PROPOSED REVISED STATEMENT OF POLICY ON ECONOMIC DEFENSE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP64-00014A000100020002-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: November 16, 2016
• Document Release Date: July 13, 1998
• Sequence Number: 2
• Content Type: REGULATION

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PROPOSED .2EVI3ED STATEMENT OF POLICY ON ECONOMIC DEFENSE
General Policy
1. It is considered that under present conditions of international ten-
sion, the multilateral program to limit trade between the free world and
the Soviet .Bloc logically should be directed to increasing the scope and
severity of multilateral controls to the maximum permitted by the negotia-
ting situation and political considerations.
a. Political and psychological conditions generally, and economic
conditions in some individual countries, make substantial intensifica-
tion of multilateral controls with respect to the European Soviet bloc
impractical for the foreseeable future, in the absence of a marked
worsening of international tensions. Accordingly, any attempt to
expand the multilateral control system should be limited in scope.
Extensions of these controls should be proposed, however, when
clearly justified by new technology, new intelligence or altered evalua-
tion of the significance of pa,.ticular imports to the 'soviet bloc.
b. Since the revision of the international control lists agreed to
by the U. S. in mid-195.1 was designed to place the controls on a long-
haul basis which other governments could defend when necessary,
only relatively minor downward modifications in the multilaterally
agreed lists should be required in the near future
2. Our acoonom c d: #ense program shou'Id b V arced and administered
with full recognition of the fact that the economic defense system of the
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free world is part of the larger system of military and political alli-
ances and, like them, depends upon the cooperative efforts of the free
nations. Accordingly, in determining; the measures which the United
States should adopt and those to be urged on other nations, the impact
upon the existing international system of economic defense as a whole,
and upon the free world military and political alliances, must be taken
into account. Similarly, in multilateral military and political discus-
sions consideration should be given to the impact of courses of action on
the economic defense program.
3. A major objective of U. S. foreign policy is to increase the
political and economic unity of the free world. Accordingly, the prob-
lem.s posed for our allies by trade controls should be given appropriate
weight and taken into account in determining the nature of the controls
which the U. S. should advocate that the free world exercise in its eco-
nomic relations with the Soviet bloc.
The United States should support preservation of the existing
free world collective agreements in the field of trade controls. It
should, as necessary and appropriate, supplement the multilateral
program with unilateral controls, consistent with U.S. political objec-
tives, which are effective in imposing on the Soviet bloc any significant
economic cost additional to that imposed by the multilateral controls.
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5. The criteria for selective export controls and the specific con-
tent of the existing selective control lists should remain under a con-
tinuing review.
6. Emphasis should continue to be placed on improving the enforce-
ment of the program, particularly the multilateral aspects thereof.
7. .4hile there is a continuing necessity for U. S. controls over ex-
ports to the Soviet bloc, the U. a. as a general rule should approve for
shipment to the European Soviet bloc commodities and technology, the
control of which to a higher degree than the multilateral controls would
not be effective if applied unilaterally by the U. S. At the same time the
U. S. Government should not at this time actively promote this trade
since such official action might tend to increase the over-all level of
East-Jest trade in conflict with the general objectives of the economic
defense program. These principles should govern U. S. exports of
agricultural products in the same manner as other commodities.
8. The United States should exercise controls over excports to free
world countries to the extent necessary to avoid the circumvention and
frustration of U.S. security controls by those countries. Such controls
should not be applied, however, as a substitute device for initial
bilateral or multilateral negotiation in oersuadinry friendly foreign.
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countries to adopt adequate controls. It is important to avoid
measures which significantly reduce the willingness on the part of
free world countries to cooperate in:the international system of con-
trols, or measures which do not significantly affect the availability
/from a particular country/ of controlled commodities to the Soviet
bloc. (Commerce and Defense recommend inclusion of the bracketed
language; State and MDAC recommend its deletion.)
9. Primary controls over commodities should continue to be supple-
mented by ancillary controls when the latter will contribute substanti-
ally to the effectiveness of the control system.
10. Maintenance of personal and commercial contacts between the
free world and the Soviet bloc may have advantages, but no significant
security sacrifices in the economic defense program should be under-
taken to promote such contacts, except when justified by overriding U. S.
national security interests.
11. An essential element in avoiding or reducing excessive de-
pendence on Soviet markets or sources of supply is the development
within the free world of alternative markets for commodities sold to
the Soviet bloc and of alternative sources of supply for commodities
acquired from the Soviet bloc.
