CFEP DRAFTING GROUP ECONOMIC DEFENSE POLICY REVIEW THE CONSULTATIVE GROUP; A REVIEW OF MAJOR ACCOMPLISHMENTS AND BASIC PROBLEMS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP63-00084A000100130003-9
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 12, 2016
• Document Release Date: February 23, 2001
• Sequence Number: 3
• Publication Date: June 1, 1955
• Content Type: REPORT

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S E C R E T
CFEP RAFTING GROlTP
ECONOMIC DEFENSE POLICY-REVIEW
Staff Stud No. 13
(Draft, June 1, 1955)
The Consultative Group: A Review of Major Accomplishments
and Basic Problems
This draft of Staff Study No. 13, on "The Consultative Group: A
Review of Major Accomplishments and Basic Problems", prepared by Commerce,
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
Executive Secretary
Distribution
C~~ in Groun
DOC Declassification g& Release Instructions on File - No referral to DOC
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S E C R E T Staff Study No. 13
(Draft, June 1, 1955)
THE CONSULTATIVE GROUPS A REVIEW OF MAJOR ACCOMPLISHMENTS
AND BASIC PROB
Io Accomplishments of The Consultative Group
Origin of UoS, and International Security Export Controls
U.So strategic export controls toward the Soviet Bloc had their official
origin in the National Security Council decision of December 17, 1947. This
called for immediate U.S. export controls to the Bloc over comuodities which
were in critical short supply in the United States or which would contribute
to the military potential of the Bloc. On March 1, 1948 the Department of
Commerce established export license controls over U.S. exports to Europe.
The initial directive to seek similar selective export controls (i.e.,
parallel action) from the principal alternative sources in Western Europe
and Canada came in the Cabinet decision of March 26, 1948. Previously,
Section 117(d) of the Economic Cooperation Act of 1948 required limited
parallel action,
On August 27, 1948 the U.S. Special Representative of ECA in Europe
(OSR) was instructed by ECA and State to open discussions with ERP governments.
At first, bilateral negotiations were carriec' on by the ECA Missions in the
various OEEC countries. Early in 1949 discussions between the United
Kingdom and France led to the formulation of an Anglo-French List, based on
but much less comprehensive than the U.S. embargo and quantitative control
lists (IA and IB). In July 1949 a U.S. - U.K. technical meeting took place
in London concerning the differences in these lists. Similar bilateral
discussions were held with France and the Netherlands in August 1949.
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By mid-1949 it was recognized that a multilateral approach was required.
During October 1949 several informal meetings were held in Paris to exchange
preliminary views by the U.K., France, Italy, the Netherlands, Belgium, and
the U.S. An informal Consultative Group (CG) was formed. Denmark and
Norway were invited to attend as observers at the next meeting in November
1949, at which time it was decided to continue the CG on a permanent basis.
In January 1950 the CO met again., with Canada also attending, and agreed
to establish a permanent Coordinating Committee (COCOM) and to invite the
German Federal Republic to participate,
In February 1950 COCOM held its first meeting. Its formulation of
strategic lists and basic principles were approved by the CG in May 1950.
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On November 19, 1952, as a result of the active hostilities by Communist
China and its clear identification with the Soviet Bloc, the CG directed
COCOM to establish a permanent working group to be known as The China
Committee (CHINCOM). This group held its first meeting on November 29, 1952.
Organization
The Consultative Group (CG) presently comprises fifteen participating
countries (PCs).- Belgium9 Canada, Denmark, France (
Tunisia Greece, Italy, Japan, Luxembourg, the
Netherlands, Norway, Portugal, Turkey, Western Germany, the United Kingdom
Hang Kong), and the United States. Repre-
sentatives of participating governments hold the rank of Minister or Head of
Delegation. The CG meets from time to time to consider general policy matters,
to set the general frame of policy reference, and to review recommendations,
unresolved issues and activities of COCOM and CHINCOM.
