Enclosure
2
Part I. Review of the Effectiveness of
the Implementation of Existing NSC
Policy on Trade With Russia
Attachments
- 1.
- Summary report of Staff Committee, composed of Mr.
Marshall M. Smith, Chairman, Commerce;
Captain W.B. Thorp, Defense; Mr. Edward F.
Rains, Treasury; and Mr. Robert B. Wright,
State, [1 line of source text not
declassified]
- 2.
- Detailed report of Staff Committee3
The CFEP Committee has unanimously
accepted the analysis of the effectiveness of the implementation of
existing NSC policy on trade with
Russia, contained in the attachments hereto and forwards it for
consideration of the CFEP.
Part II. Terms of Reference for a
Study, by an Outside Agency, on the Advantages and Disadvantages to
be Derived by the United States From Peaceful Trade With Russia, Who
Should Make Such a Study and How It Should Be Financed
[Page 765]
Attachments
- 1.
- Outline for a Study of the Advantages and Disadvantages to be
Derived by the United States from Peaceful Trade with the Soviet
Bloc—submitted jointly by State and Defense4
The CFEP Committee has been unable to
reach agreement as to the desirability or necessity for making a study,
as proposed by Defense at the January 22, 1959 CFEP meeting, to assist in the determination of U.S. policy
toward trade with the Soviet bloc. Basically, Defense strongly supports
the proposal; State concurs under certain conditions; Commerce opposes,
while Treasury is up to now unconvinced as to the value of the study.
The positions of the different members with the reasons therefor follow:
- A.
- The Department of Commerce believes such a study to be
unnecessary and fails to see wherein the results would be
helpful in determining future U.S. trade policy toward the
Soviet bloc for the following reasons:
- 1.
- The subject of U.S.-Soviet bloc trade has been under
constant study and review by competent personnel of the
Executive Branch for many years resulting in full
knowledge of the problems.
- 2.
- Expansion of U.S.-Soviet bloc trade even to the
$150-200 million level, as estimated in NIE–100–8–58,5 would require either (a)
extension of credits by the U.S., (b) large increase in
U.S. imports from the Soviet bloc, or (c) payments for
U.S. exports in gold.
- 3.
- There is no indication that the bloc as a whole, or
the USSR in particular,
plans to satisfy their defaulted obligations to the U.S.
in the foreseeable future. Under the Johnson Act,
therefore, the extension of credits is prohibited, and
there is no indication that this Act shall be
recommended for modification.
- 4.
- There are no Soviet bloc exports needed by the U.S.
which are not presently, and in the foreseeable future,
being adequately supplied from Free World sources. To
the extent that the U.S. would shift its purchases from
Free World sources to Soviet bloc sources, serious
damage would result to the economies of those Free World
countries, which is contrary to the U.S. policy of
strengthening them. Additionally, in order to counteract
this result the U.S. through its Aid program would be
forced to devote additional aid to those countries, and
finally, such a transfer would serve to make the U.S.
more dependent upon Soviet bloc sources of supply, an
undesirable situation and also somewhat contrary to U.S.
policy.
- 5.
- There does not appear to be any indication that the
Soviet bloc has any intention in the foreseeable future
to utilize its reserves or current production of gold
for payment of needed imports. Rather, recent action in
this field would indicate a reversal of the sales by the
USSR of gold in
order to acquire needed exchange.
- 6.
- Even should U.S.-Soviet bloc trade increase in a few
years to the estimated $150-200 million figure, the
economic impact on the U.S. economy would be negligible
when viewed from overall U.S. foreign trade or the
GNP. Accordingly,
economic factors are of little weight in determination
of U.S. policy as opposed to political and psychological
factors.
- 7.
- From the political and psychological side Commerce
believes that increased trade in the commodities desired
by the bloc would be disadvantageous to the U.S. First,
such exports would materially assist the bloc by
providing them in minimum time and at relatively small
cost, the fruits of long and costly research had
technological development. Second, such exports would
place the bloc in a more favorable position, at least
time-wise, in intensifying their economic warfare and
penetration activities. Lastly, such exports would serve
to bolster the hold the Soviet regimes have over their
people by providing them with increased examples of
alleged Communist superiority and progress.
