Enclosed is the report which you requested on the steps taken to
implement Section 3(b) of the Export Control Act as amended July 1,
1962.2 After reviewing this report, I am satisfied that
given the far greater
[Page 713]
magnitude of trade carried on with the Soviet bloc by our Allies as
compared with our own trade with the bloc, as well as the differing
political evaluations of that trade by individual Western governments,
the United States has been remarkably successful in obtaining as
substantial a multilateral control policy as now exists. It is, however,
a compelling fact that without itself having a significant stake in
East-West trade, the United States cannot expect to have a determining
voice in the manner in which such trade is carried on by other major
Western countries under present world conditions.
Since the enclosed report includes a full and frank discussion of the
complex problems we would face now in attempting to negotiate with other
Western countries a uniform policy on trade with the Soviet bloc
countries, I would appreciate it if you would regard the report as not
being for public dissemination.
Enclosure4
REPORT TO THE SECRETARY OF STATE ON IMPLEMENTATION OF
SECTION 3(b) OF THE EXPORT CONTROL ACT OF 1949 AS AMENDED JULY 1,
1962
The amendment to Section 3(b) of the Export Control Act of 1949
provides a clear endorsement of the principle that our efforts in
the East-West field should be carried out to the maximum extent
possible on a multilateral basis. This amendment has two aspects
which are commented on separately.
The first is the provision that the United States should formulate,
reformulate and apply export controls to the maximum extent possible
in cooperation with Allied nations. The major means whereby we
pursue this objective is through the Consultative Group and
Coordinating Committee (CG-COCOM) operation and the annual list
review procedure. The purpose of the annual COCOM list review is to keep the
International
[Page 714]
Lists
currently valid by adjusting them to new technological, military and
economic developments in the Sino-Soviet bloc and the free world. It
provides this Government with an opportunity to propose the addition
of important new items to the International Lists, provided that
they can be justified under the applicable criteria. In the 1962
review the United States was successful in obtaining agreement for
the addition to the embargo list of the following new items:
electrical arc heaters, electron beam welders, some fifteen
fluorocarbon compounds, gravity meters, and special batteries or
power sources. Most of these new items embody advanced technology
and in the United States are related to production for or use in
military and space exploration programs. Only two whole items and
two partial items were deleted from the embargo list; the United
States itself proposed deletion of these items on the grounds that
they were no longer significant. Forty-five items were revised or
clarified, seventeen of these revisions resulting in net expansion
of embargo coverage.
The COCOM annual review is
scheduled to begin in October of this year. Careful preparations are
being made for this review by canvassing all available American
research developments and intelligence in order to identify the
technologically advanced items of strategic significance that should
be brought under multilateral control. While we cannot be certain
what negotiating problems may be faced this year, the Department
intends to make every effort to further the interests of this
Government consistent with the objectives of United States policy in
this field as set forth both in the Export Control Act and the
Mutual Defense Assist-ance Control Act of 1951.
With respect to the second provision of the amendment requiring the
formulation of a “unified commercial and trading policy to be
observed by the non-Communist nations”,5 the situation is not as clear cut as is the
case with respect to the COCOM
negotiations. With respect to COCOM and Battle Act strategic controls it is fair to
say that we do have a unified policy although there may be
differences in detail on the merits of embargoing particular
commodities. In the area of trade and economic relations with the
Soviet bloc beyond the scope of strategic controls, however, the
fact is that the United States has a more restrictive policy than do
other Western nations. The United States denies the export to the
Soviet bloc of a wider range of commodities and technology than do
other major trading countries. We maintain a complete embargo on
trade with Communist China, North Korea and north Viet-Nam. We do
not permit United States flag vessels to engage in voyages to those
areas. Our controls on trade and shipping with Cuba are more
sweeping than the controls of other friendly countries. American law
in effect prevents
[Page 715]
the
extension of credit to the Soviet bloc and requires the payment of a
higher level of import tariffs on goods of Soviet bloc origin. The
entry of certain types of furs from the Soviet Union is prohibited
by United States law.
To achieve uniformity on the basis of the policies and practices of
our Allies, assuming we wished as a matter of policy to do so, would
require changes in American laws. Alternatively, to attempt to
achieve uniformity on the basis of present American policy and
practices would require a major policy confrontation with other
Western countries. Given the economic and foreign trade problems
that some of these countries face, they are aggressively pursuing
the expansion of trade with the Soviet bloc, and they consider that
this has political as well as purely commercial or balance of
payment advantages. While United States policy toward trade is
permissive, it also is based on the assumption that the continuation
of a pattern of mutually advantageous trade relationships with the
Soviet bloc is to the interest of the West.
