Eisenhower Library, Eisenhower papers, Whitman file
Memorandum of Discussion at the 188th Meeting of the National Security Council on Thursday, March 11, 19541
eyes only
Present at the 188th Meeting of the Council were: The President of the United States, presiding; the Vice President of the United States; the Acting 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 Attorney General (for Items 2, 3 and 4); the Secretary of Commerce (for Items 5, 6 and 7); Mr. Morrison for the Director, Bureau of the Budget; the Chairman, Atomic Energy Commission (for Items 2, 3 and 4); the Federal Civil Defense Administrator (for Items 2, 3 and 4); the Chairman, Joint Chiefs of Staff; the Director of Central Intelligence; Sherman Adams, the Assistant to the President; Robert Cutler and C. D. Jackson, Special Assistants to the President; Gen. Persons, Deputy Assistant to the President; Walter S. Delany and Kenneth R. Hansen, Foreign Operations Administration; Marshall Smith, Acting Assistant Secretary of Commerce for Internal Affairs; the Executive Secretary, NSC; and the Deputy Executive Secretary, NSC.
There follows a summary of the discussion at the meeting and the main points taken.
[Here follows discussion of significant world developments affecting United States security, the status of United States programs for national security as of December 31, 1953, the release of a sanitized film on Operation Ivy, the conduct of a nationwide civil defense exercise, and the military effect of a relaxation of controls on trade with the Soviet bloc in strategic materials from free world sources.]
6. US–UK Differences on Economic Defense Policy (NSC 152/3;2 Memo for NSC Planning Board from Executive Secretary, same subject, dated March 9, 19543)
Mr. Cutler indicated that according to the agenda the next item for Council consideration involved proposals to amend the statement of policy in NSC 152/3 with respect to the level of controls to be maintained on trade with Communist China. In point of fact, however, the agenda had been disrupted by the receipt of a proposal by the British Government for a drastic cut in the lists of items [Page 1109] subject to control by the nations of the free world in their trade with the Soviet bloc. This proposal was of such a serious nature that it required immediate consideration by the National Security Council. The nature of the British proposal was set forth in Attachment 3 to the reference memorandum. In brief, the British proposed to cut International List I by 50% and virtually to abolish International Lists II and III.
Mr. Cutler then called attention to the Planning Board recommendation that the Council adopt the third of the three possible courses of action which the United States could choose from to meet the British proposal. This course of action involved the despatch of a message from the President to Prime Minister Churchill, to include the points listed in the “Outline of Principal Points to be Made in Personal Communication from the President to Prime Minister Churchill Concerning UK Proposed Revision of East-West Trade Controls” (copy filed in the minutes of the meeting).
At the conclusion of Mr. Cutler’s briefing the President inquired to what extent action of the Executive Branch on this problem was governed by the Battle Act and how much freedom of action the Executive Branch was permitted.
Admiral Delany advised the President that the Executive Branch had wide discretionary power regarding all the items on the controls list except actual military and atomic materials, which were automatically embargoed under the law. Nevertheless, said Admiral Delany, we could not go along with the British proposal and cut International List I in half, without inviting a very serious reaction from the Congress.
Admiral Delany then went on to indicate that the Economic Defense Advisory Committee–Advisory Committee on Export Policy (EDAC–ACEP) had been engaged for many weeks now in reviewing all the items on the control lists on a case-by-case basis in order to see which ones could safely be decontrolled. They had entertained, however, no idea of a percentage cut across the board in any of these lists. The essence of the difference between the U.S. and British positions with respect to items which should be subject to export control, was the U.S. view that a number of strategic items should be subject to control when they contributed indirectly to Soviet war potential, even though such items were not themselves actual munitions of war.
At the conclusion of Admiral Delany’s summary of the differences between the British and the U.S. points of view, the President, with a show of great impatience and exasperation, stated that this country was now trying desperately to bring the nations of the free world into closer concert in order to oppose Soviet imperialism. How could we rationally insist that neither we nor our allies [Page 1110] can sell any of these materials to the Soviets when we in the United States find ourselves weighed down with vast agricultural surpluses and when our allies are told that we are not in a position to buy from them the materials and products which we don’t wish them to sell to the Soviet bloc? The question boils down, therefore, to what we are going to do to our allies over the long term. To make matters worse, this whole difficult question of East-West trade is involved in a climate of emotion and prejudice. So serious and important, concluded the President, was this problem over the next ten or fifteen years, that the United States could not afford to take any short-term view of it.