- 8.
- The Soviets have openly declared that they utilize
trade as a political weapon. Certainly, therefore, in
any increase in trade on the part of the Soviets, it can
be considered to be to their political advantage.
- 9.
- Finally, U.S.-Soviet bloc increased trade would be
contrary to U.S. interests from the standpoint of
assisting a military political and economic enemy whose
avowed purpose, backed by day-to-day actions, is the
destruction of the U.S. form of government, its prestige
and leadership and its ever expanding economy leading to
the highest standards of living in history.
- B.
- The Department of Treasury reported that it as yet has not
been convinced of the value of the proposed study in assisting
the Executive Branch in determining future U.S. policy on trade
with the Soviet bloc. However, Treasury indicated they would
accede to the majority views of the CFEP that such a study would be helpful, provided
it would be made by a governmental task group assisted by
outside consultants whenever appropriate.
- C.
- The Department of State favored the proposed study on the
basis that the results might prove to be helpful in determining
future policy. As an example of a question which the study might
answer, they pointed to the supposition on page 3 of the summary
relative to the probability that U.S. firms might have competed
successfully with Western European firms for some of the sales
of items unilaterally embargoed. However, the Department of
State indicated it would wish to review its position should
other than the joint State/Defense outline guide for the study
be accepted and should other than the Rand Corporation be
suggested for making the study.
- D.
- The Department of Defense strongly supports their proposal for
a study by an outside agency for the following reasons:6
[Page 767]
- 1.
- Present U.S. policy is based upon short term
considerations and is not responsive to conditions which
might exist in a period ten to fifteen years in the
future. We, therefore, need to postulate various
situations and analyze the pros and cons of trade under
those assumptions.
- 2.
- While the present policies on trade may be appropriate
for the short term view, they may, at the same time, be
inappropriate and detrimental to the accomplishment of
long term objectives.
- 3.
-
Should the study confirm the present policies as
being appropriate, there is a possibility it might
point the way for the adoption of other measures
which would extend, reinforce and make more
effective those measures presently being taken.7
- 4.
- The evolution of the USSR standard of living may well lead to
changes in the political situation making it possible
that a greater degree of coexistence would be desirable
and advantageous.
- 5.
- While Defense recognizes the Soviets have openly
stated they will show the superiority of their economic
system over that of the West and will bury us, it
doesn’t necessarily follow the best way to combat that
is by withdrawing from all trade. The study by unbiased
experts might show that a continuation of present or
increased trade would be more advantageous to the U.S.
in combatting this threat.
- 6.
- Even though a great deal has been done in this field
within the government by qualified people, the work has
been mostly by part time attention and by personnel who
have been very close to the implementation of existing
policies. Therefore, an objective study by newcomers,
expert in the whole field of international trade, based
on long range thinking would serve to either confirm the
accuracy of the present policy base or point the way to
desirable changes in policy. In short, such a study
would bring into the determination of policy a new fresh
look of a problem which has been with us for ten
years.
With respect to outside firms which might make such a study, there was no
agreement in the CFEP Committee. State
felt that it would wish to reconsider its views if a firm other than
Rand Corporation was to be concerned. Defense, while not limiting its
selection to Rand Corporation, indicated it was satisfied of the
competency of that firm. Commerce and Treasury did not express any
preference since
[Page 768]
basically
they are opposed to the study. However, in addition to the Rand
Corporation, the names of Battelle Institute, Johns Hopkins, and
Stanford Institute were mentioned.
On the matter of financing such a study if one is to be made, it was the
consensus of the Committee that funds therefor should come from funds
available to the President. Additionally, the time element was
mentioned. Defense reported Rand had indicated a period of at least
three months, but felt that six months would be desirable in order to
provide a complete and comprehensive study.
