U.S. TRADE POLICY AND NATIONAL SECURITY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP64-00014A000100120004-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 11
• Document Creation Date: December 12, 2016
• Document Release Date: June 23, 2000
• Sequence Number: 4
• Publication Date: October 9, 1959
• Content Type: MF

DEPARTMENT OF STATE INSTRUCTION
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OiaFIOI 1 '.=SE ONLY
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CA?3151, October 9, 1959
1J. S. Trade P?13_cw; ax-d National Securrit;tr
ALL A ERICANN DIPLo ,:A`? IC AND GOT S ULAR POSTS
'p'Il.e i port ancc to our national security- of the administra-
tion's liberal trade polic4/ and the adverse security effects of
trade restrictions have been the sub, ect of considerable attentio ?
in recent months wit!i,'i the GOverr::vnt. The enclosed paper, pre-
parec in the Departnent of State as hack :roti nd for iwt?er-departMentel
discuss:' ens, is enclosed for 1,j our
f,? neral information.
"7'rad.e Polic;r- arid ?1a'lio gal ?Sec ,rit j"
po,r;er rated Juno h, 1959.
State Dept. declossification & release instructions on file
O -FI' IAL '.S?; ONLY
DRAFTED
APPROVED BY: E - C. W. Adair, Jr.
CLEARANCES: TO - Mr. Iiefner
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fl `A. 1. YEt r OF STATE
AND
NATIONAL SECURITY
June 4, 1959
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TRADE POLICY AND NATIONAL SECLI"RITY
its pec h.
nations' interest, to improve the security and well-being of the US and
The broad Qbjective of US foreign economic policy is identioal
with that of our general foreign policy: to protect and advance the
This broad objective of our foreign economic policy has three major
components. First, to promote the economic strength of the US, second$
to promote the economic strength of the rest of the free world, and third,
to build and -maintain cohesion in the free world.
To .(*ieve these objectives we have followed three basic economic
I would like to deal first with the general aspects of the problem
policiess The expansion of trade; the promotion pf private inveent;'
dprovision of mutual assistance.
Diring the past 6 years, by building on existing programs and, even
more important, by developing new programs designed to meet new needs and
changing conditions, there has been created a complex pattern of
interrelated programs. Some of them we carry out on our own and others in
cooperation with.friendly nations. These programs are well. suited to the
proz,otion of our basic objectives.
At the present time, however, the achievement of these objectives is
endangered from within by the growth of protectionist sentiment and from
the outside by the Soviet economic offensive. It, purpose thin morning
is to suggest some of the ways in which. protectionism adversely affects
our domestic,, economy., our political-economic relations with our allies
and therefore our national security.
1 to specific illustrations.
Protect,onism has certain recognisable benefits. It can athe
assure
survival. of a sensitive industry .*iidh might otherwise succumb because of
its competitve disadvantages. It chn prdide a blanket for an infant
industry during its formative years. 'It can,prevent economic and social
dioxuption in a community dependent on a si;,gle industry and without the -
resources to develop alternative industries.
.In spitof these recognizable advantages, however, there are
xie.lat'1vely few people who would contend that protectionism pz'Ovides a
bas'is` fair a "c ynamic expanding economy. The reasons are abvio t.,,
Protection discourages the development of new products, new methods of
prodtiction and distribution, and cost-saving techniques.
Pfrtection reduces our ability to compete with otaer industrialized
economies.
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Protectioi contributes to inflation by raising the costs of the
products we buy abroad.
t i peri .s our export markets by making it more difficult for other
countries to earn the dollars they need in order to buy from us. It also
endangers those markets by inviting retaliation on the part of other'
countries.
Protectiopist measures inevitably reduce total US output by
preventing the; shift of domestic resources from less efficient to more
efficient industries. By lowering our total national product, such
mo
wilaown our rate of growth and reduce the resources available
measures s s slow
ty needs, including aid to the less developed countries.
Having indicpted the effects of protectionist policy on the domestic
economy, I wo d i.ike to indicate briefly the effects on the economies
and the etheranob. For example, approximately one-half of everything
the Netherlands produces Is shipped abroad.
Foreign trade is vitally important to our economy, but even so it
oonst .tute,s o 4y 4% of our gross national product. In other major
industrial' countries (national onaas product t is'3 to 4 times greater. it is 5
11 .9
as eat; forns such as Belgium, Sweden
smaller advanced patio
to 9 time"
of other countries.
relations with those countries. This is true even when the action itself
" does not seem important to us
Our trade po.icy is of tremendous concern to all. of these countries,
first because exports play such a major role in their economies and
secondly because the United States is a major mar'cet for their goods.
Both of these Feasons explain,why any action by the United States which
adversely affects sales of their key products, or threatens those sales,
is front page news abroad and has a serious effect on our international
I can cite five specific examples of restrictive measures which have
adversely eh af affected four important allies. Lead and zinc affecting
ad:
affecting the IIetherlands, electrical equipment and woolen
fabrics affecting the United Kingdom and cotton textiles affecting Japan.
In the cage of many less developed countries, one, or a few
2/3 of Chile's copper
1/2 of Cuba's sugar
x.14 of Indonesia's rubber
0 of Bolivia's tin
over' 1/2 of Brazil. Is coffee
~/5 of Venezuela's oil
" 13 of Peru's lead and zinc.
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commo ities, comprise the bulk of their exports. For many of these
countries the US market is especially important. To illustrate this
point, the United States imports
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The ability of the less developed countries to sell their products in
the United.ctat~s affects their ability to import capital goods and other
necessary manufactured products.
