460.509/8–452: Circular airgram
The Acting Secretary of State to Certain Diplomatic and Consular Offices1
U.S. East-West Trade Policy
Excon. The following telegram from the American Ambassador at Moscow2 is being repeated to certain posts as of interest to Chiefs of Mission and to officers concerned with the Economic Defense Program.
“When I met with Draper on my way to Moscow he asked me to bear in mind particularly here our east-west trade problems and to let him have any views I might be able to form on effectiveness and suitability of present program. In light of this I thought fol gen observations might be of interest to Dept and to him:
1. Answer to these questions depends in my opinion primarily on basic policy determination which I gather has not yet been made in manner commanding support of our govt as whole.
If basic purpose our policy in problems of trade with Commie areas is maximum restriction on exports which cld be expected to assist development of Commie milit potential, and if such things as desirability of maximum fon trade equilibrium on part of our allies and rapid emergence of those allies from econ dependence on us are regarded as secondary—if, in other words, we are prepared to make up by US aid whatever econ losses may occur to our allies by foregoing trade with Commies and to accept whatever other polit and other consequences may flow from such renunciation on their part, and if our allies are in agrmt with these propositions—then I wld say there is no valid reason in principle for us or our allies not to reduce trade with Commie areas to absolute minimum. Commie leaders are not, as a rule, going to import anything they do not feel will promote their gen purpose. Achievement of econ autarchy within Commie bloc and of maximum milit potential are prominent components of this purpose. They have no interest in trade for its own sake. This means there are not likely to be any form of imports to Commie area acceptable to Commie polit authorities which will not serve to promote developments politically and militarily disadvantageous to ourselves. Not only this, but Sov leaders will never hesitate, if it proves to their advantage, to exploit polit any econ ties with private interests in non-Commie world upon which those private interests may have become seriously dependent and thru which polit pressures can thus be brought on non-Commie govts. There are real dangers in any fon trade rels with [Page 865] Commie area which produce important chronic or habitual dependence of fon firms on Commie orders or sources of supply. For these reasons, if effects of renunciation of E-W trade on our allies are secondary consideration, I cld only recommend sharpest restriction of all trade with Commie area.
On other hand, if we are giving first priority to unity and prosperity of non-Commie world, on theory that development of non-Commie potential is more important than destruction of Commie potential, and if transactions with Commie countries are to be looked at from standpoint of what they bring us as well as what they cost us—in other words, if what we are concerned with is net balance of our econ transactions with Commie world and not just what flows from us to them—then we have entirely different problem and one to which there can be, in my opinion, no generic solution. In this case, each trade agrmt or major transaction with Commie area wld have to be studied on its merits and a careful balance cast up as between likely benefit and detriment to free world. In this case it wld be extremely difficult to try to handle problems of E-W trade effectively on basis of any fixed norms such as those provided by natl legislation, internationally agreed lists, etc. Problem cld be effectively handled in these circumstances, only by flexible internatl authority with executive rather than advisory authority capable of working rapidly and quietly, examining each sitn on its merits, and having its decisions respected and promptly implemented by various Western govts concerned.
2. Doubt there is any important problem on path of increase in Sov and satellite industrial and milit power that Commie authorities will not be able to solve even in absence of all trade with non-Commie countries, but think their timetable of achievement may be appreciably affected by whether they are able to break specific bottlenecks thru prompt importations of high quality goods, particularly capital goods, readily available abroad or whether they have to wait until they are able to put such goods into effective production within their area. Problem of E-W trade, from their standpoint, is therefore probably rather one of timing than of any decisive effect on ultimate results of their industrial and milit effort. But timing may be of high importance.
3. I have no desire to see us expedite tempo of Commie milit industrialization and have misgivings, running back over more than 20 years of experience, about seeing non-Commie businessmen involve themselves in any unnecessarily extensive and habitual business ties with Commie trade monopolies. But my personal view has always been that morale and econ soundness of non-Commie world constitutes our safest and most hopeful objective, and that if we have to pay price for that soundness in form of certain amount of carefully restricted and guarded trade with Commie area, we shld look at it that way and concentrate only on making sure that price we pay is not too high. Kennan”