poland in exchange for coal and (b) the Department of Commerce to issue the necessary export licenses. The timing of these actions would be determined jointly by the Secretaries of State and Commerce. The Danes have been informed that this question has been placed on a 24 hour action basis within the government.

2. Senator Kem has received information from an anonymous source regarding the proposed action and has asked the Department of Commerce for a report on the matter.

Discussion:

1. Background information on the Danish auto parts case can be found in the attached memorandum to the Secretary dated August 28, the Report to the Council on the case, and the Record of Action taken by the Council on August 29 (Tab B).⁴

2. As for the merits of the Defense Department proposal, there is no question but that the shipment of U.S. auto parts to Poland with the permission of the United States Government might be exploited as a domestic political issue. At the same time, the solution proposed by Defense is not as simple or satisfactory as would appear on the surface. Among possible complications, the following are especially important:

a. Financing: It is not strictly accurate to say that financing is the only real problem, although it is a major problem. ECA claims that it is not in a position to finance the additional coal which Denmark would require from the United States should deliveries from Poland not be resumed, particularly in view of the recent cut in funds available for economic assistance. Defense has indicated informally, however, that it could finance out of funds available to it the necessary shipments of U.S. coal.

Moreover, it appears that Defense has underestimated the magnitude of the financing problem. Defense in making its financing estimate has dealt with only 670,000 tons ($15 million) for the remainder of 1951 and only 1,200,000 tons ($28 million) for 1952. If deliveries from Poland were not resumed, there would be an amount of 670,000 tons of coal for the remainder of 1951 and 2,670,000 tons of coal ($62 million) for the year 1952 which would have to be supplied by the U.S.

b. Shipping: By giving top priority to shipments of coal to Denmark, it would be possible to make sufficient shipping available to take care of Denmark’s most urgent requirements for coal before winter. However, the diversion of sufficient shipping for this purpose would be at the expense of other equally urgent needs in Western Europe, including shipment of U.S. coal to Austria.

c. Effect on Danish Economy: Failure by the United States to supply the auto parts may result in a complete collapse of the current Danish-Polish trade agreement negotiations; this would have an adverse effect on those industries which have been engaged in exporting to Poland, particularly the textile and manufactured products industries. Alternatively, in order to conclude a new trade agreement with Poland, Denmark may be forced to include delivery of additional cargo vessels which the Soviet bloc is known to desire urgently and which the United States regards as of greater strategic importance than auto parts.

d. Effect on Danish Cooperation in Mutual Defense Effort: Unilateral action by the United States which might result in a serious curtailment of Denmark’s traditional trade with Poland and which thereby might place Denmark in a position of even greater dependence upon grant assistance from the United States would put under further strain Denmark’s delicate relationships to the Paris Coordinating Committee and the NATO. This is especially true in view of our previous insistence that Denmark prevent the export of ships to Poland and our recent successful effort to persuade Denmark to agree to a considerable extension of the International Embargo List and to agree in NATO with the U.S. proposal to embargo shipment to Soviet bloc of raw material in short supply and urgently needed for Western defense purposes.

3. There are other instances in East-West trade negotiations in which from the standpoint of U.S. national security we might wish to replace Polish coal in order to prevent the export of commodities of higher strategic importance than auto parts to the Soviet Bloc. If a maximum effort has been made to meet the Danish case, it might limit our ability to deal with other urgent situations which will continue to arise.

Recommendations:

It is recommended that in any discussion of this problem with Mr. Lovett you take a non-committal position on behalf of the Department pending further exploration of the possibilities by ECA and Defense.

1. Drafted by Coster and Wright.
2. The letter by Lovett was not attached to the source text as Tab A, but see p. 1177.
3. For summary of NSC Action 540, see footnote 4, p. 1176.
4. The three documents referred to here were not attached to the source text as Tab B. For information concerning the NSC Action, see ibid.; for the memorandum to the Secretary of August 28, see p. 1174; and, for the report to the National Security Council, see p. 1169.