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

113. Memorandum of Discussion at the 282d Meeting of the National Security Council, Washington, April 26, 1956¹

Washington, April 26, 1956

[Here follow a paragraph listing participants at the meeting and item 1.]

2. Pattern of International Trade, Particularly Trade Between the Free World and the Soviet Bloc (NSC Action No. 1536–a²)

The Executive Secretary reminded the Council that the President had requested Mr. Joseph Dodge, as Chairman of the Council on Foreign Economic Policy, to coordinate Council consideration of the next three items on the agenda. Accordingly, Mr. Dodge rose and asked Mr. Allen Dulles to present the first report. (A copy of Mr. Dulles’ report is filed in the Minutes of the meeting.)³

In his presentation Mr. Dulles referred first to a chart entitled “Divisions of World Trade” (in billions of dollars). This was divided into trade of the free world, East-West trade, and intra-bloc trade, and the levels of trade in each of these categories compared between the years 1948 and 1955. Apart from the great growth of trade within the free world from 1948 to 1955, Mr. Dulles pointed out that the major change was the considerable increase in intra-bloc trade.

Mr. Dulles then turned to a second chart, entitled “Bloc Imports” (in billions of dollars). This chart also gave the major categories of items imported by the Soviet bloc. Soviet bloc imports from the free world had been just under $2 billion in value in 1948. In 1955 these imports were just over $2 billion in value. Mr. Dulles indicated that after controls on free world exports to the Soviet bloc had first been imposed in 1948, European trade with the bloc had increased slightly, while the trade of the United States and Canada with the bloc had dropped abruptly and remained low. Mr. Dulles also pointed out the greatly increased importation of food products into the Soviet bloc, which since 1954 had become a net importer of food products. The Soviet bloc was likewise still a net importer of manufactured products, though it was now engaged in exporting a considerable number of items of manufactured goods. Likewise, the cost of manufactured goods exported by the Soviet bloc was declining.

Mr. Dulles next turned to a chart which described “Bloc Exports”. This indicated that the bloc had exported to the value of just over $2 billion in 1948. This figure had risen to $2,367,000,000 in 1955, with Western Europe again the dominant market.

After a brief description of the system of controls on East-West trade, Mr. Dulles drew the conclusion that the current controls on trade between the West and the Soviet bloc did not impose any serious deterrent to the industrial growth or military capabilities of the Soviet bloc. On the other hand, these controls were effective in reference to certain specific items where they acted as a qualitative deterrent. Mr. Dulles then described the various means by which the Soviet bloc circumvented these controls, with particular reference to copper, shipping, and rubber. He noted that the Soviet Union had imported 100,000 tons of copper in 1955. This was chiefly in the form of copper wire, because this commodity was not decontrolled. Copper wire had thus replaced raw copper, which was the chief form of Soviet bloc imports of copper prior to the decontrol of copper wire. Soviet bloc imports of copper in 1953 and 1954 amounted to approximately 120,000 tons.

These figures occasioned questions and discussion by Secretaries Dulles, Humphrey and Wilson. Secretary Wilson expressed regret that the West had permitted the Soviet bloc to get so much copper at a time when to have withheld this commodity would have hurt the Soviet bloc. Under Secretary Hoover also pointed out that more effective transshipment controls had helped to reduce the import of raw copper into the Soviet Union in the course of 1955.

With respect to shipping, Mr. Dulles went on to point out that the Soviet bloc sought in particular high-speed freighters and tankers, both of which were under strict control. As a result, they have had to use domestic shipyards in order to construct such vessels. While this had no apparent effect on the Soviet bloc production of naval vessels, it had certainly delayed modernization of the Soviet bloc commercial fleet.

As to free world controls on trade with Communist China, Mr. Dulles expressed the view that, by and large, such controls had been more effective than controls imposed on the European members of the bloc. If all controls were dropped, Mr. Dulles estimated that trade between the West and Communist China would be increased annually by the sum of approximately $125 million.

