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

88. Minutes of the 36th Meeting of the Council on Foreign Economic Policy, Executive Office Building, Washington, January 12, 1956¹

Washington, January 12, 1956

ATTENDANCE

• Messrs. Hoover, Prochnow, Goodkind, Humphrey, Burgess, Garnett, Amory, Williams, Cooley, Gray, Thorp, Davis, Weeks, Smith, McClellan, Anderson, Johnson, Brundage, Hutchinson, DeLany, Hauge, Dodge, Cullen, Rand

Draft Minutes of the 35th Meeting, January 4, 1956 were approved as corrected.

AGENDA SUBJECTS

CFEP 501—East-West Trade.

1. On December 28 [22], 1955, the National Security Council by NSC Action No. 1494 requested the CFEP to prepare a U.S. position paper on controls over trade with Communist China for the use of the President at his forthcoming meeting with Prime Minister Eden.² Pursuant to the NSC request, the CFEP established a special interdepartmental committee composed of Mr. Gray (Defense), Mr. McClellan (Commerce) and Admiral DeLany (ICA), under the chairmanship of Mr. Prochnow (State) to prepare the U.S. position for Council approval.

2. The Committee’s recommendations are contained in CFEP 501/8 which was distributed on January 11, 1955.³ The Committee has submitted a negotiating position paper (Incl. 1 to CFEP 501/8) which is supported by two position papers (Incls. 2 and 3 to CFEP 501/8).

3. The Committee recommended that the U.S. advise the United Kingdom that the U.S. intends to make no change in its policy of complete embargo against Communist China; and that the United States believes that the Free World should at this time strengthen rather than soften the multilateral export controls against Communist China, but if concessions must be made to preserve the multilateral control system, the United States should acquiesce to a minimum reduction of controls confined to 19 items selected in part from recent exceptions requested by Japan; and to an exception for Japanese export of wooden fishing vessels which are now being sold by Japan to Russia. As a corollary, the U.S. should obtain British consent to the restoration of controls over copper wire exports to the European Soviet bloc and the establishment of quantitative controls over List II ships (merchant vessels). If the British will not agree to either of the above positions, the Committee recommended that the United States make no further concessions unless it becomes apparent that the multilateral control structure will collapse, in which event the United States position should be reviewed.

4. The first recommendation is supported by a position paper (Incl. 2, CFEP 501/8) which states that controls should not be reduced because:

a. Communist China is still an aggressor nation.

b. Present controls result in significant economic and political pressures on Communist China.

c. Reduction of controls would damage Free World interests by prejudicing current Sino-U.S. negotiations, impairing the prestige of the U.S. and the Free World in the Far East, and by adversely affecting U.S. public and Congressional opinion so as to impair flexible administration of the Battle Act.

5. The second recommendation is supported by a position paper (Incl. 3, CFEP 501/8) which recommends certain minimum reductions in the multilateral export controls only if necessary to preserve the multilateral control system. Agreement on minimum reductions could be sought on the basis of the level to which Japan might agree plus other minimum reductions of interest to other Consultative Group countries. It would be reasonable to meet the Japanese requests because of Japan’s need for enlarged export markets, because Communist China represents a nearby export market and source of raw materials, because availability of a Communist Chinese market might ease the pressure of Japanese exports on Free World markets, and because Japan is most entitled to relief.

6. The 19 items selected for deletion from the embargo list include dynamometers, antimony, materials for food and textile processing, materials for the drug and plastic industries, light buses, fire trucks, and thin galvanized iron and steel sheets.

7. After extended discussion of the many aspects of the problem, the Council approved the negotiating position paper (Incl. 1, CFEP 501/8) and the two supporting position papers (Incls. 2 and 3, CFEP 501/8) and requested the Chairman to forward them to the NSC.⁴

[Here follows discussion of overall foreign economic policy.]

1. Source: Eisenhower Library, CFEP Records. Secret. No drafting information is given on the source text.
2. See the editorial note, supra.
3. CFEP 501/8 was forwarded to the Council on Foreign Economic Policy on January 11, under cover of a memorandum from Cullen. It included a series of recommendations by the special committee; a negotiating position paper; and two alternative position papers, one supporting no policy change and the other supporting minimum reductions in the China differential. Also included with CFEP 501/8 was a transmittal memorandum from Herbert Prochnow to Joseph Dodge, dated January 11. (Eisenhower Library, CFEP Records)

4. On January 13, Dodge forwarded these papers to Dillon Anderson under cover of a brief memorandum. (Ibid.) The same day, Dillon transmitted the papers to the NSC with a brief covering note of his own. Also enclosed was a copy of an aide-mémoire from the British Embassy to the Department of State, dated January 3, which reads as follows:

   • “1. The considered view of Her Majesty’s Government is that maintenance of the China ‘differential’ is no longer defensible in the present circumstances. The objective of Her Majesty’s Government is the alignment of the China and Soviet Bloc embargo lists. In order to help meet United States difficulties, however, they propose spreading the relaxation over a period of a year.
   • “2. With this in mind, Her Majesty’s Government would welcome agreed action by the members of the Consultative Group on the following lines:
     • “(a) certain priority items, of which Her Majesty’s Government have drawn up the attached list, should be dropped from the embargo list over the next six months;
     • “(b) the remaining items of the ‘differential’ should be dropped from the list during a period of a further six months, the whole operation taking a year to complete.
   • “3. Her Majesty’s Government are making this communication in the belief that discussions will be more fruitful if the United States Government are aware of their proposals before the Prime Minister’s visit at the end of January. After the United States Government have studied them, Her Majesty’s Government would welcome talks between officials, preferably in London, as long as possible prior to the Prime Minister’s visit.” (Department of State, S/S–NSC Files: Lot 62 D 1, Communist China: Multilateral Export Controls on Trade with)