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

334. Memorandum of Discussion at the 377th Meeting of the National Security Council⁰

August 21, 1958.

[Here follows a paragraph listing the participants at the meeting.]

1. U.S. Economic Defense Policy (NSC 5704/3;¹ NSC Action No. 1865;² Memo for NSC from Executive Secretary, same subject, dated August 13, 1958³)

Mr. Gray briefed the Council on the subject item, and called immediately upon Mr. Randall as Chairman of the Council on Foreign Economic Policy. (A copy of Mr. Gray’s briefing note is filed in the minutes of the meeting, and another is attached to this memorandum.)⁴

Mr. Randall pointed out that the CFEP had met, and had received the report of the negotiations at the recent meetings of COCOM and of the Consultative Group (CG). The sole issue before the NSC this morning was whether the results of the negotiations were within the authority extended by NSC Action No. 1865–b, reading as follows:

“Agreed that the best interests of the United States would be served by liberalizing the multilateral security controls on trade with the Sino-Soviet bloc; thereby facilitating accord with our allies and agreement on the maintenance of an effective multilateral security trade control system. Such system should continue controls on munitions and atomic energy items and on other items having a clear military application or involving advanced technology of strategic significance not available to the Sino-Soviet bloc.”

The CFEP had unanimously agreed that the negotiations had been conducted within the above-mentioned authority, although the Defense Department representative was not very happy at some of the results of the negotiations.

Mr. Gray then called on Mr. Douglas Dillon, the Under Secretary of State for Economic Affairs. Mr. Dillon presented to the Council an oral report covering the background of the negotiations in COCOM and in the Consultative Group. He pointed out that at about this time last year, when the China and Soviet control lists had been consolidated, we had agreed with our allies to undertake a review of the new combined lists. Work had proceeded all during the following autumn and resulted in a U.S. proposal for a new list containing 148 items which would be subject to control. When we presented this new list to our allies, they had thought that our list was still too broad and inclusive. This was the background for the discussion of the subject which was held in the National Security Council in February 1958, the end product of which was NSC Action No. 1865–b quoted above.

Negotiations on the technical level lasted from mid-March 1958 to the first of July 1958. The U.S. negotiators started out with our original list of 148 items and argued for them as effectively as they could on technical grounds. Subsequently, certain further reductions in the list were agreed upon. Following this, the Consultative Group met in Paris in the middle of last month. The Departments of Defense and Commerce were provided with an opportunity to go over the instructions to the U.S. Delegation prior to these final negotiations. The Defense Department desired us to hold out for certain items which most of our Delegation felt it would be impossible to negotiate successfully without at the same time threatening the effectiveness of the whole multilateral security trade control system. Defense’s concern centered around four major items: jet fuel, tankers, nickel, and steel rolling mills. We succeeded, in the international negotiations, in retaining jet fuel on the international control list. We also succeeded in maintaining control on nickel to a considerable degree. The problem of the tankers proved very difficult. We agreed to relax the controls on tankers whose speed was less than 18 knots, while keeping control on tankers whose speed was 18 knots or better. The United Kingdom also finally agreed to our keeping steel rolling mills on the list for international control.

The President inquired why there had been such controversy about retaining steel rolling mills on the control list. He had not thought that this would be so important, in view of the high degree of efficiency now known to exist in the Soviet steel industry.

Mr. Dillon replied that Commerce had thought it extremely important to retain the international controls on the export of steel rolling mills to the Soviet bloc. This was the only aspect of Russian steel production in which the Russians were still behind the United States in progress.

Mr. Dillon expressed the view that as a result of the July negotiations the list of military items for international control had actually been somewhat expanded and strengthened. The only item to come off the military list was civilian aircraft, which everybody agreed did not belong on the military list. Certain kinds of civilian aircraft and aircraft weighing over 90,000 pounds were to be continued on the list for control, though on the regular list and not on the military list.

The final result of the negotiations in Paris was agreement on an international list of 119 items for multilateral control. The extent of the controls was considerably decreased, although it was the feeling of most of the U.S. Delegation and of the State Department that we now had a solid and reasonable international list.

Mr. Dillon then read the conclusions of a letter from the Deputy Director, Intelligence, CIA (Mr. Robert Amory), to himself,⁵ indicating the judgment of the Central Intelligence Agency that the items decontrolled in the new lists would not substantially benefit Soviet military capabilities.

Mr. Dillon also insisted that items containing advanced technology were safeguarded under the new control list, and that it had been agreed to relax the controls on raw copper because it had been impossible to maintain control over the export of copper wire, which was the really crucial item which we would have liked to maintain controls on. At least, the decontrol of raw copper would be highly pleasing to Chile.