Governor Stassen replied to the President that if the review of the lists, which was now being carried out by the EDAC–ACEP group on a reasonable basis, could be carried to its conclusion and the British request did not interfere, he was quite sure that the result of the reappraisal would give the President what he felt was necessary without involving too serious repercussions in Congress. But, said Governor Stassen, he was completely convinced that the Soviets were now purchasing from the free world just about everything that they could afford to purchase. The Soviets were obliged to use the resources they had on a very restricted “shopping list”. If the free world suddenly expanded this shopping list, the Soviets would not actually buy very much more than they are now buying. Instead, they would use their restricted resources to select and purchase from the expanded shopping list precisely what they most needed to develop their war potential. This, said Governor Stassen, presents us with a very serious problem. While we may be obliged to make certain concessions to our allies and expand our present tight shopping list more than we regard as wise, we certainly ought to continue to try to restrict this list in view of the fact that there will be very little net advantage to the free world in its indiscriminate expansion.
The President commented that all this sounded very good in theory, but he would like to see it tested in practice. The position of the Council, continued the President, seemed to him very different when it studied the other side of the coin. For example, when we were discussing the problem of Indonesia it was the view of many members of the Council that the United States should not buy the rubber and tin which formed the basis of the Indonesian economy. But we nevertheless insist that Indonesia continue to act as an ally. This was completely unreasonable, and some kind of a modus vivendi must be devised if we were not to lose all of our allies.
Governor Stassen reassured the President that it would be possible to find such a modus vivendi. Obviously, the United States [Page 1111] would have to continue to purchase certain raw materials which we did not need for our stockpiles. But Governor Stassen again expressed doubt whether, in order to save our allies, it was really necessary to widen the shopping list for East-West trade to the extreme point advocated in the UK proposal.
After a brief exchange of views on the purchase of raw materials by the United States, between Governor Stassen and Secretary Humphrey, Mr. Cutler suggested that before the Council got down to a detailed discussion of the problem, there were three or four background views which should be presented. The first of these was the intelligence appraisal of the problem, which Mr. Cutler invited Mr. Dulles to provide the Council.
Mr. Dulles said initially that there was one important point which must not escape the Council’s attention. If we opened up trade with the Soviet Union we automatically opened it up with Communist China, since the Soviets would undoubtedly resell to China strategic materials which it had itself purchased from the free world countries.
Mr. Dulles then read various paragraphs from a CIA estimate on the effects of the proposed relaxation of controls, both on the Soviet economy and on the economies of the free world nations.4 He concluded that there would be no substantial advantage to be gained by the free world from the proposed relaxation, but on the other hand, the over-all effect of the relaxation on the Soviet economy would not be very significant except in a certain limited number of key strategic items. In the latter case, ability to purchase these items would break certain bottlenecks in the development of Soviet war potential.
Mr. Cutler then called on the Acting Secretary of State for his views. Secretary Smith said that he was now convinced that the economic lever was the most powerful weapon the free world possessed in the cold war. He agreed with the point made by Mr. Dulles with regard to Communist China profiting from an increased trade between the Soviet Union and the free nations, and emphasized that the present embargo on Communist China was severely punishing that country and throwing the whole Chinese economy back on the Russians for support.
Secretary Smith affirmed that he did not like any part of the British proposal, not least of all because it would rob us of an important quid pro quo at the forthcoming Geneva Conference. Quite apart from this tactical consideration, Secretary Smith said that the United States should oppose the British proposal because it involved the sale to the Soviet Union of many items of great strategic [Page 1112] importance which he believed it was vital to keep from Russia. There would, of course, also be a very violent public and Congressional reaction. As far as he could see, said Secretary Smith, the British were proposing a horse trade. Accordingly, they have taken the most advanced position possible for bargaining purposes. We could, of course, not afford to reject the British proposal out of hand, as suggested in Alternative 1. The objective, therefore, was to secure a negotiating position which might end up in a decision to cut the list not by 50%, as the British desired, but perhaps at some level between 20 and 25%. In any case, we must try to assure ourselves of some flexibility in our bargaining position, and this was best secured, thought Secretary Smith, by concurrence in the recommendation of the Planning Board for a message to Churchill from the President.
