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

55. Memorandum From the Deputy Assistant Secretary of State for Economic Affairs (Kalijarvi) to the Under Secretary of State (Hoover)¹

Washington, March 25, 1955.

SUBJECT

• “Interim Report on Review of Economic Defense Policy” (CFEP Agenda Subject 501)

The above-entitled Interim Report was drafted in this Department and has been approved and transmitted to the CFEP by the Steering Committee of which I am Chairman. We recommend, of course, that you support this paper in the Council discussion and that it be approved by the CFEP.

The purposes of the Interim Report are three-fold:

(1) To establish that substantial time is needed, and is available, for a comprehensive review of the economic defense policy and program. Several months are needed to accomplish the intelligence research and analysis requisite to any successful new approach toward further revision of the multilateral strategic lists for the Communist bloc as a whole. Only by such painstaking effort can we hope to harmonize the present divergent suggestions of the various agencies and to develop an adequate basis for negotiations with other countries. Fortunately, we are free at the moment from insistent pressure by other friendly countries against the general structure of existing controls.

Tab B to the Report blocks out an assignment for the review and sets a deadline of June 30 for presenting a draft to the Steering Committee. The Drafting Group is asked to formulate alternative courses of action based on varying assumptions as to the degree of East-West tensions, and to address specific attention to the various agency papers already submitted as preliminary suggestions.

(2) To establish that no substantial change should be made in the economic defense policies and programs as of the immediate moment. Considerable urgency has been attached in the past, especially by FOA and Commerce, to study of relaxation in the trade controls applied against Communist China. The Interim Report makes the fundamental point that under present circumstances political factors require maintenance of these controls at current levels. Tab A to the Report summarizes the reasons for this conclusion; it was prepared by FE, and is a close paraphrase of the Secretary’s own words as uttered recently to Chinese Foreign Minister Yeh.²

Other changes or improvements in the controls, particularly those applying to Eastern Europe, are not of immediate urgency and can be usefully undertaken only in the context of the long-range program that should emerge from the forthcoming review.

(3) To clarify the interim policy. In order to avoid confusion, interagency controversies and an undesirable posture of conflict within the executive branch toward the legislative branch of the government, there should be a general re-affirmation of the existing NSC directives on economic defense policy for application pending the outcome of the review.³

1. Source: Department of State, Central Files, 460.509/3–2555. Secret. Drafted by Goodkind.
2. For text of Dulles’ conversation with George Yeh, see Foreign Relations, 1952–1954, vol. II, Part 1, p. 251.
3. At the 15th meeting of the CFEP on April 5, the Council discussed, among other matters, the report by the Steering Committee on East-West Trade. According to the minutes of the meeting drafted by Cullen, “It was agreed that the Council adopt the recommendations. However, there was considerable discussion about the instructions to the Drafting Group. It was agreed that the Steering Committee in the report should (1) include examination of policies designed to weaken the entire economic position of the Soviet Bloc and Communist China as well as policies designed to reduce their relative economic potential for war including policies with respect to import and financial controls, and (2) grant first priority to review of the policy under the assumption of the existence of the present degree of East-West tensions.” (Eisenhower Library, CFEP Records)