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

333. Report Prepared in the Department of State⁰

Washington, December 6, 1963.

STATUS REPORT ON EAST-WEST TRADE ACTION PROGRAM

For convenient reference, each of the seven action recommendations approved by President Kennedy on September 19, 1963¹ is quoted below, followed by a summary of the progress thereon since that date.

1. Study of Sale of Technology

"The Export Control Review Board should analyze the possibilities and problems inherent in an effort to organize the sale of technology to nations under Communist control and make policy recommendations. This study should develop clear criteria for “adequate compensation” in the field of technology; determine whether or not present prices meet those criteria; examine the feasibility of acquiring in the government the requisite information in particular fields; weigh the likelihood of cooperation from other nations; and assess the political and economic benefits and costs of such a program, both within the United States and in our relations with other nations.”

This assignment involves the very complex question of whether some form of compensation other than the price set by the exporter would be both feasible and desirable in the case of sales of technology to the Soviet bloc. The Department of Commerce has prepared a preliminary draft study on this topic.² It also has in process the development of information from private business on their experience in dealing with the Soviet bloc on technology. Further analytical staff work will be necessary before significant progress on this assignment will be possible.

2. Review of Licensing Procedures

"The Department of Commerce should keep existing procedures under review through the ACEP structure to make sure that individual licensing decisions are not made in a manner so as to weaken a future negotiating posture for the United States and so as to reflect the prevailing state of relations with the USSR.”

As noted in Secretary Hodges’ memorandum to the members of the Export Control Review Board on September 27,³ no special action is required of the Board members beyond instructions to their respective “staff people working in the Committee structure of the Export Control Review Board to keep [Recommendation 2]⁴ firmly in mind and to note the President’s statement that ‘the judgment of the Secretary of State on the political situation in the satellites and the state of bilateral relations with the Soviet Union should be given special weight by the Board,’ and that the spirit of the third recommendation concerning satellites should be implemented in our current licensing policy.”

3. Guidelines for Eastern Europe

"In the light of the rapidly changing conditions in Eastern Europe, Export Control Review Board should prepare guidelines for a less restrictive, step-by-step expansion in trade with individual nations of Eastern Europe, within the present legal structure.”

In the President’s memorandum of September 19 he gave special emphasis to the approval of this recommendation and the second recommendation above, setting them, in terms of priority, ahead of the less urgent studies provided for in the first, fourth, fifth and sixth recommendations. A draft “Policy Guidelines on Trade with Eastern Europe”,⁵ based on consultation by State, Defense and Commerce, is expected to go forward to the Board in the very near future.

In a memorandum of September 26 to the Chairman of the Advisory Committee on Export Policy (ACEP Document No. 174, October 17, 1963)5 the Department of State Member set forth the reasons for the Department’s judgment that the political situation and attitudes of Rumania had reached the stage where special trade arrangements would be helpful to the achievement of United States objectives. There has been favorable action by the Committee on recommendations in the State document, including:

1. Some liberalization for Rumania of export controls applied to items subject to individual licensing;

2. Procedural changes in the ACEP structure to secure quicker action on export license applications for Rumania;

3. Completion of a technical study, now under interdepartmental review, of technical data on polyisoprene and polybutadiene synthetic rubber plants because of interest on the highest levels in the Rumanian Government in such purchases in the United States and the likelihood that possible approval of those plants would be a key element in the development of a program for further constructive developments in United States-Rumanian relations.

In addition, officials of the Departments of State and Commerce met with the Chairman of the Rumanian State Planning Committee on November 26 and 27 to discuss United States-Rumanian trade relations in general terms with a view to meeting for more detailed discussions at a later date.

4. Study of Possible Bilateral Trade Agreement with USSR

"The Export Control Review Board should prepare a contingency plan for negotiating a bilateral trade agreement with the USSR. It should explore the coverage of such an agreement. It should also explore what is necessary for protection of industrial property and copyrights, and should consider whether any other means to secure better returns for the sale of technology are feasible.”

The Department of State has developed the major elements of a bilateral agreement and has an up-to-date staff study on the status of the Lend-Lease problem. A special Working Group has also prepared a preliminary report on “The Protection of Industrial and Intellectual Property in U.S.-U.S.S.R. Trade”6 as a basis for determining a United States position in any negotiations regarding industrial property and copyrights in United States-USSR trade.

5. Study of Possible United States Commercial Corporation

"The Export Control Review Board should study whether United States national interests in a period of expanded East-West trade could be adequately protected by either a step-by-step or bilateral agreements approach and whether it is necessary also to constitute a United States Commercial Corporation.”

A draft report⁶ has been prepared and interdepartmental discussion on it will begin shortly.

6. Study of New East-West Trade Act

"The Departments of State and Commerce should establish a working group to determine the necessary content of such an Act and to develop data for use in Congressional consideration of the Act.”

Preliminary staff work is under way on such an Act.

7. Relationships with Other Free World Countries

"The Department of State should examine problems arising from relations with our Allies and third countries in this sphere. It should explore the feasibility of modifying the COCOM system but preserve the substance of mutual security protection.”

The Department of State has transmitted a circular instruction to all posts describing the nature of current East-West trade policy developments.⁷ No proposal has been developed for changes in the COCOM system. It has thus far been premature and inappropriate to enter into discussions with our Allies and third countries about expanded trade with Eastern Europe.

0. Source: Department of State, Central Files, STR 5. Secret. No drafting information is on the source text. There are two covering memoranda to the source text: One memorandum from Assistant Secretary of State for Economic Affairs Johnson to Under Secretary of State Ball, December 6, requests approval for transmittal of this report to McGeorge Bundy, and the approval line on the memorandum is signed. The second memorandum from Benjamin H. Read, Department of State Executive Secretary, December 18, transmits this report to Bundy.
1. Document 329.
2. The draft study under reference has not been further identified, but a “Study of Special Aspects Pertaining to Export Controls of Technical Data, Plants, Prototypes, and Components, Parts and Materials” by the Bureau of International Commerce, Department of Commerce, July 30, is in the Kennedy Library, National Security Files, Departments and Agencies, Department of Commerce, Technical Export Controls Report, July 30, 1963.
3. Attached to the memorandum from Under Secretary of State for Political Affairs Harriman to Secretary of Commerce Hodges, October 7, in Department of State, Central Files, STR 5.
4. Brackets in the source text.
5. Not found.
6. Not found.
7. See Document 330.