Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

CH–6. Memorandum from the Assistant Secretary of State for Inter-American Affairs (Rubottom) to the Deputy Under Secretary of State for Economic Affairs (Dillon)¹

Washington, June 18, 1958

SUBJECT

• Strategic Control On Copper And U. S. Relations With Chile

Problem:

Chileans are unconvinced of the importance of security controls on exports of copper to the Soviet bloc. Many believe they are senseless and harmful to Chile’s economic position. This is grist for the communist mill and being exploited by the extreme-left presidential candidate who is coming up strong in the race to be decided by the September 4 elections.

Discussion:

The Communists have long claimed that U.S pressures on Chile to restrict sales of Chilean copper to the bloc have been harmful to Chile. They have implied that all of Chile’s economic problem would be solved if the strategic controls were ignored and Chile embarked on a policy of unrestricted trade in copper with the bloc. Although some Chileans realize the spuriousness of this contention, it is widely accepted and is at the root of much Chilean resentment of the United States. At a time when copper prices are falling, when the reimposition of the U.S. excise tax on copper imports is imminent, and when the press is full of reports of strong pressures in the U.S. in favor of hiking up the excise, this feeling becomes particularly strong and the leftist argument in Chile especially appealing.

Senator Salvador Allende, presidential candidate of the extreme-left, is closely allied to the communists and follows much of their line. He has indicated that, if elected, he would “reject the prohibition which prevents us from placing our products in any country and accepting the best condition of the market”. In a four candidate race, Allende is now running strong second to the right-wing candidate, Jorge Alessandri. It is far from inconceivable that Allende might win the election. Our Embassy reports that Allende’s compaign derives advantage from any exacerbation of issues involving U.S. relations. He obviously benefited from the violent anti-U.S. reaction in Chile to the Department of Interior’s press release on the copper excise tax.²

From the viewpoint of U.S. interests, it would be better if any of the candidates other than Allende won the Chilean elections. Were Allende to win we could be faced with a pro-Soviet, anti-U.S. administration in one of the important countries of the hemisphere. An insight into Allende’s orientation is contained in his recent speech (Text attached—Tab A).³ At the very least, we would have to deal with an Administration opposed to much of what we stand for in the fields of political and economic policy. The position of the $750 million worth of U.S. investment in Chile would be endangered. Allende has indicated he plans to introduce a bill to change the copper law in ways which have the American companies greatly concerned. Moreover, if Allende carried out his announced intention of dropping strategic controls on trade with the Soviets, we would be faced with the necessity of a Battle Act determination with all that would imply for our relations with the entire hemisphere.

It is speculative, of course, whether anything the U.S. might do at this time could in any way affect the outcome of the Chilean elections. I believe, however, one action we could take, which would dramatically deprive Allende of one of his strongest talking points and would wipe out an issue that has long beclouded our relations with Chile, would be an announcement by the U.S. that it no longer objected to trade in copper in all forms with the bloc.

I understand that the downgrading of international strategic controls on copper is already being urged by several countries in the COCOM meetings now going on and that there is a good possibility that eventually we will have to acquiesce to such a downgrading. I also understand that the large loophole in existing controls created by the downgrading of copper wire of under 6 mm has already resulted in a substantial movement of free-world copper to the bloc in the form of wire and that it is doubtful whether the downgrading of other copper would lead to a significant charge in the supply availabilities of the bloc. I further understand that the chances of our obtaining agreement within COCOM to upgrading the controls on less than 6 mm copper are negligible.

It is pertinent to recall that for some time the communists in Chile argued that Chile’s economy was suffering from U.S. objections to Chilean trade in nitrates with Communist China and that there would be a significant improvement in Chile’s balance-of-payments position and in the position of the ailing nitrate industry if Chile could only take advantage of the “tremendous” potential market that existed in communist China for Chilean nitrates. In 1954, the Chilean Government finally consulted with us on this point and was informed that we did not object to Chilean sales of nitrates to Communist China. Since that date, to our knowledge, not one pound of Chilean nitrates has been sold to Communist China and an effective communist propaganda argument has been eliminated.

I understand that information available to the departmental officers concerned with strategic controls indicates that continuation of existing international controls on exports of copper to the bloc will not have a significant impact on Soviet military capabilities so long as copper in the form of wire is available to the Block. In these circumstances U.S. initiative in agreeing at this time to the elimination of these controls would remove an issue damaging to our relations with Chile and with other copper-producing and trading countries, could help to forestall the possibility that a pro-Soviet administration might be elected in an important country of the Western Hemisphere, and thereby could make a contribution to U.S. security interests more substantial than maintenance of controls which apparently no longer serve a significant purpose.

Recommendation:

Accordingly, I recommend that the Department:

1. After appropriate consultation with other agencies, agree to remove copper from the embargo list in the forthcoming Consultative Group negotiations.

2. Give prompt notification to Chile of the Consultative Group decision in order to obtain maximum advantage in U.S. Chilean relations.

1. Source: Department of State, Central Files, 460.259/6–1858. Secret. Drafted by Silberstein; initialed by Rubottom.
2. The Embassy reported in telegram 714 from Santiago, April 22 (825.2542/4–2258), and in despatch 1117, May 13, 1958 (825.2542/5–1358), that, following Seaton’s press release, Allende announced that he would introduce a project to modify Chile’s new copper law by, inter alia, re-establishing a Government monopoly over copper sales. In despatch 1207, June 6, the Embassy reported that at a large rally in Santiago, May 29, Allende spoke vigorously in support of Chile’s right to sell its products to any country in the world depending upon where it could receive the best market terms, and criticized Chile’s domination by the United States on such matters. (725.00(W)/6–658)
3. Not printed.