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

460.509/2–1554

Paper Prepared for the NSC Planning Board by the Economic Defense Advisory Committee and the Advisory Committee on Export Policy¹

confidential

[Washington, undated.]

The Randall Commission Report re East-West Trade²

Summary of the Section on East-West Trade

1. In response to the Planning Board request the following comments are submitted informally from EDAC/ACEP on the East-West trade sections of the Randall Commission Report. These comments should be considered as in addition to, and not in lieu of, the separate comments and recommendations requested by the President from the individual agencies.

2. The report specifically recommends:

a) “First, the present ban on exports by the United States to Communist China and North Korea and our efforts to secure similar action by others must continue until the present threats to our security and that of other free nations in those areas have been removed.”

b) “Secondly, our present efforts to prevent exports to the European-Soviet bloc that might contribute to its military strength must continue until genuine peace is assured.”

c) “The Commission therefore recommends that, so far as it can be done without jeopardizing military security, and subject to the embargo on Communist China and North Korea, the United States acquiesce in more trade in peaceful goods between Western Europe and the Soviet bloc.”

The report notes further:

d) “Over and above these two categories of shipments there lies a possible area of trade between the East and the West in Europe in commodities which do not strengthen the forces of military aggression, a trade from which net advantage might accrue to the West.”

e) “For many generations there has existed a broad historic pattern of trade in Central Europe that served to support the economies of countries that are now our allies. …³ Since the unmasking of Soviet designs against Western civilization, in conjunction with other free nations we have sought to restrict that trade. This weakened the economies of friendly countries and increased their need for our aid.^*

f) “When we terminate that aid there is grave question as to whether we should attempt longer to prevent such friendly nations from availing themselves of their normal and historic trade pattern.”^*

g) “It may well be, moreover, that more trade in goods for peaceful purposes would in itself serve to penetrate the Iron Curtain and advance the day when normal relationships with the peoples of Eastern Europe may be resumed.”

discussion

3. With regard to the first recommendation, the statement regarding the ban on exports to Communist China and North Korea does not coincide with the presently stated U.S. policy in one respect wherein it is stated “our efforts to secure similar actions by others must continue.”

4. It is the present position of the U.S. with respect to other free countries’ trade with Communist China that current levels of strategic trade controls, which are much more stringent than the system in effect against the Soviet bloc in Europe, should be maintained. Most of the other major trading countries of the free world have not been able, for reasons they hold to be valid, to accept the total embargo position of the U.S. and present policy, in recognition of the anticipated increase in pressure for relaxation of present strategic controls on the part of free world countries, directs that we “continue intensified efforts to persuade our allies to refrain from relaxing their controls.”

5. The Commission further recommends that without jeopardizing military security and subject to the embargo on Communist China and North Korea, the U.S. “acquiesce” in more trade in peaceful goods between Western Europe and the Soviet bloc. This recommendation is in line with present U.S. policy but the use of the word “acquiesce” implies that we should not object to other countries engaging in trade which we ourselves are committed to forego. The fact is that, policy-wise at least, we are in no sense committed to forego non-strategic trade with the European Soviet bloc. Quite the contrary, several recent statements of U.S. policy by top level officials have emphasized our willingness to trade in non-strategic goods. The word “acquiesce” also implies incorrectly that the United States has not already indicated that it does not object to more “trade in peaceful goods.”

6. It is not believed that strategic restrictions of the friendly nations on East-West trade have “weakened the economies of friendly governments and increased their need for our aid”, as stated in the Commission Report. The strategic controls may have had a cost to the free world countries from a balance-of-payments point of view, however, it is doubtful that the magnitude of any such costs could be said to have had a weakening effect on Western countries or to have increased their need for our aid. It has been the change in the traditional pattern of trade largely induced by Soviet policies which has had in the past an effect on the balance of payments and the aid requirements of the Western countries.

7. Another statement is made to the effect that “when we terminate … aid there is a grave question … whether we should attempt longer to prevent friendly nations from availing themselves of their normal and historic trade pattern.” This arises from a misconception of what has been occuring in the over-all trade picture with the Soviet bloc since World War II. The process of rapid industrialization, collectivization and a sustained policy of seeking self-sufficiency on the part of the Soviets has been the major determining factor in altering the normal and historic trade pattern with the West. The report appears to leave the impression that it is possible for this pattern to be revived by actions on the part of the Western countries. In our view the economic conditions do not currently exist, nor will Soviet policy allow, a reinstitution of the traditional trade pattern.

8. Regarding the statements or dissents on the report, the first statement by Mr. Parker, Mr. Whitney, et al., gives rise to the mistaken impression that acquiescense by the U.S. in non-strategic trade with the Soviet bloc will establish a basis to reduce or terminate our aid. We believe these results would not follow. On the other hand valid reasons recognized by existing U.S. economic defense policy do exist for the U.S. continuing to interpose no objection to trade in non-strategic goods.

9. In this connection, the dissent of Mr. McDonald (page 77) contains within it a significant acknowledgment that there is a definite relationship between U.S. trade policy generally and the particular problem of East-West trade. Mr. McDonald has phrased the situation as follows: “Under these circumstances, it is unwise for the U.S. to frown upon trade between Western Europe and the countries in the Soviet bloc while, at the same time, failing to take adequate steps to facilitate increased trade between Western Europe and the U.S.” These observations, though valid, were in the context of a dissent which took as its thesis that increased trade with the U.S. was a means for bringing about a total embargo with the Soviet bloc, an objective not in accordance with existing U.S. policy.

1. The source text was one of several papers attached to a memorandum of Feb. 15, 1954, by Hope to Drumright. Hope’s memorandum indicated that the paper had been transmitted to the NSC Planning Board during the week of Feb. 9 to form part of the material upon which a reevaluation of NSC policy on East-West trade controls would be based.
2. For documentation concerning the Randall Commission report, see pp. 49 ff. Concerning the East-West trade portions of the report, see the memorandum by Fleming, Dec. 15, 1953, p. 1066.
3. Ellipses throughout in the source text.
4. Underlining supplied. [Footnote in the source text. Printed here as italics.]
5. Underlining supplied. [Footnote in the source text. Printed here as italics.]