Thereafter, Mr. Dulles adverted briefly to the problem of rice, particularly in relation to Burma, and closed his formal report with a statement as to future bloc prospects for East-West trade. In this latter context, Mr. Dulles estimated that East-West trade could be doubled in the next five years. He agreed, however, with Mr. Dodge that even if the present levels of East-West trade doubled by 1960, such trade would amount to only 4% of total world trade.

The National Security Council:

Noted and discussed a report by the Director of Central Intelligence on the subject, prepared in collaboration with the Departments of State and Commerce pursuant to NSC Action No. 1536–a.

[Here follows discussion of item 3; for text, see volume IX, page 182.]

4. Multilateral Export Controls on Trade With Communist China (NSC 152/3; NSC 5429/5; NSC Actions Nos. 1487,⁴ 1494,⁵ 1511;⁶ NIE 100–55;⁷ SNIE 100–56;⁸ Memos for NSC from Executive Secretary, same subject, dated January 13⁹ and April 9,¹⁰ 16¹¹ and 23,¹² 1956)

Mr. Dodge reminded the Council of its recent actions on the reference subject, and then proceeded to brief the Council on the contents of the report to the NSC by the CFEP on multilateral export controls on trade with Communist China (enclosure to the reference memorandum by the Executive Secretary dated April 9, 1956). He read the majority views as to the U.S. position in forthcoming negotiations with respect to the ChinCom list. He also read the negotiating objectives and negotiating procedures, on which subjects all departments and agencies were in agreement. Mr. Dodge then read the language proposed by the Departments of Defense and the Treasury as a substitute for paragraph 3–a, which was endorsed by all the other departments and agencies. The fundamental difference between the position taken by the Defense and Treasury Departments, as opposed to the majority position, derived from the fact that all the concessions which Defense and Treasury were willing to make in decontrolling items for shipment to Communist China, came from List A in Annex D of the CFEP report. List A consisted of items judged to have the least strategic and economic significance for Communist China. Finally, Mr. Dodge pointed out that the Joint Chiefs of Staff had endorsed the stricter and shorter list proposed by Defense and Treasury.

At the conclusion of these introductory remarks and explanation by Mr. Dodge, Secretary Weeks expressed surprise that the Department of Commerce was included in the majority position. He had believed that Commerce had sided in this matter with Defense and Treasury. Secretary Humphrey added that this also was his understanding of the position of the Department of Commerce. Mr. Dodge replied that while initially in the CFEP the Department of Commerce had aligned itself with the Departments of Defense and the Treasury, the Commerce representatives had ultimately reversed their position and aligned themselves with the majority view.

In concluding his remarks Mr. Dodge called attention to the existence of various ancillary reports bearing on the subject of East-West trade. Among these he singled out for mention a study by the Department of Defense of recent British requests for U.S. … technical information. The Defense Department believed that the British requests for this information gave us a handle to use in our negotiations with them on the ChinCom list. Mr. Dodge also noted a study which had been made of the number and character of exceptions which the CoCom and ChinCom countries had made, under which exceptions they had shipped certain controlled items to the Soviet bloc, including Communist China.

When Mr. Dodge had concluded his reference to these and other studies of the problem of East-West trade generally, Secretary Weeks reiterated that the Department of Commerce was in favor of the shorter list proposed by the Departments of Defense and the Treasury; he wished to make this point clear and leave to a later time explanations of the misunderstanding of the Commerce position.

Secretary Humphrey stated his desire to summarize what was essential in the position taken by the Departments of Defense and the Treasury in the CFEP paper. Above all, what these two departments wanted was a firm agreement with our allies to remove certain important items from the list of items which could be traded with the Soviet bloc, before proceeding to add any items which could be traded with the Soviet bloc. Secretary Humphrey also expressed very great concern about the extensive number of items on the exceptions list which had permitted our allies to trade many items which were under control.