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The Coordinating Committee (COCOM) consists of representatives of the
CG participating governments, It is permanently established in Paris as
the working committee of CG to consider and recommend specific control
measures.
The China Committee (CHINCOM) provides rticipation in its delibera-
sw
tions and decisions by all PCs t the ou set, however, in order to assure
speedy handling of problems and to avoid unnecessarily burdening some
delegations with increased representation, it was felt advisable to limit
the permanent members to Canada, France, Japan., U.Ko and U.S 0 CNINCOM is
responsible for the development and implementation of the detailed aspects
of security export controls and policy relating to Communist China, Its
recommendations are referred to COCOM, CG, or direct to governments,
depending upon the subject matter and the committee's action, Matters which
involve the Soviet Bloc as a whole, including Communist China, are dealt
with by COCOM,
Major Accomplishments
Some of the major accomplishments of the Consultative Group and its
subsidiary committees have beens
1. Establishment and maintenance of uniform selective security export
controls and basic policies
principles and criteria. These are voluntarily
and cooperatively arrived at; provide an effective foundation for mutual
effort; and buttress the ability of the cooperating countries to withstand
successfully the trade tactics of the Soviet Bloc and criticism of controls
within their own countries. No restraint is placed on the privilege of any
PC to exercise more stringent controls,
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2. Establishment and maintenance of a central forum for exchange of
information and discussion of mutual control problems. The CG organization
enables the cooperating governments to bring their collective judgment to
bear on problems related t o security export controls; to marshall their comm
bined intelligence on commodity, security and economic issues; and to review
on a continuing basis Soviet Bloc trade trends and tactics.
3. Establishment and maintenance of basic lists of strategic commodities.
From the rather humble Anglo-French list there have now been evolved by the
CG structure a series of basic control lists covering: (a) atomic energy
embargo items; (b) munitions embargo items; (c) other embargo items; (d) quan-
titative control items; (e) surveillance items; and (f) special China embargo
items. These lists have grown and contracted With changes in the international
situation. The commodity definitions on these lists have undergone revisions
found to be appropriate in the light of continuing review.
1. Establishment and maintenance of enforcement measures and controls,
known as ancillary controls. The principal types of multilateral ancillary
controls are:
a. Import Certification/Delivery Verification System (IC/DV). This
is a procedure for assuring that items on the first four lists enumerated
above will be imported and actually brought under the export, control authority
of the importing country. The effectiveness and simplicity of this procedure
has led to its acceptance,, wholly or partially, by British and French
Dependent Overseas Territories., Austria, Yugoslavia, Hong Kong, Macao, Belgian
Congo, and 'Union of South Africa,
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b, Transit Authorization Certification Scheme (TAC)O This is a
method for assuring that items on the first three lists enumerated above
exported by a participating country will not be permitted to pass through
another participating country to the Soviet Bloc without a specific certifi-
cate., authorizing such transshipment, from the original exporting country.
Non-PCs are 't g invited to use this device and the following have already
accepted it: New Zealand, Australia, Nyassaland, Gibraltar, Cyprus, French
.Morocco, Spain, Peru and Bolivia,
c. Transaction or Financial Controls. This provides govermental
regulation of nationals of a cooperating country in fi4oial transactions
for the sale or disposal of specified items on the first four lists enumeer-
ated above to the Soviet Bloc, directly or indirectly, where he `goods-
involved are situated outside the jurisdiction of the government exercising
the control, The U.S. Treasury Department has maintained this type of
control since June 1953. The control became effective in Canada on June 1,
195 and in the United Kingdom on January 7, 19550 , Other cooperating govern-
ments are expected t instil to similar controls as soon as legislative or
A
other legal rer ,r cents are completedo
d, Other procedures and devices for improving the effectiveness
of strategic export controls. PCs exercise additional controls, not neces-
sarily uniform in detail or extent, in compliance with mutually afire
principles to make their commodity export controls effective, These include
controls relating to transportation, technical data, parts, and anti-diversion.