Therefore, it determines in large measure the basis of their economic
growth and their ability to raise standards of living.
The promotion of economic growth in the less developed countries is of
Course a prime objective of our foreign policy. By this means ,09 hope to
help those countries to achieve peace and stability. Unfortunately their
economic health can be seriously damaged by US import restrictions. Our
import quotas on petroleum,. lead and zinc, and cotton, for example, have
had that effect on Mexico, Venezuela, Peru, Indonesia, Egypt, the Sudan
and other less developed countries.
The Soviet Union, of course, recognizes clearly the major role that
trade can play in furthering its objectives. The evidence; e1early shows
that friendly countries, when denied.access to our market,.are forced to
increase their economic dependence on the Soviet Bloc. As a-specific
example, after the Imposition of restrictions against Uruguayan wool tops
in 1953, the Soviet Bloc steadily increased its purchases, and as a result
It is now t ,e ms,st Important outlet. for Uruguayan wool tops. Recently our
countervailing duty on wool tops=was removed.. A;; you knot, our action to
impose quotason lead and zinc was followed by violent anti-American
reactions i..Peru and there have been sharp reactions in Venezuela to our
oil import policy.
]:n assesing where we stand today it is important, of course, to keep
the pAA.ture in balance. On the one hand, since :.953 we have pursued an
active policy for the promotion of international trade. We have taken
,Part 'In two successful trade conferences in 1955 and 1956. It is true
that.many of the tariff concessions we gave at those conferences were
su~all amounting to no more than a 15% reduction in the existing duty.
Nevertheless imports of the products affected by the concessions were
valued at approximately pl billion. P great deal of attention has been
,given to escape clause actions that we have found. it necessary to take in
recent years. Unfortunately little account is taken of the applications
that were turned down.. Other countries often fail to acknowledge that out
of 27 cases in which escape clause action was recommended by the Tariff
Commission no action was taken in 19 cases.
O;n the, the; side of the balance, there are the various restrictive
measures that hake been taken. Xou will note fr9m,tom ebart...that ..since,
153 we have taken restrictive action od 29 commodity groups exported
from 45 tree world countries,
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ACS N, 'r.AKP N TO REESTRICT IMPORTS SINCE JANUARY 1, 1959
AN C c +1MODITIF,SS AFFECTED
Commodities No. of Countries Type of Action* Date of Actio4
Affected {29) Affected 45
Cattle 2
Wool Tops 1
Butter and/or
Butter Oil 5
Cheese 8
Dried Milk Products 4
Plaaseed and/or
Linseed Oil
Peanuts and/or Pea-
Almonds 1 CD
Tuna anise JL1N 'S6
Woolens Toweling 9 OCT !56
B3eavey Electrical MAR ' S7
Equipment 2 BA
Clothespins Il FC NOV 'Si
Safety Pins 4 EC NOV !57
Tung; Nuts and Oil 4 22 NOV 157
Thermometers 2 EC APR t58
Small Arms' 7 L JUN ' 58
Long Staple Cotton 4 22 J UL ' S$
Long, oot~
wear' Rubber-soled r 3 L
SEP 'S8
'Lead 16 EC OCT '58
Zinc; 15 EC OCT 158
JAN 'S9
e
Cast, Cron .3 AU in B irxa 3 Ca AR 156
Bicycles 8 _ C
1 fn OCT !55
I b iYD4-
Hardboard 1 r AUG 'S5
Alsa a over JUL
Watch Movements 5
Fish sticks 1 L AUG '54
AUG !5h
TAR
CD
22
22
22
APR '53
MAY 53 /
JUL ' 53
JUL 153
JUL !53
JUL '53
JUL '53
(Voluntary' Program
Mar ' 54 - Mandatory
Program Mar 't S9) 9 N(`A MAR `54
Rye and Aya Flour` 1 ~. APR 54
k C1 1 GEC JUN ! 54
Petroleum
nut vu
EC > Escape Clause AD - Antid'unping
?- Invocation of Geneva Reservation Bk. - Buy Anerican
L - Legislation' NSA - National Security immendment
n 22 21 La - Invocation of Trade Agree-
13 '1
- Countervailing Duty ment Reservation
CD
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4, sirit>c:,.l,Y izpos:ible to determine precisely how rmich trade
,cct ka, tYso restrictions. However, it has been calculated on
s ,. ~ ae te;s t figures available, that is for 1957, the trade
` 4cd y UUpse, eatric Lions represented about ,2.1 billion or 28% of
3 4orts of ,competitive :atoms, Out of this total oil products account
proximat ly 1, billion and the remaining items account for about
r Pno tm..., 'h0se figures are subject to a number of qualifications.
r4E the more e,:',fectlve the action in & l1er t da t restricting Imports the
you w 0tq
from the u4p twhat some countries are affected by only
tr t4 , whereas others are affected by as many as twelve.
'^! er, azr le,, has been affected only by our restrictions of oil
but A. directly involves more than 80 of that country's exports
u United :'+t atos _
t oommo t briefl y ,on several of the more important
"
t
C ei~ 6"r?'Y nit 4?.Fte
c
r
i's t ca ectrtca1 coon, rient -- Our d~ision on the Greer's
' - : case, ? p en uproar in the United Kingdoms One extreme sector
' t spin on called for immediate discri.n nstion against purchases,
^ t ^ ~ eta The ''ritz sh consider the pending OCDY heavy electr
ct .cal,,,pqui azaegt core '"the most important s tizbject in economic relations
the United Kingdom since the institution of
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