321. Memorandum From Secretary of Defense Laird to President Nixon 1
- Improving Trade Relations with Communist Countries
In response to a request by your staff, I am submitting my views on the proposals by Secretaries Rogers and Stans to liberalize East-West trade.2
The issue of whether to propose legislation authorizing the President to extend most-favored-nation treatment and Export-Import Bank credits and guarantees to individual Communist countries has already arisen in connection with NSDM 15 (May 28, 1969),3 the Export Expansion Act of 1969, and the Export Administration Act of 1970 .
In NSDM 15 you decided that “present legislation provides an adequate basis for US trade policy toward the USSR and the Communist countries of Eastern Europe at this time, in view of the status of our overall relations with them,” and that “we should be prepared to move generously to liberalize our trade policy toward the Soviet Union and other Eastern European countries whenever there is sufficient improvement in our overall relations with them.”
I recognize that this important issue should be reexamined periodically. However, the first question to reexamine is whether there has been a real improvement in our overall relations with the Soviet Union and specific countries in Eastern Europe.
Similarly, the concept of “equivalent benefits” to the US is the key to defining overall US objectives. Equivalent benefits need to be related to our political and national security objectives and to Soviet and Eastern European moves to liberalize their trade arrangements with us, if authority is to be requested from Congress to liberalize our trade arrangements with them.
Again, to achieve “equivalent benefits” and to convince Congress that a request for discretionary authority should be granted, we need a [Page 829] plan that states explicitly what is to be expected of the Soviet Union and specific countries in Eastern Europe. This plan should be in the form of potential negotiating packages that link our, and their, interests and objectives with practical moves on both sides.
The preconditions of negotiating should include some non-economic quid pro quos, such as a move by the Soviet Union to urge Hanoi to move toward release of US prisoners of war. The trade package itself should require the Soviet Union and Eastern Europe to reduce such barriers to East-West trade as import quotas, bilateral trading arrangements, unrealistic exchange rates, inconvertible currencies, and preferential pricing.
The Communist countries of Eastern Europe should move toward membership in GATT and the IMF, as some of them are already doing. They should be required to accord nondiscriminatory treatment to our exporters and the same exchange rates that we provide to Communist countries.
Above all, we should take no actions that will strengthen the bilateral state-trading system of Communist countries. Rather, we should use the opportunity to negotiate new kinds of multilateral, more direct, and flexible trading arrangements acceptable to both sides.
A summary of the rationale for my views on the potential effect of the State and Commerce proposals on total exports and exports of strategic commodities and technology is attached (Tab A).
I recommend that:
- In accord with NSDM 15, we first determine those cases in which there is sufficient improvement in our overall relations to warrant further liberalizations of our trade policy.
- We take no steps to request discretionary authority from Congress until we have developed a broader plan and specific negotiating packages that spell out how we propose to use it.