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5e Recent Revision and Reformation of International Listso During the
first half of 19., the CG participating governments undertook the vast and
difficult task of overhauling the existing international strategic lists to
the European Soviet Bloc, This was motivated to a great extent by the
general feeling among the CG nations that the existing control lists should
be adjusted to take account of current conditions and factors., such as:
the probability of a long period of tension short of war; the desirability
of expanding non-strategic trade with the Hloc in order to provide a sounder
basis for peace; the need for increased trade by friendly countries arising
from their greater internal strength and mounting production surpluses; and
the practicability of achieving more effective controls over a shorter list
of commodities with less complex definitions. The changes which became
effective August 269 1954 included (a) net reduction of international
embargo lists from about 260 items to about 170.. of quantitative control
list from about 90 items to about 20a and of surveillance list from abMt
100 items to about 60; (b) recofinitirn and reclassification of a ntnaber of
items; and (c) addition of a few items. Controls toward Commmaaist China
were not changed. No changes were made in the control of munitions and
atomic energy items.
Since that time., tniform. international lists of munitions and atomic
energy items were agreed upon as annexes to the existing embargo lists,
in addition., there has been an editorial codification of the Special China
Embargo List and some adjustments of administrative rather than substantive
nature with respect to the implementation of that list o L sL
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I1. Basic Problems and Differences of Viewpoints in the
Consultative Group
Conflict between Commercial and Security Interest
The United States has not been dependent upon foreign trade to the extent
that some free world nations have been. U.S. trade., including Lend-Lease aid,
with the Soviet Bloc has never represented a very significant proportion of
total U.S. trade. 2/ In the United States, national security was and still
remains the dominating influence in the trade picture. This has not been the
case with most other free world countries., many of whom considered it vitally
important to temper security aspects because of commercial trade necessities
or interests.
When the Consultative Croup was organized in 1949?50, the Soviet Bloc's
designs and actions were clear to free world nations. Western European
nations were struggling to recover from the ravages of World War II, attempt-
ing to stabilize their economies and to overcome scarcities of goods. Some
were dependent upon the Bloc as a source of needed materials (e.g., grains,
lumber, coal) and as a market for some indigenous products. Marshall Plan
assistance from the United States provided valuable aid and made easier
their adherence to U.S. security export control policy. For the most part,
this subjugated but did not eliminate their commercial interests.
1/ In 1917, U.S. exports to the Soviet Bloc countries, including China,
totalled $693.5 million (Eastern Europe $339.9 and China $353.6); U.S.
imports from these countries totalled $224.9 millions (Eastern Europe $108.2
and China $116.7). In 1954.9 U.S. exports to Eastern Europe were $6 million
and virtually none to Commune
were $420 million an
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Today the general economic picture has changed,, Despite the falling
off of American economic assistance., Western European production has in-
creased to a point where exportable surpluses are becoming increasingly
available and competition for Western markets has intensifLedo Despite the
recognized uncertainties of East-West trade., there is a growing active
desire to find markets behind the Iron Curtain. Latent commercial interests
are again coming to the fore
The consequence of these developments has been a passive., sometimes out-
spoken resistance to expansion of security trade controls$ and a rising
pressure for reduction of restrictions on East-West trade. The recent re-
vision of the international strategic lists went a long way toward alleviat-
ing this situation., but its further manifestation in connection with trade
with Comnunist China is probably delayed only by reason of the exigencies
existent in the present Asiatic situation and the strong UoS0 views on
the subject,
Differing Interpretations of Control Criteria
It has been and still is the United States' objective to deny or limit
exports to the Soviet Bloc in Europe of goods which would contribute signif-
icantly to the war potential of the Soviet Bloc., and to maintain an embargo
toward Communist China,, CO participating nations agree to control goods of
direct military importance to the Bloc., but do not generally agree that goods
basic to the Bloc's industrial., defense-s'apporting effort should be
similarly controlled. Nations adhering to the UN China Embargo Resolution
do not feel impelled to maintain a complete embargo toward Communist China.
