383. Memorandum From the Chairman of the Inter-Agency Task Force To Review the COCOM System (Armstrong) to the Chairman of the National Security Council Under Secretaries Committee (Irwin)1

REVIEW OF THE COCOM SYSTEM (NSDM 159, PARA. 4)

I am submitting herewith the report on this subject requested in the memorandum of the Chairman of the Under Secretaries Committee dated May 22, 1972.2

The study has been completed in the immediate aftermath of a major COCOM List Review.3 It has also been conducted within the environment of our changing economic and political relationships with the countries of East Europe—notably the U.S.-Soviet agreements on lend-lease, trade, and shipping, as well as improving economic relations with Poland, Hungary and other Eastern European countries. This process of regularization is drawing our East-West commercial policy more within our overall economic foreign policy with strong emphasis on export promotion.

In conducting the work of the Task Force, I have found that there is general agreement on the need for an effective strategic embargo and on the continued value of COCOM as an essential part of such a program. No one has suggested either the withdrawal of U.S. support for COCOM or, at the other extreme, any sharp increase in the scope of the COCOM embargo program. All have agreed that there have been problems in maintaining the cooperation of the COCOM members in a relatively tight COCOM system. There has been general agreement on a number of steps, both within the U.S. Government and in COCOM itself, that would be helpful in making the system function somewhat more smoothly.

Despite this considerable area of agreement, however, our discussions have reflected differences in evaluating the weight or priority that should be accorded to the U.S. effort in COCOM in relation to other elements [Page 960]in our national policies, both foreign and domestic. Other U.S. objectives in our political or economic programs, or compulsions that may flow from important international developments, may and indeed do compete with the objective of maintaining a strong COCOM system. When this happens, compromises may be necessary.

It is clear from our discussions in the Task Force that the way different agencies would determine the kind of adjustment that should be made grows out of their evaluation of the relevant assumptions in the light of their primary responsibilities.

One of the options reflects this aspect of our discussions, in suggesting a higher priority effort in COCOM based on evaluations of its high importance and low cost in terms of impact on competing programs. This option, espoused by Defense and supported by Defense comments at various points in the study, asserted a greater need for new basic guidelines, a more pessimistic view of the future of strategic controls without a major U.S. effort, and a higher appreciation of the past accomplishments of COCOM than the other members seem prepared to support.

Since the agency views have been so fully developed in connection with the drafting of the report, I hope it will be possible to obtain agency positions without holding a meeting.

Attachment4

STUDY OF COCOM (NSDM-159)

I. Summary

Description of COCOM System

In 1950, the U.S. and its principal Allies established a strategic trade control system the function of which was to restrict the flow to the Communist world of equipment and technology which could make a significant contribution to the military strength of those countries. This system remains today in its essential operating features much as originally established. Its administration is in the hands of a permanent Coordinating Committee (COCOM) which sits in Paris and whose 15-[Page 961]nation membership consists of all of the NATO nations (less Iceland) plus Japan. U.S. participation is authorized by the Mutual Defense Assistance Control Act of 1951 (the Battle Act), and U.S. positions and actions in COCOM are formulated and taken by the Department of State in coordination with the Departments of Defense and Commerce and the Atomic Energy Commission, as well as other departments and agencies concerned with security controls over exports.

The basis of COCOM actions is a list of commodities (and technology related thereto) the export of which is embargoed. By agreement among the participating countries, no member country will license exports of these items to Communist countries without COCOM approval. A unique aspect of COCOM is that all decisions require unanimous agreement of the members, whether they are determinations of what will be included in the International List or approvals of requests by the participating countries for exceptions to permit them to license specific transactions of embargoed items.

How the System Has Worked

Despite many spotty areas and variations in thoroughness of application, the COCOM system has in our view worked reasonably well in accomplishing its limited purpose of controlling the flow of a selective list of strategic goods and related technology to the Communist countries. Approximately every three years this list is reviewed and revised in negotiations carried out over a period of months, the latest such review having just been completed. This updating process has resulted in a considerable narrowing of the embargo coverage over the past decade or so, but new items have also been added to protect new technological developments.

