CFEP DRATING GROUP ECONOMIC DEFENSE POLICY REVIEW FOREIGN ATTITUDES TOWARD ECONOMIC DEFENSE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP63-00084A000100040006-6
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 31
• Document Creation Date: December 9, 2016
• Document Release Date: March 22, 2000
• Sequence Number: 6
• Publication Date: June 6, 1955
• Content Type: REPORT

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CFEP DRAFTING GROUP
ECONOMIC D SE POLICY REVIEW
Staff Study Noe 3
Draft of June 6, 1955
Foreign Attitudes Toward Economic Defense
This draft of Staff Study No. 3, on "Foreign Attitudes Toward
Economic Defense", is transmitted for your use in connection with the
work of the CFEP Drafting Group on Economic Defense 'Policy Review.
In compliance with the request of the Chairman of the Drafting
Group, the Executive Secretary, EDAC, is providing reproduction and
distribution facilities as a service to further the work of the CFEP
Drafting Group.
Irving I. Kramer
Ebcecutive Secretary
Distributions
CFEP Drafting Group
SECRET
State Dept.raeclassi ica on 9P lease i struPctions on0The00040006-6
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Shx HET This dgcument co tdists of
31 pages. No. of
"o copies,, Series A.
ECQNC fIC DEFENSE' POLICY REVIEW
Staff Study No. 3
(Draft of June 6, 1955)
Foreign Attitudes Toward Economic Defense
Abstract
In any discussion of the restriction of trade with the Soviet blec,
foreign attitudes must be considered of paramount importance. The US by
itself has now virtually no direct control over Soviet bloc imports in the
sense that US exports to the Communist bloc amount to only one-tenth of one
percent of the small total of Free World exports to that area,
While there is considerable agreement among the Free World countries
about the necessity for controlling trade with the bloc, US public and
popular attitudes have generally favored tighter restrictions than have
other countries.
Two major factors probably explain most of the difference. First,
foreign countries are more inclined than the US to believe that trade is a
potentially important means for reducing international tensions and the
danger of war, Second, many foreign countries, more dependent for their
economic well being than the US on foreign trade in general, are more con-
cerned with the effect on their domestic economies of restrictions on trade
with the bloc. In fact, at times their concern seems out of proportion to
the actual potential for trade with the bloc. Thus, there was and continues
to be widespread support for the Danish statement in the Consultative Group
of COCOM in the spring of last year,, which proposed that in any revision of
the export control system it was essential that the effect of the
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restrictions on economic and social conditions in the participating countries
themselves be kept closely and firmly in mind"
While there are wide differences among the countries of the Free
World in their attitudes toward economic defense measures,, a considerable
degree of uniformity has been achieved in the application of the controls
multilaterally agreed upon. Denmark, which frequently attempts to have the
restrictions on trade with the bloc reduced., has not concluded a trade
agreement with the USSR because the latter insists on the inclusion of
tankers which CCCC! has termed "strategic." The countries of Asia have
generally adhered to the UN embargo of "strategic" goods to Communist China.
In Indonesia and Burma., however., there are considerable political and
economic pressures for expanded trade. These attitudes are particularly
influenced by the neutralist foreign policy orientation of these countries.
India which loudly proclaims its neutrality and independence of the US.,
secretly follows Western trade controls from considerations of foreign
policy,, although, in addition,, it has only limited amounts' of "strategic
goods available for export. While demonstrating little sympathy or under-
standing of the program of economic defense,, Japan has faithfully observed
its international commitments in this regard. West GermarLy favors tight
controls but objects to applying them,, which it does., to its trade with
East Germany, The UK has been a positive force in developing the present
limited trade control program. and in providing for its effective implementation.
Currently,, there are two major areas of disagreement between the US
and other countries of the Free World in the matter of trade controls.
First is the quest..on of treatment of Communist China. The second is the
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question of the definitions identification and treatment of *strategic"
versus Ononmstrategicv' trade.
Most foreign countries are opposed to applying higher levels of con-
trols against Communist China than against the rest of the Communist bloc
now that the wars in Korea and Indochina are over. Many Asian countries
are, in particulars motivated by neutralist sentiment and a desire to reduce
international tension as well as economic considerations in seeking to
reduce the barriers to trade with Communist China. It is pointed out that
the differential in export controls Imposes only a light burden on Communist
China since the latter can., through the services of European bloc traders.,
purchase goods denied it directly. Moreover., Japan feels that this factor
puts it at a serious disadvantage vi.s,-a-vis the Western European countries
in trade with Communist China.
Foreign countries have generally embraced the philosophy of 4Istrategic?'
goods in the sense that they willingly embargo exports of such goods but
believe that trade in "non=strategic" goods is not only not undesirable but
is to be positively encouraged. Moreover., they generally favor a narrower
definition of "strategic.," wanting it to relate solely to goods which seem
to have an immediate military application. The present control systems
limited primarily to embargoing exports of goods of direct military use., is
the result of fairly general foreign pressures led largely by the UK,, for a
narrow sphere of trade controls. There seems to be little recognition abroad
of the implications of the fact that export controls cannot prevent the bloc
from achieving a given level of domestic availability,. in any particular
commodity (other than a new product).
