CURRENT INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000400080001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 15, 2016
• Document Release Date: May 18, 2004
• Sequence Number: 1
• Publication Date: December 3, 1954
• Content Type: REPORT

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OCI NO. 2113
3 December 1954
CURRENT
INTELLIGENCE
WEEKLY
CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
CONFIDENTIAL
25X1
State Dept. review completed
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DOCUMENT NO. t.
NO CHANGE IN CLASS, 0
0 DECLASSIFIED
CLASS. CHANGED TO: 1S
NEXT REVIEW DATE: IIg
AUTH' 70
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly has been prepared prima-
rily for the internal use of the Central Intelligence Agency.
It does not represent a complete coverage of all current
situations. Comments and conclusions represent the im-
mediate appraisal of the Office of Current Intelligence.
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SUMMARY OF CONTENTS
THE SOVIET WORLD . . . . . . . , . . , . . . Page 4
The coexistence campaign--The Orbit security
conference,
MENDES-FRANCE AND NORTH AFRICA. . . . , . ; . , o . . Page 6
The problem of North Africa poses the most seri-
ous parliamentary threat yet faced by Mendes-France.
His main hope of surviving the debate on it scheduled
for 10 December lies in the unwillingness of many
deputies to precipitate a crisis before the assembly
acts on the Paris accords. The premier's hand will
be strengthened considerably if his plan for peace-
fully settling the terrorist problem in Tunisia shows
clear promise of success before the debate,
JAPAN'S PLANS FOR ASIAN ECONOMIC CO-OPERATION Page 8
Japan has been developing since the spring of
1953 plans for regional economic co-operation in Asia
which are designed to bridge the nation's critical
trade gap. The government hopeA to combine these
plans with the proposed American program for economic
development in Asia, and thus become both a contrib-
utor and a recipient of aid.
USSR SEEKS SCANDINAVIAN GOOD WILL e . , , . . . . . Page 10
During the past year the USSR has conducted an
intensified campaign of conciliation aimed at over-
coming the Scandinavians' traditional dislike and
fear of the Soviet Union. The Soviet effort is not
likely to modify the basic Western orientation of the
Scandinavian countries, but it has had some success in
exploiting local economic conditions and the widespread
desire for reduced international tensions.
INCREASE OF TENSIONS IN SOUTH AFRICA EXPECTED UNDER
NEW PRIME MINISTER . . . . . . . . . . . . . . . . . . Page 12
The choice of Johannes Strijdom to be prime min-
ister of South Africa will lead to a gradual increase
of racial and political strife--an intensification of
conflict between blacks and whites as well as greater
bitterness between the Afrikaner and British elements.
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COMMUNIST GAINS CONTINU -N MALAYA. . . . . . . . . . Page 14
The political and psychological climate in South-
east Asia since the Geneva conference appears to have
made Malayan Chinese more susceptible to Communist
approaches. The "selective terrorism" which became
evident in 1952 has continued and there has been an
increase in subversive activity. Meanwhile Malayan
political leaders discount the local Communist prob-
lem as trivial.
THE STOCKHOLM WORLD PEACE COUNCIL MEETING ,
. Page 16
The meeting of the World Peace Council from 18
to 23 November in Stockholm provided an outline of
the general content and priorities of the Communist
propaganda offensive for months to come which sug-
gests that Moscow expects to follow its current
policies unchanged,
USSR REVISES ITS CONTROLS IN EAST GERMANY .
. . . . Page 18
Since the grant of ostensible "sovereignty" to
East Germany on 25 March, Soviet controls have been
altered to resemble more closely those that prevail
in the other European Satellites. These changes
indicate that the Soviet Union is now operating in
accordance with a long-range plan for control of
supervision of East Germany.
WESTERN EUROPE SUFFERS SETBACK IN PROGRESS TOWARD
FREER TRADE AND CONVERTIBILITY OF CURRENCIES. .
. Page 20
Developments at recent meetings of the Inter-
national Monetary Fund, of the Organization for
European Economic Co-operation and of the parties to
the General Agreement of Tariffs and Trade indicate
that further relaxation of trade restrictions and
general convertibility of currencies are more distant
than they seemed six months ago.
3 Dec 54 CURRENT INTELLIGENCE WEEKLY
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Numerous manifestations of the Soviet Orbit's coexistence
campaign during recent weeks suggest that Moscow is making a
major co-ordinated effort to exploit this theme and hopes it
will have great influence on world opinion.
The campaign has been particularly noticeable in the
friendly attitudes the Satellite countries have adopted to-
ward Western diplomats at recent state functions. In mid-
November all Western military attachds in Poland were invited
to a hunting party
nue.11 On 11 November, Rumania re axe rave res r: ons
to Hungary, Bulgaria and Yugoslavia, and on 15 November Ameri-
can officials traveled these routes without interference.
At the same time, however, the Hungarian and Czech
governments have been quietly trying to reduce the operational
efficiency of the American diplomatic missions in Budapest
and Prague. In Hungary, a native employee of the legation
was arrested and travel restrictions there have been more
stringently enforced. In Czechoslovakia,, eight local employees
have been forced to quit in the last three months. There is
no uniform discrimination against American representatives in
the Satellites, but these low-level harassments manifest a
continuing policy of limiting the capabilities of Western dip-
lomatic missions.