Mr. Cutler then pointed out that the British proposal had caused a violent disagreement in the British Government itself. Essentially the British position was that of the Prime Minister himself, supported by the Treasury and the Board of Trade. The Foreign Office and the Defense Ministry had been opposed to so large a relaxation of the export controls. Mr. Cutler thought it desirable to hear from Admiral Radford on this point.
Admiral Radford stated that for some time the Joint Chiefs had been recommending strongly against any radical revision in the control structure. They were opposed to any material changes in the International Lists. As an example of the danger involved, Admiral Radford cited the proposal by the British to sell a 50-kilowatt television transmitter to the Soviets. This proposal had been made under the present control system. The technical know-how which the Russians could derive from the purchase of such a transmitter would be enormous, and such transmitters could be readily adapted to the jamming of free world communications in the event of war. So concerned were the Joint Chiefs of Staff about this item that they were about to send a message to the British Chiefs of Staff pleading with them to use all possible influence to prevent the transaction.
Secretary Smith interrupted to say that the State Department had entered a formal protest with the British Government regarding this sale.
Since, said Admiral Radford, it was possible to send items like this to the Soviet Union under existing controls, the Council could imagine how concerned the Joint Chiefs of Staff were at the prospective relaxation of these controls. Hasty action in connection with Sir Winston’s proposal would be very greatly to our national disadvantage. Admiral Radford concurred in the view that the relaxation of controls would not result in a considerably higher level [Page 1113] of East-West trade, and would do very little to assist the British economy as a whole. On the contrary, the Russians would limit their purchases to the crucial strategic materials which were in short supply.
Mr. Cutler then called on Secretary Weeks, who said that he was in entire accord with the recommendation made by the Planning Board. Indeed, it seemed to him fantastic that the British, who were members of our team, should propose to sell such materials as nickel to the Soviets when these materials were in short supply in the free world. To sum up his position, continued Secretary Weeks, the Council had originally proposed at this meeting to discuss relaxation of trade controls with Communist China. This was, so to speak, a one-alarm fire. The sudden British proposal represented a four-alarm fire in the next block. This was so much more important that Secretary Weeks believed that we should sit down at once to discuss with the British the proposal they had laid before us.
Mr. Cutler then inquired of Secretary Weeks the probable effect of the British proposal on the United States business community. Secretary Weeks replied that the relation of the U.S. business community to the problem of East-West trade was already sufficiently complicated and difficult. This new British proposal would compound the felony in the eyes of American businessmen.
Mr. Cutler then stated that he believed that if the Council would permit him to read the two-page outline of points to be covered in the communication from the President to Prime Minister Churchill, it would be helpful in clarifying the issues before the Council. After completing his reading of these points, Mr. Cutler indicated that the outline covered all the points raised by the Planning Board in its previous discussion of this outline, with three possible exceptions. One, the desirability of suggesting to the British that we sit down with them to assess the new Soviet trade policy. Two, the desirability of emphasizing to the British the wide area of trade possibilities with the Soviet bloc involving non-strategic materials. Three, the possible solution of Britain’s economic problem by developing markets in the free world which would, of course, involve the possibility of lower U.S. tariffs.
Secretary Humphrey said that he now concluded that from the point of view of immediate tactics and immediate U.S. defense requirements, the right thing for the Council to do was to accept the Planning Board’s recommendation that the President address this communication to the Prime Minister. Nevertheless, he expressed the emphatic warning that the attempt to maintain elaborate trade controls on East-West trade over the long haul was as foolish as trying to hold back Niagara Falls.
[Page 1114]When the President had expressed the most emphatic agreement with Secretary Humphrey’s position, the latter went on to suggest the Planning Board alternative as the best short-term action, and thereafter to insist that the National Security Council address itself to a thoroughgoing study of a sensible long-term policy with respect to East-West trade. As a matter of tactics and timing we must separate the long- and the short-term aspects of the problem.
