Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

106. Memorandum of Discussion at the 281st Meeting of the National Security Council, Washington, April 5, 1956¹

Washington, April 5, 1956.

[Here follow a paragraph listing the participants at the meeting and discussion of agenda items 1–4.]

5. International Trade, Including Trade Between the Free World and the Soviet Bloc

Apropos of Indonesian purchases of rice from Burma and Thailand, the President said he wished to make a comment, part of which would be familiar to the National Security Council. He went on to point out that the United States takes the position that it will not trade with the Soviet bloc. Having taken such position, we proceed to dispose of our agricultural surpluses to countries which have normally been the markets for countries friendly to the United States. This course of action worsens the situation.

Secretary Dulles pointed out to the President that we did not supply a country like Indonesia with our surplus rice until Indonesia had already purchased its “normal quota” from traditional suppliers like Burma. The President added that in any case our disposal of agricultural surpluses should not be permitted to trouble the normal trade relationships between countries friendly to us. Secretary Dulles then referred briefly to the difficulties encountered with the Congress in the matter of our large surplus food products, and also pointed out that the Soviets bought the surplus products of underdeveloped countries primarily for political reasons.

At this point the President said he wanted to tell the members of the Council about a recent visit of Bernard Baruch.² Baruch had come to see him, said the President, primarily to challenge us on the whole program for the development of our missiles. When the President had completely satisfied Baruch as to the extent of the Administration’s program, Baruch had suddenly switched the conversation to this matter of world trade. He had expressed the opinion that the world would be much better off if the United States completely removed all of its existing barriers to trade. The President said that this was such a complete reversal of Baruch’s previous views on this subject that he had been absolutely astonished. Nevertheless, continued the President, the National Security Council was well aware of his own opinion that, in the matter of setting up so many barriers to the free flow of trade, the United States was in point of fact cutting off its nose to spite its face.

When the President had finished, Secretary Dulles said that the President’s remarks brought to mind a matter which he had spoken about in the Council some weeks ago. He referred to his suggestion at that time that the United States might cause a great deal of difficulty to the Soviet Union if it were suddenly to offer to Czechoslovakia a large amount of surplus U.S. agricultural commodities. So far as he knew, continued Secretary Dulles, nothing had ever come of this suggestion, and he presumed that it was buried somewhere in the depths of the government bureaucracy.

The President said that Secretary Dulles’ complaint reminded him of the irritation of General Persons, who had unburdened himself to the President very recently. General Persons’ conviction was that while Administration officials down to the Assistant Secretary level were loyal and reliable, there were below this level a number of career officers who defeat and frustrate the policy recommendations of their superiors. These people were often in quasi executive positions, and General Persons said he had a list of the offenders which he would be discussing with the heads of the Executive departments and agencies.

Reverting to the previous subject, the President then qualified his statement urging the removal by the United States of all trade restrictions. He admitted that not all restrictions could be removed, but the United States should nevertheless do everything that it could, for example, to encourage Japanese trade with Japan’s neighbors, including Communist China.

Secretary Wilson said that of course in Defense we were “a little emotional” on this matter of East-West trade. He had come, he said, to feel that there were only two really tenable positions to take on U.S. trade with the Soviet bloc. Either we should not trade with the Soviet bloc at all, or else we should adopt a fairly liberal trade policy with the bloc. The middle ground of juggling lists of controlled items was very difficult. Secretary Wilson added that of course he meant that we should continue to embargo the sale of arms and armaments to the Communist nations. What particularly worried him at the moment was the amount of copper and of electronics machinery which was reaching the Soviet bloc from the West.

The President wondered whether it would not be useful to decontrol everything except perhaps such vital commodities as copper and a few others. Admiral Radford pointed out that at the present time the U.S. list of controlled items for trade with the Soviet bloc contained nothing but strategic materials. For example, all non-strategic goods were flowing between Japan and her neighbors. Our pressures on Japan were not restricting the exchange of consumers goods.

Secretary Wilson reiterated that he was “burned up” by the trade our allies were conducting with the Soviet bloc in copper and electronics machinery. He advocated that the United States should concentrate its efforts on preventing such sales to the Communist nations.

The President then turned to Mr. Allen Dulles and inquired whether the Central Intelligence Agency kept itself regularly informed on the flow of trade throughout the world. Mr. Dulles replied that the CIA did keep careful track of the trade of the Soviet bloc, but that responsibility for tracing the flow of free world trade belonged to the Departments of State and Commerce. The President thereupon asked Mr. Dulles whether, in conjunction with State and Commerce, he could provide the National Security Council with a 20-minute presentation on the general flow of world trade, both trade among the free world nations and between the free world and the Soviet bloc.

