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

345. Memorandum From the Assistant Secretary of State for European Affairs (Merchant) to the Under Secretary of State for Economic Affairs (Dillon)⁰

March 27, 1959.

SUBJECT

• Problems Posed by Commerce Department Views on East-West Trade

I know that you are very much aware of the problems created by recently expressed viewpoints of the Commerce Department on east-west trade.

The publicity in the press last week centering around the Senate Committee testimony of Admiral Strauss emphasizes, in my opinion, the need for coping with these problems at an early date. The Administration has gone on record on several occasions, most recently in your conversation with Mikoyan, and in the President’s reply to Khrushchev’s letter of June 2, 1958 on trade,¹ as favoring an expansion of peaceful trade with the Soviets. Admiral Strauss, however, has been quoted as stating that there is no such thing as “peaceful trade” with the Soviets, as favoring the shipment only of consumer goods to the Soviets, as attributing to the Administration planning for an “Economic NATO”, etc.

The various agencies can, of course, be expected to produce different ideas on economic defense during the current review of policy in this field. However, I know that in CFEP discussions you have emphasized, and it has been agreed, that during this review period existing policy would continue in effect. The public statements of Admiral Strauss scarcely seem consistent with this agreement.

The press has increasingly begun to pick up evidences of Commerce viewpoints at variance with those of other agencies and of the President. It would be surprising if this were not to lead to further and more searching press inquiries, replying to which would prove quite embarrassing. Questions might well be raised, too, by our NATO allies, in such forums as the UN ECE and ECOSOC. In ECE and ECOSOC meetings our position in favor of expanding peaceful east-west trade has been very useful in gaining the support of our allies in resisting Soviet “propaganda proposals”, e.g., for a World Economic Conference, etc. In such a forum, the Soviets could now cite the public statements of Admiral Strauss as evidence that the Administration has not been sincere in stating its support for an expansion of peaceful trade, and as indications of a rift between the U.S. and its allies. Such accusations would have their effect, also, on our negotiations with the Soviets on political matters, e.g., at a Foreign Ministers’ meeting, thus generally weakening our posture in the cold war.

The problem of reconciling Commerce statements with Administration points of view may, of course, come to a head when the CFEP considers certain of the draft replies to the questions posed by Senator Fulbright.² I am hopeful that whether or not this is the case, you will find some means of seeking early top-level resolution of this problem, in light of the dangers which I have noted.

0. Source: Department of State, Central Files, 460.509/3–2759. Confidential. Drafted by Lubert O. Sanderhoff of the Office of European Regional Affairs with clearances from B.E.L. Timmons, Director of the office, and Ruth H. Kupinsky, also of that office. Cleared with Edward L. Freers, Director of the Office of Eastern European Affairs, and William N. Turpin also of that office.
1. Mikoyan and Dillon discussed possible expansion of U.S.-Soviet trade on January 19, 1959. For Khrushchev’s letter and Eisenhower’s reply of July 14, see American Foreign Policy: Current Documents, 1958, pp. 846–850.
2. The questions asked by Fulbright and the replies provided by the Department of State are included in “U.S.-U.S.S.R. Trade Relations,” Committee Print, U.S. Senate Committee on Foreign Relations, 86th Congress, 1st Session, June 24, 1959 (Washington, 1959), pp. 9–26.