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TABLE CF CWTENTS
Page
I a United Kingdom 0 0 0 0 0 a o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1
IIa France o a o a o o o o a 0 0 o o o o 0 o o a a o o 8
TV. Germany o o a o o -0 0 0 0 0 0 ?o o -o o 0 0 0 o 0 o o a o 10
IV. Italy O O O O O o O O o o O O O O O O O O o O O o O O O 12
V. SnedenO a o o a o o O o 0 0 o O a o 0 0 0 0 0 0 o O o o O 13
VI. Denim k o 0 0 o a 0 0 0 0 0 o a o 0 0 0 0 0 0 0 0 0 0 0 0 15
VII. Greece - and Turkey ...... 0 0 0 0 0 0 0 0 a. 0 a a o 17
VIII, Japan o. 0 0 0 0 o a. a a . . a a a 0 0 o a s 18
IX0 Southeast Asia o 0 0 0 0 0 0 0 0 o a a o 0 o a 0 0 0 0- a o 23
X. South Asia o. o 0 o a o 0 0 0 0 0 0 0 0 0 0 0 0 0 O o 0 0 26
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I. UNITED KINGDOM
General British Position, As early as 19l9...the UK Government, after
consultation with the US? took the lead in getting the countries of Western
Europe together to agree on a framework of strategic controls over trade
with the Soviet Bloc, The UK has played a key role in the Consultative
Group since it was established in 1949. The British also initiated controls
over exports to Communist China even before the Korean War and supported the
UN resolution in 1951 under which China was declared an aggressor and exports
were strictly limited. British initiative was also important in the relaxa-
tion of controls over trade with members of the European Soviet Bloc agreed
upon in the Consultative Group in 1954. (The change did not affect controls
over trade with Communist China, North Korea, Tibet, and more recently North
Vietnam, In addition,, trade with Macao is carefully regulated,)
The UK during the past year took the lead in having the export control
lists limited to items which are in the main of immediate military action.
The British cannot, however, be characterized as anti-control, Actually
they have probably made more positive contributions to COCCM than any member
except the US. The record of formal British commitments on East-West trade
controls indicates both independent initiative by the government in plugging
some loopholes in the controls system inaugurated by the UK and approved by
COCOM and in cooperating with other Western countries to render the system
effective. Labor and Conservative governments, as well as the majority of
the British people, have recognized the need for some such controls. They
are not likely to alter their position as long as the international situation
requires limitations, on trade with the Communist world.
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Considerations Affecting British Attitudes Toward Controls. The
British Government regards the international political and strategic aspects
of the existing control system as a paramount consideration of national
policy? The government is not likely to act unilaterally to change this
system or to evade compliance with its regulations because of some dif-
ferences with other COCOM members concerning Soviet-Chinese capabilities
or intentions or because of overwhelming economic urgency. Although subject
to considerable pressure from private British traders and political groups to
increase the volume of trade with the Soviet-Chinese bloc, both on economic
and political grounds, the government does not attach an exaggerated import-
ance to this trade.
The trade comprises only about 2 percent of Britain's total overseas
trade,, partly as a result of the imposition of controls. Under the most
favorable circumstances it is not likely to assume the proportions (about
6 percent) it had with Soviet-Satellite members in Europe before World War II.
Soviet economic policies and the changed pattern of economic life in most of
the satellite countries have worked to limit exports and the capacity to pay
for imports_, and have probably altered fundamentally the long-term economic
relationships between the UK and Eastern Europe. In addition., the lack of a
satisfactory settlement on British properties nationalized by the Eastern
Europeans acts to depress British trade and investment in the area.
The influential Federation of British Industries and the Trades
Union Congress have generally concurred in the estimate of the limited
economic importance of East-West trade for the UK, stressing the need to
:increase legitimate trade opportunities wherever they arise but warning
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against large expectations from trade with the Soviet Bloc countries. Despite
persistent demands for increased trade by segments of the British business com-
munity and for an equalization of controls between the European-Soviet Bloc
countries and Cost China, the national economic stake in this trade
remains marginal and is not likely to become the sole determinant of British
policy in COCt . The British are, however, concerned about the economic
future of Hong Kong.
There are nevertheless reasons why the British Government and much of
the business--community still continue to favor a progressive relaxation of
controls, if the international situation warrants it. Generally, the British
view the whole control system as an international expedient, voluntarily agreed
upon to meet an emergency of uncertain duration and only valid so long as it
meets the requirements of the mergency without causing unnecessary economic
embarrassment to the cooperating members or perpetuating political tensions
between the West and the Communist world. The British favor the largest pos-
sible area of permitted trade and, conversely, prefer to limit the area of
prohibited trade. There is no essential difference between Conservatives and
Laborites in this basic respects The viewpoint is the closest the British
are likely to come to what may be called a philosophy for COMM action,, com
parable in some respects, but far more flexible and loose, to the British
approach to the purely military aspects of NATO.
