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

89. Memorandum From the Chairman of the Council on Foreign Economic Policy (Dodge) to the Under Secretary of State (Hoover)¹

Washington, January 13, 1956.

SUBJECT

• Soviet Economic Offensive in Relation to the British Proposal to Substantially Reduce Export Controls on East-West Trade

One point not mentioned in the discussion at yesterday’s meeting may suggest the basis for a strong counter-argument.

Because of the totalitarian aspect of the Soviet Government, it can arbitrarily extract a percentage from its gross national product in various categories of production for sale abroad, regardless of domestic needs.

This is used as an aggressive threat to the economic, trade, and political stake of the British and other European nations, in the Far East, the Middle East, and Africa, which are areas of principal concern to the United States and its Allies.

The substantial reduction already made in the level of the COCOM controls, coupled with some degree of evasion and weakness in implementation undoubtedly has contributed to the Soviet ability to undertake in this economic offensive without too much penalty on its domestic economy.

The further the Soviets go in their economic and trade offensive, the greater the penalties should be on its domestic economy, unless the penalties are relieved and the offensive is assisted by increased imports from the Western Nations, which, in turn, can help increase the threat to their own economic and political stake in the nations of these critical areas.

In the background are the obligations of the Soviets to help industrialize and militarize China which any further substantial relaxation on trade controls would facilitate. There have been continued Soviet offers of a virtual trade monopoly for West Germany in the industrialization of China.

For these reasons, the Soviet economic offensive can be strengthened and assisted, and any economic counter-offensive by the Western Nations can be weakened or made less effective, by a relaxation of the level of trade controls.

The trade and political interests in these critical areas may be better protected by increasing the level of controls and strengthening their implementation.²

Sincerely,

Joseph M. Dodge

1. Source: Department of State, Central Files, 460.509/1–1356. Secret.
2. On January 16, Hoover replied: “In my opinion you have presented a strong argument for not having a substantial reduction in CHINCOM or COCOM controls.” (Ibid.) Hoover sent copies of Dodge’s memorandum to MacArthur, Kalijarvi, Robertson, Merchant, and Macomber.