Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

105. Minutes of the 40th Meeting of the Council on Foreign Economic Policy, Executive Office Building, Washington, April 3, 1956¹

Washington, April 3, 1956.

ATTENDANCE

• Prochnow, Kalijarvi, Knoll, Burgess, Overby, McClellan, Smith, Hockersmith, Morse, Gray, Nichols, Wormser, Amory, Williams, Cooley, Winant, DE Lany, Hale, McCall, Hutchinson, Davis, Lay, Johnson, Hauge, Dodge, Rand, Cullen

Draft Minutes of the 39th Meeting, March 16, 1956, were approved as corrected.

AGENDA SUBJECTS

CFEP 501—East-West Trade.

1. The Chairman stated that the President, on January 31, 1956, requested the Council on Foreign Economic Policy to review a list of items on the ChinCom list submitted for decontrol by the British Prime Minister and recommend adjustments that could be made in the ChinCom list to the net benefit of the Free World. As a first step, the Economic Defense Advisory Committee was requested to appraise the items on the ChinCom list to determine:

a. Items of greatest and least advantage to the military potential of China;

b. Items the export of which would be of particular immediate or relatively immediate advantage to Free World governments other than Japan and the United States; and

c. Items the export of which would be of particular immediate or relatively immediate advantage to Japan.

2. The EDAC report dated February 29, 1956 was transmitted to Council members on March 2, 1956 as CFEP 501/info.² This agreed report listed 34 items from the ChinCom list of 297 as being of least advantage to the military potential of Communist China. Of these 34 items, 7 were proposed for decontrol by the British and 10 by the Japanese. (Six of the items were proposed for decontrol by both countries.)

3. On March 2, 1956, EDAC was requested to classify the items on the ChinCom list into three groups in the ascending order of strategic and economic importance to Communist China and recommend a U.S. negotiating position for this subject.

4. The report and recommendations submitted by EDAC, distributed as CFEP 501/9 and CFEP 501/10 dated March 22 and March 28 respectively, were considered by the Council.³

5. There were substantial disagreements about the recommended U.S. negotiating position and an extended discussion principally revolved around:

a. The extent of possible U.S. concessions for removal from the ChinCom list.

b. The need for quid pro quos evidencing a maximum net benefit to the Free World sufficient to justify any agreed concessions.

6. The Council consideration resulted in a disagreement by Defense and Treasury to an otherwise agreed negotiating position. This disagreement was principally related to (a) above.

7. It was the consensus of the Council (except for the Departments of Defense and Treasury) that the following U.S. negotiating position, negotiating objectives, and negotiating procedures should be adopted in the forthcoming bilateral and Consultative Group discussions of possible revisions of multilateral export controls against Communist China:

a. U.S. Position

The United States is prepared:

(1) To negotiate as an area of concession, and to the extent it becomes necessary, a downrating from the ChinCom embargo list to a surveillance list or decontrol, of the 81 items in List A and List B of Annex D⁴ (CFEP 501/9) and natural rubber (with a special bilateral agreement on reporting with the U.K.); and to agree to a special bilateral exceptions arrangement with Japan on wooden fishing vessels.

(2) In the negotiations, emphasis will be on granting a minimum of concessions and on achieving a maximum of support for and agreement to the stated U.S. negotiating objectives.

(3) To review ChinCom controls whenever a change in the international situation occurs which in the view of any PC is deemed sufficient to warrant a review either for further relaxation or strengthening of controls to Communist China.

b. US Negotiating Objectives

The United States should seek maximum agreement to and support for the following objectives:

(1) With respect to the China differential controls:

(a) To retain substantial control in terms of the coverage of listed items;

(b) To continue to apply effective bunkering and voyage licensing controls to the differential area;

(c) To tighten the ChinCom exceptions procedures and practices (including implementation of procedures already agreed);

(d) To achieve a clearer and firmer undertaking through CoCom to deny or strictly control to Eastern Europe items which are being obtained by Eastern Europe from the Free World and then diverted to Communist China.

(2) With respect to CoCom controls:

(a) To oppose any relaxation of CoCom controls;

(b) To achieve as a matter of high priority embargo of copper wire;

(c) To obtain acceptance of improved controls over the sale, transfer and repair of merchant vessels;

(d) To achieve improved quantitative control (specific proposals would be prepared in advance of the CG meeting);

(e) To seek improvement of reporting procedures and possible establishment of “peril points” or other similar techniques for IL-III items.