The British accept the fact that economic defense precautions are
inseparable from military preparedness against a potential enemy. They do
not always agree., however, that the priorities are the same or that the
justification for particular economic defense measures is clear. They have
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adopted a highly selective attitude toward controls and lately have resisted
hard restrictions on goods which they consider to have a marginal strategic
character and have opposed the imposition of embargoes on individual items
like shipping of certain tonnage and speeds, copper wire, rolling mills, some
types of generators, and other comiriodities. Other reasons for this position
undoubtedly arise from the tough, pragmatic line the British have customarily
adopted, regardless of the party in power, toward international trade, and
from domestic economic and political pressures which every British Government
must somehow-attempt to reconcile with both the national self-interest and
British international commitments.
US-UK Differences over Control Policies. The record of US-UK co-
operation on the establishment and enforcement of international control
policies is far more impressive than the differences in outlook and detail,
which have divided the two countries. This fact is overwhelmingly true at
the governmental and technical levels, although it is often obscured by
public and partisan controversies in both countries over particular cases of
alleged violation of the system of controls or differing interpretations of
what the system calls fora
Some differences have already been referred to, both substantive and
procedural, and need not be stressed again. Broadly speaking, the British
believe that elements in the US administration and Congress think of CCXCOM
in terms of a comprehensive, quasi-permanent, rigid system of controls, while
the British tend to think of COCCM as a means of applying a series of ad hoc and
by no means necessarily permanent set of restrictions on particular commodities
designed to reduce the offensive threat of the Soviet-Communist world,
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Because the US and the USSR are so deeply polarized in basic political
and economic philosophy and so deeply opposed in strategic aims,, the British
believe that little disposition exists in the US for compromise or flexibility
in dealing with international Communism on the trade front. Yet., because the
British Government and most responsible political leaders appreciate the
danger of Soviet-Chinese expansionism., they do not disagree fundamentally on
the need for some controls; they nevertheless are disposed to more far-
reaching compromises than the US in various economic and political situations.
The spirit of this approach reflects a more prevalent public view in the UK
than in the US of the possibility of peaceful coexistence with world Communism
under certain czrcimstances. It reflects a softer and more accommodating
type of diplomacy and a willingness to live with situations of stalemate or
half-measures.
The British attitude is., of course., directly related to a heightening
sense of fear of war and the vulnerability of the British Isles. If economic
defense measures deter Communist aggression., they serve a major purposes, the
British agree; if., on the other hand., they exacerbate tensions without effect-
ively deterring., they have little justification. All too often., British critics
of US foreign economic defense policies believe.. the US appears willing to
follow an inflexible trade policy toward international Communism that leaves
little room for Western maneuver. Their case is also often based on an
indictment of general US economic foreign policies which they would like to
see liberalized and freed from controls that allegedly impede British exports.
This merging of criticisms about specific East-West trade controls with those
relating to the general posture of free world economic foreign policies
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reflects the permanent concern of all British Governments with international
trade.
The divergent recognition policies of the US and UK toward Communist
China have also raised special problems. The Conservative government has
resisted various Labor attempts to dramatize the potential value of the
Chinese trade and to secure the lifting of the UN embargo. Labor and
businessmen's junkets to Communist China during 1954 and much fanfare on
Peeiping's side about the possibility of reviving and expanding Sing British
trade have been coupled with criticisms of the "hard" US policy toward Com-
munist China and US support of the Chinese Nationalist regime on Formosa.
The British business community, several individual firms of which
have suffered heavily from near confiscatory Communist Chinese actions., has
probably few illusions about building up a secure Chinese market for British
goods on an effective reciprocal basis. Yet., almost as a matter of principle.,
these business elements and doctrinaire political groups in the Labor Party.,
who want Communist China to be admitted to the UN and recognized as a great
new revolutionary force in Asia., will continue to insist that trade between
the Communists and the UK is the key to better political relations between
Peiping and the West. Although the Communist Chinese trade front is a soft
area in British thinking and policy, the estimates of its possibilities are
far more sober than they were before Korea, Indochina, and the recent Formosa
Straits disputes. The British recognized that trade with China must be a two-
way street., and the most critical of them fear that Peiping may continue to
control or adversely influence the main Asian avenues of trade., including
Hong Kong., and deny it any real meaning.
