S/S Files: Lot 63 D 351: NSC 104
The Executive Secretary of the National Security
Council (Lay) to the National Security Council
secret
Washington, February 12,
1951.
NSC 104
U.S. Policies and Programs in the
Economic Field Which May Affect the War Potential of the Soviet
Bloc
Reference: Memo for NSC
from Executive Secretary, same subject, dated February 12, 19511
The President has referred the enclosed letter by the Secretary of
State2 and its
attached report on the subject for consideration by the National
Security Council of the “Recommendations on Substantive Measures”
contained in Part II–A therein. The Secretary of the Interior, the
Secretary of Agriculture, the Secretary of Commerce, the
[Page 1903]
Economic Cooperation Administrator and
the Director, Bureau of the Budget, are being invited to participate in
consideration of the enclosure by the Council, the Secretary of the
Treasury and the Director of Defense Mobilization.
The President has referred the “Recommendations as to Organization”
contained in Part II–B of the enclosed report to the Director, Bureau of
the Budget for separate consideration.
Also enclosed is a copy of the letter from the President to the Secretary
of State3 requesting the
enclosed report.
The analysis of the “Vulnerability of the Soviet Bloc to Existing and
Tightened Western Economic Controls”, and the analysis of the “Trade of
the Free World with the Soviet Bloc”, referred to in the enclosed letter
by the Secretary of State, are being transmitted separately by the
reference memorandum.
It is recommended that the “Recommendations on Substantive Measures”
contained in Part II–A of the enclosed report, as adopted, be submitted
to the President for consideration with the recommendation that he
approve them and direct their implementation by all appropriate
departments and agencies of the U. S. Government under the coordination
of the Secretary of State.4
[Enclosure 1]
The President to the
Secretary of State
confidential
Washington, December 28,
1950.
My Dear Mr. Secretary: Recent developments
in the international situation require that the United States review
and adjust certain of its policies and programs with respect to its
international economic activities. It is necessary that we now take
such measures as are feasible to prevent the flow to countries
supporting Communist imperialist aggression of those materials,
goods, funds and services which would serve materially to aid their
ability to carry on such aggression. We must enlist the cooperation
and support of other nations in carrying out those measures; and in
securing such support we must stand ready to take such steps as may
be necessary to minimize the economic dependency
[Page 1904]
of cooperating nations upon
Communist imperialist countries. Such objectives must necessarily be
achieved without materially impairing our collateral aim of
increasing the flow, and assuring the sound allocation, of strategic
and critical materials to the free countries of the world.
It is my desire that to the extent that legislation, organization and
funds permit and subject to your advice and concurrence with respect
to foreign policy objectives, all appropriate programs of the
Government now be adjusted and hereafter administered in the light
of the above determinations. I desire that you keep me currently
informed of the actions taken by the various agencies involved in
support of these objectives.
Further, I request that you take the lead in developing
recommendations, for submission to me within the next 30 days, of
additional measures to achieve these purposes. The development of
recommendations will require an analysis to be undertaken by the
Economic Cooperation Administration, with such assistance from other
agencies as it may request, of the economy and trade of Communist
imperialist aggressors as well as the economy and trade of countries
trading with them and the development of specific programs for the
adjustment of those trade patterns.
I am having copies of this letter transmitted to the Secretaries of
Defense, Treasury, Agriculture, Commerce and Interior, to the
Economic Cooperation Administrator, and to the Director of Central
Intelligence with the request that they undertake such studies and
analyses and participate in the development of recommendations as
you may require.
I am also sending copies of this letter to Mr. Harriman5 and to the Director of the Bureau of the
Budget with the request that they work closely with you in the
development of the recommendations, the latter especially on those
which have organizational and budgetary implications.
Sincerely yours,
[Enclosure 2]
The Secretary of State
to the President
secret
Washington, February 10,
1951.
Dear Mr. President: In accordance with
your letter of December 28th concerning U.S. policies and programs
in the economic field which may affect the war potential of the
Soviet bloc, I submit herewith
[Page 1905]
a report containing the recommendations of
the Department of State, together with supporting material setting
forth our conclusions as to the nature of the vulnerability of the
Soviet bloc, the nature of the economic relationships between the
Soviet and non-Soviet worlds, and the implications of alternative
lines of action.
There is appended to the report an analysis of the vulnerability of
the Soviet bloc, prepared in the Department of State on the basis of
its own intelligence reports and of those of the Defense
establishment.* There is also appended an
analysis of the economies and trade of the free world with Soviet
bloc countries, prepared by the Economic Cooperation Administration
with the assistance of the Department of State and other
agencies.*
The report contains a series of substantive recommendations for
immediate action to strengthen our own controls and those of
friendly countries. It also recommends further exploration of a
number of lines of action which there has not yet been time to
consider fully.
As activities in this field require constant review and consideration
and as the possible lines of action are of interest to several
departments and agencies of the Executive branch, it is also
recommended that an interdepartmental Economic Defense Strategy
Board be established for the purpose, among others, of considering
proposed economic defense programs and their relationships to
foreign policy objectives and other foreign operations. If you
concur in this recommendation, it would be desirable for this Board
to be established promptly.
Pending the establishment of any new mechanism, I suggest that the
report be considered by the National Security Council. I believe
this particularly desirable as certain aspects of this subject are
already before the Council.
The pressure of time has made it impracticable for us to seek and
obtain final approval of the report from the other departments and
agencies interested in this subject. We did, however, seek their
comments and suggestions on our preliminary draft and have
endeavored to reflect their views. We have also had the benefits of
the views of the Bureau of the Budget and of Mr. Harriman’s office
in the development of the recommendations.
. . . . . . . . . . . . . .
Sincerely yours,
[Page 1906]
[Attachment]
Report Prepared in the Department of State
secret
[Washington,] February 9,
1951.
Report to the President on U.S. Policies and Programs in the Economic Field
Which May Affect the War Potential of the Soviet Bloc
. . . . . . . . . . . . . .
part ii
recommendations
It is not possible to make final recommendations covering the entire
subject under review without further study and consultation with
other agencies of the Government. However, the following
recommendations are submitted with a view to setting a pattern for
immediate action and establishing machinery for carrying forward the
consideration and development of policies and programs. Because of
the interests of certain other departments and agencies of the
Government in this subject, and because some aspects of it have been
before the National Security Council, it is suggested that these
recommendations be referred to the Council for review and
consideration by it and other appropriate departments and
agencies.
A—Recommendations on Substantive Measures
Export Controls
1. The U.S. Government should, pending further developments in the
U.N., continue to prohibit all exports to communist China, Manchuria
and North Korea, but should apply licensing controls so as to permit
Hong Kong and Macao to procure from U.S. sources imports for local
uses and for transshipment to non-communist destinations.
. . . . . . . . . . . . . .
7. The U.S. Government, in view of the Chinese Communist aggression
in Korea, should press for the application of effective controls on
exports to China. Its efforts through the United Nations should be
directed at achieving agreement on economic sanctions by the maximum
number of countries; if necessary to achieve a wide measure of
agreement, such sanctions may be confined to a list of goods
including atomic energy materials, arms, ammunition and implements
of war, petroleum, and industrial equipment useful in producing war
materials.
. . . . . . . . . . . . . .
