45. Memorandum From the Assistant Secretary of State for Economic Affairs (Waugh) to the Under Secretary of State (Hoover)1

SUBJECT

  • The Dodge Council’s2 Study of East-West Trade Controls

In the recent Far East policy paper, 5429/5, the NSC directed that East-West trade controls against Communist China be maintained at their present levels, but at the same time instructed the new Council on Foreign Economic Policy to review urgently all aspects of our economic defense policy relating to trade with the entire Communist bloc. The Economic Council has already received some background materials for this broad assignment, including a new National Intelligence Estimate (NIE 100–55),3 and as a next step in the study Mr. Stassen and Mr. Samuel Anderson undertook to submit to the Council meeting now scheduled for Friday, January 21, a paper posing major policy issues.

The latest draft of this Commerce–FOA paper is attached herewith (Tab B)4 and an earlier draft was reviewed hurriedly with the various interested bureaus. It poses basic questions about our trade control policies for the European and Far Eastern parts of the Soviet bloc. It offers a broad critique of the effectiveness of present policies. It reviews the history of their genesis and elaboration. Although opinions would differ within the Department upon the merits of this paper, or the purposes it can properly serve, all are agreed that it is more or less inadequate, particularly with respect to the focus and setting given to the specific problems it attempts to formulate. It is the general view also in this Department that an adequate approach to this policy review will require time for assimilation by the Council of such pertinent materials as the Intelligence Estimates and for preparation and study of more thorough and coordinated submissions directed at the problem areas which the Council may wish to explore in detail.

In the course of this policy review, the Council members will be required ultimately to commit themselves on at least three fundamental questions: [Page 215]

(a)
Should the U.S. abide by its present East-West trade policies for the European and Far Eastern parts of the Soviet bloc and retreat from those policies only on an ad hoc basis if and as necessary when the opposition and resentment of other countries present serious dangers to our friendly association and collective arrangements with them?
(b)
Should the U.S. attempt through resort to available inducements and pressures to persuade currently unwilling countries to participate with us in controls of wider scope and greater severity for both the European and the Far Eastern parts of the Soviet bloc?
(c)
Should the U.S. now decide to retreat from some aspects of its present East-West trade policies, thus making it possible to offer concessions to other countries, including those in the Soviet bloc, in order to gain advantage both in the field of increased effectiveness of remaining controls and in other fields?

Recommendation: That you urge the Economic Council to take ample time to examine pertinent materials other than the FOA–Commerce paper bearing on economic defense policy, and to call for further submissions dealing more thoroughly with whatever problem areas within this NSC assignment the Council may wish to explore in detail. Adequate time should be allowed for preparation of such additional submissions, which should be presented on a coordinated basis, and which should spell out alternative courses of action, with recommendations.

  1. Source: Department of State, Central Files, 460.509/1–2155. Secret. Drafted by Goodkind and concurred in by Armstrong, Stibravy, Barbour, Sebald, Silver, Ludlow, and Doherty.
  2. The Council on Foreign Economic Policy was chaired by Joseph M. Dodge.
  3. Document 43.
  4. See the summary of this paper, supra .