The President said he wished to put a question. If we put copper wire on the embargoed list, which of our friends would we hurt and how much would we hurt them? It was pointed out to the President that most of the copper which was going to the Soviet bloc came from Africa, although it was largely British-owned. Mr. Dodge commented that the case for embargoing copper and copper wire was very strong, because these commodities were in short supply in the Soviet Union and were absolutely essential to all kinds of military production and also to the large hydroelectric projects which were being carried out in the Soviet Union and which were currently being offered by the Soviet Union to various underdeveloped countries. The President said that of course he favored prohibiting trade with the Soviet bloc in copper. Otherwise, however, he was strongly against too long and large a list of embargoed and controlled items. The sensible thing was to concentrate on controlling a group of truly significant items and to secure from our allies a commitment for the strict enforcement of controls on these items. If we could obtain these objectives we could say “to hell with the rest of it.”

Secretary Wilson expressed strong skepticism as to the value of an embargo on the shipment to the Soviet bloc of combination boring, milling and drilling machines with spindle sizes of six inches and larger in diameter. Secretary Wilson believed the Soviets could make such machines any time they wanted to.

Secretary Humphrey stated that it seemed a matter of great significance to him that the exceptions on the ChinCom list were better than two-thirds of the list itself, and that exceptions on the CoCom list amounted to 80% of this list.

The President repeated that he had very definite feelings on this problem. If we try to maintain too strict a list of controlled and embargoed items, the dam of trade would burst and the whole system of multilateral controls on trade with the Soviet bloc would be carried away in the flood. Accordingly, it was much more sensible to bear down on a few vital products of which we wished to deprive the Soviet bloc. He certainly agreed with Secretary Wilson on the futility of embargoing these boring machines. We should get down to what needs to be done, get our friends to stand firmly with us on these few items, and let the rest be decontrolled.

Mr. Dodge expressed the feeling that the long list of exceptions showed indication of the impending disintegration of the multilateral controls system, particularly as it related to controls on trade with Communist China. In response to this statement, the President expressed great sympathy for the plight of Japan, which he felt was either obliged to trade with Communist China or “pass a tin cup around in San Francisco.” Mr. Dodge discussed this matter briefly, and expressed the opinion that the removal of controls on trade between Japan and Communist China would by no means provide a complete answer to Japan’s trade and economic problems. The President expressed agreement to the extent of stating that Japan’s problems had to be settled in bites, and not all at once.

Secretary Wilson felt that there were two points which needed emphasis on trade between Japan and China. China had obvious need of certain manufactured articles produced in Japan. Japan in turn needed certain raw materials from China. Perhaps the two countries could get together and work it out; but from a psychological point of view, as long as the Japanese feel that the United States has them under wraps, they won’t like it. Perhaps the best thing was for us to allow the Japanese to make the effort to increase their trade with Communist China and see for themselves that this was not the real answer to all their problems.

At this point the Secretary of State turned to Secretary Humphrey and asked him whether he was aware that some of our U.S. banks were apparently extending credits to certain banks in Western Europe, which were in turn extending credits to banks within the Soviet bloc. Secretary Humphrey replied that he was at the moment investigating these allegations; indeed, the Attorney General had spoken of it to him only yesterday. Secretary Humphrey went on to state once again the essence of the Treasury position. It was simply a matter of bringing pressure and finding means by which we could exclude certain vital items from going to the Soviet bloc and to secure effective control of these particular items in exchange for a general reduction of other items on the present control lists.

With considerable vehemence, the President expressed his firm opposition to bringing pressure on the British by withholding from them … technical information if they refused to agree to our views on the ChinCom list. He said he remembered vividly our dependence in the early stages of the last war on British intelligence, and the generosity with which this intelligence was made available to the United States. He would have nothing to do with what, in practice, amounted to blackmailing Great Britain. Secretary Wilson expressed himself as in complete agreement with the President’s position on this point.

Mr. Dodge said that there was one other matter of importance to bring to the Council’s attention. In view of what had happened in recent days at the hearings of the McClellan Committee and the difficulties which Secretaries Weeks, Hoover and others had encountered, the question of timing of any Council action to reduce the items on the ChinCom list was of extreme importance. Both State and the International Cooperation Administration were concerned about the possible adverse impact on the current mutual security program in Congress if the Council moved too fast or too fully in the matter of the ChinCom controls.