In addition to these main items which had been removed from multilateral control, some 20 new items had been added. These were mostly items which contained very modern technology. Mr. Dillon expressed the general view that the new agreement would stick. All the nations making up the multilateral control system were happy about it, with very few exceptions. However, it had been agreed to review the list annually. The new review will occur in September 1959, when the United Kingdom may again attempt to remove steel rolling mills from the international list.

With respect to the language of NSC Action No. 1865–b as it applied to controls on atomic energy items, Mr. Dillon said that he had not understood the language to mean that we could never change the list of atomic energy items subject to international control, but, rather, that the language meant that we would not decontrol items on the atomic energy list which we agreed were significant. The Atomic Energy Commission is now discussing this matter with representatives of the United Kingdom. There are only two or three items on this list about which there might be a disagreement between ourselves and the United Kingdom. We should have guidance that whatever eventuates from the AEC discussions with the United Kingdom should be acceptable to the United States provided the AEC agrees.

With respect to the Battle Act lists, Mr. Dillon said that he, as Battle Act Administrator, had signed a revised list in mid-August which conformed the Battle Act lists to the newly-agreed international lists. Mr. Dillon felt that he had no alternative but to sign such lists, but since this was a matter of major decision, he had not sent forward the new Battle Act lists until he could secure approval in principle again for the precedent set in 1954 of having the Battle Act lists conform to the international lists. He therefore hoped that the National Security Council would note that the Battle Act Administrator had conformed the Battle Act lists to the new international lists. Finally, said Mr. Dillon, a “watch list” was set up in Paris over some 35 items.

When Mr. Dillon had concluded his oral report, the President inquired if there were any questions. Secretary McElroy said that what Mr. Dillon had said was OK with him. He believed that the Department of Defense had been given consideration with respect to its own views. Defense was not altogether happy with some of the decisions made in the international negotiations, but Secretary McElroy said he realized that decision had to be taken. He would not suggest that the NSC take any other action than to note the action taken by our negotiators as provided in the CFEP report.

Secretary Weeks noted that representatives of the Department of Commerce had also sat in on these negotiations, and had done the best they could to advance their own views on what items should be controlled and what items should be decontrolled. Secretary Weeks went on to point out that the emergence of a new international control list made it requisite for Commerce to bring out a new Export Control List. It would be necessary to go over the new international control lists with a view to determining which of the items on the new multilateral control list should be subject to continued U.S. unilateral control and therefore be placed in the new Export Control List. In this regard, Secretary Weeks pointed out that the Russians want to buy from the United States and the West not consumers goods, but heavy industrial equipment. Accordingly, it was his view that the CFEP should sit down and decide what the United States could do by way of unilateral controls on industrial equipment which the Russians were eager to purchase. He felt that this subject should receive some mention at this meeting.

At the conclusion of the discussion, the President asked for further information about the matter of steel rolling mills, where the Russians were clearly behind the United States and the West. Given the fact that the Russians were still unable to buy steel rolling mills from the West, were they not in a position to secure models of Western rolling mills and then copy them for production in the Soviet Union? Mr. Dillon replied that they would be unable to obtain such plans legally. The President commented that, by and large, he believed that we were often kidding ourselves in imagining that in embargoing or controlling items for export from the West to the Soviet bloc we were securing any concrete advantage. However, he emphatically believed that it was desirable to maintain controls over such items as steel rolling mills, where the Russians were obviously behind the West.

The National Security Council:⁶

a. Noted and discussed the report on the subject by the Chairman, Council on Foreign Economic Policy, transmitted by the reference memorandum of August 13, 1958; in the light of an oral report on the subject by the Under Secretary of State for Economic Affairs.

b. Noted that the Battle Act Administrator had signed new Battle Act Lists which conform to the new international lists recently negotiated in the COCOM and CG.

c. Noted the statement by the Under Secretary of State for Economic Affairs that, under NSC Action No. 1865–b, U.S. negotiators would have sufficient flexibility in the forthcoming review of the International Atomic Energy Lists.

[Here follow agenda items 2–8.]

S. Everett Gleason

0. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret; Eyes Only. Drafted by Gleason on August 22.
1. See footnote 1, Document 320.
2. See footnote 9, Document 327.
3. See footnote 1, Document 333.
4. Attached but not printed.
5. See footnote 5, Document 333.
6. Paragraphs a-c constitute NSC Action No. 1969, approved by the President on August 26. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council)