Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 2

460.509/2–1653

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

confidential

[Washington,] February 16, 1953.

• Subject:
• Departmental Policy on Non-Strategic Trade with the Soviet Bloc

From time to time in recent months, the question has arisen whether the United States should take action to prevent the consummation of the sale by another friendly country to the Soviet bloc of such products as high-grade iron ore, zinc, and cotton. Because these problems can originate in any geographical area and because it is desirable that a consistent course should be followed in their handling, it seemed to me that it might be useful to review in this circular memorandum the relevant policies involved.

1. The general approach to East-West trade.

Our general approach in the control of East-West trade, as laid down in appropriate NSC directives, is to develop a system of selective controls on the export of strategic items to the Soviet bloc. For a variety of reasons, we are not seeking a total embargo on East-West trade. We do not seek to curtail non-strategic trade, nor do we seek to prevent the consummation of transactions involving certain kinds of strategic goods, where the net advantage in the transaction lies with the West. Some of the reasons for our policies are psychological, some economic; in any event, the present policy is clearly confined to the selective approach of preventing or restricting the movement of strategic commodities. This leads to a number of questions.

2. Is the proposed export “strategic” or “non-strategic”?

Under the Battle Act, the Executive Branch is charged with the responsibility of developing with other friendly countries cooperative programs to control the trade of strategic goods with the Soviet bloc. The first problem, therefore, is to define the word “strategic” in this context. For this purpose, certain lists have been prepared. The first are lists of commodities of primary strategic importance, which have been prepared in connection with the administration of Title I of the Battle Act (Title I Lists, Categories A and B). In all circumstances, we seek to prevent the shipment of goods on these lists to the Soviet bloc.

The next gradation of strategic goods is the category of so-called “secondary strategic items”. This category is covered by the United States Security Lists IA, II and IIB, which are published by the Department of Commerce. These products are distinguished from primary strategic commodities chiefly by the fact that shipments of products in this category are considered to have strategic significance only when they exceed certain amounts. With respect to these secondary strategic items, the United States Government believes that exports to the Soviet bloc should be very carefully controlled to ensure with respect to some items that the amounts shipped are not large, and to ensure with respect to others that transactions will only be made where the transaction involved results in a net advantage to the West. The question whether a “net advantage” derives to the West has to be judged on its merits in individual cases; the type and quantity of goods the West might receive in return would be particularly important in this judgment.

3. Is the volume of non-strategic trade so great as to become dangerous in a strategic sense?

If the goods being considered for export to the Soviet bloc are not of primary or secondary strategic importance, the United States does not, ordinarily, try to interpose an obstacle on security grounds to their export by other friendly countries. But this conclusion is qualified in a number of ways. There is a risk that friendly nations may develop such close economic ties with the Soviet bloc in the marketing of their non-strategic commodities and in obtaining materials essential for their economies that the trade poses a security problem for the free world.

This is the case, of course, because once these trade channels are established, a threat by the Soviet bloc to interrupt such trade can force a friendly country to yield to Soviet bloc demands for shipment of strategic items, to accept political decisions or do. [sic] Accordingly, even where the export of non-strategic goods to the Soviet bloc is involved, a judgment may at times have to be made whether the trade is so large and prospectively so long-run in its nature as to raise the possibility of a serious threat of this kind. In most cases, this will probably prove not to be the case; but there may be instances, such as the recent Finnish-Soviet trade agreements, which raise concerns of this kind.

4. Is other non-strategic trade desirable?

There are situations, of course, in which the United States might object to the export of products to the Soviet bloc, on grounds other than strategic grounds; for example, when the product concerned, though not “strategic” in the usual sense, is nevertheless in short supply in the free world. We would be particularly likely to interpose objections in such situations if the free world supplier had been aided by the United States in the development of his production, either by financial aid, by priority assistance, or otherwise.

Apart from situations of this sort, however, our policy has not been to discourage non-strategic trade. There is, in fact, considerable danger in following any other course. Any other course involves many risks; in alienating friendly countries; in jeopardizing the supply of needed materials now obtained from the Soviet bloc by some friendly countries; and in opening us to the propaganda charge from Communist quarters that we are against the peaceful development of the world economy and in favor of economic warfare. This is a charge which the Soviet bloc has been able to exploit with some success in the past; we must by all means attempt to avoid vulnerability to the charge in the future.

Our vulnerability to the charge is greatest with respect to non-strategic products on which we maintain high tariffs or quantitative restrictions of any kind. On such products, in particular, it is dangerous to urge the termination of trade with the Soviet bloc while denying friendly countries alternative opportunities to sell their products here.

1. This memorandum, drafted by Raymond Vernon of the Office of Economic Defense and Trade Policy, was also sent to Thomas C. Mann, the Deputy Assistant Secretary of State for Inter-American Affairs; John M. Allison, the Assistant Secretary of State for Far Eastern Affairs; Henry A. Byroade, the Assistant Secretary of State for Near Eastern, South Asian, and African Affairs; and James W. Riddleberger, the Director of the Bureau of German Affairs.