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British Attitudes toward Sanctions. The British regard COCOM as a
multilateral effort based on voluntary cooperation and would like to keep it
that way. They would almost certainly resist US attempts to impose policies
on CCCC*: members which were thought to violate the voluntary principle or to
ignore the special needs of individual countries. There is already some of
that feeling in the UK. Although the more sophisticated British officials
and public observers recognize that certain sanctions are implied in any
donor-recipient relationship and are explicit in provisions of the Battle Act,
they would react sharply against a US move to tighten or broaden existing
sanctions as applied to the UK. Not only would such a move create serious
political problems for the British Government in dealing with an always latent
anti-Americanism on the left (and, in foreign trade matters, on the right as
well), but it would also be interpreted as an indication of US lack of con-
fidence in the British will and effectiveness in carrying out COCE'4 policies.
The British are convinced that their record in this respect is good, both in
fulfilling agreed international trade policies and in containing those dom-
estic elements which favor increased trade at-almost any price. The UN
embargo on trade with Communist China, for example, contains no sanctions,
yet the UK has thus far abided by the policy despite often intense pressure
to relax or abandon it. Responsible British opinion in government and the
press does not believe that the controls agreed upon in the UN and in COCOM
are the result of US~'dietation. They would almost certainly hold that view,
if the US sought to apply sanctions which they regarded as inappropriate and
demeaning to their national self-respect., Rather than accept such conditions
(whatever they might be) they would be strongly inclined to refuse aid. If
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Fr .b emimen t rs "point out -that-this -trade??mntrtita to less than
.thre,....total ?arnc ttat the difficulties of dealing with Soviet
-wrrt,vatellite ? ate trading .enterprises make it an even less attractive
prospect. Moreover, the Soviet Union itself is held primarily responsible
for the current lag in trade following its unilateral restriction of ship-
ments.,after French ratification of the Paris accords.
Differences between the US and France on the subject of East-West
trade now are minor, and the French who with the US and the UK founded
COCOM, have come more and more to share in leadership of the Consultative
Group. In the first years of controls, the French insisted on secrecy of
CCCOM commitwnts and took the view that the Battle Act was a unilaterally
imposed US statute not legally binding on France. At present, most import-
ant measures are discussed trilaterally (France, US, and UK), France
chairs the CG and relations are smoother than at any time in the past.
Propaganda against control measures in the press has diminished markedly
in ettent and effectiveness.
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III. GM NY
The question of controls on trade with Communist dominated countries
has recently received relatively little attention in West Germanyp either
among official or business circles. This stems directly from the general
lack of interest in East-West trade. The Germans see little economic
necessity for a greatly expanded volume of trade with the East since there
are abundant western markets for German exports.
The business community feels that the US has overemphasized the need
for trade restrictions and exaggerated the strategic benefits which might
accrue to the East from expanded economic intercourse. A number of business
spokesmen have hailed recent indications of a partial relaxation of restraints
on trade with the East and have pointed out that West Germany must keep
abreast of other western states,, particularly the UK, in regard to com-
mercial ties with the Communist bloc. Pressure for relaxed controls has
come from certain vocal industries such as shipbuilding (for Eastern Europe)
and chemicals (for export to Red China). However., neither the Bonn
authorities nor any important segment of public opinion has expressed any
serious opposition to the basic concepts of embargoes, export quotas and
sanctions for violation of such strategic controls.
An exception to this situation that has caused marked difficulty
between the Federal Republic and COC +I has been the question of interzonal
trade i.e., between East and West Germany. West German authorities
recognize that COCOM restrictions apply technically to exchange with the
Soviet Zone as well as with other Communist-dominated areas. Nevertheless,
both the government and public opinion feel that in practice special
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all -.
exceptions must be made for interzgnal trade. They assert that West Germans
have a special duty to maintain close economic ties with the East German area
and to assist its population by the export of goods to raise the standard of
living.
Latest information. indicates that such difficulties have been at
least partially resolved and that on the whole the Federal Republic is at
present carrying out its COCOM and CHIN COM obligations. There has been a
noticeable diminution of complaints over West Germany's being subjected to
more stringent trade controls with the East than other western states. The
Bonn authorities used to be resentful because of the traditional position of
leadership of the US, UK, and France within COCCM.
The US in the past year has generally endeavored to keep the Federal
Republic informed on tripartite discussions., ands during this time, the Bonn
authorities have recognized the desirability of the US solving its disagree-
ments with the UK and France on a bilateral or trilateral basis rather than
airing them publically in CCCCM. Germany also appears convinced of the need
to strengthen ties with this organization and are eager to develop it into a
general clearinghouse for exchange of information and coordination of policies
in regard to East-West trade.
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While Italy has generally followed the US lead in COMM., it has
occasionally played a positive role. On many occasions it has been willing
to accept broader and stricter controls than either the US or the UK were
advocating.
Several reasons have been advanced for Italy's fairly strong positions
Firsts Italy has not been a major exporter of many strategic or potentially
strategic items. Second., some Italians have profited through illegal trade
in strategic goods. Were this trade to be ],egitimatized,, higher Italian
costs of production would make it difficult for the country to compete
successfully in Eastern Europe. The positive and forceful role played by
DBOrlandi9 who until recently was Chairman of COCc1,, must be mentioned.