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These diferent viewpoints lead to differences in interpreting the
control crite a and assessing the strategic character of items proposed
for control. in large measure, they are responsible for the interminably
long and difficult negotiations concerning some of the residual items not
disposed of in the recent list revision (e.g., metal rolling mills, ships,
etc,), At present, this presents an important problem for the U.S. because
it makes it extremely difficult, if not impossible, to justify embargo of
certain items we feel are highly strategic but which many PCs contend do not
meet their interpretation of the criteria.
Differential Levels of Control Toward European Soviet Bloc and Communist China
The armistice in Korea afforded an opportunity for a number of free
world nations to relax their trade controls toward Communist China and to
build up pressures for a general reduction of the level of control toward
China. They were restrained from actively pressing such proposals by the
outbreak of hostilities in Indo-China, the political hassle over UN prisoners
of war held by China, and the explosive Formosa situation. It is apparent
that, when some or all of these tensions abate, there will be an insistent
clamor for relaxation of strategic controls toward Communist China. Mean-
while, although CG participating countries have agreed to try to avoid
significant frustration of China controls by reason of exports to Eastern
Europe, it is not evident that there is a concerted effort toward this end.
Consequently, the future outlook indicates that the United States
must prepare itself for a concerted drive by free world nations to relax
China controls. Of immediate concern is the special problem posed by Japan.
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Problems Arising from Special Count and Geographical Situations
It would be a mistake to assume that all differences in viewpoints are
between the United States and all other CG members. Two outstanding examples
illustrate this.
West Germany does not regard East Germany in the same light as the rest
of the Soviet Bloc. Strong political, enthological and emotional in-
fluences make the Western Ge willing to concede that the division of
their country is more than a temporary, separation. Hence, they feel that
continued interzonal trade is vital, even in some strategic goods. Other
CG participating nations adhere-to the principle that East Germany should be
treated as part of the Soviet Bloc. Although this German interzonal trade
problem has not been officially brought into the open, some PCs are aware of
it and developments may force official review of the issue in the CG structure.
Japan is the only Far Eastern member of the CG, although Hong Kong and
Macao follow in varying degree the control policy of the United Kingdom and
Portugal. Japanvs geographical situation and historical trade with China
cause it to react differently toward China trade than do other CG countries.
During the long period of American post-war occupation of Japan, that country
exercised controls toward China comparable to those of the U.S. but much more
stringent than those of other CG countries. Since the peace treaty, Japanas
controls have been brought into line with those of CG countries other than
the U.S. Nevertheless, Japan's. situation has been exacerbated by trade im-
balances, difficulties in attaining economic stability, and more recently by
the revision of the international lists. Japan contends that the latter action
operated to her disadvantage because it expanded opportunities for trade by
Western European countries with Eastern Europe - even to the extent of pro-
viding some transshipments from Eastern Europe to China o without affording
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similar benefits to Japan which,, because of geographical location, is unable
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be adhering to the CG/CHINCOM policy but seems to be maximizing her attempts
to trade with China by exploiting exceptions and loopholes in the China
controls. When Japan finds a propitious opportunity, she will probably
demand a liberalization of the China controls. It is likely she will get
much support from other CG members.
Participation in CG Structure Activities
The United States maintains a full delegation in Paris, including
permanent representatives to CG,and COCCI/CHINCOM. Most control proposals
have been submitted by the U.S. and a considerable part of the technical,
economic,, political, military, and intelligence support in CG/COCOM/CHINCOM
has been provided by Washington. However, most participating governments
do not maintain comparable permanent delegations in Paris, and contribute
little or no technical or intelligence support. Most participating govern-
ments confine their activities to matters which affect their own particular
interests.
