SUMMARY OF THE NSC DISCUSSION ON THE EAST-WEST TRADE PROBLEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80R01443R000200180014-7
• Release Decision: RIFPUB
• Original Classification: T
• Document Page Count: 4
• Document Creation Date: November 17, 2016
• Document Release Date: May 31, 2000
• Sequence Number: 14
• Content Type: SUMMARY

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General Cutler introduced the East-West trade control problem
raised by the UK proposal, summarized the NSC policy (NSC 152/3),
outlined the possible courses of action, and presented the Planning
Boards recommendation that a letter (contents outlined) be sent from
the President to the Prime Minister. General cutler then called upon
Governor Stassen and Admiral DeLany to provide the essential back-
ground.
Governor Stassen stated that the East-West trade program had
been under review in accordance with 152/3, that an item-by-item
review was regarded as essential, and that they were mindful of the
need to hold the list to the minimum. He believed the control
program was having an important effect on the Soviet bloc.
The President asked how this British proposal affected the Battle
Act. Admiral ?eLany said that it would create difficult problems of
accommodation but the Battle Act itself does allow considerable
flexibility. The British proposal would require such a scaling down
of the lists that it would create a serious problem in Congress.
General Smith stated that the State Department was now convinced
that the free world can apply effective economic pressure on the
bloc and that the course of action recommended by EDAC was essential
to this end. He referred,to Mr. Molotov's comment made to him
recently in Berlin that he (Molotov) could not understand our China
embargo as that just forced China to depend on USSR. General Smith
State, NSC declassification & release instructions on file
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remarked that Molotov always has a purpose in making such remarks.
He said the British proposal was an extreme one (50% as compared
with the EDAC estimate of 10-151% on basis of present review under
152/3). He believed this was a hard bargaining position taken by
the UK. He estimated that it might be possible through negotiations
to come out with the list pared down by 20-25 percent which would
probably be acceptable.
The DCI pointed out that the British proposal would permit
Communist China to obtain many of the decontrolled items in
considerable quantities by transshipment through the USSR and the
Trans-Siberian Railway, and thus in effect nullify the controls
on the China trade. He then read selected paragraphs (12, 14, last
sentence of 15, first sentence of 17) from draft NIE 100-3-5It.
Admiral Radford used the TV case as illustrative of the type
of assistance that the Soviet bloc could obtain from the West under
the British proposal. The Joint Chiefs were in full support of the
MDAC program.
The Secretary of the Treasury said there was no doubt about
the course of action that should be followed in the short run (strong
opposition to the British proposal) but did say that he believed
the long run did create some real problems if it became necessary to
continue economic aid. In response to a question from General Smith,
he said he considered the short run to be It to 5 years.
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The President said that he was much concerned about the trade
problem over the long run. He believed that trade was an essential
engredient of strength as witness achievements in the past result-
ing from trade incentives. As for the present he was faced with
the weekly demands of the lead producers, for example, to keep out
foreign lead in order to relieve the unemployment in the lead mines.
Copper mines in the U.S. were on 4 day week, etc. Preventing trade
with the bloc would build up other pressures. How would the U.S.
handle the raw material and production surpluses of other countries
if we didn't permit them to sell to the bloc?
The DCI stated that the national estimate indicated a maximum
increase in exports to the bloc from the free world of $500 -dllion
as result of relaxation and over the next year or two the increase
would not exceed $200 million.
Governor Stassen pointed out that irany of these production
surpluses were the result of the free world support of the Korean
war over the past three to four years, that adjustments within the
West were required, and that given a year or two it was quite possible
to make such adjustments.
Secretary Weeks took a firm stand in support of the EDAC posi-
tion. He cited the British proposal to decontrol nickel, a stock-
pile metal which the U.S. was having the greatest of difficulty in
obtaining. In response to a question from the President he said
that he did not believe that there would be great pressure from U.S.
business for relaxation to the degree proposed by the British and
that U.S. business would continue to cooperate in the control program.
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The Secretary of Defense stated that he felt restrictions on
East-West trade were essential, and that increased trade with the
bloc would not contribute much to solving the unemployment problems
the President was worrying about.
General Cutler called upon the Vice--President to express an
opinion about Congressional reaction to a proposal such as the
British. The Vice-President stated that the Congress certainly
would not accept a relaxation of controls to the degree proposed
by the U.K. He indicated that some relaxation could, with diffi-
culty, be sold.
The President indicated his agreement with the expressed
recommendation of the NSC.
General Cutler stated that it was proposed to assign the
drafting of the President's letter to the Department of State.
It was agreed to defer consideration of the China control
paper until after the bilateral negotiations with the UK and the
Geneva Conference. General Smith suggested action On one point,
that having to do with the recommendation that the U.S. agree to
the gradual relaxation of Japan's trade restrictions to the ChinCom
level. The Council expressed agreement with this recommendation.
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