The National Security Council, the Acting Secretary of the Treasury, the
Secretary of Commerce, the Economic Cooperation Administrator and the
Director of Defense Mobilization, at the 76th Council meeting6 with the President
presiding (NSC Action No. 402),
considered a draft report on the subject (NSC 94) and approved the statement of policy contained
therein subject to editorial changes in paragraphs 1 and 2 thereof, as
contained in the enclosure.
The Council also noted the views of the Joint Chiefs of Staff regarding
NSC 94 (Reference B) as read at the
meeting.
[Subenclosure]
Staff Study by the Special Committee on East-West
Trade of the National Security Council
secret
[Washington, undated.]
NSC
Determinations Under Public Law 843, Section 1304 (The
Cannon Amendment)
the problem
1. To recommend to the National Security Council appropriate action
with respect to the Council’s responsibilities under Public Law 843,
Section 1304 (the Cannon Amendment).
analysis
2. Public Law 843 contains the following provision, referred to as
the “Cannon Amendment”:
Sec. 1304. During any period in which the Armed Forces of the United
States are actively engaged in hostilities while carrying out any
decision of the Security Council of the United Nations, no economic
or financial assistance shall be provided, out of any funds
appropriated to carry out the purposes of the Economic Cooperation
Act of 1948, as amended, or any other act to provide economic or
financial assistance (other than military assistance) to foreign
countries, to any country whose trade with the Union of Soviet
Socialist Republics or any of its satellite countries (including
Communist China and Communist North Korea) is found by the National
Security Council to be contrary to the security interests of the
United States.
This Act may be cited as the “Supplemental Appropriation Act,
1951”.
This provision will require a review of East-West trade by the NSC and determination as to the effect
of such trade on U.S. security interests.
3. The problem has three parts. It will be necessary:
-
a.
- To define the policy considerations which will require
denial of economic or financial assistance to any country
whose trade with countries of the Soviet Bloc is contrary to
U.S. security interests.
-
b.
- To obtain and examine statistics of trade with the Soviet
Bloc by countries receiving U.S. assistance.
-
c.
- To outline the procedural arrangements whereby the
National Security Council may fulfill its
responsibilities.
4. In the light of the present international situation and of the
probable intent of Congress in adopting the Cannon Amendment, the
Council should assume that loans as well as grants are subject to
scrutiny in terms of U.S. security interests. Furthermore, the
Council
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should also
appraise the trade between the Soviet Bloc and countries receiving
U.S. assistance in terms of the risks of general warfare, and not
limit its considerations solely to a period, as described in the
Cannon Amendment, “in which the Armed Forces of the United States
are actively engaged in hostilities.…” With these two
interpretations, it is recommended that the following policy
considerations be adopted as a basis for Council determinations
under the Cannon Amendment:
-
a.
-
The U.S. position should be based on a
prompt and full consideration of the merits of the case
with respect to each country for which a judgment may be
required.
- The Cannon Amendment is discretionary, in that a finding
of the National Security Council is required before its
provisions become operative. This should permit flexibility
in its application. It should also permit a redefinition of
the U.S. security interest in international trade as it may
be warranted by events and by the special country problems
involved. However, Council action should be vigilant and
prompt in support of the intent of the law.
-
b.
-
U.S. security interests in trade between
the Soviet Bloc and countries receiving U.S. assistance
should be related to the risks of general warfare as
well as to the scope of hostilities actually under
way.
- The Amendment applies “during any period in which the
Armed Forces of the United States are actively engaged in
hostilities while carrying out any decision of the Security
Council of the United Nations.” Obviously, the nature and
extent of these hostilities should be a primary
consideration in determining when countries receiving U.S.
assistance are trading with the Soviet Bloc in a manner that
is contrary to U.S. security interests. However, of equal
importance with the scope of hostilities under way should be
consideration of the risks of general warfare.
- (1)
- Under conditions of general
warfare, any trade of third countries with
the enemy would be contrary to the U.S. national
security interest, except under the most unusual
circumstances. All exports of third countries then
would contribute to the continuation of hostilities
and every effort, direct and indirect, should be
made by the United States to prevent such exports
from taking place. Exceptional circumstances
justifying a variation in the application of this
principle would relate only to trade with the enemy
that may be required for military and strategic
reasons (e.g., under threat of retaliatory invasion
of third countries, or for the purpose of obtaining,
by such indirect means, particular strategic
materials from enemy territory).
- (2)
- Under conditions short of general warfare, the
national security will permit a more comprehensive
examination of the terms of trade between third
countries and countries of the Soviet Bloc. The
determination of how rigid the controls over third
countries’ exports to the Soviet Bloc should be, in
the interest of U.S. security, will of course be
related to the best estimate as to how much time may
be expected to elapse before the outbreak of general
hostilities. U.S. East-West trade controls have been
operating on the basis that general hostilities are
a possibility but
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not a certainty, and that for
the present, our objective is to obtain the maximum
relative strengthening of the West over the Soviet
Bloc. As presently applied by the United States,
this policy takes due account of the contribution
which trade with the Soviet Bloc may make to the
strengthening of the West. The present hostilities
should not change this policy or objective.
Nevertheless, a review of East-West trade in the
light of current events should now be made on the
basis of revised assumptions with respect to the
risks of general hostilities.
-
c.