Some Satellites have removed specific sorepoints in re-
lations with the West in their release of prisoners of inter-
national reputation. Poland's release of Herman Field and
Hungary's liberation of Noel and Herta Field follow a long
series of protest notes delivered by the American government
during the last five years. Hungary's release of Anna Kethly,
an internationally known Social Democrat, may be regarded as a
conciliatory gesture to Socialist and Trade Union circles in
Western Europe which have been agitating for her liberation
for several years. The release of Israeli citizen Simon Oren-
stein, who was implicated by the Czechs during the Slansky af-
fair in 1949, may be a step in a cautious Orbit rapprochement
with Israel.
3 Dec 54 CURRENT INTELLIGENCE WEEKLY Page 4
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The recently intensified Soviet effort to woo Yugoslavia
reached a new climax when four of the top Soviet leaders--
Malenkov, Khrushchev, Molotov and Bulganin--toasted both Mar-
shal Tito and the Yugoslav Communist Party at a reception at
the Yugoslav embassy in Moscow on 28 November. The toasts con-
stituted the first direct Soviet "approval" of the "heretics"
of Communism since the 1948 split.
The new Chinese Communist ambassador to Finland recently
sent notes to the missions of countries which do not recog-
nize Peiping, informing them that he had presented his cre-
dentials and expressing a hope that he could "enter into
good connections" with the addressees "for the promotion of
the relations between our two countries." The American em-
bassy received no note.
Developments at the opening sessions of the Orbit se-
curity conference in Moscow suggest that the purposes of this
meeting are to establish the framework of a general collec-
tive security system open to all European states, and to
warn Western Europe of the consequences of ratification of
the Paris agreements, at the same time preparing the ground
for subsequent Orbit moves to counterbalance West German re-
armament.
Molotov in his opening speech declared that the "remili-
tarization" of West Germany will require the states partici-
pating in this meeting to "take common measures in the field
of organizing their military forces and their commands" and
to "rally their forces and considerably strengthen them,"
The Czech and East German premiers have echoed Molotov's pro-
posal, and in particular emphasized co-operation among
Czechoslovakia, Poland and East Germany. They have not
clarified the exact nature and timetable of such common meas-
ures,. but have implied that this conference should lay the
groundwork for the establishment of an Eastern security ar-
rangement to counterbalance NATO. Apparently the Moscow
conference decisions will not be fully implemented until final
ratification of the Paris agreements.
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MENDES-FRANCE AND NORTH AFRICA
The problem of North Africa poses the most serious
threat yet faced by the Mendes-France government. The
premier's main hope of surviving the debate on this issue
scheduled for 10 December lies in the unwillingness of many
deputies to precipitate a crisis before the National Assembly
acts on the Paris accords. His hand will be strengthened
considerably if his plan for a peaceful settlement of the
terrorist problem in Tunisia has by then shown clear promise
of success.
The American embassy in Paris believes a majority against
the government could be mustered in the assembly on the North
African question now. The outburst in Algeria on 1 November
was a considerable shock to most Frenchmen, who had regarded
that area as safe from disturbances like those in Tunisia
and Morocco. Rightist opponents of the premier immediately
charged that the government's conciliatory Tunisian policy
was responsible.
The willingness of the premier's opponents to exploit
anxiety over the growing seriousness of the North African
situation was apparent in the assembly vote of 12 November
postponing debate on the Algerian disorders. The Popular
Republicans, who had abstained on similar votes in August,
and the Communists, who had supported the government in Au-
gust, voted against the premier. A group of Gaullist Social
Republicans has consistently opposed the government on this
issue, despite the party's participation in the cabinet.
Mendes-France is making every effort to refute the
charge that he is following a "soft" policy. He is attempt-
ing to stop foreign encouragement of the North African na-
tionalists. He has repeatedly castigated Egypt for inciting
North African nationalists against France, and he assured
the assembly on 12 November that Algeria will remain part of
France.
A Foreign Ministry spokesman recently reiterated a
French threat to hold North Africa even at the expense of
NATO commitments. In the event of new outbreaks in North
Africa France can be expected to continue to strip its
European contingents and will probably use MDAP equipment
against the nationalists.
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Mendes-France hopes to hold his coalition in line by
a mixed policy of force and conciliation in North Africa.
Severe repression of further outbursts in Algeria would be
generally approved by the French public and parliament.
Mendes-France scored a success on 23 November when the
Tunisian government accepted a compromise based on a French
proposal to permit the quasi-military fellagha to surrender
without fear of reprisal. The truce teams are now in contact
with the fellagha in Tunisia and the results of their talks
are expected to be known before 10 December.
In Morocco, Mendes-France would like to institute a
dramatic change in policy both to satisfy liberal elements
in parliament and to counteract Arab propaganda. Though a
program of limited reforms has been prepared for Morocco, a
speedy solution is impossible because of the impasse over the
dynastic issue. He has succeeded in persuading moderate
Moroccan leaders to discuss reforms, but terrorist activity
continues and rightist parties in the assembly will not permit
any weakening now.
