173. Memorandum From the Under Secretary of State for Economic Affairs (Mann) to the President’s Special Assistant for National Security Affairs (Bundy)1
SUBJECT
- NSAM 333: Follow-up on the Miller Report2
The State Department supports the East-West Trade approach recommended by the Miller Committee. I believe we should now take the following actions:
1. Public and Congressional Presentation
We should sound out the Congressional leadership on specific legislative proposals. The President has already pointed to the urgent need for East-West Trade legislation. In his May 7th speech, he stated his intention “to recommend measures to the Congress to increase the flow of peaceful trade between Eastern Europe and the U.S.”3
We should take advantage of the momentum created by the Miller Report, the CED Report, the Chamber of Commerce resolution, the favorable reaction in the Business Council, and the Congressional soundings made at the request of the President in connection with the publication of the Miller Report.
We should proceed on the assumption that the administration will introduce a Bill in this session of the Congress, ask for hearings this year and work for prompt enactment at the beginning of the next session. This timetable would be in line with our two-track policy toward communist countries. The act of requesting this legislation would be evidence of our continued interest in working out constructive relations with these countries, even as we pursue the military deterrent part of our strategy. What we propose here would give the President freedom of movement without obligating him to enter into any specific negotiation, now or at any other time.
[Page 499]As to pubic presentation, business is solidly on the side of facilitating East-West trade. Labor appears to be split; we should seek opportunities for the President and the Secretary of State to explain our foreign policy objectives in this field to George Meany and other labor leaders such as Paul Hall. At this stage we should begin to discuss the issues raised by the Miller Committee publicly, possibly in speeches by the President, the Secretaries of State and Commerce, and other high administration officials.
2. Proposed Legislation
Our main requirement is authority to grant—or withdraw—most-favored nation tariff treatment to individual communist countries in the discretion of the President. This discretionary authority, along with a flexible licensing policy, would provide us with bargaining leverage to use trade as an effective political instrument. Without such authority, it is clear that we cannot move very far toward the approach recommended by the Miller Committee.
We prefer to seek this authority through a separate East-West Trade Act rather than through amendment of section 231 of the Trade Expansion Act. A separate East-West Trade Act would make clear how MFN could be used as part of bilateral trade agreements with communist countries and how this trade could serve our foreign policy objectives.
A separate East-West Trade Act would provide a vehicle for consideration by the Foreign Affairs as well as the Ways and Means and Finance Committees of the Congress. An East-West Trade Act could also be a means to tidy up the President’s authority to authorize Ex-Im Bank credit guarantees to communist countries and to deal with subsidiary issues such as the removal of the present ban on the importation of seven kinds of furs from the Soviet Union.
We have prepared a draft East-West Trade Act designed to implement the Miller Committee recommendations. This draft has not been discussed outside the State Department, and a number of its provisions represent judgments that could go either way without disturbing the essential purpose. We believe this draft should now be discussed among the interested agencies of the Executive Branch and on the Hill. A draft of the statute and a summary and analysis of its provisions are attached.4
3. Flexibility in administration of the Export Control Act
The Miller Committee recommended that the Export Control Act be renewed with “emphasis placed on the possibilities of using trade and export licensing for constructive as well as for restrictive purposes.” Secretary [Page 500] Connor has already pointed to the need for flexibility in his testimony before the House Committee on Banking and Currency on the extension of the Export Control Act.5
The Act will be coming up before the Senate Banking and Currency Committee sometime this month. It would be desirable for Secretary Rusk to testify on the foreign policy objectives that underlie the administration of export controls. He could do so by way of comment on the policy implications of the Miller Report. Prior consultation with Senator Fulbright would be in order.
4. A Tentative Action Program
Armed with the proper tools, we should be in a position to use trade negotiations:
- —to encourage the movement toward national independence and internal liberalization in Rumania. We should do what we can to sustain the present momentum for change in that country and to support its policy of moving closer to the West.
- —to further economic decentralization in Czechoslovakia. The Czechs are now debating how far they should go in liberalizing their economy and exposing it to international competition. The promise of closer economic relations with the United States could encourage them in this direction. We could also use such negotiations to break the long stalemate in our relations caused by our inability to reach a satisfactory settlement of financial and property claims.
What we do in these countries could stimulate pressures for change in Poland, Hungary and Bulgaria and create new opportunities there.
- —The Poles, who are more heavily involved with the West than any Bloc country, have moved very little lately. In some respects they have retrogressed.
- —The Hungarians may now have as much internal freedom as any other people in the Bloc. But the regime has been cautious in developing new relations with the West.
- —The Bulgarians continue to be strongly oriented to Moscow. Nevertheless, they are showing some interest in extending their economic relations with the West.
Our economic relations with the USSR, even more than is the case with East European countries, are closely tied to the general international situation. We should be prepared, however, to use trade negotiations to increase Soviet interest in broader relations with the United States. Such negotiations could also provide a framework for settling lend-lease claims.
[Page 501]The development of trade relations with the USSR would be an important and logical step in the progression that started with cultural and scientific exchange programs and has been expanded through agreements for cooperation in specific technical projects, the growth of tourism, and the Test Ban Agreement. It is in our long term interest to utilize all possible avenues of entry into the closed Soviet society and to enlarge the kind of relations that could prove useful when tensions mount. Trade could be a highly effective device to such ends.
- Source: Johnson Library, National Security File, NSAM File, NSAM 333, Box 7–8. Confidential. Copies were sent to the Secretary of Commerce and the Deputy Secretary of Defense.↩
- NSAM No. 333, May 13, directed the Secretaries of State, Commerce, and Defense to appoint senior representatives to a committee that would recommend to the President “what actions the government should take in our trade relations with the USSR and Eastern Europe in the light of the recommendations of the Miller Report.” (Department of State, S/S–NSC Files: Lot 72 D 316)↩
- The quotation is from President Johnson’s remarks broadcast on the 20th anniversary of V–E Day; text in Public Papers of the Presidents of the United States: Lyndon B. Johnson, 1965, Book I, pp. 506–509.↩
- Not attached, but a copy, dated June 4, is in the Johnson Library, Papers of Anthony M. Soloman, East-West Trade Legislation #2, Box 4.↩
- Reference is to Secretary Connor’s testimony on May 13 before the Committee’s Subcommittee on International Trade.↩