567. Letter From the Secretary of Defense (Gates) to the Secretary of State 1

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,

Thomas S. Gates 4

[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.

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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.
  1. Source: Eisenhower Library, Files of the Office of the Special Assistant for National Security Affairs, Cuba. Secret. Copies were sent to the Secretary of Commerce, the Director of Central Intelligence, and Gordon Gray. Gray’s copy is the source text.
  2. Enacted February 26, 1949; for text, see 63 Stat. 7.
  3. Enacted September 8, 1950; for text, see 64 Stat. 798.
  4. Printed from a copy that bears this stamped signature.
  5. Secret.