Foreign Relations of the United States, 1969–1976, Volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972

291. Action Memorandum From the Acting Assistant Secretary of State for Economic Affairs (Greenwald) to the Deputy Under Secretary of State for Economic Affairs (Samuels)¹

Washington, April 16, 1969.

SUBJECT

• Your Request for Views on Ambassador MacArthur’s Letter of April 4 and a Reply Thereto

The substance of Ambassador MacArthur’s comment² is that our export controls on non-strategic trade with Eastern Europe are outmoded, ineffective, and economically damaging to American business. We agree with these findings. They are generally consistent with our analysis of East-West trade controls in the memorandum to the Secretary from Mr. Greenwald on “Strategic Trade Restrictions” that has been sent to you for your review.³

United States controls that go beyond the multilateral strategic embargo have an impact of close to zero on the economic or military potential of Communist countries. (For special reasons Cuba is an exception.) There may be rare instances in which some specialized American equipment or technology cannot be supplied by another Western country, but the predominating pattern is one of substitutability.

Commerce Department export controls are designed to catch the rare case with so wide a margin of safety that they have become unnecessarily cumbersome. Of the categories requiring export licensing on the Commerce control list, about 600 represent items on the international COCOM strategic embargo list. An additional 500 entries represent goods not on the COCOM list but individually licensed for export to Western as well as Communist countries. A further 800 items, not on the COCOM list and not controlled individually to Western countries, nevertheless require individual licensing review for shipment to Eastern European countries. Thus approximately 1300 items, none of them on the international strategic list, are individually controlled. Our rough estimate is that not more than 200 of these items are even remote candidates for effective unilateral U.S. control.

The red tape involved in terms of documentation, end-use checks, interdepartmental review, etc. is a drag on trade. It would certainly help our exports to put American businessmen more nearly on equal terms with other Western businessmen.

However, to realize the advantages of significantly increased trade that Ambassador MacArthur envisages, a change is needed not only in export controls but in lifting the ban on Export-Import Bank export financing and on most-favored-nation tariff treatment. Even if these actions were taken, there are some purely economic factors that would operate as limitations on the magnitude of trade expansion—bilateral trading patterns between West and East Europe, a tendency of American firms to trade with the East through their West European subsidiaries, and a shortage of attractive products from East European countries.

Recommendation

That you sign the attached response to Ambassador MacArthur. (Tab A)⁴

1. Source: National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 16. Confidential. Drafted by R.B. Wright (E/ITP/EWT) on April 14 and cleared by Shaw (EUR/RPE).
2. Document 289.
3. Not found.
4. Samuels’ April 17 letter, not printed, noted that the review of East-West trade policy would go beyond non-strategic trade controls and consider limitations on export financing and tariff treatment of imports from Eastern Europe. The expiration of the Export Control Act on June 30 set a timeframe for completion of the review.