Finally, the Italians continue to receive large amounts of US economic and
military aid and may,, therefore., follow the US lead somewhat more closely
than they would if this were not the case.
A large body of Italians in private and public life do not consider
export controls to be an important weapon in the cold war. They no longer
regard war as a possibility for the foreseeable future and they consider the
contribution of those items which Italy might export to the Soviet bloc to
be of relatively minor importance to the Bloc's potential for war. The
Italians are concerned about their serious unemployment and have occasionally
asked for exceptions from the Battle Act provisions on those grounds.
The Italian non-Communist press has in general an unfavorable view
toward East-West trade controls., particularly since Italy's main newspapers
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13
are owned by some of the country's largest industrial concerns, which are
interested in exporting their goods to the Soviet and China bloc. In
general, developments concerning East-West trade control, such as those
summarized in annual Battle Act reports, receive little publicity.
Sweden stands in a special relationship to COCCM. Although it
regards membership in this body as incompatible with its policy of freedom
from great power military alliances, it nevertheless cooperates with it
secretively in denying to the Communist-dominated states those items in
their trade included on the international prohibited lists. This cooperation
in COCCI strategic controls is effected principally through informal discus-
sions carried on between Sweden on the one hand and the US, UK, and France as
the major COCOM members on the other. In the past the US has taken the
initiative in securing Swedish cooperation on internationally embargoed items.
Sweden's views on the issue of East-West trade controls have dif-
fered to some degree from those of the COCOM members. Since the Battle Act
was passed,, Sweden has accepted no direct aid from the US and, therefore, was
not exposed to the threat of sanctions included in that law. Government
leaders as a result were not confronted with the political problem of
appearing to bow to the public threat of foreign duress. This charge has
been made in the Swedish Communist press, nevertheless, but has not caused
serious embarrassment to the government which is not bound by public agree-
ments to maintain trade controls.
Aside from these special circumstances, the Swedish Government and
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people have tended to share in large measure the attitudes of the continental
.COCOM members toward the US on the issue of strategic trade controls. These
attitudes may be summarized as follows$
1) Sweden accepts in principle the importance and necessity of not
building up the military strength of a potential enemy, Where it tends to
differ with the US is on the definition of strategics, preferring a restrict-
ive interpretation. It is opposed to what may be called economic warfare as
carrying with it the risk of military conflict. It refused., for examples, to
support economic sanctions by the UN against Communist China., and even
abstained on the resolution to embargo strategic items alone. Sweden also
tends to regard the free flow of the maximum amount of international trade
as not only essential to its own economic prosperity., but also as constituting
a factor for peace by holding open channels of communication and by retaining
the tie of economic inter-dependency. These views are strongly influenced by
Sweden's exposed position as a small country vis-a-vis the Soviet Union in the
Baltic, and by the experience of having had to live with more powerful
neighbors. Like the other continental countries, Sweden also has tended at
different times to regard the US as inexperienced and impetuous in dealing
with the Conmunist-dominated states, and as overstressing the Communist
military threat.
2) Swedish business circles in particular have tended to regard inter-
national economic controls on strategic goods, and the Swedish government's
cooperation in applying theses, as the result primarily of US initiative and
pressure. This attitude stems in large part from the leading role taken by
the US in Stockholm in the past in winning Swedish government support for
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COCCI measures. During the past year a multilateral approach has been
utilized in which the UK and France have joined with the US in taking up
with the Swedish Government trade control problems.. Disappointments in
trading with the USSR and lessened dependence on Polish coal have also'served
to soften Swedish criticisms of the US.
Sweden has been critical of the sanctions contained in the Battle Act
even though its provisions have not been applicable to Sweden. Swedish sym
patties were clearly on the side of Denmark,, for example, at the time of US
objections to the delivery of Danish built tankers to the Soviet Union in
1952 and 1953.
VI. DEBARK.
Denmark accepts in principle the concept of restricting the sale of
strategic goods to the Communist-dominated world, but wishes to have the term
very narrowly defined. Economic controls as such are not regarded as having
a significant effect on the war potential of the Soviet bloc. Beyond this,
Denmark looks upon East-West trade as something which should be eagerly pursued
as economically and politically desirable, Nevertheless, Denmark has refused
to sign a trade agreement with the USSR because the latter insists on the
inclusion of tankers in the list of goods to be traded.
