293. Action Memorandum From the Acting Assistant Secretary of State for Economic Affairs (Greenwald) to Acting Secretary of State Richardson 1

SUBJECT

  • U.S. Trade Policy Toward Communist Countries (NSSM 35)

The paper on East-West trade requested in NSSM 35 has been completed (Tab C).2 The interested Departments and Agencies have been asked to make their recommendations in memoranda to the President. An NSC meeting on the general subject of East-West trade may be held at a later stage, but will be held before the May 20-21 date for Commerce/State testimony on the renewal of the Export Control Act before the House Banking and Currency Committee only if the memoranda response procedure proves unsatisfactory. The major issues are identified in a summary of the basic paper (Tab B).3

In the Review Group discussions, Defense (Warren Nutter) has been most reserved about liberalization of trade with the USSR and Eastern Europe. Nutter is probably personally opposed to moving at all, but his line has been that we should not take any step (even public indication of a more favorable attitude, administrative relaxations under existing law, or requests for Presidential authority to negotiate) without trying to get something in return from the Communist countries involved. No one (including the Soviets) would disagree that the granting of better tariff treatment (applying the MFN rates instead of the higher 1930 tariff rates) calls for trade and related concessions on the other side. But Nutter does not draw any distinction between this kind of mutual exchange of benefits and the relaxation of export controls or credit limitations which we impose on our own trade (and the Western Europeans do not). In the latter case we think it is unrealistic to talk about asking for reciprocity except possibly in the broad, atmospheric political context.

The President of the Export-Import Bank, Henry Kearns, feels strongly that no attempt should be made to remove the restrictions in the Export-Import Bank Act that bar its participation in financing [Page 765]exports to the Soviet Union and Eastern Europe because he fears that such an attempt might lead to even more serious limitations on the operations of the Export-Import Bank. We believe that despite Mr. Kearns’ concern, it would be logical for the Export-Import Bank to engage in normal export financing as a part of a decision to adopt a policy of encouraging East-West trade.

In the attached memorandum to the President,4 we have restated our view of the major premises and have recommended a policy of actively supporting increased East-West trade for both political and economic reasons. We also recommend that the President seek necessary legislative authority to liberalize export controls, negotiate for extension of most-favored-nation tariff treatment, and permit export financing. With these tools, the President will be able to use trade more effectively as an element in our relations with the Soviet Union and each of the Eastern European countries. We recommend approval of the three illustrative export cases.

Recommendation

That you sign the attached memorandum to the President (Tab A).

  1. Source: National Archives, RG 59, S/S Files: Lot 80 D 212, NSSM 35. Confidential. The date is handwritten. Drafted by R. B. Wright (E/ITP/EWT) on May 13 and cleared by Springsteen (EUR), McHenry (C), Schnee (H), and Neubert (S/P).
  2. NSSM 35 is Document 288. The 35-page NSSM 35 Response at Tab C is not printed.
  3. Document 292.
  4. Document 294.