Foreign Relations of the United States, 1969–1976, Volume XXIX, Eastern Europe; Eastern Mediterranean, 1969–1972

20. Memorandum From C. Fred Bergsten of the National Security Council Staff to the Presidentʼs Assistant for National Security Affairs (Kissinger)¹

Washington, December 3, 1970.

SUBJECT

• Administration Initiatives on East-West Trade

Issue

At Tab I is a memo for the President on our basic East-West trade policy.² It was triggered by memos to the President from Secretaries Stans and Rogers,³ proposing that in the near future we seek Congressional authority to extend MFN treatment and Export-Import Bank credits to individual Communist countries.

I solicited memos from Secretary Laird⁴ and the various interested parties in the White House to round out the picture, which—along with the lack of policy urgency—explains the delay from the original Stans submission. I attach only the Stans, Rogers, Laird and Shultz memos to your memo for the President; I attach all of the others to this cover note to you, and list them at the bottom.⁵

Stans has also indicated that he wishes to see you as soon as possible on this issue (Tab 3),⁶ and has noted to the President that you have held up his proposed trip to the USSR (Tab 4).⁷ I presume that you would prefer to defer seeing him until after the President makes his substantive decision, though Stans would of course like to see you before then.

My memo to the President is longer than the usual effort. However, it has to cover a number of issues and different viewpoints, and the subject is clearly of great interest to the President. In view of these factors, you might also want to consider holding a meeting of the various involved parties of the White House before sending the memo (Timmons, Shultz, McCracken, Flanigan)—though I have gotten written viewpoints from all of them and they all essentially defer to the foreign policy considerations as dominant. I think a meeting of the agencies would be a useless rehash of well known viewpoints, though we might consider an NSC meeting to convey the Presidentʼs decisions if they are along the fairly subtle lines which I recommend (or any other subtle lines).

Substance

In my view, our East-West trade policy is based on precisely the right premise: that it should be determined by our overall foreign policy objectives toward the Communist countries. The economics of the issue are marginal to us.

However, it is also my view that we have not used our East-West trade policy effectively to pursue our foreign policy objectives toward these countries. It is simply an error to think that we will extract significant concessions from the Soviets in return for granting an export license on particular cases, such as Gleason.⁸ We cannot pursue our Romanian policies very far without additional policy tools, and MFN treatment and Export-Import Bank credits are precisely the concessions which Romania wants—and others will want—in return for playing our game in the broader sense.

I therefore think there is a strong substantive reason for us to try to get the additional legislative authority proposed by Stans and Rogers. (Incidentally, both are interested quite personally in the issue and I have therefore used their names in the memo for the President rather than the names of the agencies which they head as per usual.)

It seems to me that the tricky issue is how to obtain the authority without signaling that we regard our overall relations with the Communist world as having undergone any significant improvement. My proposed recommendations attempt to do that, by playing on the action which Congress is likely to take on its own and separating into individual actions—rather than packaging—any other steps:

• —There will be a Senate initiative to eliminate the Fino amendment from the Export-Import Bank Act, which has a high probability of success.
• —We can seek the elimination of the PL–480 restrictions which the President has already decided to seek (and sought once before unsuccessfully) in the new foreign aid legislation.
• —We can seek the investment guarantee authority, which would be applied immediately only to Yugoslavia and Romania, in the separate OPIC legislation.
• —We need no changes in the Export Administration Act to permit liberalization of our export controls so need take no initiative here, and could take a relaxed posture if the Senate tries to liberalize it on its own.
• —The only place where we might need to take an initiative ourselves would be on MFN, and it could be submitted by State and Commerce instead of by the President. In addition, we might roll it into broader trade legislation either early in the year (if the Mills bill⁹ does not pass in this session) or later in the year after we get the report of the Williams Commission.¹⁰
• —Hal Sonnenfeldt would prefer to defer any action at this time, mainly due to the present uncertainties surrounding U.S.-Soviet relations and the resultant acute likelihood that any new action, however mild, would be misread in Moscow. He also prefers not to imply to the Western Europeans any softening of the U.S. stance on the issue at this point, which he feels might encourage them to further step up their trade and extension of credits to the Soviets.

