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

187. Minutes of the 62d Meeting of the Council on Foreign Economic Policy, Executive Office Building, Washington, August 20, 1957¹

Washington, August 20, 1957

PRESENT

• Clarence B. Randall, Special Assistant to the President—Chairman
• Thorsten V. Kalijarvi, Assistant Secretary of State
• W. Randolph Burgess, Under Secretary of the Treasury
• Walter Williams, Under Secretary of Commerce
• True D. Morse, Under Secretary of Agriculture
• John Irwin, Deputy Assistant Secretary (ISA), Department of Defense Fred G. Aandahl, Assistant Secretary of the Interior Percival Brundage, Director, Bureau of the Budget W. S. DeLany, Chairman, Economic Defense Advisory Committee Robert Amory, Jr., Deputy Director (Intelligence), Central Intelligence Agency
• Frederick Winant, Special Assistant, Office of Defense Mobilization Joseph S. Davis, Member, Council of Economic Advisers James S. Lay, Jr., Executive Secretary, National Security Council Paul H. Cullen, Secretary, Council on Foreign Economic Policy, and their assistants

I. The Council approved the minutes of August 1, 1957.

II. CFEP 557—U.S. Economic Defense Policy.

1. The Council on Foreign Economic Policy considered the recommendations of the Williams Committee and the Economic Defense Advisory Committee for a revised United States economic defense policy in the light of the outcome of the recent CHINCOM negotiations. The Williams Committee recommendations concerned U.S. unilateral trade policy toward Communist China, and EDAC’s recommendations covered the remainder of the economic defense policy. These recommendations were distributed to the Council on August 14 as CFEP 557/1.

2. The basis for CFEP action in this matter was a National Security Council memorandum to the CFEP, dated June 25, 1957, requesting it to review our economic defense policy (NSC 5704/1) and to submit recommendations for answers to certain questions concerning the implementation of this policy, posed by the Joint Chiefs of Staff.²

3. The Council concluded that our present economic defense policy should be continued except for that portion of the policy which provided for a multilateral differential on trade with China. In place of this the Council recommended that, when it was clearly feasible and desirable from a foreign economic policy standpoint, approaches be made to individual free world countries on a bilateral basis to encourage them to maintain unilateral controls toward Communist China at a more restrictive level than the multilateral controls. The U.S. economic defense policy, which was unanimously adopted by the CFEP for consideration by the NSC, is attached hereto.³

4. The CFEP also recommended the following answers to the questions posed by the Joint Chiefs of Staff:

Joint Chiefs of Staff Question No. 1

“Possible application of Battle Act, Export Control Act and Trading With the Enemy Act restrictions on trade with certain of our Allies in response to their widened trade with Communist China.”

Recommendation

These acts should not be applied against our Allies in retaliation for their elimination of the special China trade controls. The proposed redraft of economic defense policy (attached hereto) takes into consideration appropriate application of the cited legislation for antifrustration purposes. EDAC, with respect to multilateral controls, and ACEP, with respect to U.S. unilateral export controls, provide the appropriate means for interagency consideration of proposals on such matters.

Joint Chiefs of Staff Question No. 2

“The posture to be adopted by the United States in the face of possible action on the part of our Allies further to weaken the COCOM/CHINCOM controls.”

Recommendation

The proposed redraft of foreign economic defense policy (attached hereto) and the planned work program under that policy are designed to produce the best possible action on the part of the United States to achieve the needed international security controls.

Joint Chiefs of Staff Question No. 3

“The advisability of introducing the trade control question into the North Atlantic Council to insure that the strategic and security aspects of this vital Western cold war instrument are accorded proper emphasis vis-à-vis economic and commercial considerations. The Joint Chiefs of Staff are strongly of the opinion that this step should be taken, and that the United States should thereafter intensify its role of leadership in defending the controls.”

Recommendation

1. That the U.S. draw the international security trade control (Consultative Group (CG)) structure to the attention of the North Atlantic Council (NAC) and ask that in its reporting activities, NAC bear in mind the possible pertinence of trade control matters to subjects treated in its reports, and that the whole or parts of any reports which deal with such matters be made available to the CG for guidance unless specifically objected to by NAC.

2. That NAC not be asked to make any special review of the trade control question at this time.

Joint Chiefs of Staff Question No. 4

“In event of referral of the trade control question to NATO, the procedures to be adopted for coordination with Japan.”

Recommendation

The procedures involved in the action proposed immediately above would provide appropriate coordination with Japan because Japan would participate as an equal partner in any CG deliberation on the use of NAC guidance.

Joint Chiefs of Staff Question No. 5

“The manner and timing of further discussions of U.S. economic defense policy with Congressional leaders.”

Recommendation

The manner and timing of further discussions of U.S. economic defense policy with Congressional leaders cannot be determined at this time and should be left to the discretion of the Secretary of State after consultations with the heads of appropriate interested agencies.⁴

1. Source: Department of State, Economic Defense Files: Lot 64 D 234, Policy Review Papers—NSC 5704/1. Secret.
2. Not printed. (Ibid.,S/S–NSC Files: Lot 62 D 1, U.S. Economic Defense Policy)
3. Not printed.

4. On August 21, Randall transmitted to Cutler the proposed paper on economic defense policy and the paper containing recommendations for answers to the questions posed by the JCS. He explained that both these papers had been approved by the CFEP at its meeting of August 20. “The only substantive policy change recommended in the economic defense policy,” his memorandum reads in part, “would recognize the elimination of a multilateral differential on trade with Communist China and substitute a policy calling for approaches to individual Free World countries on a bilateral basis to encourage them to maintain unilateral trade controls on trade with Communist China at a more restrictive level than controls which are agreed to on a multilateral basis.” (Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5704 Series)

   On August 23, the statement of economic defense policy was circulated to the NSC as NSC 5704/2; the recommended answers to the questions posed by the JCS constituted Annex A. (Ibid.)