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

343. Memorandum of Discussion at the 395th Meeting of the National Security Council⁰

January 29, 1959.

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

1. U.S. Economic Defense Policy (NSC 5704/3; NSC Actions Nos. 1865–c, 1944 and 2032;¹ Memos for NSC from Executive Secretary, “East-West Trade (Foreign Assets Control Regulations)”, dated December 23, 1958,² and January 14, 1959;³ Memo for NSC from Executive Secretary same subject, dated January 23, 1959⁴)

Mr. Gray gave a brief statement of the problem and recommended approval of the draft NSC Action proposed by 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.)⁵

After the Council had agreed to Mr. Gray’s recommendation, the President inquired as to how many foreign countries would be affected by the action which the Council had adopted. Secretary Dulles replied that he doubted if the new action would produce any appreciable, practical effects but there might be certain instances in the United Kingdom and France. The President inquired whether West Germany would be affected. In reply Secretary Dulles pointed out that the new action would apply only in cases where the subsidiary of an American corporation in a foreign country represented the sole source in that country for the goods which Communist China was ordering. Accordingly, the chances of practical effects were very remote.

The National Security Council: ⁶

a. Noted the report in the reference memorandum of January 23, 1959, that:

(1) The Council on Foreign Economic Policy agreed that existing U.S. Economic Defense Policy (NSC 5704/3) should be continued pending a CFEP study of the effectiveness of the implementation of existing policy on trade with the USSR.

(2) The Chairman, CFEP, appointed a CFEP committee to make the above study and to recommend the terms of reference, organization and financing for a study, by an outside agency, on the advantages and disadvantages to be derived by the United States from peaceful trade with the USSR.

b. Noted that, following the statement by the Secretary of State to the NSC on July 3, 1958 (NSC Action No. 1944), with respect to NSC 5704/3 (paragraph 20), the Canadian and United States Governments issued the following joint press statement on July 9: “The Canadian and United States Governments have given consideration to situations where the export policies and laws of the two countries may not be in complete harmony. It has been agreed that in these cases there will be full consultations between the two Governments with a view to finding through appropriate procedures satisfactory solutions to concrete problems as they arise.”

c. Agreed that it may be desirable in the national interest to make exceptions for friendly foreign countries with respect to trade with Communist China by foreign subsidiaries of U.S. corporations abroad (Paragraph 20, NSC 5704/3). Such exceptions should normally be limited to situations (a) which are important to the economy of the friendly foreign country, and (b) in which an indigenous company (not U.S. controlled) is unable to fill the order. The NSC understands, however, that the licenses issued will be kept to a minimum.

Note: The above actions, as approved by the President, subsequently transmitted to all holders of NSC 5704/3.

The actions in b and c above, as approved by the President, subsequently referred to the Secretaries of State and Treasury for appropriate implementation.

[Here follow agenda items 2–4.]

S. Everett Gleason

0. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret; Eyes Only. Drafted by Gleason on January 29.
1. See footnote 9, Document 327; footnote 3, Document 330; and footnote 6, Document 341.
2. See footnote 3, Document 341.
3. See footnote 4, Document 341.
4. In this memorandum, Lay transmitted to the NSC a memorandum from Randall to him, also January 23, in which Randall reported on the conclusions of the CFEP meeting of January 22. (Department of State, S/P-NSC Files: Lot 62 D 1, U.S. Economic Defense Policy) See footnote 5, Document 341.
5. Not printed.
6. Paragraphs a-c and the note that follows constitute NSC Action No. 2042, approved by the President on February 3. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council)