I am certainly in no hurry. The scenario which I recommend would stretch out over many months anyway, but there is not even any urgency in deciding to start down that path. The only problem is bureaucratic since Stans and Rogers are both eager to move and they deserve some answer in the next few weeks.

Sonnenfeldt would also prefer to clearly limit any new initiatives to Romania alone, but recognizes the bureaucratic and substantive difficulties—mainly to Romania itself, since this would single it out much too sharply.

He also has some sympathy for seeking new authority vis-à-vis only Eastern Europe and China, to avoid any possibility of a misleading signal toward the Soviets. Here too, however, the discrimination—in this case solely against Moscow, especially if China were included—would be so blatant as to produce the wrong result in the other direction. Nevertheless, I have included an option of supporting/seeking authority for Eastern Europe alone in the choices under recommendation 1 for the President.

Recommendations

1. That you sign the memo at Tab I for the President.

2. That your office inform Stans that you would be pleased to see him on East-West trade matters and set up a time for the meetings.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, Box 326, Subject Files, The Presidentʼs Annual Review of US Foreign Policy, Vol. II–part 2. Secret. Sent for action. Concurred in by Sonnenfeldt. Printed from an uninitialed copy. Handwritten notations at the top of the page, apparently in Sonnenfeldtʼs hand, read: “until I see where we get,” and “Why held-up for 4 weeks[?]” At the bottom of the page a note in the same hand reads: “Must be rewritten & shortened. Pres needs 1 Recommendation. I want to hold-up MFN.”
2. Not found, but presumably a draft of Document 21.
3. See Documents 19 and 17.
4. For the memorandum from Laird to the President, November 21, see Foreign Relations, 1969–1976, volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972, Document 321.
5. All attached but not printed. On October 1 Bergsten sent a memorandum to Schultz, Flanigan, Timmons, and McCracken. Bergstenʼs memorandum and the responses to it are in the National Archives, Nixon Presidential Materials, NSC Files, Box 326, Subject Files, The Presidentʼs Annual Review of US Foreign Policy, Vol. II–part 2.
6. Stans forwarded to Kissinger a copy of his November 19 memorandum to the President (see Document 19). In the attached November 19 memorandum to Kissinger at Tab 3, Stans wrote: “I would like to discuss this with you as soon as you have a chance to read it.”
7. Tab 4 was a November 23 memorandum to Kissinger, in which Flanigan wrote: “At a recent meeting between Secretary Stans and the President, Secretary Stans urged strongly a relaxation of the limitations on trade with Eastern Europe. He pointed out the USSR wanted to buy $12 billion worth of goods and our U.S. industry is missing those markets. He further said he had delayed his trip to Russia at your request. The President responded by saying the delay in the trip to Russia might well be temporary, perhaps only until after the Party Congress. With regard to sales of U.S. products to countries in Eastern Europe other than the USSR, the President indicated that Stans was free to encourage sales to any of these countries.”
8. Reference is to Gleason Works of Rochester, New York. See Foreign Relations, 1969–1976, volume IV, Foreign Assistance, International Development, Trade Policies, 1969–1972, Documents 312, 315, and 320.
9. A reference to H.R. 18970, reported by the Chairman of the House Ways and Means Committee, Wilbur D. Mills (D–Arkansas), to the full House of Representatives on August 21. The bill, which established import quotas on shoes and textiles, passed the House on November 19. (Congressional Quarterly, Congress and the Nation, Vol. III, 1969–1972, p. 124)
10. A reference to the Commission on International Trade and Investment, chaired by Albert Williams. Nixon appointed the commission in 1970 to prepare recommendations on U.S. trade and investment policy. (Public Papers: Nixon, 1971, p. 301)