Ambassador Dillon believes that the French Communist
Party may be trying to make the North African issue into
"another Indochina" as far as French domestic politics is
concerned. The Communists apparently hope to extend their
influence in the assembly by attacxing the premier whether
he adopts a firm or a conciliatory policy toward the North
Africans. They are evidently encouraged in this hope by
having already obtained some rightist support for a resolu-
tion critical of the premier's drive against alcoholism.
Despite the personal prestige Mendes-France built up
on
his American trip, his general position in
the
assembly
has
deteriorated considerably in recent weeks.
A
misfire
on
the Tunisian truce agreement, combined with
the
growing
reluctance of deputies to share responsibility
for
the
Paris accords, might lead to his overthrow in
the
debate of
10 December.
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JAPAN'S PLANS FOR ASIAN CECONOMIC CO-OPERATION
Japan has been developing since the spring of 1953 plans
for regional economic co-operation in Asia which are designed
to bridge the nation's critical trade gap. The government hopes
to combine these plans with the proposed American program for
economic development in Asia, and thus become both a contributor
and a recipient of aid.
Prime Minister Yoshida's proposal in Washington for a four-
billion-dollar American economic aid program for Southeast Asia
reflects Japan's interest in the development of that area as an
indirect method of gaining needed markets and assured sources of
raw materials. As the only highly industrialized nation in the
Far East, Japan would hope to benefit by supplying capital equip-
ment to the underdeveloped areas and by developing resources
essential to Japan's industrial needs.
A report submitted to the government by the semiofficial
Japanese Asian Economic Council in August stressed the impor-
tance of integrating Japan's economic assistance with Point
Four, the Colombo Plan, and other international projects in
which the recipients themselves participate as a group. This
was deemed necessary to quiet other Asian countries' suspicions
of Japanese economic imperialism, as well as to enlist their
co-operation in solving foreign exchange and other problems on
a regional basis.
Japanese planning started early in 1953, as American spend-
ing in Japan declined and Japanese trade in South and Southeast
Asia appeared to have reached a maximum under then existing
conditions. It was recognized that Japan would have to settle
its reparations problems and establish full-scale diplomatic
relations before it could expand trade significantly.
Japan planned to utilize reparations as an initial stimu-
lant to create a demand for Japanese goods and know-how and to
demonstrate Japan's interest in co-operating in various national
development programs. This meant switching from payments made
exclusively in services--as provided in the Japanese peace
treaty--to a policy whereby Japan would also pay part of the
costs of raw materials used in the manufacture of goods to be
shipped as reparations payments. This idea was incorporated in
the recent agreement with Burma, along with a Japanese promise
of long-term loans and investments to further Burma's eight-
year plan. The agreement was tied to a peace treaty and to a
commercial agreement allowing Japan to increase its normal
trade simultaneously.
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A prime feature of Tokyo's regional economic planning is
the emphasis it places, on lending,. investing and the granting of
technical assistance. by Japan.in Southeast. Asia.in the basic
fields of transportation, power, agriculture, fisheries, and
even education, health and sanitation. This aid is considered a
prerequisite to any large increase in trade and private invest-
ment. At the same time, Japan envisages American loans to
develop and modernize its own.industries.
The chief obstacles to Japan's economic co-operation program,
aside from resentments remaining from World War II, are high
Japanese prices, shortage of investment capital and keen Euro-
pean and American competition. To bring down prices, the Japanese
government has continued its deflationary policy, kept the budget
within bounds and encouraged various forms. of export subsidies,
some of which smack strongly of dumping.
In a fundamental attack on internal economic problems, both
conservative parties have recently come out for a controlled
economy, with prices and wages controlled, raw material imports
centralized, and plants modernized on a priority basis. Addi-
tional capital is to be obtained through a new fiscal policy
which will promote. savings, regulate loans?and channel investment
into key industries.
To date, Japan has invested or extended technical aid in
South and Southeast Asia for iron mines and fisheries develop-
ment; assembly of irrigation pumps, diesel engines and electric
motors; manufacture of textiles, chinaware, and pharmaceuticals;
and building of thermal generating plants. In addition, con-
tracts concluded or under negotiation involve caustic soda
manufacture, pearl trading, lumber, marine transport, a joint
development bank in Indonesia, and exploitation of salt beds
in Thailand and Indochina.
Japan can probably increase its trade with South and South-
east Asia substantially over the $4$5,000,000 in exports and
$603,000,000 in imports recorded in 1953, given its own efforts,
reparations settlements, and the institution of a co-ordinated
regional development program. This will. tend to give Japan a
greater stake in the defense of the area,against Communism.
At the same time, a rapidly expanding population will still
force Japan to look outside of Southeast Asia for. perhaps two
thirds of its total trade. Unless this need is met, the lure
of the China market will remain a.threat to. Japan's co-operation
with the free world.
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USSR SEEKS SCANDINAVIAN GOOD WILL
During the past year the USSR has conducted an intensified
campaign of conciliation aimed at overcoming the Scandinavians'
traditional dislike and fear of the Soviet Union. This Soviet
effort is not likely to modify the basic Western orientation
of the Scandinavian countries, but it has had some success in
exploiting local economic conditions and the widespread desire
for reduced international tensions.