Denmark9a attitude is strongly influenced by regard for the country9s
specialized economy which is dependent upon a relatively high level of foreign
trade, To achieve optimum stab.lity and volume in their trade, the Danes
want extensive international markets, They do not see very favorable pros-
pects for increased and stable trade with the US which they consider a highly
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restrictive and unpredictable trading partner. Moreover,, for the past 18
months a serious deterioration in the nation's reserves of EPU currencies
has enhanced the already strong desire to seek more trade with the 'East. A
chronic unemployment problem has worked to the same end. The Danes also feel
that the CCCOM limitations on East-West trade have not only lost them some
traditional business without providing alternatives,, a Communist theme to
which the government is sensitive,, but have put Denm*.rk with its specialized
exports in an especially unfavorable bargaining position vis-a-vis the
Communist bloc which has shown a particular interest in ships. The Danes
want as much flexibility as possible in their current efforts to renew trade
talks with the Soviet Union which were broken off in the summer of 1954 over
Danish refusal to deliver additional tankers. As a result,, on shipbuilding
the Danes have strongly insisted on concessions to their views on quantita-
tive controls and speed limitations on several classes of commercial shipping.
There is also a widespread conviction in Denmark that trade with the
Soviet orbit will have a salutary effect on the relaxation of world tensions.
In addition to avoiding the feared specter of economic warfare, it is also
looked upon as a device for maintaining the economic dependence of the Com-
munist bloc states on the West. Co-existence is looked upon by government
and people alike as a vital necessity' This view is a product of Denmark's
military weakness in the face of a pronounced strategic vulnerability-, and a
legacy of pacifism-, anti-militarism and neutralism that still influences
important segments of the population.
Denmark has tended to regard strategic controls as primarily a product
of unilateral, efforts by the United States-, a view strongly influenced by
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.. 17
Danish experience. It was the US alone., for example, that attempted publicly
under the terms of the Battle Act to dissuade Denmark from making delivery of
two 13,000 ton tankers to the Soviet Union. This effort was indignantly
denounced as unwarranted interference in Danish affairs on the ground that
Denmark was morally and legally bound by its contract with the USSR and that
COCOM regulations took specific cognizance of exceptions for such prior
coimnitments .
VII. GREECE AND TURKEY
On the whole., controls on trade with the Communist countries are
accepted uncritically in Greece and Turkey. Such controls do not call for
a significant sacrifice on the part of either country. Neither has any
important quantity of strategic commodities to offer the Soviet bloc or
ahy possibility of conducting an extensive trade with the Communist Far East.
Moreover, both countries have closely associated themselves with the US in
the cold war and are inclined to regard adherence to the US concept of economic
defense as an inevitable element in that association. Greece and Turkey look
to the US as the prime source of the assistance they require in building
military strength and in economic development objectives to which they attach
the first importance and which they believe are far more likely to be sewed
by a close relationship to the US than by unrestricted trade with the
Communist countries.
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VIII. JAPAN
1, Japanese Attitudes toward Economic Defense
In Japan there has been relatively little understanding of or
sympathy for the economic defense program on the part of the general
public and little positive support for the maintenance of export controls
within business circles and certain agencies of the government itself.
At least three broad factors appear to shape Japanese attitudes in this
regard: uncertainty as to the present necessity for or effectiveness
of export controls, the high priority given to the expansion of trade in
order to achieve economic self-support, and the national drive to achieve
increasing independence in the realm of foreign policy.
(a) Uncertainty as to the necessity for or effectiveness of export
controls - There is present in Japan little sense of imminent war or
fear of direct Communist military threat, a fact in part attested by the
slow pace of Japanese rearmament efforts. The attitude of successive
Japanese governments increasingly has reflected the ready response of
the public to signs of a relaxation of international tensions, and it is
the announced policy of the Hatoyama administration to encourage such
a tendency by promoting closer relations between Japan and the bloc.
Despite an increasing awareness of the political objectives underlying
Communist trade offers, most Japanese apparently are confident that their
national security will not be endangered by an acceptance thereof.
In addition, the view is not uncommon in government and business
circles that export controls have not in fact weakened Communist China's
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19
military potential but rather have forced Peiping to depend upon the
USSR not only for its war materiel but for its industrial development.
The inevitable corollary of this view is that freer trade between the
mainland and the non-communist world may in fact weaken the Sino-Soviet
axis by providing an alternative to that dependence.
(b) The pressures to expand trade - Few, if any, national policies
are given a higher priority in Japan than the expansion of international
trade in order to achieve economic self-support, Despite the admitted
importance of expanding Japan's markets in Southeast Asia and other areas
of the free world, history and geographical proximity have combined to
sustain'the notion that mainland China is a natural market of prime
importance.
The widespread acceptance of this view has lent credence to
left-wing criticism that export controls are largely responsible for
Japan's economic ills - a view assiduously cultivated by domestic and
foreign communist propaganda. Among the most vigorous exponents of
this view have been small businessmen and the Japanese trade unions,.,
whose members are confronted with the growing threat of unemployment.
Moreover, little effort has been made by the press or the government to
counter the false impression that export controls are the principal
cause for the small volume of trade with Communist China. This impression
has persisted despite the fact that a substantial reduction in those
controls during 1954 apparently had little effect on trade levels.
