323. Letter From Secretary of State Rusk to Senator Jacob K. Javits 0

Dear Jack: I regret the delay in making this further reply to your letter of May 22, but as I indicated in my response of May 28,1 the question you raise requires an answer in some depth.

Enclosed is the report which you requested on the steps taken to implement Section 3(b) of the Export Control Act as amended July 1, 1962.2 After reviewing this report, I am satisfied that given the far greater [Page 713] magnitude of trade carried on with the Soviet bloc by our Allies as compared with our own trade with the bloc, as well as the differing political evaluations of that trade by individual Western governments, the United States has been remarkably successful in obtaining as substantial a multilateral control policy as now exists. It is, however, a compelling fact that without itself having a significant stake in East-West trade, the United States cannot expect to have a determining voice in the manner in which such trade is carried on by other major Western countries under present world conditions.

Since the enclosed report includes a full and frank discussion of the complex problems we would face now in attempting to negotiate with other Western countries a uniform policy on trade with the Soviet bloc countries, I would appreciate it if you would regard the report as not being for public dissemination.

With warm personal regards,

Sincerely,

Dean 3

Enclosure4

REPORT TO THE SECRETARY OF STATE ON IMPLEMENTATION OF SECTION 3(b) OF THE EXPORT CONTROL ACT OF 1949 AS AMENDED JULY 1, 1962

The amendment to Section 3(b) of the Export Control Act of 1949 provides a clear endorsement of the principle that our efforts in the East-West field should be carried out to the maximum extent possible on a multilateral basis. This amendment has two aspects which are commented on separately.

The first is the provision that the United States should formulate, reformulate and apply export controls to the maximum extent possible in cooperation with Allied nations. The major means whereby we pursue this objective is through the Consultative Group and Coordinating Committee (CG-COCOM) operation and the annual list review procedure. The purpose of the annual COCOM list review is to keep the International [Page 714] Lists currently valid by adjusting them to new technological, military and economic developments in the Sino-Soviet bloc and the free world. It provides this Government with an opportunity to propose the addition of important new items to the International Lists, provided that they can be justified under the applicable criteria. In the 1962 review the United States was successful in obtaining agreement for the addition to the embargo list of the following new items: electrical arc heaters, electron beam welders, some fifteen fluorocarbon compounds, gravity meters, and special batteries or power sources. Most of these new items embody advanced technology and in the United States are related to production for or use in military and space exploration programs. Only two whole items and two partial items were deleted from the embargo list; the United States itself proposed deletion of these items on the grounds that they were no longer significant. Forty-five items were revised or clarified, seventeen of these revisions resulting in net expansion of embargo coverage.

The COCOM annual review is scheduled to begin in October of this year. Careful preparations are being made for this review by canvassing all available American research developments and intelligence in order to identify the technologically advanced items of strategic significance that should be brought under multilateral control. While we cannot be certain what negotiating problems may be faced this year, the Department intends to make every effort to further the interests of this Government consistent with the objectives of United States policy in this field as set forth both in the Export Control Act and the Mutual Defense Assist-ance Control Act of 1951.

With respect to the second provision of the amendment requiring the formulation of a “unified commercial and trading policy to be observed by the non-Communist nations”,5 the situation is not as clear cut as is the case with respect to the COCOM negotiations. With respect to COCOM and Battle Act strategic controls it is fair to say that we do have a unified policy although there may be differences in detail on the merits of embargoing particular commodities. In the area of trade and economic relations with the Soviet bloc beyond the scope of strategic controls, however, the fact is that the United States has a more restrictive policy than do other Western nations. The United States denies the export to the Soviet bloc of a wider range of commodities and technology than do other major trading countries. We maintain a complete embargo on trade with Communist China, North Korea and north Viet-Nam. We do not permit United States flag vessels to engage in voyages to those areas. Our controls on trade and shipping with Cuba are more sweeping than the controls of other friendly countries. American law in effect prevents [Page 715] the extension of credit to the Soviet bloc and requires the payment of a higher level of import tariffs on goods of Soviet bloc origin. The entry of certain types of furs from the Soviet Union is prohibited by United States law.

To achieve uniformity on the basis of the policies and practices of our Allies, assuming we wished as a matter of policy to do so, would require changes in American laws. Alternatively, to attempt to achieve uniformity on the basis of present American policy and practices would require a major policy confrontation with other Western countries. Given the economic and foreign trade problems that some of these countries face, they are aggressively pursuing the expansion of trade with the Soviet bloc, and they consider that this has political as well as purely commercial or balance of payment advantages. While United States policy toward trade is permissive, it also is based on the assumption that the continuation of a pattern of mutually advantageous trade relationships with the Soviet bloc is to the interest of the West.

The question is, therefore, whether there is a redefinition of East-West economic relationships which would be advantageous, which would fall somewhere between our policy and that of our Allies, and which might be negotiable with them. In studying the possibilities for such a proposal, we are considering the concept of a code which might set forth standards to be sought by market economy countries in their trading relations with the state trading countries of the Soviet bloc.

