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

200. Memorandum of Discussion at the 242d Meeting of the National Security Council, Washington, March 24, 1955¹

Washington, March 24, 1955

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

1. Anti-Trust Laws Affecting Activities Outside the U.S. (NSC Actions Nos. 766–c, 1200 and 1263;² Memos for NSC from Executive Secretary, same subject, dated November 1, 1954³ and March 16, 1955⁴)

Mr. Cutler briefed the Council on the background of the problem, and said he would call first on the Attorney General for comment.

The Attorney General alluded to the fact that a trial run as to the effect of the anti-trust laws on U.S. commercial activities outside the United States had been provided by the Iranian case. He reminded the Council that the Justice Department had withdrawn its criminal action against the American oil companies who had participated in the alleged Iranian oil cartel. Meanwhile, the civil case against the oil companies was proceeding smoothly.⁵ The oil settlement worked out in Iran,⁶ continued the Attorney General, provided a first-rate laboratory lesson at the same time that the committee of lawyers had been preparing the report which was now to be presented to the National Security Council. Mr. Brownell then said he would ask Assistant Attorney General Barnes to summarize the findings and recommendations of Chapter II, entitled “Trade or Commerce with Foreign Nations”.

Judge Barnes outlined the findings of the committee in its report, and indicated that the Department of Justice supported the recommendation of the committee on page 92 that, for a designated period of five years beyond the expiration date of the Defense Production Act,⁷ the President be authorized to extend the exemption from the prohibitions of the anti-trust law. Judge Barnes added that legislation to accomplish this recommendation had been prepared by the Department of Justice, approved by ODM, and circulated.

Discussion then centered on the most desirable mechanism for consultation by the Department of Justice with other agencies of the Executive Branch prior to initiating legal action for violation of the anti-trust laws in instances where issues of foreign policy or of the national security might arise. It was the general view that the prevailing practice of informal consultation on this subject between the Departments of State and Justice was satisfactory.

Secretary Dulles then informed the Council that he wished to make a few general observations with respect to the committee’s report. He pointed out that the report had been prepared by a considerable group of eminent lawyers for the Attorney General. The gist of the report was that everything was more or less all right at the present time. Moreover, the committee report appeared to agree with a number of “pretty extreme decisions” by the courts.

Secretary Dulles then queried whether the problem of anti-trust laws affecting activities outside the United States did not require consideration from more than a purely legal point of view, which was so apparent in this report. As a result of three hours of conference with the Senate Finance Committee yesterday, Secretary Dulles said that he was very worried over the prospect of “unrestrained imports” into the United States from abroad, which could result from the unfettered operation of the anti-trust laws. Such unrestrained imports could quite possibly lead the United States Government into the adoption of a quota system for the regulation of imports, and accordingly, to a certain degree of socialism, which would be far from welcome. Moreover, if indeed a quota system were adopted by the United States, it would pose very serious problems in the area of foreign policy. How, for example, would we set about apportioning quotas among friendly foreign countries? All these problems, continued Secretary Dulles, led him to wonder whether some kind of system, which would enable the participating commercial companies to exercise some degree of control over imports of foreign products into the United States, might prove to be better than the present system which, because of the severity of our anti-trust laws, virtually requires the most extreme competition. All this, said Secretary Dulles, should not be taken as an indication that he favored veering away from so-called liberal trade policies. It did indicate his belief that the whole problem needed to be studied from a broader point of view than the strictly legal one.

Secretary Humphrey concurred in Secretary Dulles’ judgment that the committee’s report provided an excellent legal analysis of how the anti-trust laws were actually affecting American enterprise outside the borders of the United States. On the other hand, what really interested the National Security Council was how best to promote private American investment abroad. It was obvious, said Secretary Humphrey, that American money will tend to go where conditions abroad are best from a competitive point of view. Moreover, the fact cited by Judge Barnes, that only four anti-trust cases had been initiated by the Department of Justice in the course of the last year, was not really as significant as it seemed. The present antitrust laws were so extremely severe and restricted that many American companies had simply made up their minds not to run the risk of violating these laws. Accordingly, Secretary Humphrey again agreed with Secretary Dulles that the problem represented by the committee’s report was not merely what the anti-trust laws provided, but what kind of system will permit attractive foreign investment possibilities to American citizens without at the same time destroying the competition and free enterprise which we wish to preserve domestically in the United States.

In response to Secretaries Dulles and Humphrey, the Attorney General alluded to a recent report by the Cabinet Committee on Energy Resources, which had reached the conclusion that the Administration should continue with its present program of relying on voluntary restrictions of imports rather than to embark on a quota system.⁸

In reply to the Attorney General, Secretary Dulles pointed out that these voluntary arrangements among companies do not in practice work out for a very long period without arriving at something very much like “concert” among the companies concerned. They cut very close to violations of the anti-trust laws. Indeed, many American companies are being forced by circumstances to skirt so close to violations of these laws that it made one wonder whether the Government will not in the near future have to readjust its overall policies respecting the effect of the anti-trust laws on commercial activities by Americans outside the United States. The last thing, said Secretary Dulles, that the United States Congress really wanted was unbridled competition for U.S. markets from abroad. While such competition was OK in the U.S., it was not OK from abroad. Secretary Dulles went on to point out that while the point of view of our country on this subject has matured, we are still adhering to a policy with respect to anti-trust laws which we had outgrown. The real issue before us now in this area could be put in a single question: Where does the real national interest lie?