This minimal participation in CG structure activities by most PCs places
the U.S. at a disadvantage in marshalling intelligence and gaining support for
security export proposals. It tends to set in motion a process of deteriora-
tion or growing indifference toward CG structure activities. Consequently,
it would appear vital for the U.S. to seek methods of overcoming such apathy
in order to maintain and increase the effectiveness of this valuable multi-
lateral operation.
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PhiloeopF r Toward ,East-West Trace
Last year Sir Winston Churchill emphasized the philosophy of trade as
an alleviator of tensions between East and West, The United States has not
disputed this philosophy, but has cautioned that the Kremlin and the Soviet
Bloc utilize foreign trade to achieve political ends, to farther their
economic penetration of Western countries, and to promote the longer range
`objectives of Commmnism. The problem is not so much one of opposing view-
points between the U,S0 and other CG participating countries as it is one
of maintaining constant watchfulness lest the desire of the free world to
develop peaceful trade as a basis for ultimate peace between East and West
might become a springboard for the accomplishment of Communist unfriendly
designs.,
Different Evaluations of
In the free world there are some who view existing tensions as a battle
between thie Soviet giant and the American colossus, Some are inclined to
dismiss hostile designs and actions of the Soviet Bloc as purely defensive
or merely competitive in an overall economic contest. The United States
has tried, particularly in advocating COCOM discussions of Soviet Bloc trade
trends and tactics, to emphasize the long-range objectives of the Communists,
which are antagonistic to the ideology and economic freedom of Western
countries, The skill of the Co uni sts in shifting attention from their
ultimate objectives by short-term peaceful tactics should not obscure their
fundamental design. Admittedly, it is difficult to determine the extent
to which this difference of viewpoint affects the approach of other govern-
ments to security trade controls or gives rise to some of the issues and
problems which manifest themselves in the day-to-day operations of COCOM and
CHINCOM.
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Resentments Against the United States
There are many evidences of Western solidarity and. 'unity. Not the least
of these is the existence of the CG structure, Notwithstanding, some PCB
harbor resentments toward the United States which tend, in varying degree and
at different times, to make the cooperative control effort more difficult.
The most recurrent and apparent resentment by CG participating governments
against the United States is in connection with our commercial policy.
Denmark alluded to it in strong terms at the CG meeting in July 1954. This
resentment follows the thesis that the United States doee not suffer by
cutting downIrade with the Soviet Bloc., whereas other free world countries
who do so are placed under serious economic disadvantages because their
access to markets within the free world, especially in the U.S., is
restricted by offcial trade barriers.
his leads to attacks on U0S. pro-'
tective tariffs, the Btu American Act, the regulations requiring use of
American vessels to carry aid cargoes, U.S. customs proced'.res, etc. This
form of attach against the United States serves to remind us of the need for
remaining a "good neighbor", doing what can be done to remove trade barriers
within the free world orbits and generally eliminating minor harassments
which might inhibit the effective multilateral implementation of security
export controls,
Unanmit1
The CG structure operates vender a rule of unanimity, No policy, can be
adopted or action taken by the CG structure if a single PC objects. Since
there are fifteen PCs, including the U.S., it is apparent that multilateral
decisions are not easily achieved. Strong negotiating efforts by the U.S.
are generally required. It has been necessary to approach certain PCs
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bilaterally and some at top Governmental levels. In recent negotiations.,
the U.S. has found it necessary to isolate a single objector in order to
bring the collective judgment of all other PCs to bear. This method has
succeeded in a number of instances, but not always. It must be borne in
mind that the rule of unanimity preserves the sower rights of each PC.,
,zn including the U.S., and is indispensable to the existence of the CG organiza-
tion. On the whole, this rule cannot be regarded as a paramount obstacle
to the attainment of our multilateral control objectives, despite the
egressions of concern it evokes in some quarters when progress appears
slower or less complete than some would desire.
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III. Appraisal and Conclusions
Appraisal
The establishment of the CG organization was a precedent-shattering event
of considerable importance in this history of world affairs. It was not
easily or quickly achieved. The task of overcoming some of the obstacles
blocking this achievement was assisted by the post-war economic plight of
the Western European nations and the advent of the U.S. Marshall Plan.