Generally speaking, the U.S. has been in favor of maintaining more extensive controls than our COCOM partners, who are constantly seeking reductions in the embargo coverage. This basic difference in policy approach has led periodically to fairly serious strains within the Organization. Our partners have made a few spectacular departures from the rule of unanimous decision in response to heavy commercial pressures. The most serious of these was unilateral denunciation of the differential China list in 1957 by the UK. There have also been several important exports of embargoed commodities and technology without COCOM approval, particularly in the aircraft and computer fields. However, such instances have been surprisingly few.

Defense points out that the COCOM system was established at a time when our partners, still trying to rebuild their economies in the aftermath of World War II, had little of strategic value to export. Now their situation is different and while all COCOM members render lip service to the principles of the embargo and even occasionally propose [Page 962]additions to it, their major emphasis is on its reduction and on obtaining exceptional treatment for the sale of their manufactures and technology. They have proved themselves quite willing to class as strategic and place under embargo a commodity which only the U.S. can export, but when they develop a capability to produce the same commodity (often as a result of U.S.-furnished technology) they tend to argue that it is no longer strategic, confident that the burden of any increased Free World defense expenditures which may have to be made as a result will be borne by the United States.

Some inroads into the system have been made by illegal diversions to Communist countries of shipments of strategic commodities. While such diversionary activity can never be stopped completely, efforts to minimize it have varied greatly in intent and effectiveness from country to country and at different times. While it is of course difficult to assess the effects of this type of activity, such information as is available indicates that the controls have not been seriously undercut in most instances.

A further limitation on the effectiveness of the embargo is the availability to a limited, though increasing, degree of strategic commodities from five Western “neutral” non-COCOM countries. The three most important—Austria, Sweden and Switzerland—have cooperated with COCOM in varying degree.

Impact of the COCOM Embargo

As demonstrated in the body of the report, the USSR’s technology applicable to nuclear weapons delivery systems lags significantly behind the West—from two to six years for such items as liquid and solid propulsion systems, guidance systems, penetration aids, test equipment, communications equipment, transistors, integrated circuits, and advanced computers. The study cited in the report shows that the lag is even greater for the PRC, ranging from eight to twelve years. It is a reasonable assumption, and Defense believes it is demonstrably the case, that the COCOM controls are playing a significant role in preventing this gap from closing.

The resulting gain to the U.S., in military terms, is a margin of technological advantage on which the success of our deterrent strategy heavily depends and on whose maintenance in FY 1973 we will expend more than $8 billion for defense research and development alone. The Department of Defense considers that, in economic terms, the gain to the U.S. is the saving of several billion dollars for additional defense research, development, procurement and deployment which would become necessary if our present margin of technological advantage were to be lost or seriously impaired.

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At the same time, in terms of effect on total trade, only a small percentage of potential exports are affected by the embargo, and its complete elimination could be expected to produce only a minor increase in the present $12 billion level of Free World exports to the Communist areas.

Present Situation and Problems

The COCOM organization remains voluntary and informal, depend-ent upon the cooperation and cumulative effectiveness of the national control systems of the member nations. The principle of unanimous decision continues in effect. A major review of the lists has just been successfully concluded, and the day-to-day handling of exceptions requests continues relatively smoothly.

However, the COCOM system as it presently exists is faced with some increasingly serious problems. First, as a result of the prevailing spirit of détente, the new emphasis on East-West trade, and heightened commercial interest, our COCOM partners put increased pressure on the U.S. during the recent list review to agree to substantial relaxation in the embargo. For example, at one stage the UK made it clear that it was unenthusiastic about continuing its COCOM cooperation if the U.S. could not be more forthcoming in reducing controls on items the UK regarded as crucial.5 Our partners have also pressed for U.S. approval as exceptions to the embargo of exports of highly advanced technology. Departures from the principle of unanimity have been averted in several instances only by U.S. acquiescence in such proposals after high level political representation and review. We do not agree with our partners’ apparent assessment that the strategic risk has sufficiently lessened to permit the degree of liberalization they desire. However, it is evident that our increasingly divergent views are creating a serious political problem which threatens the continued effectiveness of the organization.

In the view of the Department of Defense, in agreeing to relaxation of controls in the last list review and in approving a number of major exceptions cases, the U.S. has made substantial concessions to allied pressures. There is every sign that these pressures will continue unabated, particularly in the very areas, such as electronics, which can continue to benefit from strong controls, and the U.S. is thus faced with the choice of stiffening its stand from here on out, or having the COCOM system become little more than a facade.

