Foreign Relations of the United States, 1958–1960, Volume X, Part 1, Eastern Europe Region; Soviet Union; Cyprus

127. Memorandum of Conversation⁰

New York, September 24, 1959.

SUBJECT

• Journal of Commerce Dinner for Khrushchev

PARTICIPANTS

• Chairman Nikita S. Khrushchev
• Ambassador Menshikov
• Ambassador Lodge
• Acting Assistant Secretary Foy D. Kohler
• Mr. Eric Ridder, Publisher, Journal of Commerce

(See attached for Others)¹

This was a dinner given at the Sheraton Carlton Hotel by Mr. Eric Ridder, Publisher, New York Journal of Commerce, arranged by Soviet Ambassador Menshikov directly with Mr. Ridder.

After the dinner was well underway, Mr. Ridder opened the discussion with a short speech in which he expressed the hope for some friendly discussion with the Chairman with free give and take on both sides. He thought this might clarify many questions and cited an example which bothers American businessmen: namely, that the Soviets are reported to be mining gold at the cost of $166 an ounce when the world price is $35 an ounce. Summarizing, he said he would focus on a question to Mr. Khrushchev as to whether the chances of improving trade relations between the USSR and US have been improved by his visit to this country? Mr. Khrushchev said he would like to reverse that question. What did the American businessmen think? Mr. Cortney of Coty² stated that they had not been improved, that such a visit was not a factor in the process. Mr. Ridder disagreed. Mr. White, of Republic Steel,³ then took the floor to explain his concept of the difficulties in the Soviet-American relationship. He said that he had started out as a worker and had worked in the USSR, in Greece and other countries. He was now in management. One thing he had found in his present capacity was that in connection with any labor difficulties, there was always some communist hell-raising involved. In almost any situation Soviet influence was found and it was anti-American. There was some applause after this (in which, apparently by inadvertence, Mr. Khrushchev joined).

After a few remarks from Mr. Fleming and Mr. Strauss, Mr. Moore of Moore-McCormack⁴ sketched his company’s improving business behind the Iron Curtain, citing that their shipment of hams for Poland had tripled in three years and shipments to Czechoslovakia of Christmas tree ornaments had considerably increased. They would be interested in carrying more Soviet products.

Mr. Cortney then referred to the question of the price of gold. He said that Soviet secrecy on their gold holdings and production created a lack of confidence in business circles. Mr. Khrushchev did not understand why this worried American business, saying that the question of trade was simply a question of: “You buy what you need from us, we sell you what we can.” Mr. Cortney took him up on this remark saying this was not the basis of international trade, which resulted rather from mutual advantage. He repeated again that he could not understand why the USSR kept its gold stock figure a secret. Mr. Khrushchev in turn repeated that he did not understand why Mr. Cortney should want to know this kind of thing. Mr. Khrushchev then continued and referred to Mr. Strauss’ earlier suggestion that the goods of Iron Curtain origin encountered sales resistance in the US. In this connection he cited Soviet trade with West Germany despite political differences and said he didn’t see what difference the origin made, if the goods were right. Mr. Strauss pointed out that goods had to be marked as to origin under American law, and that there was in fact sales resistance to Soviet goods. Mr. Khrushchev then went on to talk about “discriminatory” American tariffs. In developing his thesis, he said the USSR in fact had nothing to sell, that their warehouses are almost empty. He went on to say, however, there was good trade with the Soviet Union and other western countries.

Mr. Reed of American Express⁵ then referred at some length to the recent exchanges of managerial, industrial and technical exchanges and asked whether Mr. Khrushchev did not find them useful. Mr. Khrushchev agreed, then went on to say he did not understand why they were able to have trade relations with such a firm as Krupp in West Germany and not with the US. Mr. Cortney again intervened to put the picture in perspective, pointing out that the entire trade of the USSR with the outer world was only two billion dollars out of a total world trade of 220 billion dollars. Mr. Khrushchev then said the questions Mr. Cortney were raising were political, not economic. If the US did not want to trade, then it should not trade. The USSR does not need our goods, though he would point out that in earlier days trade was rather extensive and that Ford, for example, had found it profitable to deal with the USSR. Mr. Cortney said that what was good for Ford was not necessarily good for the US. Khrushchev retorted the United States is made up of Fords.