The President expressed agreement as to the reality of this danger, but Secretary Dulles pointed out that he would be seeing Selwyn Lloyd next Wednesday¹³ and would certainly like to be in a position to talk with the Foreign Secretary on the matter of the ChinCom levels. Mr. Dodge added that in any case he felt that certain members of Congress should know what the Council was proposing to do about this problem before we actually begin to do it. Secretary Weeks expressed very strong agreement with Mr. Dodge’s latter point. The Vice President said that we need not anticipate any great difficulty with the Foreign Affairs Committee or the Foreign Relations Committee. On the other hand, in the case of the McClellan Committee and Senator Symington, we would find ourselves up against a strictly political maneuver. A big pitch would be made by the Democrats. They would cause much more trouble than the right-wing Republicans. No one need be too worried about McCarthy.

The President repeated his suggestion that a presentation of the problem to the two Foreign Affairs Committees would be a good way to get things started in Congress. The Vice President agreed that this would be helpful if it proved possible to do it. On the other hand, he did have a distaste for telling McClellan and Symington what we proposed to do in our forthcoming negotiations with the British.

At this point the President turned to Secretary Dulles and asked for his views as to what was the desirable action for the Council to take on this problem. Secretary Dulles replied by stating his feeling that if we could indicate to the British and to our other allies that we are prepared to agree to their continuing to make exceptions with respect to the ChinCom list, such exceptions to be confined to the items in Lists A and B in Annex D, such a procedure would be much more satisfactory than formal negotiations with our allies with the object of amending the actual CoCom list. In other words, if we could operate on the basis of an informal understanding that this Government would not object to continued exceptions within the limits of Lists A and B, this method of operating would be preferable to formalizing changes in the ChinCom list, particularly from the point of view of public relations.

Both Secretaries Wilson and Humphrey expressed great concern over the proposal for Council action made by Secretary Dulles. They predicted that if this Government followed such a course of action the result would soon be the complete wreck of the multilateral controls system on trade with the Soviet bloc and Communist China. Mr. Dodge added that Secretary Dulles’ proposal also provided no answer to the problem of copper. Secretary Dulles replied that we would certainly never be able to get copper back on the embargoed list unless we were prepared to be pretty liberal with respect to other items that our allies desired to decontrol.

The President suggested that the United States itself was in a very good position to do something about preventing the Turkish output of borax from finding its way to the Soviet bloc.

The Attorney General then inquired whether, in the course of the forthcoming CoCom and ChinCom negotiations, the United States could work it out in such a way that when final agreement was reached on the list of items subject to control, this list could be made public. The Congress was very anxious to have this list, and it seemed to the Attorney General that the Congress should have it. Secretary Hoover replied by pointing out that all information on the actual items in East-West trade had long since been made public. The only things which were still kept on a confidential basis and supplied to the Congress on this basis, were the technical descriptions of items which comprised the strategic list. The items of this list, he believed, could not be made public without severe repercussions from our allies. The Attorney General nevertheless contended that the Executive Branch was in an unfortunate position from a public relations point of view because it had withheld this list. Secretary Dulles, however, contended, as had Secretary Hoover, that all products which were actually traded between the West and the Soviet bloc were in the public domain. The only information we withheld from the public were the items that are not traded. In this difference of opinion Secretary Wilson expressed his sympathy for the viewpoint of the Attorney General, while Secretary Weeks expressed his agreement with the position of Secretary Hoover. The President commented that whatever we did we could not jeopardize the multilateral controls system. Secretary Dulles added the warning that we might very well have a break with our allies if we decided to publish the items on the control and embargo list, or if we otherwise persisted in looking at the problems of East-West trade from the narrow point of view of exclusive U.S. interests rather than from the point of view of the free world as a whole.

