Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 1

Eisenhower Library, Whitman file

Memorandum of Discussion at the 191st Meeting of the National Security Council on Thursday, April 1, 1954

top secret
eyes only

April 1, 1954

The following were present at the 191st meeting of the Council: The President of the United States, presiding; the Vice President of the United States; the Secretary of State; the Secretary of Defense; the Director, Foreign Operations Administration; and the Director, Office of Defense Mobilization. Also present were the Secretary of the Treasury; the Acting Secretary of Agriculture (for Item 1); Mr. Anderson for the Secretary of Commerce (for Items 1 and 6); the Acting Director, Bureau of the Budget; the Chairman, Council of Economic Advisers (for Item 1); the Deputy Secretary of Defense; Mr. Davis, Assistant Secretary of Agriculture (for Items 1 and 6); Mr. Clarence Francis, Special Consultant to the President (for Item 1); Lieut. Everhart, USNR, Department of Defense (for Item 4); the Chairman, Joint Chiefs of Staff; the Acting Director of Central Intelligence; the Assistant to the President; Mr. Cutler, Special Assistant to the President; the Deputy Assistant to the President; the Acting White House Staff Secretary; Mr. Harlow, Administrative Assistant to the President; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.

There follows a summary of the discussion at the meeting, together with the chief points taken.

1. Disposal Abroad of Government-Owned Agricultural Surpluses (NSC 5415)

After Mr. Cutler had briefed the Council on the contents of the Planning Board report,¹ the Acting Director of Central Intelligence stated that CIA had a number of amendments to propose. The first one, in paragraph 2, was designed to correct the impression given by the existing paragraph that the draft report had not considered political and domestic issues but had confined itself to the national security interest involved in the disposal abroad of Government-owned agricultural surpluses. In point of fact, the economic and political considerations had been considered, and this fact should therefore be stated.

After discussion of this and other amendments proposed by CIA, Secretary Humphrey expressed the belief that it would be desirable to trade our surplus butter for almost anything we could get in return from the Soviet bloc. He did not agree that we should confine our trade of butter only to the receipt of urgently needed materials. The President endorsed Secretary Humphrey’s point of view by stating that it would be advantageous to the United States at all times to get non-perishable materials in exchange for surplus perishables. The President went on to state that this would apply to materials in the stockpile even in the event that stockpile objectives had already been reached. Secretary Dulles and Dr. Flemming also expressed agreement with Secretary Humphrey’s view.

It was accordingly suggested that paragraph 5-a-(1) should be amended to indicate that we would dispose of Government-owned surpluses to the USSR in return for any strategic materials and not only for those most urgently needed.

The President then expressed the view that, since the present paper at its outset stated the general rule that disposal abroad of Government-owned agricultural surpluses should be decided on a case-by-case basis, he thought it foolish to vitiate this general rule by a series of specific guidelines set forth in the subsequent paragraphs of the paper.

Mr. Cutler explained to the President that it was essential, before bartering agricultural surpluses with the Soviet bloc, to make sure that such barter did not seriously injure the trade of friendly countries. The President replied that since the materials we received from the Soviet Union would go into our stockpiles, they would be insulated and would consequently do no harm to the trade of our allies. Mr. Cutler then pointed out to the President that the damage might work the other way round, and that if we dumped agricultural surpluses on the Soviet bloc this would deprive some of our allies of their market for these products in the Soviet Union.

Secretary Dulles, using manganese as an illustration, stated that he had assumed that if the United States got non-perishable materials from the Soviet bloc they would promptly be placed in the stockpile. Accordingly, the exchange would not interfere with normal U.S. purchases of manganese from friendly countries.

The President observed that the sensible thing to do was to raise stockpile objectives. We would lose our friends and allies damned fast if we took our butter out into the Atlantic and sank it.

Mr. Francis suggested that the Council not concern itself unduly about surplus butter, since he believed that he had devised a program which would ensure getting rid of the butter without resort to barter proceedings with foreign countries.

Dr. Burns stated his belief that the Planning Board paper had made a valid, if somewhat subtle, distinction between urgently needed strategic materials and other materials which it would be merely desirable for the United States to obtain in exchange for perishables. He likewise endorsed the caution contained in the paper with respect to possible damage to the trade of friendly countries.

Secretary Humphrey, however, reiterated his earlier opinion that he would take anything, even including soft currencies, if we could get rid of perishable agricultural surpluses in the United States. The President likewise emphasized his conviction that the United States could not afford to destroy food under any circumstances.

Secretary Humphrey said that he could not imagine the United States selling butter to the Soviet Union at any price lower than American housewives were obliged to pay for this commodity.

After further discussion, Mr. Francis said that he very much wished to “get into the act”. He pointed out that it was possible to distinguish between various types of perishable agricultural surpluses. Butter was in a rather special category, and he hoped that a plan to sell our surplus butter back to the U.S. people would be successful. He did not believe that if cottonseed oil, for example, were bartered or sold to the Soviet bloc at less than the domestic price, it would cause any great difficulty. The real trouble, said Mr. Francis, was that we were not in a position to sell any of these surplus commodities at the world price, although the law permitted such a sale even though the world price was lower than the domestic price. In point of fact, barriers to such transactions existed among the departments and agencies, chiefly on the ground of the injury such transactions might do to the economies of our allies.