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-12. It would be unnecessary and undesirable, under current con-
ditions, fox- the U. S. to institute general import or financial controls
against members of the soviet bloc other than Communist China.
13. As long as Communist China continues in the role of an actual
rather than a potential aggressor, there should continue to be applied
against Communist China a higher level and wider scope of controls
than are applied against the remainder of the Soviet bloc. (In similar
vein, should any other member of the Soviet bloc become an actual
aggressor against a free world nation, prompt consideration should be
given to institution of a higher level and wider scope of controls against
such aggressor as well.) On the other hand, at such time as Communist
China may be found to have ceased to be an actual, rather than a potential,
aggressor, the levels and scope of controls should be re-examined and
revised in accordance with paragraph 32 below.
14. Because the relationship of the economies of Hong Kong and Macao
with that of Communist China is so close that the risk of the circumvention
and frustration of economic defense controls toward Communist China is
greater through transactions with these western colonies than throu;;h
similar transactions with other free world countries, it is necessary to
take special care in the control of transactions with Hong r:ong and
Macao.
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Toward the Soviet Bloc Excluding Communist China
15. In controlling selectively the export of commodities, technology
and services from the United States to the Soviet Bloc:
a. Continue the prohibition of all exports of the following destined
for the soviet Bloc, either directly or indirectly: Arms, ammunition,
implements of war and atomic energy materials.
b. Deny or limit, as appropriate, export from the United States to
the European Soviet Bloc of the following categories of commodities,
technology and services:
(1) All. commodities and technology included on the COCOM
international embargo and quantitative control security lists and all
services similarly denied or restricted.
(2) Such additional commodities, technology and services as
would contribute significantly to the economic capabilities for war of the
European Soviet bloc, the U. S. unilateral control of which can reasonably
be expected, because of U. S. production,, supply or technology, to be
effective in depriving the European Soviet bloc of a significant contribution
to thelatter's economic capabilities f,)r war.
(3) Other commodities, technology and services which raise
such special political problems as to warrant U. S. export control to the
European Soviet bloc despite the absence of international controls.
c. As a general rule, approve for shipment from the U. S. to the
European Soviet bloc commodities, technology and services not included
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in subparagraph b, and where appropriate, remove the requirement of
specific licenses for such shipments.
16. a. Maintain U. S. controls on the export of commodities, technology
and services to Free World countries to the extent necessary:
(1) To minimize the risks of unauthorized transshipments.
(2) To avoid the frustration or circumvention of U. S. controls
towards the European S::viet bloc and Far Eastern Communist destinations.
b. In implementing subparagraph a. (2) above:
(1) Limit or deny export of controlled commodities, technology
and services to any Free World country when such limitation or denial will
have the result of significantly affecting the availability /from such
country/ of such commodities, technology and services to the Soviet
bloc and Far Eastern Communist destinations. (Commerce and Defense
recommend inclusion of bracketed language; State and MDAC recommend
its deletion.
(2) Such controls should not be applied as a substitute device for
initial bilateral or multilateral negotiations in persuading friendly foreign
countries to adopt adequate controls and should not be employed in a way
which would significantly reduce the willingness on the part of the Free
World countries to cooperate in the international system of controls.
17. The U. S. Government should not, in general, actively encourage
trade with the Soviet bloc, either by the U. S. or by other countries.
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18. Improve the availability and enhance the utilization of current
intelligence in matters relating both to negotiations for and to enforcement
of controls.
19. Continue to. study, and wh:er4wrappropriate explore with our allies,
the development of improved criteria and listing techniques for export
controls.
20. Foster greater recognition and assumption of responsibilities by
other Free World countries for the efficient enforcement of agreed control
measures.
21. Improve implementation and enforcement of controls by greater
utilization of both bilateral and multilateral techniques and procedures,
including closer coordination among national control authorities, as well as
by the development and maintenance of significantly useful ancillary
measures.
22. In making proposals for extension of multilateral controls, negotiate
these proposals so as to minimize expenditure of good will and bargaining
power.
23. Consult with other principal free world nations before entering into
new major economic defense programs, except when such consultation
would be impractical because of urgency or the character of the control
under consideration.
24, Remind Free World nations, on appropriate occasions, of the risks
of excessive dependence on the Soviet bloc as a trade partner, and stand
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ready, within the limits of feasibility, to assist, and encourage others to
assist, Free World countries threatened with such dependence. Foster
the provision of safeguards designed to minimize the immediate effects
of a sudden reduction or cessation of trade initiated by the `Bloc.