Probable Soviet objectives--of which the Scandinavians
are generally aware--are (1) to increase the economic
dependence of Scandinavia, particularly Iceland and Finland,
on Soviet trade, (2) to keep Finland neutral but susceptible
to Soviet pressure, (3) to maintain Sweden's traditional
alliance-free status, (4) to discourage Norway's and Denmark's
contributions to NATO, possibly with the hope of eventually
inducing them to leave that organization, and (5) to get
Iceland to denounce the defense agreement with the United
States, forcing the abandonment of the American base at
Keflavik. Principal Soviet targets seem to be Finland and
Iceland, which are the most vulnerable economically and have
pro-Communist parties usually polling over 20 percent and
15 percent respectively of the popular vote, as contrasted
with the mere five percent in the other three Scandinavian
countries.
The greatest Soviet successes have been in promoting
trade relations. The shipbuilding industry in Finland has
become heavily dependent on exports to the Orbit-and
Communist trade promotion has had considerable success. The
USSR has become Iceland's second largest market for frozen
fish, and between 1 August 1953 and 31 August 1954 an
estimated 20 percent ($10,000,000) of all Icelandic exports
went to the USSR. Both Norway and Sweden have increased
their trade with the Soviet Union during 1954, but Danish-
Soviet trade negotiations were broken off last July as a
result of the Danish refusal to build embargoed tankers.
Soviet naval visits to Stockholm and f:elsinki in July
had a generally favorable effect on the Swedes and Finns.
The conclusion of an agreement in September between Sweden
and the USSR to co-ordinate air-sea rescue activities in
the Baltic also appealed to Swedish opinion, even though,
as the Swedish press pointed out, the pact merely formalized
what friendly countries would do on an informal basis.
According to press reports, Swedish fishermen are now
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generally less liable to seizure if they penetrate the 12-mile
limit off Soviet-controlled areas, The Danish Foreign Ministry
states that it knows of only one instance during 1954 of a
Danish vessel being stopped by the Russians, presumably for
being within the 12-mile limit.
There has been a lively and growing exchange of commercial
trade union and cultural delegations between all the Scandina-
vian countries and the Soviet Union, A noteworthy example was
the visit to Iceland last September of two ten-member Soviet
delegations, one of artists and the other of scientists.
According to all reports, most Icelanders felt that they had
never before been honored by such distinguished delegations.
During the past year or so the political"complexion of
the Scandinavian delegations invited to the Soviet Union has
changed. Formerly they were composed mostly of Communists and
fellow travelers, but they now include an increasing number of
strongly pro-Western individuals. Finnish Social Democratic
leaders Fagerholm and Leskinen, who had earlier been labeled
by the Communists as archenemies of the Soviet Union, informed
the American embassy in Helsinki on their recent return from
the USSR that they were told Moscow wanted to be friends with
the duly constituted authorities in most states, whether they
were anti-Communist or not.
An even more pronounced Soviet gesture toward Finland was
the announcement on 19 September, the tenth anniversary of the
Soviet-Finnish armistice, that the Order of Lenin had been
awarded to President Paasikivi. Equally unprecedented was the
Soviet apology for an overflight of Finnish territory by Soviet
aircraft, The Finns have not reacted enthusiastically to these
gestures, but have expressed hope that they augur well for
future relations.
In general the Scandinavians have cautiously welcomed the
Soviet gestures of friendship, and the standing of local
Communists and fellow travelers has been somewhat enhanced.
Nevertheless, there has been no basic change in Scandinavian
opinion regarding the USSR and its ultimate intentions in the
area.
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INCREASE OF TENSIONS IN SOUTH AFRICA EXPECTED
UNDER NEW PRIME MINISTER
The choice of Johannes Strijdom to be prime minister of
South Africa will lead to a gradual increase of racial and
political strife--an intensification of conflict between the
blacks and whites as well as greater bitterness between the
Afrikaner and British elements.
The selection by the Nationalist Party caucus on 30
November of Strijdom, 61-year-old "wild man of the Transvaal,"
represents a victory for the extremist element in the party.
His advocacy of a republic and strict repression of nonwhite
elements reflects the traditional rural background of his
Nationalist followers. Most of the Afrikaners have not for-
gotten the independent Boer republics of the late nineteenth
century, nor have they forgiven the British for their imperi-
alism of the Boer War era and the subsequent commercial and
cultural supremacy. The fanaticism of this extreme wing,
however, will be tempered by the moderation of the Cape's
provincial leaders and the political necessity of keeping a
united Nationalist Party.
Because they fear inundation by the non-Europeans--
Africans, Coloreds and Indians--who outnumber the whites
four to one, the prime minister and his followers are pre-
pared to place racial purity above the economic necessity
of integrating non-Europeans into the industrial life of the
nation. Among the measures which Strijdom may be expected
to push are removal of the last non-Europeans from the common
voting roll, separate labor unions, and implementation of the
1950 law decreeing enforced residential segregation.
Further repression of the non-Europeans will widen the
gulf between them and the whites, strengthening their belief
that force is the only way to put an end to white domination.