Secretary Humphrey, noting our very great anxiety to get copper back onto the embargoed list, urged that we bring heavy pressure on Great Britain to accomplish this objective. Secretary Dulles forcefully warned that too much pressure on the British could well result in the breakdown of the Anglo-American alliance. Was Secretary Humphrey seeking this objective?

Secretary Wilson stated his opinion that if we failed to convince the British and our other allies on the rational necessity of embargoing copper wire, the next logical position to which the United States should retreat was a position that we would embargo actual munitions to the Soviet bloc and let the controls on everything else go by the board. If we did this, we would at least get credit throughout the world for supporting the doctrine of free trade.

Secretary Dulles said that in effect Secretary Wilson was suggesting that we use all the remainder of the control and embargo list as a bargaining point for securing a complete and effective embargo on sales of copper and copper wire to the Soviet bloc. Secretary Dulles believed that if we agreed to giving up controls on everything else, we could certainly get copper wire back on the embargo list.

Secretary Humphrey observed that if one stopped and thought of all that we had done for the British, one would suppose that they would be willing to agree to embargo shipments of copper to the Soviet bloc. After all, the volume of British trade in this commodity was not in itself so great as to be very important. Moreover, besides the … technical information which the British were seeking from us, there was a lot else that the British needed from us and which we could withhold if they proved stubborn. In response to this proposal, the President observed that Secretary Humphrey seemed to be suggesting that we give up our alliance with Great Britain. Secretary Dulles turned to Secretary Wilson and asked with considerable heat whether the Department of Defense was currently doing anything for Great Britain which it did not deem desirable on its own merits from the point of view of U.S. national interest. If the Defense Department was doing such things, they had better quit doing them. Secretary Wilson disclaimed any desire whatever to impair the Anglo-American alliance, but repeated his contention that if the British could not be brought to agree to a rational solution of the copper problem, he advocated a complete change in the basis of our trade policy vis-à-vis the Soviet bloc—namely, continuing to embargo munitions to the Soviet bloc, but otherwise free trade.

The President stated his belief that whatever we are doing about this problem we are certainly doing from the point of view of enlightened self-interest. He expressed, furthermore, support for Secretary Dulles’ proposal that we not agree to formal negotiations designed to reduce the ChinCom list levels, but instead continue to wink at the exceptions our allies make to this list and determine if we cannot, as a result, induce them to agree to embargo copper.

Secretary Dulles emphasized again his belief that such a de facto change in the level of trade with Communist China, rather than a formal change in the ChinCom lists, might prove highly advantageous and might enable us to get copper on the list of embargoed items. For one thing, said Secretary Dulles, he did not wish the Administration to be put in the position of appearing to be “going soft” on Communist China. This charge might well be made against us if, by formal Council action, we reduced the number of controlled items on trade between the West and Communist China.

The Vice President said that with respect to this general problem, and particularly with respect to making the ChinCom list public, he would give his advice for what it might be worth. He said that he was well aware of the difficulties Secretary Weeks had encountered with the McClellan Committee. On the other hand, he had very little worry that the general public could be made to believe any charge that the Executive Branch was “soft” on trade with Communist China. In short, he was not much concerned over the politicking which would go on in the McClellan Committee. It was his advice that the Council make the best possible decision on ChinCom controls based on strategic and policy considerations, and leave domestic political considerations out of the picture.

Secretary Dulles again reemphasized that the exceptions which our allies would be permitted to make would all be confined to Lists A and B in Annex D of the CFEP paper, and that such exceptions would be permitted only in return for allied agreement to the embargo of copper wire. Secretary Humphrey still expressed great concern that the course of action suggested by Secretary Dulles would result in the rapid disappearance of all controls on trade between the West and the Soviet bloc. The President stressed his view that what we wanted most of all was an agreement for the embargoing of copper wire, plus a firm commitment by our allies to maintain all other controls upon which they had agreed.