The objective of achieving agreement on such a standardized pattern of trading relations with the Soviet bloc nations is unquestionably a highly desirable one. Whatever attempts we make to this end, however, must be viewed against the background of the present state of trading relationships between Western countries and Soviet bloc nations.

The principal compelling fact is that the other major industrialized countries of the Western world carry on trading relationships with the Soviet bloc at a much higher level than is the case with respect to the United States, and with far less predisposition to restrict exports. The exports of the Western European countries to the Soviet bloc run at a rate of over $2 billion annually while the United States exports are only a twentieth of that. Western European (and Japanese) exports to the Sino-Soviet bloc rose to $2.8 billion in 1962 and imports to $2.9 billion. United States exports to the bloc were only $125 million and imports $79 million. The exports of all free world countries to the Soviet bloc exceeded $5 billion.

In these circumstances and under present conditions in East-West relations, the United States would be in a very difficult position to persuade other major trading countries that they should make any sweeping changes in their methods of trading with the Soviet bloc. From their standpoint, while there may be some complications in carrying on trade [Page 716] with state-trading countries, the amount of trade that takes place indicates that the Western countries have been reasonably successful in overcoming those difficulties. Without a significant stake in East-West trade the United States cannot expect to have a determining voice in the manner in which such trade is carried on by other Western trading countries.

The trade of other free world countries, moreover, is carried on without the apparatus of restriction and control over both strategic and nonstrategic trade which already characterizes United States trade with the Soviet bloc. As long as the other industrialized countries of the West are satisfied with the conditions under which their trade with the Soviet bloc takes place, there is no compelling reason for them to impose new or different standards or regulations, especially if such action is unlikely to increase the level of trade. At the same time, so long as other countries are unwilling to adopt rules on exports as stringent as those enforced by the United States, American controls will inevitably have a limited effect. Unless the commodities embargoed by the United States are subject to identical international control or are uniquely American in their availability, the Soviet bloc can obtain what it wishes from other supplying countries. In these circumstances and recognizing that in the absence of a marked worsening of international relations a change in the attitude of other countries is unlikely, the problems of achieving a general agreement on a common code of trade practices appear very formidable indeed. Nevertheless, the Department intends to have discussions on this problem with our Allies in the future and has been actively working on the elements of a standardized code which might be negotiable. We cannot, however, be optimistic about the prospects for making a useful settlement in this area.

Although we face the general negotiating problem outlined, we have on certain issues sought an accommodation with Allied countries in an area beyond the limitations of the present COCOM system. This has been the case on such questions as the supply of wide diameter pipe to the Soviet Union, the problem of credit terms to the Soviet bloc, Soviet penetration of less developed countries, and specialized world commodity problems such as petroleum in which Soviet capabilities are a significant factor. We will continue to make further efforts at reaching multilateral agreements over and beyond the COCOM control when the situation warrants such efforts.

In summary, it must be recognized that there are manifold issues involved in the carrying on of economic and commercial relations with the Soviet bloc during the present stage of East-West relationships. Concurrently, it must also be recognized that almost without exception the objectives which we seek in terms of a more regularized Western trading policy towards the bloc would require a strengthening of governmental control in one form or another by other cooperating nations. Given the [Page 717] present attitude of Western European countries towards East-West trade, we could not expect to obtain full Western European acceptance and application of any pattern of economic relationships with the Soviet bloc that might contain elements of economic warfare, even if that aim were considered by this Government to be desirable.

United States policies are kept under continuous examination to assure that they contain the proper balance of restraint and permissive contacts which are so highly necessary as a means of working towards a long-term assumption of responsible patterns of conduct by the Soviet Union and other Soviet bloc countries. As is recognized in the amendment to the Export Control Act, our only prospect for effectiveness in seeking coordinated trade policies is to work with our Allies on a mutual basis. While there is some indication of an increased awareness on the part of our Allies and the less committed countries of Soviet objectives and capabilities in the economic field, it must be emphasized that given the present attitude of Western European countries on East-West trade it would at best be very difficult to obtain their cooperation in a uniform trade policy. So long as we are enabled to preserve a flexible and balanced approach to these problems under existing legislation, we should continue to be able to make some progress towards United States objectives.

  1. Source: Department of State, Central Files, STR 7. No classification marking. Drafted by Robert B. Wright on July 2 and retyped on July 10.
  2. Both letters are attached to the source text, but not printed.
  3. Section 3(b) of P.L. 87-515, approved July 1, 1962, added the following paragraph to Section 2 of the Export Control Act of 1949: “The Congress further declares that it is the policy of the United States to formulate, reformulate, and apply such controls to the maximum extent possible in cooperation with all nations with which the United States has defense treaty commitments, and to formulate a unified commercial and trading policy to be observed by the non-Communist-dominated nations or areas in their dealings with the Communist-dominated nations.” (76 Stat. 127)
  4. Printed from a copy that indicates that Rusk signed the original.
  5. No classification marking. Prepared on July 10.
  6. This phrase should read “by the non-Communist-dominated nations.”