Communists and other extremists will become more powerful in
non-European organizations. Government suppression will force
the non-European movements undergrouund,and although they are
weakly organized now, their potential for strikes, riots and
sabotage will grow.
An extremist Nationalist program will provoke bitterness
between the Afrikaners and the English-speaking minority,
which constitutes about 40 percent of the whites. The Brit-
ish suspect the Afrikaners of seeking to undermine the con-
stitution on the questions of the Colored franchise and the
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powers of parliament, and fear that their language and cul-
ture may be submerged. Any declaration of a republic, even
if favored in a plebiscite, would seriously divide the Euro-
pean population.
In foreign relations South Africa is likely to take a
more isolationist stand, although not one of neutrality in
East-West relations. Continuation of a friendly policy to-
ward the United States, including the supplying of uranium
and other strategic minerals, is to be expected. Opposition
to consideration by the United Nations of South African prob-
lems will be intensified.
Withdrawal from the Commonwealth, while being given
increased vocal attention, still remains'.improbable, largely
because South Africa gains tangible benefits from Common-
wealth membership in terms of defense, international pres-
tige and access to the London capital market. Recognition
of native African states as members of the Commonwealth, how-
ever, would place a severe strain on South Africa's ties with
the Commonwealth.
There now appears to be no effective challenge to Strij-
dom's position. Afrikaner parties have splintered in the
past, but in view of strong Nationalist discipline and the
weakness of the opposition, Strijdom should be able to con-
trol his party at least until the 1953 elections. His vic-
tory means an even more racialist South Africa--a situation
which may endanger the multiracial experiments now being at-
tempted in the Rhodesias and in British East Africa.
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COMMUNIST GAINS CONTINUE IN MALAYA
The political and psychological climate in Southeast Asia
since the Geneva conference appears to have made Malayan
Chinese, particularly the younger elements, more susceptible to
Communist approaches. The "selective terrorism" which became
evident in 1952 has continued, and there has been an increase in
subversive activity. Meanwhile Malayan political leaders,
although agreeing with the government that full independence
must await the end of the state of emergency declared in June
1948, discount the local Communist problem as trivial.
Communist success in recent months has been most noticeable
in the Chinese schools, which have long been a primary Communist
target. In Singapore the authorities have discovered an in-
creased number of Communist study grou s, general unruliness has
grown, and the Communists have found that the issue of compulsory
military training can be used to attract participants in anti-
government demonstrations. According to one Singapore principal,
his students feel that compulsory military training, imposed by
a colonial government which is preparing for a gradual withdrawal,
is inconsistent with what they call the "new status of Chinese"
in Asia. Chinese elders tell government officials they are
unable to control their young people and that many youths go to
the jungle for Communist indoctrination and then return to their 25X1
homes.
Patterns of subversion also persist in other segments of
Malayan society. Efforts to establish cells among the Malay and
Indian communities continue and are achieving some success, and
penetration of the locally recruited home guard is a major
government problem. Authorities believe Communist activity is
increasing in both the United Malay Nationalist Organization
(UM'MN3) and the. MMalay.an .Chinese Association (MCA), the two most
active nationalist groups.
I ommunist
guerrillas have achieved much greater flexibility as a result
of a gradual reorganization and redeployment taking place since
1952, and independent platoons are now able to range over two
or three districts receiving food and intelligence from their
local supporters.
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Communist terrorists in north Malaya appear to be moving 25X1
toward the Thai border area, where the party has established a
strong base and is believed to exercise considerable control over
both the Chinese and Malay population/
directed primari y against governmen forces and informers,
continues elsewhere in the Federation, with the greatest number
of incidents occurring in those major rubber and tin producing
states where there are the most Chinese and where support is
most readily obtainable--Johore, Negri Sembilan, and Perak.
Meanwhile a leading Malay nationalist has qualified state-
ments he had made earlier indicating that demands for self-
government had temporarily abated. In mid-October UMNO chairman
Abdul Rahman affirmed categorically to the UMNO annual congress
that the end of the emergency was prerequisite to the attainment
of full independence. In early November, however, he stated that
self-government can and should precede the end of the emergency-
He characterized the local Communist danger as "very insignifi-
cant" aside from being "'an irritation and a financial drain,"
and denied Communist penetration of UMNO.
Malaya's first federal elections are tentatively scheduled
for next July and will be preceded by elections to the Singapore
council in March or April. Almost unopposed in the Federation
and one of the principal contenders in Singapore will be the
UiNO-MCA alliance, a successful Malay-Chinese political partner-
si.ip through which the Malays hope to gain independence and the
Chinese, as a by-product, expect political and cultural benefits.
With the political consciousness and awareness of outside
influence increasing among the people, Malayan political
leaders recognize the popularity and vote-getting power of a
strong anticolonialist stand. In such an atmosphere the
Communist demand for a united struggle against the "British
imperialists" may yield additional Communist gains.
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THE STOCKHOLM., WORLD. PEACE .COUNCIL MEETING
The meeting of the World Peace Council from 18 to 23
November in Stockholm provided an outline of the general
content and priorities of the Communist propaganda offensive
for months to come which suggests that Moscow expects to
follow its current policies unchanged.