Mr. McCabe of Scott Paper⁶ then changed the subject by asking Khrushchev to give his impressions of the trip.

Mr. Khrushchev took the floor, agreeing to try to give his impressions. He had found that the American people were essentially peace-loving. Business people seemed to him particularly interested in good US-USSR relations, except perhaps for the few who depended directly on government arms contracts. However, among US politicians he found there were some who feared the end of the cold war. Maybe they had made too many speeches to permit it. This was the horse they rode into Congress and they couldn’t get off. Overall, however, his principal impression was that the US wants to come to an agreement with USSR and to live in peace. As to trade, he would repeat that the USSR does not need this but still believes it would be a good thing. He could agree with Mr. Cortney that national specialization was a factor in international trade. However, since the US did not agree to exports which the USSR needed, the USSR had been obliged to produce its own industrial equipment. For example, he had visited the Mesta plant and found that their largest press was 50,000 tons in capacity.⁷ The largest press produced by Soviet industries now is 70,000 tons. He then cited Soviet development of an advanced oil drill. However, the USSR could buy from the US, for example, chemical equipment in which the US is ahead; maybe also some equipment for the oil industry. The Soviet Union had once traded on a considerable scale with the DuPont Company but not in recent years. It could do some business again if the State Department permitted, but since this was not permitted the USSR was buying more goods of this type from West Germany and the UK. Orders to the UK had in fact mounted so rapidly that he had had recently to counsel restraint on his industrial people, so they would not exceed payment possibilities. The USSR was also buying synthetic fibers and production machinery from Italy and France. It was a question of pay and take. If the US found it profitable to trade with the USSR, good. If we did not find it profitable, then we wouldn’t trade. This was the law of trade. The USSR could wait while the US took its time to come around to an understanding of these facts.

Mr. White turned his attention again to economic systems, charging that the USSR had adopted the Western incentive system, the production methods and many other features. He said that was fine. Mr. Khrushchev quickly interjected that the Soviets are not stupid. What they found that was good in the Western system they took. The original and greatest contribution in modern production was Henry Ford’s invention of mass production which was a high point in economic history. However, he concluded: “If you don’t want our caviar, don’t buy it. It is very good. We will eat it ourselves.”

Mr. Hewitt of Deere Co.⁸ then referred to the fact that they had made sales to the Soviet Union over a period of years but always just one or two tractors or combines. He wanted to ask why the Soviets just buy samples of Western production. To this, Mr. Khrushchev said he wanted to give a frank and honest reply. Why should the USSR buy US industrial output in any quantity? They were able to produce everything they needed themselves. Consequently, they buy Western models only to compare and borrow what they consider best. He said the average customer of Deere Co., the US farmer, certainly buys only one or two machines. The Soviet Union buys as much as any farmer or even more. Why should the Deere Co. complain; presumably the company profited equally from both transactions. Maybe Mr. Hewitt should try to get Mr. Garst to buy more of his products. Mr. Hewitt said that he was not talking about individual and private customers but about trade between nations which he understood was the subject of the discussion. Mr. Khrushchev replied that the Soviets were not interested in tractors or combines or planes. At the moment they were only interested in equipment for the chemical industry.

Mr. Pace ⁹ then asked about the question of payment. Mr. Khrushchev replied that the USSR needed credit, not government credit, but private credit of the kind given them by the UK. They were prepared to pay reasonable rates of interest. In reply to a question from the floor, he said he did not have his technicians available and could not say at exactly what rate. However, he indicated it would probably be the going world rate. He then went on to say that the Soviets were already making vast savings over their calculations in the 7-year plan, being now 5% ahead, which resulted in a significant accumulation of ruble availabilities. (The inference was that increased foreign purchases would increase the savings over the plan and improve Soviet payment possibilities.)

