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

188. Memorandum of Discussion at the 336th Meeting of the National Security Council, Washington, September 12, 1957¹

Washington, September 12, 1957

[Here follows a paragraph listing the participants at the meeting.]

1. U.S. Economic Defense Policy (NSC 5704/1; NSC Action No. 1677;² Memos for NSC from Executive Secretary, same subject, dated April 11³ and September 6, 1957;⁴ Memo for NSC from Acting Executive Secretary, same subject, dated June 25, 1957; NSC 5704/2)

Mr. Cutler introduced the subject, and called on Mr. Randall to brief the National Security Council on the contents of the reference report on the subject (NSC 5704/2).

Mr. Randall expressed the opinion that the Council would find the report a rather conventional one—business as usual. After describing the process by which the revised policy had been formulated, Mr. Randall went on to point out that the only real change from the previous policy on this subject (NSC 5704/1) consisted of a recognition of the fact that multilateral controls on trade with Communist China had disappeared. Accordingly, the new policy suggests that in place of the vanished CHINCOM policy, the United States should engage in bilateral negotiations with other countries in order to try to maintain something of a differential on Free World trade with Communist China as opposed to such trade with the European Soviet bloc. Mr. Randall believed that the fruits of such bilateral negotiations were largely a pious hope. As for unilateral U.S. controls on trade, etc., with Communist China, the policy directs that we continue our complete embargo on trade with Communist China.

With respect to the questions asked by the Joint Chiefs of Staff, as set forth in Annex A to NSC 5704/2, the document includes one new sentence. No sanctions are to be applied by the United States against our allies for what they have done in the past with regard to eliminating special Chinese trade controls. This does not necessarily preclude the possible application of sanctions for future actions by our allies.

Mr. Randall then stated that NSC 5704/2 clearly represented the consensus of the members of the Council on Foreign Economic Policy. As a “good chairman” of the CFEP, Mr. Randall stated that he went along with the consensus of the group. Nevertheless, he stressed his personal feeling that the continued maintenance of U.S. unilateral controls on U.S. trade with Communist China made very little sense. In the first place, this practice was unfair to U.S. businessmen, who were thus penalized in their competition with foreign businessmen. Beyond this, the continuation of U.S. unilateral controls had the effect of giving Russia a gift by throwing so much of future trade with Communist China into the hands of the Soviet bloc. Mr. Randall also stated his belief that questions of trade were readily separable from such political questions as the recognition of Communist China by the United States or the admission of Communist China to the United Nations.

Mr. Cutler then called on Secretary Dulles for his views. Secretary Dulles stated that all he had to say was this: Many of our relationships with the Soviet-Chinese Communist bloc countries have had to take into account not only the direct U.S. relationship with the bloc, but also the impact of what the United States does vis-à-vis the Communist powers on what might be called our weaker brethren. It is proving a very difficult political task to prevent Communist penetration of some of our allies in the Far East, such as Burma, Thailand, Vietnam, etc., etc. If the world consisted just of the United States and the USSR, and the United States alone had to deal with the USSR, Secretary Dulles said he would find himself in agreement with Mr. Randall’s personal views as just expressed. This, however, was, of course, not the case. After all, the Chinese Communists have consistently violated all decent standards of civilized intercourse. This fact doesn’t hurt us, but it may hurt other friendly nations. We want very much to maintain a non-Communist area between us and Communist China, just as we have succeeded in maintaining such an area in the West between us and the USSR itself. We are holding on to this non-Communist area in Asia only with great difficulty, and that area consists of rather small fragments—Japan, Formosa, the Philippines, Southeast Asia, etc., etc. Thus the area constituted an insular position. Nevertheless, it would be a great disaster if these nations were to be taken over by the Communist Chinese and if, thus, the whole Western Pacific area were to fall into the hands of the Communists. It is such considerations as these which, said Secretary Dulles, made him doubtful of the wisdom of cutting down on our unilateral controls on U.S. trade with Communist China.