The delegates' speeches and the final resolutions adopt-
ed hewed to the line of "coexistence" and a united front.
In Europe, which is apparently to continue as the priority
target, the key to coexistence was defined as the immediate
opening of four-power talks to reunite Germany and to con-
.elude an Austrian treaty and the immediate convening of the
Soviet-proposed collective security conference of all European
states--which are treated as the only means of preventing
German rearmament and a consequent Eincrease in the danger
of war. WPC Bureau member Isabelle Blume stated that a WPC-
sponsored European conference to oppose German remilitari-
zation.is scheduled for the second week of December in Paris,
a few days before the French assembly begins to debate the
London and Paris agreements.
Speeches and resolutions at Stockholm
took
the position
that the key to coexistence in Asia and the
Near
East is
the establishment of collective security on
the
basis of the
Sino-Indian five principles--mutual respect
for
territorial
integrity and sover.eignt,y, mutual nonaggression, mutual non-
intervention, equality and mutual benefit, and peaceful
coexistence. These principles, as spelled out in the reso-
lutions on Asia and on dependent countries, require the
defeat of all military blocs such as the Manila pact,the
Turkish-Pakistani pact, an end to foreign interference and
the withdrawal of foreign military forces, Chinese Communist
representation in the UN, and the cessation of armed con-
flict in Malaya, Kenya and North Africa.
Latin America received greater attention than at past
WPC meetings, in the form of coverage in Communist propa-
ganda media and the adoption of a resolution devoted entirely
to Latin American problems.
The WPC resolution on disarmament lagged considerably
behind recent Soviet tactics in the UN asserting that the
peaceful use of atomic energy will be possible "only after
the prohibition of the use of this energy for military pur-
poses." This was not included as a condition for adoption
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of the "atoms-for-peace"' plan in the UN resolution passed on
23 November with Soviet support.
The WPC disarmament resolution demanded "immediate agree-
ment on the prohibition of experimental explosions of atomic
and hydrogen bombs," and was similar to India's UN proposal
for a moratorium on atomic and hydrogen development. Moscow
has carefully avoided supporting this proposal in the past,
apparently in order not to circumscribe its own activities
in this field. The resolution appears to be an attempt to
curry favor with New Delhi.
If all the conferences suggested for 1955 are held, WPC
capabilities would be significantly increased. The only peace
meeting explicitly proposed by the WPC is a "world peace as-
sembly" scheduled for 15 May. However, speeches at Stockholm
contained scattered references to regional peace conferences
which Asian and Latin American peace partisans will attempt to
organize in the coming year. Vague references by Asian
speakers to an "Afro-Asian" conference in Indonesia and to an
Asian conference in India suggest indecision about the details
of the Asian "peace" program for 1955. A Latin American con-
ference to discuss political, economic and cultural imperialism
in the area was called for by several Latin American speakers,
but not specifically scheduled. The immediate convening of a
"world scientific conference" to discuss means of banning
atomic weapons was proposed by several speakers. Other indi-
cations of projected efforts to mobilize scientists suggest
considerable exploitation of this issue in 1955, even if no
"world scientific conference" is held.
The list of recommendations on cultural activities con-
tained detailed instructions to national peace organizations
on how to expand cultural exchanges. The list stressed the
importance of celebrating national cultural anniversaries
as a means of identifying the peace movement with popular
sentiments. Like the long resolution on internal organiza-
tional problems, it had all the earmarks of current Communist
Party instructions to the cadres on the essentials of united
front activities.
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USSR REVISES;: ITS CONTROLS
IN' EAST GERMANY
Since the grant of ostensible "sovereignty" to East
Germany on 25 March, Soviet controls have been. altered to
resemble more closely those that prevail in the other European
Satellites. These changes indicate that the Soviet Union is
now operating in accordance with a long-range plan for con-
trol and supervision of East Germany. Because of the special
situation there, however, this system of controls cannot
remove the need for the presence of Soviet troops to the
extent that it has in other Satellites.
The Soviet high commission remains technically the supreme
authority in East Germany and still handles relations with the
Western powers based on four-power agreements on Germany.
Most of the commission's functions, however, have been trans-
ferred to the Soviet embassy in Bet-lino which now plays a role
similar to that of the USSR's diplomatic missions in the other
Satellites.
The ambassador forwards Moscow's orders to the local
Communists, as is the case in the other Satellites. In ad-
dition to the usual large diplomatic staff, the embassy also
has political and economic advisers and a military staff for
"civil affairs" whose "advice" has the force of direct orders.
The political advisers review major policy matters and
exercise control over the Socialist Unity Party (SED). At
the local level, control of political activity is apparent-
ly exercised by the six consulates which have replaced the
high commission's district offices. The frequence of dis-
sidence within the party in the provinces makes this political
control, which is supported by various covert organizations,
an important function of the Soviet consulates.
Soviet economic control has diminished slightly during
the past year, primarily because of the cessation of repa-
rations and the diminution of supervision at the local level,
but the over-all direction of the economy continues. Advisers
recently assigned to certain economic ministries have prob-
ably taken over the direct economic supervision formerly
exercised by the high commission at the governmental level.