The question is, therefore, whether there is a redefinition of
East-West economic relationships which would be advantageous, which
would fall somewhere between our policy and that of our Allies, and
which might be negotiable with them. In studying the possibilities
for such a proposal, we are considering the concept of a code which
might set forth standards to be sought by market economy countries
in their trading relations with the state trading countries of the
Soviet bloc.
The objective of achieving agreement on such a standardized pattern
of trading relations with the Soviet bloc nations is unquestionably
a highly desirable one. Whatever attempts we make to this end,
however, must be viewed against the background of the present state
of trading relationships between Western countries and Soviet bloc
nations.
The principal compelling fact is that the other major industrialized
countries of the Western world carry on trading relationships with
the Soviet bloc at a much higher level than is the case with respect
to the United States, and with far less predisposition to restrict
exports. The exports of the Western European countries to the Soviet
bloc run at a rate of over $2 billion annually while the United
States exports are only a twentieth of that. Western European (and
Japanese) exports to the Sino-Soviet bloc rose to $2.8 billion in
1962 and imports to $2.9 billion. United States exports to the bloc
were only $125 million and imports $79 million. The exports of all
free world countries to the Soviet bloc exceeded $5 billion.
In these circumstances and under present conditions in East-West
relations, the United States would be in a very difficult position
to persuade other major trading countries that they should make any
sweeping changes in their methods of trading with the Soviet bloc.
From their standpoint, while there may be some complications in
carrying on trade
[Page 716]
with
state-trading countries, the amount of trade that takes place
indicates that the Western countries have been reasonably successful
in overcoming those difficulties. Without a significant stake in
East-West trade the United States cannot expect to have a
determining voice in the manner in which such trade is carried on by
other Western trading countries.
The trade of other free world countries, moreover, is carried on
without the apparatus of restriction and control over both strategic
and nonstrategic trade which already characterizes United States
trade with the Soviet bloc. As long as the other industrialized
countries of the West are satisfied with the conditions under which
their trade with the Soviet bloc takes place, there is no compelling
reason for them to impose new or different standards or regulations,
especially if such action is unlikely to increase the level of
trade. At the same time, so long as other countries are unwilling to
adopt rules on exports as stringent as those enforced by the United
States, American controls will inevitably have a limited effect.
Unless the commodities embargoed by the United States are subject to
identical international control or are uniquely American in their
availability, the Soviet bloc can obtain what it wishes from other
supplying countries. In these circumstances and recognizing that in
the absence of a marked worsening of international relations a
change in the attitude of other countries is unlikely, the problems
of achieving a general agreement on a common code of trade practices
appear very formidable indeed. Nevertheless, the Department intends
to have discussions on this problem with our Allies in the future
and has been actively working on the elements of a standardized code
which might be negotiable. We cannot, however, be optimistic about
the prospects for making a useful settlement in this area.
Although we face the general negotiating problem outlined, we have on
certain issues sought an accommodation with Allied countries in an
area beyond the limitations of the present COCOM system. This has been the case on such questions
as the supply of wide diameter pipe to the Soviet Union, the problem
of credit terms to the Soviet bloc, Soviet penetration of less
developed countries, and specialized world commodity problems such
as petroleum in which Soviet capabilities are a significant factor.
We will continue to make further efforts at reaching multilateral
agreements over and beyond the COCOM control when the situation warrants such
efforts.
In summary, it must be recognized that there are manifold issues
involved in the carrying on of economic and commercial relations
with the Soviet bloc during the present stage of East-West
relationships. Concurrently, it must also be recognized that almost
without exception the objectives which we seek in terms of a more
regularized Western trading policy towards the bloc would require a
strengthening of governmental control in one form or another by
other cooperating nations. Given the
[Page 717]
present attitude of Western European countries
towards East-West trade, we could not expect to obtain full Western
European acceptance and application of any pattern of economic
relationships with the Soviet bloc that might contain elements of
economic warfare, even if that aim were considered by this
Government to be desirable.
United States policies are kept under continuous examination to
assure that they contain the proper balance of restraint and
permissive contacts which are so highly necessary as a means of
working towards a long-term assumption of responsible patterns of
conduct by the Soviet Union and other Soviet bloc countries. As is
recognized in the amendment to the Export Control Act, our only
prospect for effectiveness in seeking coordinated trade policies is
to work with our Allies on a mutual basis. While there is some
indication of an increased awareness on the part of our Allies and
the less committed countries of Soviet objectives and capabilities
in the economic field, it must be emphasized that given the present
attitude of Western European countries on East-West trade it would
at best be very difficult to obtain their cooperation in a uniform
trade policy. So long as we are enabled to preserve a flexible and
balanced approach to these problems under existing legislation, we
should continue to be able to make some progress towards United
States objectives.