The President inquired who was preventing Mr. Francis from making these sales of surplus agricultural products, and Mr. Francis replied that it was primarily the State Department.

Mr. Cutler pointed out that the Planning Board paper had advised against the sale of these products at less than world prices since we were anxious not to depress the world market for these surplus products.

Secretary Dulles, in turn, defended the State Department point of view by indicating that it was impossible for the United States to hold its coalition together if all our specific actions tended to disrupt the alliance. Nothing that the United States could do to finish off the alliance would be more effective than if it proceeded to indiscriminate dumping of its surplus agricultural commodities. Obviously, therefore, the Planning Board had been right to draw attention to the importance of avoiding damage to the trade of our allies.

Mr. Francis stated his agreement with the point of view expressed by Secretary Dulles and by the Planning Board draft, but indicated his conviction that officials of the several Government departments were not following the general guidance suggested by Secretary Dulles, and had been too cautious in reaching decisons regarding disposal of agricultural surpluses.

Governor Stassen said that the Commodity Credit Corporation was more responsible than the State Department for the failure to move any significant amounts of surplus agricultural commodities, because the CCC insisted on getting what they had paid from all those to whom they proposed to sell the commodities. Governor Stassen also endorsed Secretary Dulles’ position that such transactions should not be permitted to disturb normal market price. While, he said, we should exchange these commodities at the world price to friendly countries, even though the world price were lower than the U.S. domestic price, we should not do this in the case of sales to the Soviet bloc. Sales to the bloc should be no lower than the domestic price.

Secretary Humphrey agreed with Governor Stassen that the sale of surplus agricultural commodities to the Soviets at a lower than U.S. domestic price would create an impossible situation with public opinion.

Secretary Morse stated that he thought that the “case-by-case” basis offered a sufficient guide in the disposal of agricultural surpluses. While he agreed with Secretary Humphrey that we could not exchange butter with the Russians at a lower price than the U.S. domestic price, he saw no reason why we could not sell them cottonseed oil at less than the domestic price.

After further discussion of desirable revision of paragraph 5-a, Mr. Cutler suggested that the problem be left to the individual who had to administer the program for disposing of perishable agricultural commodities, with discretion to make a decision on a case-by-case basis. Secretary Wilson endorsed this view, and stated that he would be perfectly willing to see the administrator make a few mistakes if he could actually get rid of some of these surplus materials. The President was sure that Secretary Wilson had made a good point.

Mr. Cutler then invited the Council’s attention to a proposed revision by CIA of paragraph 5-b, which stated that “The receipt by the Soviet and European satellite peoples of U.S. agricultural surpluses in amounts which are small compared to Soviet bloc production would, in itself, involve no clear security advantage or disadvantage to the United States.” General Cabell explained that while CIA agreed to the general reasoning behind this paragraph, he did not agree that there would be no security disadvantage if the United States bartered even small amounts of certain agricultural commodities which have been publicized by the Soviets in recent weeks as in seriously short supply in the Soviet Union. The President said that as he understood General Cabell, the latter did not wish us to assist the Soviet Union to achieve the success of a Five-Year Plan to overcome deficits in the food supply.

Mr. Cutler explained why the Planning Board had taken its position, and added that if the Council adopted General Cabell’s suggested amendment the result in all probability would be that no agricultural surpluses could be exchanged by the United States with Soviet bloc countries.

Secretary Dulles expressed the opinion that the proposed CIA revision raised a very basic policy issue. The economic plight of the consumer in the Soviet bloc countries was obviously very bad, and there was widespread distress which posed serious problems for the governments, especially in the satellite states. Two different theories were current in the free world with regard to the free world reaction to this situation. One view, endorsed by Sir Winston Churchill, insisted that the interests of peace would be advanced if the free world shipped commodities to the Soviet bloc which would ease the distress of the consumer and make him more content with his fate. The other view held that the interests of peace were more likely to be advanced if the Soviet rulers were increasingly forced to concern themselves with internal problems; they would be so preoccupied with such problems that they would have no time for external adventures. The Planning Board paper, said Secretary Dulles, looking at this issue, had reached the opinion that the amounts of agricultural commodities which we could send to the Soviet Union were so small as to have no effect one way or the other on the main issue.

It was pointed out that even if we disposed of all our surplus butter to the Soviet Union this would only mean one and a half pounds for each Soviet citizen—not enough either to cause a revolution or to make the Soviet citizen more content with his lot.

The President disagreed, and expressed the belief that a pound and a half of butter to each Soviet citizen could have a significant effect. History indicated that revolutions rarely arose in societies which were completely ground down by poverty and hunger. It was when they got a taste of the better things of life that their discontent with their lot flamed into revolt.