These advisers, of whom there are apparently three in each
ministry, are experts in their fields and are given high-
ranking positions, Although some of the Soviet advisers
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in key` industrial enterprises in several Satellites are
reported to have been withdrawn during the past year, there
is no evidence of a reduction of their numbers in East Germany.
In Wismut, the East German uranium enterprise, Soviet control
is direct and all-encompassing.
In addition to the local supervision, the East German
economy is also subjected to Soviet direction through the Coun-
cil of Mutual Economic Assistance (CEMA) of which East Germany
is a member. Aspects of the East German economy known to be
under CEMA direction are the application of Soviet standards
and the integration of planning with that of other Satellites.
The basic force behind Soviet control in East Germany
remains the army of occupation. The continued presence of
the Soviet forces, including security troops, ensures the sub-
mission of the East German population and outweighs the os-
tensible sovereignty granted by the USSR. As in the other
Satellites, the control of the indigenous security and armed
forces is maintained through directly assigned Soviet advisers.
It is doubtful that the Soviet Union can risk a substan-
tial reduction of its military establishment in East Germany
in the foreseeable future because of its contiguity with the
West, the marked hostility of the people toward Communism, and
the strong desire in both East and West Germany for unity. A
token reduction of Soviet forces, however, could be carried
out. The USSR will probably continue to strive to reduce the
appearance that East Germany is an occupied country by granting
more power to indigenous Communists and withdrawing Soviet
authorities somewhat farther into the background.
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WESTERN EUROPE SUFFERS SETBACK IN PROGRESS TOWARD FREER
TRADE AND CONVERTIBILITY OF CURRENCIES
Western Europe's economy, already at an all-time high
in industrial production, has in the past two years made
marked progress -4owara the convertible currencies and rela-
tively unhampered trade characteristic of prewar days.
Developments at the September meeting of the International
Monetary Fund (IMF), at subsequent meetings of the Organiza-
tion for European Economic Co-operation (OEEC)*, and at the
current Geneva. session of the contracting parties to the
General Agreement on Tariffs and Trade (GATT) indicate, how-
ever, that these goals are now more distant than they seemed
six months ago.
Western Europe's efforts to achieve convertibility and
establish trade practices conducive to further economic
expansion are complicated by fear of competition and by ap-
prehension concerning American economic policy. The British,
whose position is most influential in these matters, see no
urgency about making sterling convertible before their next
general election, which can hardly be called before next
spring and may not occur before October 1956, The outlook
for improvement of trade practices is unfavorable..
-A generally rising trend in production, trade, and gold
and dollar reserves has been apparent in most of Western
Europe since early 1953. The unexpected persistence of this
trend, in the face of reduced sales to the dollar area attri-
butable to the downward adjustment in the United States, was
widely interpreted as evidence of Europe's lessened dependence
on transatlantic imports and as indicating early closing of
the "dollar gap." It was also seen as evidence that the
economies of several Western European countries--notably West
Germany, Belgium, and the Netherlands--had recovered and
expanded to the point where they could make their currencies
convertible into dollars before the end of 1954.
*Austria, Belgium-Luxembourg, Denmark, France, Germany,
Greece, Iceland, Ireland, Italy, the Netherlands, Norway,
Portugal, Sweden, Switzerland, Turkey, the United Kingdom.
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Progress toward trade liberalization and convertibility
Since the beginning of OEEC in 1948, the 17 member nations
have endeavored, as a condition for receipt of American aid,
to remove wartime and postwar import and exchange restrictions
and thus help restore competition and reduce costs of produc-
tion, thereby paving the way for eventual general convertibil-
ity of currencies. The increase in industrial production came
mostly in the first few years of the OEEC program but is still
continuing. Success of member countries in removing import
restrictions on trade among themselves, while at the same time
building up their gold and dollar reserves, has come mainly
since 1952.
By the end of 1953 the OEEC countries, as a group, had
removed quantitative restrictions from 75 percent of the goods
exchanged by member countries and had increased their gold and
dollar reserves from $7 billion to $1.2 billion. This improve-
ment was not uniform throughout the OEEC area., however. West
Germany, Britain, Belgium, the Netherlands and Switzerland had
removed restrictions from about half of their imports from the
dollar area. France, on the other hand, had lagged even in
removing restrictions on imports from other European nations
and has even to the present removed none from its dollar im-
ports. West Germany had increased its gold and dollar re-
serves from $149 million to $1.2 billion; while Italy's had
increased only from $428 million to $816 million.
The variations in the rate of liberalization have produced
divergent views among the member nations concerning the
proper timing and method of any broad move toward convertibil-
ity. It has been generally assumed that the European Payments
Union (EPU), OEEC's subsidiary for clearing payments among its
members, would be liquidated whenever several OEEC member
countries made their currencies convertible into dollars. But,
in such an event, the countries which found themselves unable
to "go convertible" would then have to pay for their imports
in convertible currencies without benefit of EPU facilities
for dealing with balance of payments difficulties. Also it is
feared that if the countries adopting convertibility were not
fully competitive with the dollar area, the others would seek
to sell as much to and buy as little from them as possible in
order to build up their own gold and dollar reserves, thus
imperiling the reserves of countries which had adopted con-
vertibility.
