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

143. Minutes of the 53d Meeting of the Council on Foreign Economic Policy, Executive Office Building, Washington, February 5, 1957¹

Washington, February 5, 1957

PRESENT

• Clarence B. Randall, Special Assistant to the President—Chairman
• Thorsten V. Kalijarvi, Acting Deputy Under Secretary of State
• W. Randolph Burgess, Under Secretary of the Treasury
• Sinclair Weeks, Secretary of Commerce
• True D. Morse, Under Secretary of Agriculture
• Thomas P. Pike, Special Assistant to the Secretary of Defense
• E. C. Hutchinson, Acting Chief, International Division, Bureau of the Budget
• John B. Hollister, Director, International Cooperation Administration
• Allen W. Dulles, Director, Central Intelligence Agency
• Frederick Winant, Special Assistant, Office of Defense Mobilization
• Robert H. Cutler, Special Assistant to the President for National Security Affairs
• Joseph S. Davis, Member, Council of Economic Advisers
• Gabriel Hauge, Special Assistant to the President
• Paul H. Cullen, Secretary, Council on Foreign Economic Policy, and their assistants

I. The Council approved the minutes of January 31, 1957.

II. CFEP 501—East-West Trade.

The Council on Foreign Economic Policy considered the recommendation of the Economic Defense Advisory Committee for an overall economic defense policy, which was distributed to the Council on January 31, 1957 as CFEP 501/14.

The basis for CFEP action in this matter was the National Security Council request to the CFEP (NSC Action No. 1292e) to review all aspects of the present United States economic defense policy applicable to trade with the Communist bloc and to submit to the NSC appropriate economic defense policy recommendations.

The Council on Foreign Economic Policy adopted the following economic defense policy statement for consideration of the NSC. There was consensus except that the Department of State took no position on paragraph 21.

UNITED STATES ECONOMIC DEFENSE POLICY

General Policy

1. The continued threat to the security of the free world posed by the Sino-Soviet bloc warrants the application against that bloc of such economic defense measures by the U.S. and by the free world as will retard the growth of the war potential of the bloc and reduce its unity. Our attitude and program must be one which will not increase the possibility of war, but rather one which will keep open paths which might lead to a sounder basis for peace. During this period, the courses we take should be based upon the assumption that interference in the trade between the free world and the Sino-Soviet bloc should take place only where a clear advantage to the free world would accrue from such interference. They should also be based upon the assumption that the maintenance of personal, cultural, and commercial contacts between the free world and the European Soviet bloc may have positive advantages during this period of tension and watchfulness. Our policy should reflect flexibility as between the U.S. and the U.S.S.R. on the one hand and the U.S. and each individual Eastern European country on the other hand.

2. The economic defense program should be framed and administered with full recognition of the fact that the economic defense system of the free world is part of the larger system of military and political alliances and, like them, depends upon the cooperative efforts of the free nations. The United States should support the existing free world collective arrangements in the field of trade controls. Accordingly, in determining the economic defense measures which the United States should adopt and those to be urged on other nations, the impact upon the existing system of economic defense as a whole, and upon the free world military and political alliances, should be taken into account. Similarly, in multilateral military and political discussions, consideration should be given to the impact of their courses of action upon and support to be derived from the economic defense program.

3. The U.S. should maintain such unilateral controls as will have a significant effect on the growth of the war potential of the Sino-Soviet bloc or will effectively support other U.S. policies (e.g. China policy) or fulfill U.S. legislative requirements.

4. The problems posed for our allies by trade controls should be given appropriate weight in determining the controls which the U.S. should advocate that the free world exercise in its economic relations with the Sino-Soviet bloc.

5. Political conditions generally, and economic conditions in some individual countries, may make substantial intensification of multilateral controls with respect to the European Soviet bloc impractical for the foreseeable future, in the absence of a marked worsening of international tensions. Extensions or reductions of these controls should be proposed or supported, however, whenever justified by new technology, new intelligence or altered evaluation of the significance of particular imports to the Soviet bloc.

