567. Letter From the Secretary of Defense (Gates) to the Secretary of State1
Washington, July 26,
1960.
Dear Chris: I know that you have been devoting a great
deal of attention to the Cuban problem. Unless and until more direct
action is feasible or necessary, our best course seems to lie in future
actions in the economic sphere. Since we have crossed one Rubicon with
our sugar and oil actions, should we not consider other economic
measures that could have a significant impact on Castro’s regime? It would be most
unfortunate for the United States to find that we had applied sugar and
oil sanctions only to watch the Castro Government—possibly with Soviet help—survive to
strengthen gradually its hold on the people and the economy of Cuba and,
perhaps as a result, its influence on other Latin American countries. In
the event that further actions are to be taken, their effectiveness
would be much greater if applied simultaneously than if staggered over a
period of time, thereby allowing Castro a breathing space in which to adjust his economy
to each one.
In several parts of the world one can observe a disturbing tendency on
the part of smaller nations to seek to involve the Soviet Union in their
problems in the hope of playing East against West. If we do not follow
through with respect to Cuba, we may be encouraging
[Page 1035]
similar behavior by other countries.
This could not only damage our international position but also add
signficantly to the risks of a major East-West conflict.
I understand that various economic measures are possible under the Export
Control Act of 1949,2 and the Defense Production
Act of 1950,3 and through withdrawal from GATT schedules of preferential tariff
rates on Cuban products. I am attaching a list of possible economic
measures as illustrative of the type of actions I have in mind. In
giving you my thoughts on this subject, I recognize that the Cuban
problem is a complex one with many considerations which must be
balanced. Certainly, there are no easy solutions. But from a long range
viewpoint, the risks of all-out economic action seem less than those of
stopping with half-way measures.
Sincerely,
[Attachment]
POSSIBLE U.S. ECONOMIC COURSES OF ACTION REGARDING CUBA5
1. Trade Reprisals:
A. Discouragement of extension of credit to Cuba on
sales of exports.
- a.
- Eliminate any government guarantees or insurance affecting
exports to Cuba which may be in effect.
- b.
- Publicize through trade publications the special risks
involved.
2. Elimination of Cuban
Preferential Rates and Most-Favored-Nation Treatment:
Cuban products entering the United States are subject to preferential
rates, in general, about 20 percent lower than the
most-favored-nation rates which apply to most countries. These
preferences stem from a treaty as modified by subsequent notes of
interpretation and most of them are written into GATT schedules. While it would,
therefore, take six months or longer to eliminate them, the
initiation of the process (denouncement of the treaty according to
its terms and notification to GATT
of withdrawal of appropriate items from GATT schedules) could take place at any time.
[Page 1036]
Upon a Presidential declaration that Cuba is a Communist-dominated
area, the imports of that country, after denouncement of existing
international commitments to the contrary, would be subject to
tariff rates prevailing in 1930. This action would result not only
in elimination of the Cuban preferential rates but also in reversion
to much higher rates since the most-favored-nation rates have been
markedly reduced since 1934 by trade agreement negotiations. Thus
rates applying to imports from Cuba would become considerably higher
than those applying to competing countries.
3. Export Controls:
From the standpoint of national security, the Secretary of Commerce,
under the Export Control Act of 1949, as amended, can take any of
the following actions with respect to Cuba:
- A.
- Effect a complete embargo on goods to be exported from the
United States by denying to U.S. exporters license
applications for such shipments. This action would
immediately tend to disrupt the Cuban economy until aid was
received from other sources, such as the USSR.
- B.
- Effect a partial embargo by denying export license
applications for commodities which are essential to the
Cuban economy. This action would result in a temporary
shortage in those commodities in essential daily use in the
civilian economy.
- C.
- Deny services and spare parts regarded as necessary for
the maintenance of the civilian economy. This action would
result in a temporary breakdown of services and production
facilities essential for the proper functioning of the
civilian economy.
4. Transportation
Controls:
Under Section 101 of the Defense Production Act of 1950, the
Department of Commerce can cut off Cuba completely from all trade
(export and import) with the United States and deny them dollars
that ordinarily would accrue through continuation of that trade.
They would also be denied materials and foodstuffs necessary for a
balanced economy. This sudden impact of cut-off of all trade would
present a serious problem to the orderly conduct of everyday life in
Cuba.
5. Bunkering Controls:
Under the Export Control Act of 1949 as extended, the Department of
Commerce can limit or deny the bunkering of petroleum and petroleum
products in the United States, its territories and possessions, to
foreign vessels and planes registered in or under charters to Cuba
or
[Page 1037]
carrying any
commodities manifested or destined directly or indirectly to Cuba,
to prevent their carrying on trade and traffic contrary to the
security export controls and objectives of the United States.
Other Controls and
Actions:
- A.
- Under the Trading with the Enemy Act, the U.S. could (1)
freeze Cuban bank accounts in the U.S. and prohibit all dealings
between U.S. nationals and Cuban firms; (2) embargo all imports
from Cuba; and (3) apply “transactions controls” to deny Cuba
products of U.S.-controlled firms abroad.
- B.
- The U.S. could discourage all tourist trade to Cuba, including
terminating the ferry lines to Florida, landing rights to Cuban
planes, and discourage commercial airlines from flying to
Cuba.
- C.
- Actions could be taken to restrict commercial communications
emanating from Cuba to Latin America and Communist Bloc, to
include such operations as the $1,000 weekly RCA traffic between
Moscow and Havana.
- D.
- Specific vulnerable areas of the Cuban economy include (1)
grain, lard, and rice (the largest single item of U.S. export to
Cuba); (2) automotive, machine, electrical, and electronic spare
parts; (3) petroleum, petroleum products, and technical
assistance in refining; (4) bulk paper for newsprint; and (5)
export of sugar from Cuba.