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Second, the volume of requests for exceptions to the embargo has increased to such a degree that further measures must be found to permit concentration, both in COCOM and within the U.S. Government, on cases of major concern and to screen minor cases out of the international review process. In the ten years from 1961 to 1971, the value of exceptions to the embargo rose from $3.4 million to over $75 million annually, and the number of exceptions cases processed through the Committee from 142 to 635 per year. The results of the recent list review will eliminate many exceptions requests, but requests in 1972 are running at almost double the 1971 rate.

Third, by 1972 it was apparent that the U.S. role in COCOM had undergone a gradual but distinct change. The U.S. still served very much as the conscience of COCOM, proposing more new embargo listings that the others, opposing the combined judgment of our partners on certain key items, and objecting to more exceptions cases than any other COCOM member. At the same time, the U.S. itself began to take a more aggressive interest in seeking exceptions. It moved into first place in number of submissions in 1971, and pressed hard for urgent action on some of its own cases. The handling of the RCA earth station and Boeing aircraft cases for the PRC dramatized for the other COCOM members this unusual U.S. interest in rapid almost after-the-fact COCOM approvals. The new U.S. policies on trade with the PRC and vigorous trade initiatives toward the USSR suggested to other COCOM members that the U.S. attitude toward COCOM was becoming more relaxed. Although we have repeatedly assured them that this is not the case, it seems unlikely that they are fully persuaded. Our pressing of exceptions which appear to diverge dramatically from our previous policy, and which in some cases are inconsistent with positions recently taken in the Committee on others’ exception proposals, has furthermore led to the view, now seriously held in some quarters, that the U.S. is attempting to take commercial advantage of its dominant COCOM role. The corrective steps recommended under Options B and C appear needed to prevent this new divergence of attitudes from fatally weakening the COCOM structure.

In the judgment of the Department of Defense, many of our current difficulties in COCOM could be dealt with more effectively were it not for deep-seated differences of viewpoint toward COCOM, its role, its effectiveness, its cost, and its worth among the principal U.S. departments and agencies involved in the Washington decision-making machinery. These differences have resulted in an increasing inability of the interdepartmental machinery, particularly at the working group level, to reach decisions both on exceptions cases and on list review questions as is manifested by the growing number of COCOM matters which in recent months have had to be escalated to the White House for [Page 965]Presidential level decisions. If these differences, most of which remain unstated could be brought into the open, authoritatively examined and resolved once and for all, many difficulties in the system would either disappear or be reduced to manageable proportions.

Future U.S. Policy Toward COCOM

As part of the extended analysis of COCOM in the basic paper, a range of options for the United States is examined. These options are summarized with pros-and-cons in the section immediately following, entitled Options and Recommendations.6

Most of the agencies participating in this study believe that it would clearly be unrealistic under prevailing conditions to expect success in any effort to broaden or strengthen COCOM. On the other hand, the agencies agree that the problems being experienced in the organization are not yet of sufficient gravity to warrant reliance on alternative mechanisms for controlling strategic trade nor to attempt to obtain basic modification of the COCOM structure. Several measures for improving operation of the system and preventing its deterioration, including procedures within the U.S. Government, have been identified. The question of undertaking preparations to make the COCOM List coverage as selective as possible is also examined in the report.

The options considered in this study have been grouped into five basic approaches, as described below.

Option A: Maintaining an Effective COCOM System

Under this heading are listed a number of specific actions which might be undertaken as a positive U.S. program to prevent deterioration of the COCOM system.

In recommending this Option, the Department of Defense believes that, while strategic trade controls have been reasonably effective to date, their future prospects are not promising unless the U.S. acts to give them greater support. The Departments of State and Commerce do not support the Option as presented. They believe that approaches to other member governments at an appropriately high level along the lines of Sub-Options (1) and (4) could be useful and appropriate if tied in with implementation of Sub-Option C (4) and completion of the U.S. review there referred to, dependent on the outcome of the review, but consider that a recommendation along these lines can usefully be made only after completion of the U.S. review. They also believe that such an approach made now, and unrelated to the outcome of the U.S. review, would be both undesirable and ineffective.