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A further source of concern arises from the generally
accepted view that convertibility means the end of discrimi-
nation against the dollar area. Those OEEC members which are
less lice.Ly to make their currencies convertible--for example
France and Italy--fear they will lose out in the markets of
the other members through inability to compete with expanded
dollar imports. if these apprehensions are realized, recent
progress toward trade liberalization in Western Europe will
probably be reversed, with adverse effects on productivity
and living standards.
Key role of the United Kingdom
Because approximately 40 percent of world trade is
financed in sterling, it is generally agreed that the pound
must lead the way in any general return to convertibility.
During the latter half of 1953 and the first half of 1954,
Britain, with steadily rising gold and dollar balances, took
several steps toward convertibility and there were man% inti-
mations that the pound might be made freely convertible with
the dollar by the spring of 1955. In May of this year the
OEC undertook to prepare the way by directing its experts
to study the problems that would arise, and on 30 June the
EPU was renewed for one year in the belief that general con-
vertibility would mean its liquidation before then.
Waning prospects for a general return to convertibility in
1954 soon appeared in a clarification of the British position,
however. At the mid-July meeting of the Ministerial Council
of the OEEC, Chancellor of the Exchequer Butler reverted to
a more cautious attitude. It was announced that the United
Kingdom had "no timetable for convertibility" and expectations
that it was "just around the corner" were discouraged. British
officials specified, as a major prerequisite, the adoption by
the United States of a "good creditor policy"--low tariffs
and some assurance of no sudden changes in them. They pointed
out that the outlook for such American action was unlikely to
become clear before the November congressional elections and
the international review of trade restrictions at the GATT
conference opening in Geneva. about a week thereafter.
Various domestic considerations, however, loom at least
as large as American trade policy in determining the British
attitude toward convertibility. Powerful elements in the
Churchill government--as well as various industrial and
financial groups--do not want to risk,"upsetting the apple
cart" when things are going well in general for the sterling
area. They remember the Labor government's abortive attempt
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at convertibility in 1947, and fear that another failure
might permanently impair the pound's standing as a world
trading medium. Since Labor Party leaders have thus far
refused to give a clear commitment to support a move toward
convertibility, the government will probably not undertake
it before the next general election.
The United Kingdom has therefore resisted pressure from
West Germany and the Benelux countries to take the plunge on
sterling convertibility at an early date, and has advocated
instead co-operative action to create the conditions for a
move toward convertibility for all OEEC countries together.
British officials contend that this requires not only a
liberal American trade policy but also further progress by
OEEC countries in removing restrictions on dollar imports
and the provision of adequate stand-by credits to cushion the
impact on the weaker currencies.
Current OEEC approach to convertibility and trade
At the ninth annual meeting of the 57-nation Interna-
tional Monetary Fund, which seeks to promote stability and
convertibility of currencies among its.member countries,
the responsibility for hastening the advent of convertibility
was "conferred" on the United States. The governors of the
Fund--who include the finance ministers of the principal
trading nations--argued that general willingness to take the
step depends on assurance of a liberal American trade policy
to ii,crease dollar earning opportunities for the rest of the
world.
The OEEC's Group on Convertibility, meeting a few weeks
later in mid-October, also maintained that changes in
American commercial policies were necessary. The delegates
claimed there had been "no decline in the will to become
convertible." It was apparent, however, that they feared
exposing some of their industries to the full force of
American competition and would not agree to a rigid schedule
for the removal of restrictions on dollar imports.
In discussing preparations for convertibility, this
meeting paid much attention to problems of the future
relationships of the OEEC to the IMF and particularly to the
impending GATT conference on the conditions of international
trade. There was general agreement that quantitative restrio-
tions against dollar imports could not be entirely eliminated
by all OEEC countries even after convertibility had been
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attained by most member countries. Plans were advanced for
a European Fund to provide credits to assist member nations
who might find themselves in balance of payments difficulties
during an interim period after convertibility went into effect.
In the discussions of the OEEC Group on Convertibility,
low-tariff countries like the Scandinavian members attacked
high tariffs as impediments to further moves toward liberal-
ization and convertibility. But Robert Marjolin, secretary
general of the OEEC, emphasized the difficulty of dissocia-
ting European tariff problems from world tariffs and pointed
out that GATT, not OEEC, has major responsibility for tariffs.
The OEEC ministers' meeting scheduled to follow this meeting
of the Group on Convertibility was postponed until 12 January.
It was expected that by that time the GATT conference, which
includes, 11 OEEC members, would be near enough its conclusion
to indicate the prospects for general liberalization of trade
policies.
The first three weeks of this 34-nation meeting at Geneva,
do not, however, encourage any expectation of important prog-
ress toward a general relaxation of-trade restrictions. A
number of European and sterling area. nations, particularly the
agricultural exporting countries, have thus far resisted most
efforts to liberalize dollar imports, citing American import
quotas on their products as justification. It is generally
agreed that until this impasse can be broken, there will be
no basis for general convertibility of currencies.
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ONFID~.N....
1' rM sme -Now
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