Secretary Wilson referred to the fact that the President frequently asked the question of what the United States received in return for the products and economic assistance which it gave to friendly nations. For example, said Secretary Wilson, what specifically does the United States receive in return for the $97 million worth of surplus agricultural commodities which we were providing to Indonesia as indicated by the current Progress Report?³

Secretary Humphrey undertook to answer Secretary Wilson. He stated that in return for the $97 million worth of commodities the United States received soft Indonesian currency, which we proceeded to give back to the Indonesians to assist their economic development programs. Secretary Humphrey went on to point out that the Secretary of Agriculture was desperately searching for places all over the world in which he could dump our agricultural surpluses without actually hurting anybody in the process. This was an impossible objective. One could not dump these surpluses without doing some degree of injury to somebody.

Secretary Wilson then raised the question as to whether it would not be advantageous to approach the British with the suggestion that we store in Great Britain a certain amount of our surplus food products. In the event of a future war the British people might very well starve if the sea routes were not kept open. It would accordingly be advantageous, both to them and to us, to have food reserves stored in the United Kingdom.

Mr. Lay pointed out that the study of the levels of trade between the free world and Communist China, undertaken by the Council on Foreign Economic Policy, was about ready for Council consideration. He suggested that this report be considered on April 19 together with the new report which the President had just asked Mr. Dulles to make. The President suggested that these two reports be put together.

At this point Secretary Dulles once again inquired about the fate of his proposal that we offer the Czechs a large amount of our surplus agricultural commodities. Mr. Allen Dulles replied that this suggestion had not been ignored, but had been considered by the Operations Coordinating Board at a recent meeting. At the time of this consideration the Attorney General had provided an opinion that it would be contrary to the provisions of Public Law 480 for the United States to dispose of agricultural surpluses behind the Iron Curtain.

The President then adverted to the fact that many of the restrictive laws on trade with the Soviet bloc countries had been passed when the country was in a state of hysteria and when the McCarthy problem was at its height. Now that this hysteria had lessened, the President wondered if it would not be sensible to take a fresh look at the wisdom of this restrictive legislation. Secretary Dulles said that he would confine himself to pointing out that it was “ridiculous” for the United States to have a vast pile of economic ammunition, in the shape of surplus food and agricultural products, which we could use against the Soviets but which in fact all we are doing is sitting on. The President expressed emphatic agreement with this observation, and Secretary Dulles went on to point out that the Soviets raise hell with us by their purchase of surpluses from the underdeveloped countries. Why could we not raise hell with the Soviets by offering to dispose of some of our surpluses within the Soviet bloc?

The President then referred once again to his favorite project of making West Berlin a showcase by sending to it a lot of our surplus food, so that the West Berliners would be the sleekest and best-fed people in Europe. The President recalled that somewhere or other he had had a report on this subject, and the report had said that the West Berliners were already very adequately fed.

Dr. Flemming speculated as to whether the time had not come to revive one of the President’s favorite ideas, namely, that the United States should get itself in the position of being able to barter its agricultural surpluses behind the Iron Curtain in return for strategic materials. At the moment, of course, we were completely blocked from this course of action by the provisions in Public Law 480.

Secretary Wilson was inclined to doubt whether the Soviets would barter strategic materials in return for our surplus agricultural products. Admiral Radford warned that if we thus developed trade with the Soviet bloc nations, our allies could well ask us why we were attempting to keep down their own trade with the Soviet bloc.

The President said that in any case he was convinced that the Administration had been much too concerned with what Congress thought about the problem of trade with the Soviet bloc. After all, Congress was primarily moved by political considerations. There was need, therefore, for a new look at the problem of East-West trade generally.

The Executive Secretary suggested that the President might wish to ask the Operations Coordinating Board for a report as to existing legal authority for the United States to trade with Iron Curtain countries and to dispose of agricultural surpluses in these countries. The President replied that he wanted this subject dealt with in the reports from Mr. Dodge and Mr. Dulles scheduled now for the Council meeting on April 19. He wanted all of this put together in one package, together with charts and maps.

Secretary Dulles expressed the wish that the Attorney General review his opinion (referred to earlier) as to the legal authority of the United States to sell or trade its surpluses behind the Iron Curtain.

The National Security Council:⁴

a. Requested the Director of Central Intelligence, in collaboration with the Departments of State and Commerce, to present a report at the Council meeting scheduled for April 19, showing the pattern of international trade, particularly trade between the free world and the Soviet bloc.

b. Requested the Attorney General to present, at the Council meeting scheduled for April 19, a report on the extent to which the Executive Branch, under existing law, has authority to dispose of surplus agricultural commodities to the Soviet bloc.

c. Noted the President’s request that the Chairman, Council on Foreign Economic Policy, coordinate the presentation of the above reports with the presentation of the forthcoming CFEP report on multilateral controls on trade with Communist China, which is also scheduled for consideration on April 19.

Note: The above actions, as approved by the President, subsequently transmitted to the Director of Central Intelligence, the Secretaries of State and Commerce, the Attorney General, and the Chairman, CFEP.

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret. Drafted by Gleason on April 6.
2. Former U.S. Representative on the U.N. Atomic Energy Commission, 1946.
3. Reference to a Progress Report dated March 26, not printed, which was discussed earlier in the meeting.
4. Paragraphs a–c that follow constitute NSC Action No. 1536, approved by the President on April 7. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council, 1956)