149. Minutes of Meeting of the Export Control Review Board1

Secretary Freeman stated that approval of the beet harvester machinery would mean opening the flood gates for mass production from U.S. prototypes of agricultural machinery at a time when a key Soviet problem is getting the crops out of the field at the proper time. The Soviets have declared economic war on us, but, as per the CIA report,2 the serious agricultural problem is a major factor in the slowdown of their whole economy. It is not in the U.S. interest to speed the recovery of the agricultural sector of the economy with advanced-design agricultural machinery and contribute to their capability to conduct an ideological war with economic weapons and to support communist oriented economics in developing nations. This particular beet harvester is far advanced over anything else available, being able to handle 1,200 tons of beets in a ten-hour period compared to an average at the most of 120 tons currently being handled in Soviet areas (a maximum of 210 tons in one area and a minimum of 75 tons with most areas recorded in the range of 75 to 120 tons).

Secretaries Hodges and Vance indicated that they would approve of shipping such machines if we could get something back over and above the price paid. Secretary Rusk argued that the quid pro quo lay in the turning of the Soviet economy into production of consumer goods, which an expansion of agricultural production would do. He argued further that we were not in a posture of economic warfare with the Soviets and that denial of such equipment implied that we were. He questioned what we would do about fertilizer plants if we denied such equipment as the beet harvesters. Secretary Freeman saw a distinction between (1) the beet harvesters which were technologically advanced, could not be procured anywhere else, and would be used as a prototype; and (2) such machines and/or plants as are readily available from other countries in the world to do precisely the same job. For example, our denial of some types of fertilizer plants would not prevent the Russians from acquiring them. On the other hand, if they get certain advanced-design machines [Page 447] from the U.S., they might succeed in their drive to improve agricultural production if they get a break in the weather.

Secretary Vance inquired as to whether it would not be better to keep machinery away from the Soviets if it was important to keep consumer pressure on the economy. Secretary Rusk replied that we should be cooperative in helping the Soviets to move resources from the military to the consumer field rather than keeping pressure on the Soviets at all points. Also agriculture was not going to be the strategic area in any nuclear exchange nor was it an appropriate area for economic warfare. In addition, since we had already denied a petroleum refinery, to follow it with a denial of a beet harvester would in his view signal an economic warfare approach on our part. The U.S. would also be in a position of having to deny more items than our Allies do for some time to come and therefore shouldn’t be in a position of denying more items than we need to.

Secretary Hodges agreed that it would be desirable to ship these items but only if we could obtain a quid pro quo for this and other advanced agricultural machinery. Secretary Rusk asked what quid pro quo would be requested, to which it was replied that agreements on copyrights, patents, or use of technology gained from prototypes would provide a means of protecting advanced technology and demonstrate to the country that we were in fact obtaining a quid pro quo of relaxed economic relations. Secretary Rusk stated that insisting on a quid pro quo would itself signal that we were thinking in terms of economic warfare and that he saw no reasons for the Russians to want to offer a quid pro quo over and above the sales prices. In fact they have stated that they would not pay anything more than the going price for fertilizer plants and other items which they can obtain readily in the free world.

Secretary Freeman argued that agriculture might be a more important area in which to slow down on our contribution to the Soviet economy since they may have more difficulties there than in the petroleum field. He insisted that we carefully examine the question of where we wished to maintain pressure and where we would like to relax. His interpretation of Secretary Rusk’s view was that it was “good” to assist the Soviets in developing agriculture whereas, it was not good to assist them in an area such as petroleum. Secretary Rusk replied that we should certainly not aid the Soviets in any area, such as would be the result of 15 years credit as proposed by the U.K., but we should not shy away from normal trade. He stressed that the issue before the ECRB was essentially that of economic warfare and how best it might be waged, to which Secretary Freeman agreed. Secretary Rusk then pointed out that we had sold hybrid seeds and other items, which would assist in the agricultural field, to which Secretary Freeman replied that even so there was a need for mechanized equipment which would assist them in getting the crops harvested at the right time so that they would not rot in the fields.

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Secretary Hodges stressed the desirability of insisting on a non-reproduction covenant from the Soviets in the purchase of advanced equipment and an agreement covering patent and other rights. Secretary Rusk asserted that U.S. exporters had in the past insisted upon that themselves, but Secretary Hodges urged that the Government itself insist on such arrangements.

Secretary Rusk again stressed that our policy was not economic warfare but rather should be economic competition, which we faced from all countries. Secretary Freeman indicated there was a difference when the economic competition seeks to disrupt rather than to excel, if the aim is political destruction rather than monetary gain.

Secretary Vance returned to the discussion of the diversion of resources and asked whether State Department’s position was that resources put into agriculture would cut the volume of resources dedicated to the military. Secretary Rusk said that the main objective was to develop a stake on the part of the Soviets in good relations with us, which could be based on an improvement in their standard of living and which in turn would necessitate the opening of trade relations and a continued high level of trade with the West. In this way the Soviets would have a stake in maintaining peace.

The Board reached a consensus that these were issues on which the President should focus on since he had not previously discussed this range of programs and policies with the Cabinet, and it agreed therefore to present them to the President after members return from Japan.

The positions which would be taken before the President by the four Cabinet members were:

Secretary Rusk for approval of the shipment on general policy grounds. Secretary Freeman against the export unless a quid pro quo is obtained over and above selling price which correspondingly contributes to the strength of the U.S. Secretaries Hodges and Vance for approval dependent on obtaining an appropriate quid pro quo over and above the selling price.

  1. Source: Johnson Library, National Security File, National Security Council File, NSC Meetings, Vol. 1, Tab 8, 4/16/64, East-West Trade, Box 1. Secret. No drafting information appears on the source text. The time and place of the meeting, which was held at the Department of Commerce, are taken from Secretary Rusk’s Appointment Book. (Ibid.) Another account of this meeting, drafted by Trezise, is in Department of State, Secretary’s Memoranda of Conversation: Lot 65 D 330. The January 21 date of the meeting given in that memorandum of conversation has been corrected to January 20 on a note listing the participants in Rusk’s Appointment Book, which also confirms that the only meeting of the Board attended by Secretary Rusk in this period was on January 20.
  2. Not further identified.