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

147. National Security Council Paper¹

NSC 5704/1

Washington, March 8, 1957.

STATEMENT OF U.S. ECONOMIC DEFENSE POLICY

General Policy

1. The continued threat to the security of the Free World posed by the Sino-Soviet bloc warrants the application against that bloc of such economic defense measures by the United States and by the Free World as will retard the growth of the war potential of the bloc and reduce its unity. Our attitude and program must be one which will not increase the possibility of war, but rather one which will keep open paths which might lead to a sounder basis for peace. During this period, the courses we take should be based upon the assumption that interference in the trade between the Free World and the Sino-Soviet bloc should take place only where a clear advantage to the Free World would accrue from such interference. They should also be based upon the assumption that the maintenance of personal, cultural, and commercial contacts between the Free World and the European Soviet bloc may have positive advantages during this period of tension and watchfulness. Our policy should reflect flexibility as between the United States and the USSR on the one hand and the United States and each individual Eastern European country on the other hand.

2. The economic defense program should be framed and administered with full recognition of the fact that the economic defense system of the Free World is part of the larger system of military and political alliances and, like them, depends upon the cooperative efforts of the free nations. The United States should support the existing Free World collective arrangements in the field of trade controls. Accordingly, in determining the economic defense measures which the United States should adopt and those to be urged on other nations, the impact upon the existing system of economic defense as a whole, and upon the Free World military and political alliances, should be taken into account. Similarly, in multilateral military and political discussions, consideration should be given to the impact of their courses of action upon and support to be derived from the economic defense program.

3. The United States should maintain such unilateral controls as will have a significant effect on the growth of the war potential of the Sino-Soviet bloc or will effectively support other U.S. policies (e.g., China policy) or fulfill U.S. legislative requirements.

4. The problems posed for our allies by trade controls should be given appropriate weight in determining the controls which the United States should advocate that the Free World exercise in its economic relations with the Sino-Soviet bloc.

5. Political conditions generally, and economic conditions in some individual countries, may make substantial intensification of multilateral controls with respect to the European Soviet bloc impractical for the foreseeable future, in the absence of a marked worsening of international tensions. Extensions or reductions of these controls should be proposed or supported, however, whenever justified by new technology, new intelligence or altered evaluation of the significance of particular imports to the Soviet bloc.

6. The controls should be so applied as to support U.S. policy with respect to encouraging and assisting bloc satellites to achieve and maintain national self-determination and independence.

7. The United States should avoid, and seek to have other friendly countries avoid, becoming excessively dependent on the Sino-Soviet bloc as a market or as a source of supply.

8. So long as it is considered to be in the U.S. interest, there should continue to be applied against Communist China² more severe controls than are applied against the remainder of the Soviet bloc. At such time as it is judged to be in the U.S. interest to do so, the controls toward Communist China should be revised.

Courses of Action

9. Seek to maintain the existing multilateral security trade control structure and the control measures developed thereunder, making appropriate and timely adjustments in those measures to reflect changes in bloc vulnerability or to improve cooperation and increase effectiveness.

10. Seek to maintain and, as necessary, extend the bilateral arrangements with other Free World countries to obtain support for multilaterally agreed controls.

11. Maintain toward the European Soviet bloc U.S. export controls over multilaterally agreed items and over such other materials, equipment, technology and services as can be so unilaterally controlled by the United States as to achieve a worthwhile adverse impact on the war potential of the European Soviet bloc, or can effectively serve other U.S. policy objectives judged by the U.S. control authorities to warrant the use of unilateral controls; and take all appropriate measures as will effectively enforce these controls and prevent their frustration.

12. Approve, as a general rule, for shipment from the United States to the European Soviet bloc, commodities not controlled under paragraph 11 above, and, where appropriate, remove the requirement of specific licenses for such shipments to the entire European Soviet bloc.

13. Make appropriate and timely unilateral adjustments and seek appropriate multilateral adjustment in the scope and severity of controls maintained toward selected European satellites of the USSR, as feasible, to encourage and support progress toward national self-determination and independence.

14. Enhance the utility of evaluated intelligence pertaining to economic defense problems.

15. Seek the adoption of effective measures to enforce the agreed scope and severity of the multilateral controls and increase the scope and effectiveness of multilateral exchanges and cooperation in the enforcement field.

16. Seek a close association with NATO and other security alliances and, where feasible, obtain their consideration and advice on appropriate economic security problems.

17. Seek agreement to utilize the multilateral control structure for studies and exchanges of views regarding all Sino-Soviet trade practices which appear to be inimical to the Free World.

18. Encourage Free World countries to resist Sino-Soviet economic penetration and to avoid excessive dependence on trade with the Sino-Soviet bloc; foster the development of necessary markets and sources of supply within the Free World.

19. Administer current U.S. programs, such as economic development, military and other governmental procurement, defense support, stockpiling, disposal of surplus goods and properties, and similar activities, in such a way as to take into appropriate account the objectives of the economic defense program.

20. Maintain the current level of U.S. unilateral export, import and financial controls applied against Communist China.³

21. Seek to maintain effective multilateral controls on trade with Communist China at a level above that on trade with the European Soviet bloc. Seek to obtain multilateral agreement on a differential which would embargo the items on International List II (25 items) and on International List III (63 items). The items on the Consolidated China Special List (207 items) should be offered for decontrol except those items which can be justified as being sufficiently strategic to warrant their addition to the International Lists for control to the European Soviet bloc and embargo to Communist China.

22. Take all appropriate actions effectively to enforce these controls toward Communist China and to prevent their frustration.

1. Source: Department of State, S/S–NSC Files: Lot 63 D 351, NSC 5704 Series. Secret. A covering note by James Lay, dated March 8, noted that the President approved the statement of policy in NSC 5704 on March 8, as amended and adopted by the NSC as NSC 5704/1.
2. Communist China as used throughout this paper includes North Korea. [Footnote in the source text.]

3. U.S. economic defense policy with respect to North Vietnam is contained in paragraph 71 of NSC 5612/1, which reads as follows:

   “71. Apply, as necessary to achieve U.S. objectives, restrictions on U.S. exports and shipping and on foreign assets similar to those already in effect for Communist China and North Korea.” [Footnote in the source text.]