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A fuller statement of advantages and disadvantages of this Option is found on pages7

Option B: Improved Support of COCOM Operations

Under this heading we have grouped several actions which might be undertaken, without major overhaul of the existing system, to improve Washington support arrangements—by speeding up decisions on COCOM cases, insuring adequate and timely technical contributions, and minimizing paper work.

With the exception of B (4) on which Defense dissents, these recommendations are supported by all agencies, although Defense believes that none of them go to the heart of the problem.

Option C: Modifying the COCOM Organization

Under this option, we have considered modifications of the COCOM system itself including the adoption of majority voting, national determination in exporting end-items, a liberalized de minimis rule, and further refinement of the embargo list.

For reasons set out in the Options section and in the report, all agencies agree that it would be unwise to modify the present unanimity rule in COCOM or to curtail the COCOM structure to the extent of abandoning the system of international review of individual exceptions to the embargo. The Departments of State and Commerce believe that, although the de minimis level was raised from $200 to $500 earlier this year, it could without significant strategic risk be further raised to $1,000 (and from $4,000 to $5,000 for servicing of previously exported equipment). The Department of Defense disagrees.

The Departments of State and Commerce are of the opinion that limiting the list to the minimum essential coverage necessary to meet the basic COCOM objectives should permit a further refinement of the list in 1974. Such a refinement will aid in preserving the existing effectiveness of COCOM in the face of the present spirit of détente and the mounting pressure for relaxation.

The Department of Defense can accept this recommendation only to the extent that “further refinement of the list” is not a euphemism for a sharp reduction; first on security grounds, because with the list review just ended, a sharp reduction has been made and second, on practical grounds, because, as the mounting pressure for further relaxation shows, our COCOM partners are not appeased by such U.S. action. Moreover, the Department of Defense believes this fresh review should [Page 967]be undertaken only in connection with the other measures outlined in Option A. In fact, Item 6 in Option A provides for essentially this kind of review.

Option D: Reliance Upon Unilateral Controls and Bilateral Understandings in Place of COCOM

A shift away from the COCOM to a unilateral approach is examined but the conclusion is reached that the U.S. no longer has sufficient technological leadership to make such an alternative viable. Additional factors are the commercial discrimination that would affect American firms and other Western firms subjected to unilateral U.S. controls, and the serious political problems which would result from attempting to enforce these controls extraterritorially. While Defense agrees that the COCOM mechanism continues to be the preferred approach, it would not entirely rule out this alternative when it judged that COCOM controls were no longer sufficiently effective.

Option E: Reconstitution of COCOM as an East-West Trade Coordinating Group

The possibility of expanding COCOM’s role and giving it a more positive aspect has been studied. All agencies which have expressed positions on this option consider that it would be inadvisable under present circumstances to seek to broaden COCOM into a trade development or coordination group. While other existing organizations might prove to be more suited to this purpose, the possibility should be retained of utilizing COCOM in such a role upon completion of the Conference on European Security and Cooperation.

[Omitted here is the body of the paper.]

  1. Source: National Archives, RG 59, S/S Files: Lot 81 D 309, NSC-U/SM 109C. Confidential. Drafted by R.B. Wright (EB/ITP/EWT). An attached November 24 memorandum from Acting Staff Director Seymour Weiss to members of the Task Force requested comments on the paper attached to this memorandum. Also attached is a draft memorandum to the President. For the revised memorandum based on comments received pursuant to Weiss’ November 24 memorandum, see Document 387.
  2. See Document 382.
  3. Not further identified.
  4. The title page, which is not printed, carries a Secret classification marking, but all the pages in the Summary are marked Confidential. The entire study comprises 106 pages, including a 3-page prefatory table of contents and a 4-page appendix with examples of Chinese acquisitions of COCOM-controlled items from Japan. Only the Summary, pages 1 10, is printed here.
  5. Defense notes that it is easy to exaggerate the importance of these discontents for the fact is that quarrels and disputes which loom large within the relatively narrow confines of the COCOM system do not appear to have any appreciable effect on our larger relationships with the countries involved. [Footnote in the source text.]
  6. This section of the paper is not printed.
  7. Regarding this incomplete sentence, see footnote 3, Document 385.