6. The controls should be so applied as to support U.S. policy with respect to encouraging and assisting bloc satellites to achieve and maintain national self-determination and independence.

7. The U.S. should avoid, and seek to have other friendly countries avoid, becoming excessively dependent on the Sino-Soviet bloc as a market or as a source of supply.

8. So long as it is considered to be in the U.S. interest, there should continue to be applied against Communist China² more severe controls than are applied against the remainder of the Soviet bloc. At such time as it is judged to be in U.S. interest to do so, the controls toward Communist China should be revised.

Courses of Action

9. Seek to maintain the existing multilateral security trade control structure and the control measures developed thereunder, making appropriate and timely adjustments in those measures to reflect changes in bloc vulnerability or to improve cooperation and increase effectiveness.

10. Seek to maintain and, as necessary, extend the bilateral arrangements with other free world countries to obtain support for multilaterally agreed controls.

11. Maintain toward the European Soviet bloc U.S. export controls over multilaterally agreed items and over such other materials, equipment, technology and services as can be so unilaterally controlled by the U.S. as to achieve a worthwhile adverse impact on the war potential of the European Soviet bloc, or can effectively serve other U.S. policy objectives judged by the U.S. control authorities to warrant the use of unilateral controls; and take all appropriate measures as will effectively enforce these controls and prevent their frustration.

12. Approve, as a general rule, for shipment from the U.S. to the European Soviet bloc, commodities not controlled under paragraph 11 above, and, where appropriate, remove the requirement of specific licenses for such shipments to the entire European Soviet bloc.

13. Make appropriate and timely unilateral adjustments and seek appropriate multilateral adjustment in the scope and severity of controls maintained toward selected satellites of the U.S.S.R., as feasible, to encourage and support progress toward national self-determination and independence.

14. Enhance the utility of evaluated intelligence pertaining to economic defense problems.

15. Seek the adoption of effective measures to enforce the agreed scope and severity of the multilateral controls and increase the scope and effectiveness of multilateral exchanges and cooperation in the enforcement field.

16. Seek a close association with NATO and other security alliances and, where feasible, obtain their consideration and advice on appropriate economic security problems.

17. Seek agreement to utilize the multilateral control structure for studies and exchanges of views regarding all Sino-Soviet trade practices which appear to be inimical to the free world.

18. Encourage free world countries to resist Sino-Soviet economic penetration and to avoid excessive dependence on trade with the Sino-Soviet bloc; foster the development of necessary markets and sources of supply within the free world.

19. Administer current U.S. programs, such as economic development, military and other governmental procurement, defense support, stockpiling, disposal of surplus goods and properties, and similar activities, in such a way as to take into appropriate account the objectives of the economic defense program.

20. Maintain the current level of U.S. unilateral export, import and financial controls applied against Communist China.

21. Seek to maintain effective multilateral controls on trade with Communist China at a level above that on trade with the European Soviet bloc. Seek to obtain multilateral agreement on a differential which would embargo the items on International List II (25 items) and on International List III (63 items). The items on the Consolidated China Special List (207 items) should be offered for decontrol except those items which can be justified as being sufficiently strategic to warrant their addition to the International Lists for control to the European Soviet bloc and embargo to Communist China.

22. Take all appropriate actions effectively to enforce these controls toward Communist China and to prevent their frustration.

In adopting this policy, it was the intention of the Council to effectuate a substantial liberalization of the multilateral controls over trade with Communist China.³

1. Source: Department of State, Economic Defense Files: Lot 59 D 439, China Trade Controls 1957. Secret.
2. Communist China as used throughout this paper includes North Korea. [Footnote in the source text.]
3. On February 7, Randall forwarded this statement of policy to Cutler, under cover of a memorandum. On February 8, James Lay circulated the statement of policy to the NSC as NSC 5704, “U.S. Economic Defense Policy,” under cover of a brief memorandum. (Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5704 Series)