Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

333. Memorandum From the Under Secretary of State for Economic Affairs (Dillon) to Acting Secretary of State Herter⁰

August 19, 1958.

SUBJECT

• US Economic Defense Policy

Problem

To seek NSC agreement to the recommendations made by the Secretary to the CFEP that the new level of international security trade controls be approved; and to seek NSC endorsement of the continuation of the policy of conforming the Battle Act Lists to the International Lists in coverage.

Discussion

The memorandum for the NSC of August 13, 1958 (Tab A)¹ contains a report by the CFEP on the recent review of the international trade controls which resulted in revised International, Munitions and Embargo Lists, and a secondary list of items which will be kept under surveillance by COCOM. Agreement was also reached to review controls in the fall of 1959 in the light of then prevailing conditions.

It is the consensus of the CFEP that the agreements made by the negotiators meet the requirements of NSC Action 1865 of February 27, 1958 (Tab B)² and deserve the approval of the Executive Branch.³

Defense has been reluctant to endorse the results of the CG/COCOM List Review as meeting the requirements of NSC Action 1865. Defense is therefore reluctant to concur with the action of the Battle Act Administrator in making the Battle Act lists identical to the International Lists. Defense filed a statement (Tab C)⁴ with CFEP on August 11, three days after the meeting, which registered acceptance of the results of the negotiations. This statement alleges that the new International Lists represent a 70–80 percent reduction in previous overall coverage and does not maintain effective control over many items which Defense believes have a clear military application and which incorporate advanced technology of strategic significance not available in the Sino-Soviet bloc. Defense sees no alternative to acceptance of the multilateral control system as agreed by CG/COCOM but has been unwilling to give formal concurrence to any action implying that these controls meet U.S. security objectives.

CIA’s evaluation of the results of the List Review (Tab D)⁵ concludes that the recent reduction in coverage of the COCOM embargo could not result in a significant increase in the Soviet bloc’s overall military-industrial capacity. Commerce views the results as establishing a satisfactory basis for an effective multilateral control system, although not entirely satisfied with the item coverage.⁶

The question may arise whether NSC Action 1865 permits the review of the International Atomic Energy List which the CG agreed should begin in September. (The U.S. proposal for this review was prepared and officially transmitted to EDAC for action by the Atomic Energy Commission.) Bilateral discussions on AEC recommendation have already been initiated with the British Embassy.

Recommendation

It is recommended that you authorize me, in my capacity as Administrator of the Battle Act, to make a further report on the CG–COCOM negotiations and to

(a) seek NSC agreement to the new level of international controls, which were agreed by the U.S. negotiators as meeting the requirements of NSC Action 1865. (The changes in the list were essential to maintain the multilateral security trade control system as drafted by the NSC in Action 1865.)

(b) request the NSC to confirm the principle of conforming the Battle Act Lists to the new International Lists. (This would be consistent with the action taken at the time of the 1954 List Review. To have Battle Act Lists more extensive than the International Lists would be interpreted by our allies as an attempt to enforce by unilateral means a level of control which we were unable to negotiate multilaterally. In order to avoid a lapse following the coming into effect of the new International Lists, a determination was signed on August 15 revising the Battle Act Lists; this determination was without prejudice to action by the NSC on August 21.)

(c) If the question is raised as to whether the language of the NSC Action 1865 permits modification of the present International Atomic Energy List, express the Department view that the first sentence of paragraph B of the NSC Action does permit such modification as has been or may be approved by the Atomic Energy Commission.

0. Source: Department of State, S/P–NSC Files: Lot 62 D 1, U.S. Economic Defense Policy. Secret. Drafted by Douglas Henderson, Assistant Chief, Economic Defense Division, Office of International Resources, Bureau of Economic Affairs; Jerry Knoll, also of that division; and Dillon. Cleared in draft with Robert Carr, Director, Office of International Resources; Admiral Walter S. Delany, Deputy Administrator for the Mutual Defense Assistance Control Act; and Robert H. McBride, Myron L. Black, and William E. Culbert all of the Office of European Regional Affairs.
1. This memorandum transmitted to the NSC a memorandum from Randall to Lay, August 12, which summarized the negotiation in the COCOM and CG. (Ibid.)
2. See footnote 9, Document 327.
3. See Document 332.
4. Attached to Document 332.
5. CIA views were contained in a memorandum from Robert Amory, Jr., to Dillon, August 18, transmitted by Lay to the NSC Planning Board on August 19. (Department of State, S/P–NSC Files: Lot 62 D 1, U.S. Economic Defense Policy)
6. Department of Commerce views were contained in a memorandum from Marshall M. Smith, Acting Assistant Secretary of Commerce for International Affairs, to Dillon, August 19. (Ibid., Central Files, 460.509/8–1958)