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

92. Memorandum of Discussion at the 274th Meeting of the National Security Council, Washington, January 26, 1956¹

Washington, January 26, 1956.

[Here follow a paragraph listing the participants at the meeting and items 1 and 2.]

3. Multilateral Export Controls on Trade With Communist China (NSC 5429/5; NSC Action No. 1494; Memos for NSC from Executive Secretary, same subject, dated January 13 and 24, 1956²)

At this point the President, noting that it was after eleven o’clock, asked what items remained on the agenda. Mr. Anderson replied that the final item, dealing with multilateral trade controls, was an issue which the President wished to have decided before the arrival of the British Prime Minister. Accordingly, Mr. Anderson suggested a short break, after which the Council would resume its meeting and consider this problem. The President, however, asked Mr. Dodge how long it would take to present his report, and Mr. Dodge replied that it could be done in five or ten minutes. Accordingly, the President decided to continue the meeting, and Mr. Dodge presented the gist of the U.S. position with respect to multilateral controls on trade with Communist China by reading to the Council the second paragraph of his memorandum of transmittal dated January 13, 1956. He also pointed out that the Joint Chiefs of Staff recommended acceptance of the position of the United States vis-à-vis the British proposed by the Council on Foreign Economic Policy.

There was no disposition in the Council not to accept the position proposed by the CFEP. The President, however, said he had a remark to make. Some day, he said, he hoped that he would get a study that he had asked for repeatedly. He had listened to many long arguments as to how specific items sold to the Soviet bloc by the Western powers could have very damaging security repercussions. However, the President said, he had never seen a study of the net advantage or disadvantage to the United States of trade with the Soviet bloc countries. What he wanted to know was just what we were doing to ourselves with this system of trade controls. It seemed to him that nobody had yet provided this information to him, and here we were in this country, surrounded by a lot of surplus materials which we would like very much to sell.

Secretary Dulles inquired of Mr. Dodge whether his study and position paper had addressed itself to the problems which were faced by the British and the Japanese. Did the present report contain an estimate of how much the trade of these two countries with the Communist bloc actually meant? We in the United States are much preoccupied today with the financial and economic position of Japan and Great Britain. Would their financial and economic problems really be relieved if they had their way in this dispute and the controls on trade between them and the Soviet bloc countries were drastically reduced?

In response to Secretary Dulles’ query, Secretary Weeks pointed out that the Commerce Department was frankly puzzled to explain why the United Kingdom was seeking a reduction in the controls on trade with Communist China at this precise moment in history when the British economy was running at absolute capacity and when the British economy probably could not handle additional orders from Communist China even if it got them. Moreover, China has very little that the United Kingdom really needs. It was puzzling to explain why the British were insisting upon reducing the controls on their trade with Communist China.

The President, enlarging on his earlier request for information, said that what he was really seeking was an answer to this question: If there were virtually no obstacles placed in the way of trade between the Soviet bloc countries and the free world, what would this mean, in terms of dollars and cents, first, for the United States and afterwards for its major allies? The Congress so often seemed to feel that you only hurt the Communists when you put obstacles in the way of trade between them and the free world. Perhaps, however, we were actually hurting ourselves and our allies when we create and maintain these obstacles. After all, the United States was beset with such terrific surpluses in automobiles, wheat, cotton, and the like.

Secretary Weeks replied that it was the conviction of the Department of Commerce that all the Soviet bloc really wants is to secure strategic items from the West—the very items which we should not want to let them have.

Secretary Wilson stated his belief that it was the Board of Trade which was stirring up all this commotion in England, because the manufacturing people were convinced of making fat profits over the long haul by trade with the Soviet bloc.

The President complained again that no one had yet told him what this system of trade controls was actually costing the United States and its allies. He did not want any long and elaborate study. He did want a short one-page memorandum which would cover all sides of the question.

Secretary Dulles pointed out that the most important factors in this problem of trade controls with China were psychological rather than strictly economic. Many people in the Far East have come to believe that Communist China represented the wave of the future. Seeming to grant concessions to the Chinese Communists would be bound to result in spreading this conviction and thus in building up neutralism in the Far East.

At the conclusion of the discussion, Mr. Allen Dulles read the estimate of the probable British attitude in the forthcoming negotiations.³ …

The National Security Council:⁴

a. Concurred in the recommendations contained in the Negotiating Position Paper approved by the Council on Foreign Economic Policy, enclosed with the reference memorandum of January 13, 1956.

b. Noted the President’s request that the Chairman, Council on Foreign Economic Policy, prepare a brief statement indicating the concrete gains or losses in dollars to the U.S. and its major allies which would result from the virtual elimination of all controls on trade with the Soviet bloc.

Note: The action in a above, as approved by the President, subsequently transmitted to the Secretary of State. The action in b above subsequently transmitted to the Chairman, Council on Foreign Economic Policy.

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret. Drafted by Gleason on January 27.
2. Regarding the memorandum of January 13, see footnote 4, Document 88. The memorandum of January 24 transmitted the views of the Joint Chiefs of Staff on CFEP 501/8. The Joint Chiefs, in a memorandum to Secretary of Defense Wilson, January 20, expressed the view that the CFEP position paper “provides suitable guidance for negotiation.” (Department of State, S/S–NSC Files: Lot 62 D 1, Communist China: Multilateral Export Controls on Trade with)
3. Not found in Department of State files.
4. Paragraphs a–b that follow constitute NSC Action No. 1511, approved by the President on February 1. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council, 1956)