Secretary Wilson said that he still did not understand paragraph 5-b, and wished that it be deleted.

The discussion then shifted to paragraph 5-a-(3), which stated that there would be a security advantage to the United States in receiving dollars from the Soviet bloc in exchange for agricultural surpluses so long as such exchange did not result in material injury to the trade of friendly countries. Secretary Humphrey expressed his disapproval of this paragraph, and suggested that exchanges with the Soviet Union should be by barter only and not in terms of dollars.

After further discussion, Mr. Cutler said that as he understood it, the Council desired to revise this paragraph to indicate that if the United States engaged in anything other than barter transactions with the Soviet Union, there must be a very clear and definite advantage to the United States.

The President predicted that we would have to shut our eyes to a lot of leaks of materials from our allies to the Soviet bloc if we were to keep most of these nations as allies. This applied to all phases of East-West trade. He accordingly again recommended the case-by-case basis for decision, and pointed out the futility of insisting to our allies that they decline to trade with the Soviet Union and at the same time insisting that they cannot trade with the United States.

Dr. Flemming inquired whether the President desired him to formulate a new policy statement which would raise stockpile requirements to enable us to take more non-perishable materials in return for perishables. He pointed out that the use of stockpile funds would ease the financial problem of the Commodity Credit Corporation, and that the insulation of the commodities in the stockpile would cause no undue repercussions on world prices. The President replied that of course this was the common sense thing to do.

Secretary Dulles then raised the specific problem of a Brazilian request for U.S. wheat. Since Brazil had played a key role in helping the United States at Caracas, should we not give the Brazilians the wheat they needed in exchange for materials which we might not need very much? At least this would get rid of our wheat and help a good friend. The President replied that if the transaction did not place obstacles in Canada’s path it should be done by all means.

Mr. Francis stated that he was very encouraged at the direction which the Council discussion of the problem had taken, but he hoped that the members of the Council would explain to the officials of their departments the views which they had supported at the meeting. Mr. Francis also endorsed General Cabell’s suggested revision of paragraph 5-b so as to avoid any substantial contribution by the United States to fulfillment of Soviet bloc food programs. It was accordingly agreed to accept General Cabell’s revision of paragraph 5-b.

Mr. Francis then raised the question of what purpose was served by paragraph 3 of the report, which pointed out that “trading on a government-to-government basis is a departure from private enterprise theory, is inconsistent with U.S. commercial policy and practice, and is warranted only where there are overriding advantages.” Mr. Francis questioned whether the issues raised by this paragraph bore any relation to national security considerations, and he felt that it was better for the paper to confine itself to these considerations. Although Mr. Cutler explained why the Planning Board had felt it important to include this paragraph, it was the general view of the Council that it should be stricken.

The National Security Council:

a. Adopted the statement of conclusions contained in NSC 5415, subject to the following changes:

(1) Paragraph 2: In the first sentence, insert “primarily” after “standpoint”, and delete the second sentence.

(2) Delete paragraph 3, and renumber the remaining paragraphs accordingly.

(3) Paragraph 4: In the third line, insert “at not less than world prices” after “dispose”. Delete “and that a ‘soft’ currency, if accepted, would be likely to be useful to the United States.”

(4) Paragraph 5-a: Delete “which should be made at not less. than world prices”.

(5) Paragraph 5-a-(1): Delete the word “direct” in both sentences, and the words “the most urgently” in the first sentence.

(6) Paragraph 5-a-(2): Delete the word “direct” in the first sentence.

(7) Paragraph 5-a-(3): Revise to read as follows:

“(3) In the event of disposal other than by barter as in (1) and (2) above, there must be a clear advantage to the United States and no material injury to the trade of friendly countries.”

(8) Paragraph 5-b: Revise to read as follows:

“b. Although the receipt by the Soviet and European satellite peoples of United States agricultural surpluses in amounts which are small compared to Soviet bloc production would, in itself, seem to involve no clear security advantage or disadvantage to the United States, it should be recognized that even a marginal contribution to achievement of much-publicized Soviet food programs might be against the United States security interest.”

b. Noted that the Director, Office of Defense Mobilization, would develop for consideration by the President a policy statement which would authorize increases in stockpile objectives to assist in the disposal abroad of Government-owned agricultural surpluses where there is a clear advantage to the United States.

Note: NSC 5415, as amended, approved by the President as guidance, from the standpoint primarily of national security, for all executive departments and agencies concerned with the disposal abroad of Government-owned agricultural surpluses. NSC 5415, as amended and approved, subsequently circulated as NSC 5415/1.

[Here follows discussion of agenda items 2–7: “U.S.–U.K.–France Consultation on East-West Trade,” “Current National Security Policies,” “Significant World Developments Affecting U.S. Security,” “United States Position with Respect to Germany,” “U.S. Policy Towards the Philippines,” and “Congressional Presentation of the Foreign Operations Administration Program.”]

1. Reference is the “Draft Statement of Conclusions”, p. 175.