The President said once again that this position was exactly his own. Although he was impressed by Secretary Smith’s argument that to give in to the British would endanger our position at the Geneva Conference, he remained convinced that over the longer period we must move to shorten the list of items subject to export control to the maximum possible extent. Actually, said the President, the issue came down to this: If you hope to preserve the free world as an effective unit against the Soviet bloc, you simply can not stifle the trade of the free world.
Governor Stassen repeated his conviction that the free world alone could make itself self-sufficient in the long term. Austria was a good example. It had been freely predicted at the end of the war that the Austrian economy could never be made viable if that country were cut off from its normal trade with Eastern Europe. Despite all these forebodings, the Austrian economy is in a reasonably healthy condition, notwithstanding the fact that the Austrian trade pattern has been completely changed and reoriented to the West. It was, of course, a strain to make such a readjustment, but the Austrian example proved that it was possible. Hence, said Governor Stassen, he was unable to agree that the problem could not be solved on a long-term basis within the free world countries.
Secretary Wilson expressed the conviction that our trade embargoes and controls had placed very heavy pressure on the Communist bloc. Moreover, he predicted that the increase in trade with Russia in the contingency of a relaxation of these controls would ultimately prove very disappointing. Russia has gone a long way on the course of industrialization, and this in itself had changed forever the old pattern of trade by which Russia supplied raw materials in exchange for manufactured goods from Western Europe. What had happened in recent years was like what had happened between the United States and Great Britain fifty years ago, when American industrialization cost the British so much of their market for industrial products in this country.
Mr. Dulles said that he would concur with Secretary Wilson’s statement that a relaxation of controls, even on so drastic a scale as the British were proposing, would result in only a limited amount of additional trade between Eastern and Western Europe.
[Page 1115]The President, indicating some impatience with this reasoning, said that nevertheless people were going to sell their products wherever they could and wherever they could get the best prices. He was therefore pleading that the United States look at this problem not as something involving the next year or two, but for a very long term. Looked at in this way it was perfectly plain to the President that we could not continue to stifle trade between the East and the West as we were now doing. The President was very emphatic in expressing this conviction, even though he was prepared to admit that at the present moment, and for tactical reasons, we could not agree with the British proposal.
Mr. Cutler then pointed out that the Vice President had come to the meeting at considerable inconvenience in order to express his opinion as to the effect on the Congress of British success for the case they were trying to make. The Planning Board feared that if the British won their case it could well set off a new and very dangerous wave of isolationist sentiment in the Congress. That body might move to cut off all further U.S. assistance to Great Britain.
After a further interval of discussion, the Vice President was finally able to answer Mr. Cutler’s query. He said that he felt it was absolutely vital to induce the British to agree to our counter proposal. If they go it on their own and proceed to make the cuts which they envisaged, there would be most serious repercussions in Congress. All the enemies of any kind of East-West trade, all the anti-British elements, and all the anti-UN elements in the Congress would find common ground. We should accordingly take a strong position with the British along the lines of the proposed letter from the President to the Prime Minister. We might even have to make concessions of other types to the British in order to induce them to stay with us on this issue. It would be much easier to induce the Congress to grant such concessions to the British than to agree with the proposals of Prime Minister Churchill.
The National Security Council:
- a.
- Discussed the subject on the basis of the reference memorandum supplemented by oral presentations at the meeting.
- b.
- Recommended to the President that he transmit a personal communication to Prime Minister Churchill generally along the lines proposed by the NSC Planning Board in the “Outline of Principal Points to be Made in Personal Communication from the President to Prime Minister Churchill Concerning U.K. Proposed Revision of East-West Trade Controls”, dated March 10, 1954, and distributed at the meeting; with the inclusion of an additional point suggesting that the US–UK negotiating officials jointly assess the current Soviet trade policy.
- c.
- Agreed that, with the President’s approval, the Department of State in collaboration with other interested agencies should prepare [Page 1116] a draft of such a communication for the President’s consideration.
Note: The actions in b and c above, as approved by the President, subsequently transmitted to the Secretary of State for implementation.
[Here follows discussion of United States and free world controls over transactions with Communist China, United States policy toward Spain, United States psychological strategy based on Thailand, and the law regarding the order of succession to the presidency.]