Many Japanese trade experts and representatives of major industrial
concerns acknowledge the unlikelihood that trade with the mainland could
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20
again reach prewar levels. Even if controls were completely eliminated,
procedural and financial difficulties, the relatively high price of many
Japanese commodities, and the inability or unwillingness of Communist
China to supply the exports desired by Japan would continue to limit an
expansion of trade. Nonetheless it is argued that Japan cannot afford
permanently the sacrifice of such a natural market, however limited. The
ancillary point frequently is made that Japan's present difficulty in
maintaining trade controls is increased by the failure of the free world to
assist Japan in finding alternative markets and sources of raw materials,
(c) The impact of nationalistic sentiment - As in other aspects of
its foreign policy, Japanese attiti..ades'toward participation in a program
of economic defense increasingly have been influenced by the desire to
achieve a position of equality with other nations and greater independence
of action in the conduct of its foreign policy, It is significant in this
respect that Japan was initially committed to the-economic defense program
during the period of Occupation. This circumstance may account for the
fact that Japanese criticism of continued participation in that program
appears to stem, at least in part, from a sense that Japan has not been
free to exercise an independent power of decision in an area vitally
affecting its national interests,
The operation of such nationalistic sentiments was clearly evident in
Japanese efforts to obtain cancellation of the bilateral agreement concluded
with the US in September 1952 by which Japan maintained a higher level of
controls on its China trade than any other COCOM country except the US and.
Canada, Prior to its cancellation in April 1954, Japan argued that the ohU
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derogation of Japanese sovereignty. Similar sentiments also have
motivated Japanese efforts to obtain a reduction of CHINCOM controls to
C0COM levels, In this case, Japan has insisted that the differential in
controls enables West European countries to engage in indirect trade with
Communist China through the East European satellites, This, it is pointed
out, not only discriminates against Japan,but defeats the purposes of the
economic defense program. Even more significant, however, is the
substantial Japanese concern that West European countries will have
established themselves strongly enough to exclude Japanese competition
when and if controls on mainland trade are removed.
The adverse impact of nationalistic sentiments-upon Japanese
attitudes toward the economic defense program is heightened by the
prominent role played therein by the United States, In large measure,
Japanese attitudes in this respect mirror the resentments arising from the
conflict between Japan's necessary economic dependence upon the US and its
drive for greater independence of action in the realm of foreign policy.
Experience with the bilateral agreement suggests that Japan's
co-operation can be more readily obtained if an economic defense program
is undertaken as a. multilateral program in which Japan regards itself as
occupying a position equal with all other members, To date, however,
COC0M does not appear to have satisfied completely this need, Although
the government has demonstrated an increasingly independent attitude towards
the US in its activities within C0COM, the Japanese public tends to regard
US policy as the major determinant of the decisions of that organization
and of Japan's role in that organization,
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2. Japan's Observance of Trade Controls
The Japanese government has for the most part faithfully observed
its international commitments in matters of economic defense and has
effectively administered its export controls on trade with the Communist
bloc. To date, the threat of sanctions has not been necessary to obtain
such co-operation and the government itself has taken effective action
against individual firms suspected of violations.
In the final analysis, however, the hesitation to flout US opinion
and the fear of the loss of vital support and protection probably have
been the chief factors in insuring Japan's effective participation in the
economic defense program. Only less important in this regard is the
sensitivity of both government and business to the possibility of
counteraction by Nationalist China, one of Japan's major trading partners
in Asia.
It is not likely, therefore, that Japan will unilaterally abrogate
its obligations to the economic defense program, Domestic political
pressures, however, will continue to require the government to facilitate
the extension of trade with mainland China within the limits of the present
export controls while at the same time seeking a reduction of those
controls at least to COCOM levels, Inability of the government to make
some progress in this direction seems certain to arouse resentment and
weaken its ability to continue effective participation in the economic
defense program'
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IX 0 SOUTHEAST ASIA
In general, the countries in Southeast Asia have adhered to the UN
embargo on the export of strategic commodities to Communist China., the
measure of Western economic defense principally at issue in the area, Only
minor shipments of rubber have been made and most well-informed officials
in Southeast Asia recognize that potential trade with Communist countries
is probably limited, Nevertheless, there is considerable pressure for
expanded trade, notably with Communist China, in the expectation that such
trade would ameliorate serious economic problems and satisfy basic political
objectives.