Unwitting help came from some of the antagonistic actions of the Bloc.
Fundamentally., however, the creation of this voluntary., cooperative, multi-
lateral organization was made possible because of two primary reasons. (1)
the fact that the cooperating governments and their peoples generally shared,
albeit in varying degrees and with reluctance in some instances, our mutual
security objectives; and (2) thefact.that the United States proceeded in a
firm, determined but cooperative manner to explain and win adherence to the
common security policy.
The continued existence of the CG structure as a reasonably effective
instrument to carry out the security control objectives is attributable to
the continuing support of these objectives by the U.S. and the cooperating
nations, to the flexibility and, adaptability of the program, to the soundness
of the underlying principles, and to the wisdom and voluntary character of
the decisions on day-to-day operations.
This is not to say that the multilateral operation has been completely
successful or fully effective. There have been some failures, some defici-
encies. There are additional controls, commodity-wise and enforcement-wise,
which the United States still desires. The problem of different levels of
controls toward the European and Asiatic areas of the Soviet Bloc is becoming
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more vexatious. There are old and new differences of viewpoints among the
cooperating governments, particularly with respect to interpretation of
control criteria, which affect the vigor and scope of the collective control
system.
Nonetheless, it requires no great stretch of imagination to conjecture
what the situation would have been, and would be now, if there were no multi-
lateral control structure. There would be no concerted security export con-
trol effort by free world nations, no uniformity of policy and activities.
Free world countries would actively compete for markets behind the Iron and
Bamboo Curtains. The Soviet Bloc would be able to play off one free nation
against another with its trade tricks and practices. Without the CG structure.,
the United States might stand today virtually alone, seeking vainly to main-
tain strategic controls toward the Bloc while other friendly countries
rendered these controls inutile by supplying comparable strategic goods to
the Bloc.
Despite its-inherent deficiencies and recognized weaknesses, the CG
organization has had an impact on the Soviet Bloc, (Of course, export controls
per se cannot prevent the build-up of Soviet Bloc war potential and economic
strength; at best, they can only contribute toward inhibiting the extent to
which the Bloc can build up its military and industrial might and the rapidity
with which it does so) In a material sense'then the CG organization has
,deprived the Bloc of some strategic goods, retarded its build-up of military
and industrial potential, and created problems for Communist military and
economic planners, in another and perhaps even more important sense? the CG
structure has stood as an outstanding symbol of free world solidarity and
strength, giving cause for serious reflection by Communist leaders.
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In looking toward the future, it is appropriate to take cognizance of
the problems and differences of viewpoints which continue or are developing.
Awareness of these should help to indicate the direction which future U. S.
efforts should take in seeking to achieve more fully our security objectives,
to improve the effectiveness of security export controls, and to preserve
and maximize the benefits of multilateral action.
Conclusions
1. In the existing CG organization, we have built at considerable
effort a reasonably sound and effective multilateral structure and control
operation.
2. In general, the success and accomplishments of the CG organization
more than compensate for certain deficiencies and weaknesses.
3. While the CG structure has not prevented the build-up of Soviet Bloc
military and industrial potential - and was never conceived as being able to
do this through security export controls alone - it has hindered the Bloc in
attaining military and economic growth much sooner and much more fully.
4. The existence of the CG structure symbolizes free world solidarity
and strength, valuable to maintenance of Western unity and collective prose-
cution of democratic objectives, and disturbing to the designs and purposes
of Communist leaders.
5. Future U.S. efforts should be directed toward the preservation and
improvement of the CG structure, rather than toward seeking alternative
methods for multilateral control cooperation.
6. Particular attention should be given to study of the more important
problems and differences of viewpoints which continue or are developing in
order to eliminate or minimize such impediments in the way of fuller cooper
ation and more effective operations.
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