-
The United States should continue its
efforts to persuade countries receiving U.S. assistance
and engaging in trade relations with the Soviet Bloc to
apply security controls satisfactory to the United
States. However, failure of any country to apply such
controls may not of itself be reason for denial of
assistance in terms of Public Law 843, Section
1304.
- Before assistance is withdrawn under the terms of the
Amendment, the NSC should
determine whether a greater disservice would be done to U.S.
security interests by continuation of the country’s trade
relations with the Soviet Bloc or by cessation of the U.S.
assistance program.
-
(1)
Western
Europe
The Amendment applies to any country receiving
economic or financial assistance from the United
States. In general, U.S. efforts to obtain parallel
action on security trade controls have been limited
to countries receiving ECA assistance. There is a reasonable
prospect that parallelism will be obtained from all
important OEEC
countries. Sweden has given private assurances
concerning the end-use of U.S. goods; Switzerland
does not receive ECA
assistance, while Portugal, Greece and Eire have
only a relatively small volume of trade with
countries of the Soviet Bloc. The problem of Germany
is one which warrants immediate attention as a
special case. It is believed that so far as Western
European countries are concerned, their acceptance
of a level of controls approximating that agreed in
the London tripartite talks7 may well
eliminate the necessity for action under the Cannon
Amendment.
(2) Countries outside Europe
The Cannon Amendment will apply to provision of all
types of U.S. financial and economic assistance
(including Point IV, Ex-ImBank loans, cotton credits). Its
implementation obviously will require close scrutiny
of trade relations between the Soviet Bloc and many
countries outside Europe. Consideration of area
problems outside Europe may well require a broader
interpretation of what constitutes the U.S. national
security interest in these areas than the simple
consideration of the commodities traded with the
Soviet Bloc or the balancing of strategic and
economic advantages associated with the trade.
Certainly the attempt should be made to establish
control systems in these areas, in so
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far as
possible. However, it may not be possible to
establish a workable system of security export
controls because the country is unable to accept or
enforce such controls.
The question arises as to whether U.S. aid is to be
automatically denied to all such countries which
either do not or cannot establish desirable security
control over their trade with the Soviet Bloc.
Presumably economic assistance has been supplied
these areas to serve a long-term or short-term
national interest; under current conditions, this
may be assumed to be in most cases a U.S. security
interest. Economic assistance to new or unstable Far
Eastern countries, for example, may be essential to
the maintenance in power of governments that are
capable of resisting Communist aggression. If these
governments are at the same time too precariously
situated, in external and internal affairs, to
implement security trade controls, it may well serve
U.S. security interests best to continue supplying
economic assistance to the area, despite its
continuing trade relations with the Soviet Bloc.
Obviously, such a determination can be made only on
a case-by-case basis, and after consideration has
been given to the feasibility of establishing in the
area a system of security controls on the one hand,
and to the immediate necessity of improving our
world position vis-à-vis the Soviet Bloc, on the
other.
If it then appears that satisfactory trade controls
cannot be established, the decision on withdrawal of
U.S. assistance should be made after due
consideration of the nature and magnitude of the
area’s trade relations with the Soviet Bloc and the
basic objectives of the assistance program.
Consideration should be given to the effect of
withdrawal of U.S. assistance, and to the relevant
geographic, political and economic conditions that
affect the area’s trade relations with the Soviet
Bloc.
-
d.
-
The objectives of the pertinent assistance
program, as well as U.S. objectives concerning trade
relations with the Soviet Bloc, should be in accordance
with U.S. security interests.
- The Cannon Amendment would seem to require a justification
of all current and proposed U.S. assistance programs in
terms of the national security interest. Thus the Amendment
clearly calls for an analysis of each area’s trade relations
with the Soviet Bloc. If controls are not established over a
particular country’s trade with the Soviet Bloc, the
continuation of assistance will have to be justified. The
national security interest should be interpreted broadly
enough to permit situations where an assistance program
might properly be continued even though trade with the
Soviet Bloc in security items continues.
5. The availability of statistics on East-West trade is being
reviewed, and there should be a separate country study initially for
each of the countries whose trade requires review under the
Amendment. Subsequent studies of other important countries should
also be made as the circumstances warrant. In preparing such
studies, it should be recognized that there will be difficulty in
obtaining comparable data. An attempt should be made, however, to
present the statistics in terms comparable with the U.S. 1A and 1B
lists. Furthermore, statistics
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should not be confined to items on the 1A and
1B lists, but should include other items which might aid in the
maintenance of or increase the war potential of the Soviet Bloc.
While the strategic items moving in trade both to and from the
Soviet Bloc should be identified to the extent possible, the total
content and hence the relative advantage of such trade in economic
as well as security terms should also be presented.
6. The Department of Commerce, utilizing the resources of other
interested departments and agencies, particularly State, Defense,
Treasury, ECA and CIA, is preparing the country studies
of trade to and from the Soviet Bloc referred to above, and will
submit these statistical analyses for evaluation by the Special
Committee on East-West Trade. The Department of State will provide
the Special Committee with a current list of U.S. aid programs and
keep such a list up-to-date.
7. The Special Committee on East-West Trade, upon receipt of the
statistical studies prepared by the Department of Commerce, should
evaluate each with a view to making appropriate recommendations for
Council action thereon.
