340. Minutes of the Meeting of the Council on Foreign Economic Policy0
SUBJECT
- U.S. Trade with the Soviet Bloc
The Chairman advised the members of the Council on Foreign Economic Policy that he had asked the Economic Defense Advisory Council last December to review our Economic Defense Policy and to submit its recommendations to the CFEP. Because of this and the fact that Mikoyan is expected to return to Washington about January 19,1 he said it would be useful to talk about what our policy should be in connection with our peaceful trade with Russia. He said that he hoped [Page 750] that the discussions would be free and open and pointed out that no formal action would be taken by the CFEP today as a result of the discussions.
He then asked Mr. Dillon to review for the CFEP State’s discussions with Mikoyan. Mr. Dillon stated that the Department of State had been unable to find out what Mikoyan wants to discuss. He said that the discussions with Mikoyan to date were mostly political and related to the German problem, and that the question of trade did not come up. State believes that Mikoyan does not want to talk about trade. Nevertheless, Mr. Dillon stated that Mikoyan brought up the matter of trade while in Cleveland.
Mr. Dillon said that two questions are involved in connection with our policy on peaceful trade with Russia and the bloc. First, we must consider just what this trade should consist of and, secondly, we must consider the propaganda advantage that results to either side as a result of the trade.
Mr. Dillon then reviewed the history of our policy advocating increased peaceful trade with Russia. He said that the President was very clearly in favor of the development of peaceful trade with Russia. The President first called for this at a meeting of the Summit in 1955. Mr. Dillon said the joint directive of the Summit meeting2 called for all countries to study measures to eliminate the barriers to trade. He said that the principal interest of the Soviets in trade is the propaganda advantage that they can get out of it. The Soviets look on trade as a balancing out of their economy for the things they need.
Mr. Dillon then reviewed the recent CIA estimate on trade with the Soviet bloc3 which claims that if all controls were removed, our maximum exports would be between $100 and $150 million per year. He then summarized by saying that the Department of State is in favor of increasing peaceful trade with the Soviet bloc but not in favor of conducting such trade through state trading. Also, the State Department is not in favor of granting credits to Russia and, in any event, this is precluded by the Johnson Act. He concluded by saying that he did not believe that trade between the United States and Russia will be very greatly increased in the near future. He said that he looked on trade as an element of the cold war and as more important psychologically than economically.
The Chairman said that our NSC policies call for an expansion of peaceful trade with Russia and that the language in this connection is clear. He said that trade has sharply decreased in the past few years and that he thought this was a result of certain agencies dragging their [Page 751] feet who are opposed to increasing such trade. He said that our policy has been implemented so as to convey the impression to American business that trade with Russia is a dirty word, bootleg, and disloyal. He said that trade has stagnated and that positive conduct is necessary to implement clear U.S. policy. He concluded by saying that he thought that an increase in this trade would help the cause of peace. At this point Mr. Strauss said that he did not agree and that was the reason he had requested that our Economic Defense Policy be reviewed.
Mr. Anderson said that he was troubled by the items that we and other free countries were sending to Russia. He said that the big problem here was a difference of opinion on what was peaceful trade. He spoke about the shipments of copper wire by COCOM nations to Russia requiring Presidential intervention with Mr. Churchill. He said that business is also troubled by the definition of peaceful goods. He believes that the difference of opinion on what is peaceful trade is causing the responsible agencies to take a negative attitude in issuing licenses for trade with Russia.
Mr. Randall repeated that there is a vast area of goods that are unquestionably on the peaceful side and that this is the area in which trade has nevertheless fallen.
Admiral Strauss said that the question of trade with Russia was brought very strongly to his mind several days after he had taken office as Secretary of Commerce. He said he was asked to approve a license for the shipment of carbon black to Russia. As a result of his experience as a director in the U.S. Rubber Company, he knew that carbon black was used to harden and extend the life of rubber in tires, and that since an army travels on tires in this modern age, it seemed to him that we should not be shipping carbon black to the Russians. He also said that since he had taken office, he has received communications from businessmen who fear that if they sell certain industrial machinery to the Russians, that it will be used to produce goods which will be dumped on world markets in competition with U.S. products. He said he did not know what peaceful trade means when Khrushchev says that “Russia has declared war on us.” He added that if we increase trade with Russia, it would seem to him that we would be negating our trade policy with Poland under which we had expended some $200 million to date. In his opinion, Russia should be treated the same as China; namely, the U.S. should embargo all trade with Russia. He concluded by saying that he had two responsibilities: one, as Secretary of Commerce to protect American business; and the other as a private citizen to recognize the State Department in its role as arbiter of U.S. foreign policy.