Because of their policies of political neutrality, Burma and Indonesia
are particularly anxious to free exports of restriction and are unlikely to
find any control arrangements satisfactory so long as, in~principle,
participants in controls are committed to sanctions against the Communist
Bloc, More than other countries in the area, Burma and Indonesia can
also be expected to react adversely to the threat of punitive action for
non-compliance with export controls, These countries most recently
expressed their disapproval of the control system at the Bandung Conference
in April 1955 when they seriously questioned the UN embargo,
The considerable and growing gap between US and Burmese attitudes
toward trade controls stems from Burmats basic policy of neutrality and
from its current desire to expand trade with any country able to assist in
a solution of Burma's surplus rice problem. As a matter of policy, therefore,
Burma is prepared to conclude trade or economic assistance agreements with
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any nation,, providing no restrictive political requirements are included,
In the Burmese view, US economic policies are insufficiently oriented
towards relaxation of tension in the Far East at a time when wars in the
area have been terminated. Friendly relations with Communist China are
believed to be especially imp~rtant, given Burma's exposed strategic
position. In these circumstances, the government has negotiated a general
trade agreement with Communist China; however, no embargoed items have as
yet been shipped under this agreement and there are no indications that
commitments for such shipments have been made,
The Government of Indonesia favors an expansion of trade with the
Sino.Soviet Bloc, particularly with Communist China. This policy is
chiefly intended to demonstrate Indonesia's "independent" foreign policy,
but there is also some belief that Communist China would be a valuable
market for Indonesian rubber and thus provide some relief for Indonesia's
difficult economic position. There is, therefore, persistent pressure
within the country for a relaxation or termination of controls, which is
particularly exploited by the important Indonesian Communist Party and
its numerous front organizations. In practice, however, Indonesia has
deliberately avoided a sharp break with the export controls system, and.
trade agreements executed with most Communist areas omit firm Indonesian
commitments for delivery of strategic commodities. And the immediate
importance of the export control issue to Indonesia has been somewhat
reduced by the recent rise in world rubber and tin prices.
Other countries in the area are in basic accord with US economic
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defense policies. They closely restrict trade with the Bloc, which, in
any event, would probably be small, The anti-Communist orientation of
the Philippines, its foreign policy alignment with the US and the close
economic ties of the two countries are the primary basis for Philippine
adherence to East-West trade controls. Thailand's policies stem from a
basic political decision to support the US and the free world in return
for assistance in developing a capacity to resist Communist expansion,
Since the US supports strong trade controls and these restrictions impose
little hardship especially when compared with the foreign aid received,
the Thai virtually embargo all trade with the Communists, including
non-strategic items. Trade restrictions have not been a major issue in
South Vietnam, Cambodia or Laos where they are accepted as a condition of
US aid that entails only minor economic losses.
Although policies on trade controls are set for Malaya in London
there has been a general willingness in Malaya to accede to these controls,
However, some local business interests, particularly among the Chinese,,
have exerted pressure on UK officials for a relaxation of controls with
a view to the possible expansion of the rubber trade and to enhancement of
Singapore&s position in entrepot trade,
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X. SOUTH ASIA
India and Ceylon lack sympathy with the US concept of economic defense.
Pakistan is at best lukewarm. That concept appears to many Indians, and
in some degree to Ceylonese, to be an extension of the US emphasis on
military defense - an emphasis which they believe increases tensions in
the cold war and makes hostilities more likely. Moreover, they have some
confidence that increased East-West trade in itself contributes to the
reduction of tensions. They also believe that restrictions on trade are
self-defeating in that they penalize peoples - in non-Communist as well
as Communist countries striving to raise their living standards,
"Economic defense" thus delays increased prosperity that hinders the
spread of Communism.
South Asians resent the threat of withholding US aid to countries that
do not conform to the provisions of the Battle Act, Positive offers to
induce compliance with the Act would probably encounter no less resentment
in India; in Ceylon, such offers, provided they involved substantial aid,
might be acceptable, The South Asian countries were unwilling firmly and
publicly to commit themselves to support the UN Additional Measures
Resolution of 1951. That unwillingness is as strong in India in 1955 as
it was four years ago,, based on reluctance to take any position that might
compromise its independent foreign policy, Unwillingness has declined
somewhat in Ceylon. In Pakistan it has been, largely submerged in the current
orientation of the countryes foreign policy toward the US.
In fact, however, only Ceylon presentsa serious obstacle to the
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implementation of US economic defense policies in the area, India with few
exceptions does not export its strategic commodities and in any case,
its trade with Communist countries is very small. Pakistan's exportable
commodities include no items on the US list of strategic goods; if that
were not the case, the country's understandings with the US would
dictate caution in circumventing US controls, Ceylon, whose present
anti.-Communist government might be favorably disposed to the US control
system, disregards it in practice on the basis of economic necessity,
Though Indians have paid more attention than any other South Asians
to the issues involved in US economic defense policies, they also recognize
that Communist propaganda over-estimates the value of Communist trade with
non-Communist countries. Accordingly, though increased economic intercourse
with the USSR is approved in part for its psychological value in under-
lining the country's independent foreign policy, there is a wait-and-see
attitude regarding the practical benefits to India. Pressure from
Communists in Parliament and elsewhere may force the government publicly
to seem more unquestioningly receptive to Soviet trade offers than it
actually is. In some business quarters, increased trade with Communist
countries may be viewed as a healthy development tending to force complacent,
established shippers to India to become more aggressive in their salesmanship
and to offer more competitive prices,
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