The Attorney General pointed out that one of the UN agencies had come up recently with a recommendation for the setting up of an international organization to deal with these problems. The Department of State had opposed these recommendations, and in general the U.S. business community supported State’s objections. In any case, said the Attorney General, it was inaccurate to argue that there had been no real study of this problem except in strictly legal terms. Finally, the Attorney General insisted that the Department of Justice had gone as far as it could under the law in an effort to safeguard the interests of American businessmen doing business outside the United States. If it was desired to go further than the committee report recommended, new legislation would be required. The Justice Department would stand by the committee’s recommendation that the President be given authority to exempt American companies from the prohibitions of the anti-trust laws in connection with the Defense Production Act for a period of five years.

Secretary Humphrey replied that the five-year limit was very unrealistic from the point of view of the American business investor. People could not plan to invest large sums of money on the assumption that they would be exempted from the action of the anti-trust laws for so short a period. Furthermore, Secretary Humphrey thought that the United States itself, and not some international agency, should decide what was in the best interests of American businessmen. This was no mere legal problem; we were actually confronted with the possibility of having to revise our entire tariff set-up.

The Attorney General repeated that the present report of the committee had gone as far as it was possible to go to clarify action under the present anti-trust legislation.

The President said that the essence of the problem was the question of what authority must be created to deal with foreign competitors rather than with U.S. domestic competition. The President agreed that it would be essential to look into tariff problems and the “most-favored-nation” clauses in our commercial treaties. He confessed, however, that he was not sure as to the next step that we ought to take.

Dr. Flemming inquired whether it would be desirable to extend the five-year interval of exemption from the anti-trust laws in connection with the Defense Production Act, to a longer period, perhaps of ten years. The Attorney General said that that would be OK with the Department of Justice. This view was supported by Judge Barnes. Dr. Flemming went on to point out that we might readily give the President more elbow room, perhaps even up to twenty years. At the suggestion of Mr. Cutler, the Council agreed to extending the period of exemption in accordance with the President’s discretion.

The President inquired thereafter as to how best to accomplish the more general study of the problem which had been recommended by the Secretaries of State and Treasury. Mr. Cutler suggested that the Council on Foreign Economic Policy, with added representation from the Department of Justice, was the logical group to undertake such an over-all study. Secretary Dulles thought that this was the right forum, but warned that it would take at least a year to complete such an over-all study.

The National Security Council:⁹

a. Noted and discussed the report on the subject by the Attorney General, transmitted by the reference memorandum of March 16 and summarized orally by Assistant Attorney General Barnes.

b. Agreed that the proposed amendment of Section 708 of the Defense Production Act of 1950 should be revised to authorize the President to extend the exemption from the prohibitions of the antitrust laws for a longer period than five years in any case where such longer period is required to justify U.S. private investment abroad.

c. Requested the Council on Foreign Economic Policy to sponsor a thorough review of Governmental objectives of U.S. trade or commerce with foreign nations in relation to the requirements of the U.S. domestic economy, foreign policy, and national security, and to make recommendations of policy thereon which would be in the national interest under current world conditions; including in such report, among other factors, consideration of (a) the desirability of change in the objectives, provisions, and administration of the antitrust laws as they affect U.S. trade or commerce with foreign nations, (b) the continued use of most-favored-nation clauses in treaties, and (c) the increasing pressures for the imposition of import quotas.

Note: The action in b above, as approved by the President, subsequently transmitted to the Attorney General and the Director, ODM. The action in c above, as approved by the President, subsequently transmitted to the Chairman, CFEP.¹⁰

[Here follows discussion of the remaining agenda items.]

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret. Drafted by Gleason on March 25.
2. NSC Action Nos. 766–c, 1200, and 1263 are printed as parts of memoranda of discussion at the meetings of the National Security Council on April 22, 1953, August 12, 1954, and November 9, 1954, respectively, in Foreign Relations, 1952–1954, vol. I, Part 2, pp. 1351, 1365, and 1375.
3. Not printed. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Miscellaneous Memos 1954) The memorandum transmitted the memorandum from Stanley N. Barnes, Assistant Attorney General, to James S. Lay, October 29, 1954, printed in Foreign Relations, 1952–1954, vol. I, Part 2, p. 1366.
4. Not found in Department of State files.
5. On April 21, 1953, the Department of Justice filed civil suits against Standard Oil Company (New Jersey), Socony-Vacuum Oil Company of California, the Texas Company, and Gulf Oil Corporation. Text of this action is printed in U.S. Senate, Committee on Foreign Relations, Subcommittee on Multinational Corporations, The International Petroleum Cartel, the Iranian Consortium and U.S. National Security, 93d Congress, 2d Session (Washington, 1974), pp. 35–46. For documentation, see Foreign Relations, 1952–1954, vol. I, Part 2, pp. 1259 ff.
6. An agreement, effective October 29, 1954, between a consortium of eight U.S., Dutch, British, and French international oil companies and the Government of Iran, which resolved the longstanding Iranian oil controversy, and signed by the Shah. See ibid., volume X.
7. Reference is to the Defense Production Act of 1950 (Public Law 774), enacted September 8, 1950; for text, see 64 Stat. 798.
8. Document 195.
9. Paragraphs a–c that follow constitute NSC Action No. 1356. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council, 1955)
10. This subject was entitled CFEP Agenda Subject 524 at the CFEP meeting on March 29; see infra.