Mr. Cutler then asked for an expression of opinion from the Acting Secretary of Commerce. Secretary Williams pointed out that the mere fact that the Council had just heard these two statements of Mr. Randall and Secretary Dulles on the problem of trade with Communist China, indicated how difficult it had been to find the solution to the problem set forth in NSC 5704/2. There were obviously strong arguments on both sides, but Secretary Williams thought, in a word, that the unanimous finding of the Council on Foreign Economic Policy indicated that we were living in a rapidly-changing world. It might well prove true that we will eventually be obliged to change our own policy of a complete embargo on trade with Communist China; but as of now it was the studied opinion of the CFEP that we should continue our existing system of strict unilateral controls. The economic advantages of such a course of action had not been a very difficult matter because our trade with Communist China would not be likely to be very great even if the controls were removed. Similarly, there had been no great argument about the matter from the military point of view. The two fields which had been most decisive in inducing the CFEP to recommend continuation of the U.S. unilateral controls had been the political and the psychological. Although all factors had been weighed in the CFEP’s deliberations, these last two were the determining factors.

Asked for his views by Mr. Cutler, Secretary Wilson replied that he would say that his personal views on this matter were closer to Mr. Randall’s than Mr. Randall thought. However, the military people in the Department of Defense were still so acutely conscious of the Korean war and of the bitter hostility of the Chinese Communists, that they said, in effect, that we don’t want to trade with the dirty s.o.b.’s, nor do we want the Free World nations to trade with them either. Secretary Wilson added that he himself was rather worried lest it should prove that the United States is paying in part for goods shipped to Communist China by our allies. But likewise, said Secretary Wilson, he was conscious of the fact that some of these allied nations are almost obliged to trade with mainland Asia—Japan, for instance. Undoubtedly, as Mr. Randall had said, trade properly handled does contribute to world peace. The Russians were, after all, the main devils, and by our present trade policies we are forcing Communist China to continue to depend on the Soviet Union. Secretary Wilson doubted the wisdom of such a policy.

Mr. Cutler asked General Lemnitzer, who was acting for the Chairman of the Joint Chiefs of Staff, if the Joint Chiefs of Staff were satisfied with the answers to their questions. General Lemnitzer explained that the reason why the Joint Chiefs had originally submitted these questions was their anxiety over the erosion of our security position. However, they realized the cogency of other considerations and, accordingly, had concurred in NSC 5704/2.

When called on by Mr. Cutler, Mr. Hollister said he wished to support strongly the views just expressed by the Secretary of State, whose opinions did not always receive the understanding that they deserved to have. If the United States weakened in its support of Nationalist China against Communist China, lesser powers were sure to give way rapidly.

The Vice President expressed the opinion that the discussion of NSC 5704/2 led to one clear conclusion—namely, that the matter of trade with Communist China was primarily a political problem rather than an economic problem. He believed that we had no alternative but to accept the position of the Secretary of State, for the reason that the United States has to consider not only what it would do if it were acting alone, but also the effect of our action on other powers. So at this time, at least, it seemed to The Vice President that the policy set forth in NSC 5704/2 was the most reasonable policy we could envisage.

The National Security Council:⁵

a. Noted and discussed the report on the subject contained in NSC 5704/2, prepared by the Council on Foreign Economic Policy; in the light of the views of the Joint Chiefs of Staff, transmitted by the reference memorandum of September 6, 1957.

b. Adopted the statement of policy in NSC 5704/2.

Note: The statement of policy in NSC 5704/2, as adopted, subsequently approved by the President and circulated as NSC 5704/3 for implementation by all appropriate Executive departments and agencies of the U.S. Government and referred to the Secretaries of State and Commerce for coordination through existing interdepartmental mechanisms; with a first progress report to be submitted to the National Security Council, through the Council on Foreign Economic Policy, in three months, and subsequent progress reports to be submitted at least every six months.

[Here follow items 2–8.]

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret. Drafted by Gleason on September 13.
2. See footnote 7, Document 146.
3. See footnote 2, Document 154.
4. This memorandum enclosed the views of the Joint Chiefs of Staff on NSC 5704/2. The Joint Chiefs, in a memorandum of August 30 to Secretary of Defense Wilson, recommended the Department of Defense’s concurrence in the adoption of NSC 5704/2. (Department of State, S/S–NSC Files; Lot 63 D 351, NSC 5704 Series)
5. Paragraphs a–b that follow constitute NSC Action No. 1780. (ibid.,S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council, 1957)