Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

298. Memorandum From the Secretary of State’s Special Assistant (Bohlen) to the Under Secretary of State (Bowles)⁰

Washington, April 7, 1961.

SUBJECT

• Report on Meeting with Secretary Hodges, April 7, 1961¹

As you requested, I attended the meeting this morning which had been arranged by Secretary Hodges to discuss the question of export licenses to the USSR and to the bloc. Mr. McGeorge Bundy attended, and Mr. Gilpatric and Mr. William Bundy were there from Defense. Various Commerce, Defense and State staff members also participated.

Basically, the discussion covered two points:

(1) The pending export license cases which the Department has appealed.²

(2) The future procedure for handling agency disagreements on licensing cases.

As to the pending cases, I argued for approval along the lines of your letter and Ed Martin’s briefing memorandum. I urged that the basic NSC policy guidance should be followed, and emphasized in particular that we felt that cases such as these should be looked at in terms of whether they would have a substantial impact on the war-making potential of the USSR and the Soviet bloc. The question of whether the same items were available elsewhere should be given considerable weight. I said that I thought that if we embarked on a policy with respect to trade which widened the gap in this area between ourselves and our allies, there would be no compensating national security interest which would be served. I also mentioned that a negative position on these cases would conflict with the Administration’s general position of favoring the expansion of peaceful trade. Finally, I said that it was very important to rectify the present situation where there was considerable uncertainty on the part of American businessmen and Soviet bloc purchasers, as to what could be licensed.

Mr. Hodges referred to Ambassador Thompson’s telegram, and advised that he would be prepared to approve the applications for transfermatic machines for automotive production, on the understanding that (a) Defense’s position was changed to one of approval and (b) Defense advised Congressman Lipscomb of their change in position. It appeared that Defense was ready to revise its position on these machines.

Regarding the two cases for the USSR about which you wrote to Mr. Hodges on March 27, 1961 (technical data re. nylon 66 and carbon bisulphide), Mr. Hodges said that he would approve the license for the latter, but that Commerce had a question on the former, and would want to check further on Dupont’s willingness to permit use of the process.

On the case of the research equipment for Poland, Mac Bundy and I argued at length for approval, on the grounds that this equipment would be for research basically in non-military fields. The matter was left that the Defense Department would take another look at its position, and if it withdrew its objection to issuance of the license, Mr. Hodges indicated he would approve.

As to the future procedure, Mr. Hodges said that he was sending forward a proposal to the President for an Executive Order, setting up a Board of Export Review (to be chaired by the Secretary of Commerce with participation at the Secretary level) to deal with all export license cases in which there was disagreement among agencies in the present interagency staff committees. His main concern was that the U.S. Government act and speak as one on these matters. He emphasized that, once a license was granted, it should not be revoked. He was also anxious to set up a procedure which would ensure that agency’s reservations and dissents were thoroughly thrashed out, and agreement reached on a case. He wanted to end the practice where an agency’s non-concurrence with a decision was noted for the record, but not pursued (except perhaps at a later date, as in the ball bearing case). He also said that he thought we should have no more instances where agency’s views on cases under review were ventilated to the Congress or the press. There was no disagreement with these objectives.

There was considerable discussion as to whether the proposed Board of Export Review would operate by unanimous or majority vote, and it was the consensus that agreement would have to be unanimous (in view of the right of access of Cabinet officers to the President), with all split cases going to the President. It was Mr. Hodges’ thought that there would only be about four cases a year which would have to be reviewed by the Board, but I rather think that, on the basis of the Department’s past experience with Defense and Commerce, we would have more cases than that. There seems, however, some promise of a new viewpoint on these matters in Defense, which should make the Board’s and the President’s task easier. In any event, I told Mr. Hodges that the Department would want to be given an early opportunity to review the proposed Executive Order to set up such a Board. We are arranging to obtain copies of the draft Order.

Copies of this memorandum are being sent to Mr. Ball, EUR, E and L.

0. Source: Department of State, Central Files, 460.119/5-161. Secret. Drafted by James L. Colbert on April 7. Attached to the source text is a covering memorandum from Edwin M. Martin to U. Alexis Johnson, May 8, stating Martin’s dismay that the Department of Defense was holding up licenses for certain exports to the Soviet Union, allegedly, in part, because of the Laotian situation. Martin suggested that Johnson, as the new coordinator of relations with the Department of Defense, “may wish to inquire into these hold ups.”
1. In a March 31 letter to Acting Secretary of State Bowles, Secretary of Commerce Hodges proposed that the Secretaries of Commerce, Defense, and State, and the Special Assistant to the President for National Security Affairs meet to discuss outstanding cases of licenses for exports to the Soviet Union and Poland on April 7 at 10 a.m. (Ibid., 461.119/3-3161)
2. Acting Secretary Bowles appealed a Department of Commerce recommendation to deny export licenses in three cases pending Hodges’ review: a Van de Graaf accelerator for Poland and nylon 66 and carbon bisulphide technical data for the Soviet Union. In urging the granting of these licenses, Bowles referred to “our basic interest at this time in establishing more normal relations with the Soviet Union” and “our wish to expand United States economic relations with Poland.” (Letter from Bowles to Hodges, March 27; copy attached to Hodges’ reply of March 31, cited in footnote 1 above)