[Page 752]Dr. Saulnier said that he was not surprised that the people of the United States are confused as to what is our policy on trade with Russia. He said that if you believe that trade is beneficial to both countries and that Russia’s interests are inimical to our own, it follows in the minds of the people of the United States that trade with Russia is bad and therefore should be precluded. He is disturbed by the perils of peaceful trade with Russia, but believes it is right.
Mr. Randall stated that there certainly should be no confusion in the Government as to what our policy is on this matter, but that nevertheless the interested agencies did not seem to want to carry out the policy.
Dr. Paarlberg said that he was satisfied with the present policy.
Mr. Irwin said he was opposed to any relaxation of strategic controls. He said that the Russians act from political motives and that whatever they do, they do for their own advantage. He said that although our policy is for peaceful trade with Russia for ourselves, we want other countries to avoid dependence on trade with Russia. He does not necessarily oppose all peaceful trade with Russia but would like to see a study showing the advantages and disadvantages; and which section of our economy and which goods would benefit from such trade.
Dr. FitzGerald advised that no Mutual Security purchases are made behind the Iron Curtain.
Dr. Reid said that the Bureau of the Budget supported the position taken by Mr. Randall but they believed the report now in preparation by EDAC should indicate clearly as to whether our objectives with respect to increasing peaceful trade with Russia are being met.
Mr. Bennett said he was concerned with respect to the recent dumping by Russia of aluminum and tin and he was also concerned about the dumping by the Chinese Communists of textiles in South-east Asia. He thought that this was a very important question that we should take into our consideration in connection with trade with the bloc, but that he realized that this was not necessarily included in our Economic Defense Policy. Otherwise, he could see nothing wrong in what we call peaceful trade, if it did not include dumping.
Mr. Amory of CIA said that if the United States does not trade with Russia, that Russia will trade with Germany or other Western European countries. He said that he did not agree with Mr. Strauss that the Russians are engaged in an all out trade war with the United States. He said that statements by Russia in this connection just point up the fact that they are competing with us.
Mr. Lodge said that the political factors of peaceful trade with Russia are overwhelming and that this would therefore make him support the position of the Chairman. He said he had just returned from India and it was quite evident that the Indians question our [Page 753] peaceful intentions as a result of some of the things that we are doing. He said that if we indicated that we really intended to increase our peaceful trade with Russia, it would help to alleviate this suspicion.
Mr. Patterson of OCDM stated that he agreed with Admiral Strauss that we should not do any trading whatsoever with Russia and the bloc.
Mr. Morse said that if we back away from what the President has said with respect to increasing our peaceful trade with Russia, it would indicate that we may be withdrawing from the other commitments that we have made with Russia for cultural exchanges, etc. He said he thought that we ought to try to increase the demand of the Russian citizens for consumer goods. He further indicated that he thought that one of the ways that we could increase our trade with Russia was through agricultural surpluses.
Mr. Dillon said that the Department of State favors a study in depth as to whether peaceful trade with Russia is actually helpful to the United States. He said that the Department of State hopes that friendly foreign countries will not become economically dependent on trade with Russia but, on the other hand, State did not object to friendly countries conducting a small amount of trade with Russia.
Mr. Randall concluded the meeting by saying that he would see to it that the EDAC review was presented to the CFEP as soon as possible. He urged members of the Council who had not submitted their recommendations on this matter to EDAC to do so immediately. He stated that he would like EDAC to make its recommendations to the CFEP by January 16 and that the CFEP would try to consider the EDAC recommendations on January 22.
- Source: Eisenhower Library, CFEP Chairman Records. Secret. These minutes were described as “extended” and prepared by Cullen on January 9. There is no list of participants.↩
- Soviet First Deputy Premier Anastas I. Mikoyan made an unofficial visit to the United States, January 4–20.↩
- The text of the joint directive, issued at the Geneva Summit on July 23, 1955, is in American Foreign Policy, 1950–1955: Basic Documents, pp. 2015–2016.↩
- Document 335.↩
- Printed from a copy that bears this typed signature.↩