Mr. Percy of Bell and Howell¹⁰ brought up the question of what assurances the USSR was prepared to give as respects patents, licensing rates, etc. In this connection he cited correspondence he had had on this subject with Sergei Mikoyan, son of Anastas, in connection with Sergei’s interest in the high quality of a West German camera he had. Mr. Khrushchev replied that if the Soviet Union bought patent or license rights, it would pay in accordance with world practice. However, he went on to turn the question aside by saying that young Mikoyan was speaking of a gift given him by the Germans which was in fact no better than Soviet cameras. He said his own son, Sergei, had received five such gifts, including a Japanese camera. The Soviet product was better.

Mr. White then turned to the question of the general relationship between the two countries, pointing out that Mr. Khrushchev must realize that the US has all elements in its population with very strong feelings, for example, Hungarian, Pole and Czech. Khrushchev questioned him as to his own background to which Mr. White replied that he was German, French, English, Irish and “100% American”.

Mr. Khrushchev then went on to say that Mr. White was ignorant of socialism and could not understand the Soviet system. There was then some discussion of communist activities in the US at the end of which Mr. Khrushchev asked Mr. White whether he meant that he wanted him, Khrushchev, to call off the American communists. When Mr. White replied flatly, Yes”, Mr. Khrushchev rolled his head in his hands and said, there was nothing to do with such people”.

Mr. Pace then referred to Mr. Khrushchev’s remark that he had found the American people to be peace-loving and asked whether this was a result of his trip. Mr. Khrushchev replied that it was not a result of the trip but that the trip had confirmed this estimation to him. Mr. Pace then asked as to Mr. Khrushchev’s feeling on the U.S. Government attitude. Mr. Khrushchev said the reply to this question depended on the concrete situation; for example, if the Soviet disarmament proposals were rejected, then this would cast doubt on U.S. Government intentions. Mr. Pace said we had hoped that Mr. Khrushchev would get the impression that the US was peace-loving but that it was ready to support its “moral principles by power”. Some discussion then ensued as to Mr. Pace’s meaning, which Mr. Khrushchev concluded by saying that surrounding the USSR by military bases was not “moral”. Mr. Pace pointed out that we had the same bases when we had an atomic monopoly which we did not use. Mr. Khrushchev replied that the USSR could not depend upon the caprice of a foreign government. The US atomic monopoly was like knowing that the other fellow had a loaded pistol in his pocket and said that: “He who believes in a word is fooled in the end.” More interchange ensued to the effect that the discussion had strayed far away from the subject of trade.

Mr. Khrushchev then said that he would like to make some concluding remarks and be excused. The time was then approaching 10:30 p.m. He said that the Soviet Union wanted to trade with the United States. They considered that trade was the litmus paper indicating whether we had peaceful intentions and wanted to live in peace with the Soviet Union. Evidently we were not yet reconciled to the existence of the Soviet Union, so the Soviets had to be on their guard. He could not return to the Soviet Union and tell the Soviet people of the peaceful words we had spoken if we were not willing to trade. Willingness to trade would be a test of our peaceful intentions. We should not interfere in their Socialist affairs and they would not interfere in our Capitalist affairs. Again he repeated that the removal of trade discriminations would be a test of our intentions. Similarly, if we signed a peace treaty with Germany, this would mean that we wanted peace. If we refused to sign a peace treaty with Germany, this would mean that we want war. The same could be said with respect to disarmament. However, if the arms race should continue, then the Soviets can compete. Their Seven Year Plan provides amply both for armaments and for their domestic requirements.

0. Source: Department of State, Central Files, 033.6111/9–2459. Official Use Only. Drafted by Kohler on September 26 and approved by John A. Calhoun on October 2.
1. Not printed.
2. Philip Cortney, President of Coty, Inc.
3. C.M. White, Chairman of the Board of Republic Steel Corporation.
4. Lamar Fleming, Chairman of the Board of Anderson, Clayton & Co.; Jack Strauss, Chairman of the Board of Macy’s; and William T. Moore, President of Moore-McCormack Lines, Inc.
5. Ralph T. Reed, President of American Express.
6. Thomas B. McCabe, President of Scott Paper Co.
7. Khrushchev visited the Mesta Machinery Company at West Homestead, Pennsylvania, on the morning of September 24.
8. William A. Hewitt, President of Deere & Co.
9. Frank Pace Jr., President of General Dynamics Corporation.
10. Charles H. Percy, President of Bell & Howell Co.