(3) With respect to general CG/CoCom/ChinCom considerations:

(a) To work toward a closer coordination of CG and NATO on information related to and on objectives towards the Soviet Bloc.

(4) The extent to which U.S. negotiators are authorized to indicate tentative agreement in bilateral negotiations will depend upon the extent to which the PC’s concerned accept and undertake to support in the CG the U.S. objectives stated above. Agreement of a PC not to exceed the downratings or deletions which the U.S. negotiators are authorized is alone not sufficient to warrant U.S. acceptance of the arrangements. These judgments will be made initially by the negotiators, subject to interagency review in Washington when the results of the several bilateral negotiations become available.

c. Negotiating Procedures

Full bilateral discussions should be undertaken by the United States with the various participating countries. A bilateral with Japan should occur first and be followed by a bilateral with the United Kingdom. Bilaterals with the other participating countries should promptly follow to assure a fuller understanding by them of the United States view, to gain support for that view and to avoid increasing present resentment regarding extensive U.S.–U.K. discussions. The results of individual bilaterals should be reported promptly. Before a final U.S. position is established for presentation to the Consultative Group, full account should be taken of such bilaterals as have been completed.

8. The Departments of Defense and Treasury recommend substitution of the following U.S. position for the U.S. position in paragraph 7a above (retaining subparagraphs 7b and 7c):

a. As an initial step, President Eisenhower should communicate the substance of the U.S. position to Prime Minister Eden.

b. The U.S. is prepared to offer, as an area of concession, the removal from the ChinCom embargo list of the 37 items in the A list of Annex D (CFEP 501/9), plus rubber, wooden fishing vessels, and seven B List items, five or which are of special interest to Japan.

c. If, as a result of these concessions, it does not appear that the U.S. position can be maintained, then the U.S. should move to a consideration of items on the B list, but only if the U.K. and Japan commit themselves to strongly support the U.S. in the CG on a proposal to gradually narrow the China differential, by the process of transferring some items from the ChinCom list to the CoCom list, and by dropping others entirely. In the initial stages of the process, only B list items would be considered. Certain items, such as copper wire and ships, should be restored to the effective CoCom control at once by virtue of their special importance. It should be agreed that the ultimate result would be a unified control program, substantially narrower in scope than the present ChinCom controls, but substantially broader than the present CoCom controls, the entire control to be effectively implemented.

9. In the Council discussion, the following factors were emphasized:

a. The importance of maintaining the multilateral control system.

b. Similar but adverse internal pressures in the United States parallel the internal political pressures of CG countries urging relaxation of ChinCom controls.

c. Any relaxation of ChinCom controls without adequate quid pro quo undoubtedly would adversely affect Congressional consideration of the Mutual Security program.

d. The need for a not too limited area of negotiation.

e. Every consideration should be given to providing justifiable concessions to the Japanese.

f. It would be inadvisable to involve the result of the Geneva talks between the U.S. and Communist China with ChinCom negotiations.

g. The difficulty of administration of multilateral anti-frustration controls involving Soviet Bloc indigenous production would not warrant concessions by the U.S.

10. The Council agreed that the consensus set forth in paragraph 7 and the position of the Departments of Defense and Treasury set forth in paragraph 8 be transmitted to the National Security Council for its consideration.⁵

1. Source: Eisenhower Library, CFEP Records. Secret.
2. Not printed. (Ibid.)
3. Neither printed. (Ibid.)
4. These lists included items on the Consolidated China Special List and those items on the COCOM list which were proposed by the United Kingdom and Japan for removal from China differential controls. List A contained items judged by the Department of Defense and CIA to have the least strategic and economic significance for Communist China. List B contained items judged by Defense and CIA to have average strategic and economic significance to Communist China. Another list, List C, contained items judged by Defense to be of the greatest economic and strategic significance to Communist China.
5. On April 6, Cullen transmitted to Lay CFEP 501/9 and CFEP 501/10 as well as a copy of the minutes of the CFEP meeting of April 3, under cover of a memorandum. Lay then transmitted these documents to the NSC on April 9, under cover of his own memorandum. (Department of State, S/S–NSC Files: Lot 62 D 1, Communist China: Multilateral Export Controls on Trade with)