25.a. Encourage and facilitate the flow of trade within the Free World,
including the entry of commodities into the United States, by reduction of
trade barriers, and urge other countries similarly to liberalize their
trade policies, recognizing particularly the salutary effects of such actions,
including those measures recently taken by the U. S. , toward increasing
the willingness of other countries to adopt or maintain desirable East-West
trade controls.
b. Emphasize actions taken by the U. '. and other countries to
liberalize foreign trade as a counter to the arguments made by some
countries that a greater reliance on trade with the Soviet bloc is their
only available practical alternative.
Z6. Foster the development by Free World countries of alternative
markets and sources of supply, so as to reduce dependence on Soviet
bloc markets and sources of supply.
27.a. Give careful attention to attempted Soviet bloc penetration of
less developed countries through trade and development and technical
assistance offers, assuming initially that the then existing U. S. foreign
economic policies and assistance programs will serve adequately as the
general answers or counterweight to Soviet bloc economic penetration
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moves, but being prepared to take such additional action as the particular
situation, examined in tine complete context of total U. S. foreign relations
and programs, is then deemed to require.
b. Insure that U. S. foreign economic policies and programs take
appropriate account of the desirability of reducing so far as practicable
the scope for successful Soviet bloc economic penetration.
c. Attempt to make the peoples and governments of less developed
countries aware of the existence, nature and purpose of U. S. assistance,
and discreetly employ suitable opportunities to advise such governments
to keep alert to inappropriate activities or undisclosed designs for which
Soviet bloc development assistance projects might be a mask.
28. Administer current U. S. programs, such as economic development,
military and other governmental procurement, defense support, stockpiling,
disposal of surplus goods and properties, and similar activities, in such a
way as to take into appropriate account the objectives of, and the impact on,
the economic defense program.
Toward special Areas
29. In applying U. S. controls, accord to Hong Kong treatment consistent
with that generally accorded cooperating countries while employing such
special care as may be necessary to prevent frustration of economic defense
controls on transactions with Communist China. To the same end apply
more stringent controls on trade with Macao as may be appropriate.
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36. Apply trade controls with flexibility, to the extent feasible and
desirable, in the interests of preventing the permanent incorporation
of North Vietnam in the -oviet bloc.
Toward Communist China
31. So long as Communist China is regarded by the U. as an
actual aggressor:
a. Maintain the current level of United 'tates export,
import and financial controls on trade with Communist China.
Viithout derogating from the basic principles of these controls,
administer these controls in such manner as to endeavor not
to lessen the active cooperation in the multilateral control
program of tether Free World countries.
b. Urge other Free W ..rld countries to maintain the current
level of export controls on trade with Communist China. In aid
of this effort, the United States should, without frustrating the
multilateral embargo program, endeavor to handle questions of
routine exceptions in such manner as to preserve and foster the
willingness of other countries to retain the present level of
controls.
c. Whenever it may be determined by the 'ecretary of State
that further effort to maintain the current multilaterally agreed
level of export controls would be seriously divisive among our
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allies or lead nations needing trade with Communist China toward
an accommodation with the Soviet Bloc, the Secretary should report
such determination promptly to the Council for consideration of
appropriate action.
d. In anticipation of the possible .occurrence of the situation
described in subparagraph c. above., undertake now to develop the
most effective rationale .supporting retention, to the maximum extent
then negotiatle, of the specific differential China controls now agreed
multilaterally.
Toward the Soviet Bloc Including Communist China
32. '}e;henever the President, on the advice of the National Security
Council, may find that Communist China should no longer be regarded as
an actual, rather than potential, aggressor, and that East- West tensions
in general have been correspondingly reduced:
a. Undertake, in consultation with our allies, the establishment
of multilateral trade controls on a long-haul basis of general uniformity,
and of maximum economic impact consistent with U. S. political
objectives, towards the entire Communist bloc. If feasible, take the
opportunity presented by this revision of the international control lists
to obtain multilateral consideration of more effective criteria for
selective export controls.
b. /Consider whether or not to/ undertake a progressive accom.modatior
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of U. S. security trade controls, with a minimum of necessary ex-
ceptions, to those applied multilaterally against the Communist bloc.
(Commerce and MD.AC recommend deletion of the bracketed language;
Defense, State and T:: easury recommend its retention.)
c. Except as may be modified pursuant to a. and b. above, con-
tinue, in extension toward the entire Communist bloc, the courses of
action set forth in paragraphs 15 through Z8 above.
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