Mr. Dodge at this point expressed his concurrence with the proposal made by Secretary Dulles, provided the exceptions were confined to the A and B lists, and provided the allies agreed in return to embargo copper wire. Mr. Dodge also suggested that along with the items in Lists A and B there should be added the additional items suggested for control by the Secretary of Commerce. In reply to this last point, Secretary Dulles said that he would rather see the borax problem, for example, handled by the United States in a unilateral way. If the United States produced 98% of the world supply of borax it should be able to make a deal with the Turks with respect to the remaining 2%.

Mr. Dodge then said that as he understood the consensus of the Council, the carrying out of Secretary Dulles’ proposal would result in no formal meeting of the Consultative Group, but would instead be explored in informal negotiations with the British. At this point the Executive Secretary, with the assistance of Mr. Dodge and the President, summed up the consensus of the meeting and indicated the probable shape of the Council action on this item.

In closing the discussion, the President inquired of Secretary Dulles whether it would be helpful if he were to write to Anthony Eden in support of the decision which had been reached at this meeting. Secretary Dulles replied that he thought such a letter would be useful, and that he would prepare a draft for the President’s consideration.

The National Security Council:¹⁴

a. Noted and discussed the recommendations contained in paragraphs 3 and 4 of the memorandum on the subject from the Council on Foreign Economic Policy transmitted by the reference memorandum of April 9, in the light of the views of the Joint Chiefs of Staff thereon transmitted by the reference memorandum of April 23; and of the proposed amendment thereto by the Department of Commerce transmitted by the reference memorandum of April 16.

b. Agreed that, rather than undertaking formal Consultative Group negotiations at this time for a revision of the ChinCom list, the Secretary of State should be authorized to consult with the UK and other participating countries:

(1) To seek, as a matter of high priority, agreement to the embargo of copper wire, and the largest practical measure of support for other U.S. negotiating objectives set forth in paragraph 3–b of the CFEP report.

(2) To the extent required to achieve (1) above, to indicate that the United States would not interpose objections if, subject to possible formal consultations later on, the UK and other participating countries made exceptions—where such a course seems to them clearly indicated and important—for items on Lists A and B of Annex D to the CFEP report and natural rubber and, in the case of Japan, wooden fishing vessels.

c. Noted that the President would communicate with Prime Minister Eden in support of the position in b above.

d. Agreed that the United States should make an effort to limit the sale of boron materials produced in the United States, Turkey, and elsewhere in the free world, to free world countries.

Note: The actions in b and c above, as approved by the President, subsequently transmitted to the Secretary of State. The action in d above, as approved by the President, subsequently transmitted to the Secretary of Commerce for appropriate action in collaboration with the Department of State.

[Here follows discussion of items 5–8.]

S. Everett Gleason

1. Source: Eisenhower Library, Whitman File, NSC Records. Top Secret. Drafted by Gleason on April 27.
2. See footnote 4, Document 106.
3. Not printed. (Ibid., Central Files, 460.009/4–2656)
4. NSC Action No. 1487 was taken by the NSC at its 269th meeting of December 8; see Document 82.
5. NSC Action No. 1494 was taken by the NSC at its 271st meeting of December 22, 1955; see Document 87.
6. See footnote 4, Document 92.
7. Document 43.
8. Document 90.
9. See footnote 4, Document 88.
10. See footnote 5, Document 105.
11. Not printed. (Department of State, S/S–NSC Files: Lot 62 D 1, Communist China: Multilateral Export Controls on Trade with)
12. This memorandum enclosed the views of the Joint Chiefs of Staff on the question of multilateral export controls on trade with Communist China. The Joint Chiefs recommended, in a memorandum to Secretary of Defense Wilson, dated April 17, that the NSC support the adoption of the “more exacting” negotiating position set forth in the CFEP papers under discussion.
13. Dulles was scheduled to arrive in Paris on Wednesday, May 2, for a meeting of the North Atlantic Council.
14. Paragraphs a–d that follow constitute NSC Action No. 1540, approved by the President on April 27. (Department of State, S/S–NSC (Miscellaneous) Files: Lot 66 D 95, Records of Action by the National Security Council, 1956)