Third Annual Progress Report of the Economic Defense Intelligence Committee 1 July 1954 - 30 June 1955

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01203A000100060004-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: November 9, 2016
• Document Release Date: July 20, 1998
• Sequence Number: 4
• Publication Date: October 11, 1955
• Content Type: REPORT

Approved For Release 1999/09/0
P79-01203A0001R8099AA5
?W 11 October 1955
INTELLIGENCE ADVISORY COMMITTEE
Third Annual Progress Report of the
Economic Defense Intelligence Committee
1 July 1954 - 30 June 1955
The Third Annual Progress Report of the Economic Defense
Intelligence Committee (EDIC), circulated herewith for noting,
will be placed on the agenda of an early meeting of the IAC.
25X1A9a
Acting Secretary
Approved For Release 1999/09/
DP79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-01203wA000100060004-5
m .
WO.O.ge DEP'P ISE INTELLIGENCE
,Jar 1954 -34June 193
Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
 Approved For Relea 1999/09/02 : CIA-RDP79-012033AA000100060004-5
I.
II? ryumnary of Activities.. 0 0 0 0 0 o 0 0 ? 600900 ? ?
III. ERIC Activities: July 1954 - June 1955.
Introduction ? ? o ? o 0 ? ? ? ? ? , ? ? e ? ? 0
2
A. Reports and Reviews. . ? ? . ? ? ? 0 . e ? o . 0 e . 2
Be Efforts to Improve Collection. . ? : . . ? ? . 4
Co Efforts to Improve Dissemination e e , 5
D. Assistance in Downgrading COCCt4 Documents. ... . 6
E. Programming of Research. Requirements . .
IV* Future Activities. . .
TABS
List of Completed FDIC Studies and Reviews . , ,
B. List of Cases Pending, 30 June 1955? . ?R . . . .+
.List of Cases Closed,, Other than by Completed
Study,
? e ? ? ? e . 0 . e . ? o ? ? 4
10
List of All Information Documents Distributed. . .. 11
Special Activities ? . ? . ? ? . ? .". . ? . ?
Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
 Approved For Release 1999/09/02 :CIA-RDP79-01203 4000100060004-5
EDIC/R-2
Control No. 23.67
ECONOMIC DEFENSE INTELLIGENCE CCMITTEE
THIRD ANNUAL PROGRESS REPORT
l July 1954 - 30 June 1955
INTRODUCTION
The Economic Defense Intelligence Committee (FDIC), forwerly t4s
Intelligence Working Group (IWG), c,,mpleted three yearn of ope.'ation
on 30 June 1955. The name "InteliiLence Working Group" .eras changed do
"Economic Defense Intelligence Committee" on 26 October 1954 to reflect
mole accurately the mission and fractions of the unit. The, FDIC
continues to be resp.nsibls under its Terms of Reference % for arranging
the mobilization. of intelligence resources and data to meet the needs, of
the Economic Defense Adv.1.sory Committee (EDAC), for reconending
measures designed to improve the collection of intell_genr-e for economic
defense purposes, and for providing a forum for production and review of
intelligence to meet the requirements of the economic defense rrogram.
II. SUMMARY OF ACTIVITIES
During the year.Intelligence support of EDAC operations ruched a
higher level of volume and quality than ever before. For the most par?''
however, this support was provided directly, in each case, by the agency
primarily respon3ible for the intelligence required (as outlined in
DCIL 15//1) and wac not fully reflected in the activities of EDIC.
The IWG was established at the rtquest of the Direc.tor of Mutual
Socurity and the Secretary of State, and with the approval of the
Director of Central Intelligence and the Secretary of Defense, Its.
Terms of Reference were approved by the TAC on 25 July 1952
(IAC-D'-53/1, revised by IAC-D-53/3.1 of 25 February 1953).
Approved For Release 1999/09/(!~^!!!~h79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-01203 A000100060004-5
The need for expeditious enforcement action on diversions of
strategic goods to the Bloc led to the establishment, in January 1954
of the Diversion Control Net (DCN). As a part of this effort CIA, in
accordance with EDIC recommendations, was assigned the central responsi-
bility for direct and rapid transmission of current intelligence to the
DCN. For similar reasons of urgency, "commodity" intelligence in support
of the 1954 COCOM list review was furnished directly by the individual
producing agencies to the Joint Operating Committee rather than through
EDIC. Several other interagency arrangements were made at the initiative,
of the economic defense community to provide direct intelligence support
by individual agencies without FDIC coordination. The most notable of
these was the preparation of some 20 staff papers for the "Dodge" Council
review of U.S. economic defense policy. In general, neither the action
agencies nor the intelligence agencies have felt in these cases that the
contribution of substantive intelligence coordination was sufficient
to justify the time and effort involved.
With the full realization that economic defense requirements for
intelligence reports were being met very satisfactorily through the
direct contributions of individual agencies, EDIC, while producing only
a relatively small number of coordinated reports, concentrated its efforts
on.other problems. As a consequence, the major accomplishments of EDIC
centered on efforts:
a. To review and comment on selected reports of individual
agencies;
b. to exchange information on the economic defense support
activities of individual intelligence agencies;
to improve the timely collection and dissemination of
information;
d. to assist in the downgrading of COCOM documents; and
e* to program intelligence research jointly with policy
and action agencies.
III. EDIC ACTIVITIES: July 1954 June 1955
A. Reports and Reviews
1. General
During the fiscal year there was a marked decrease in the.
number of coordinated reports prepared by EDIC in relation to the previous
period, although a number of reports were reviewed and by the and of the
fiscal year a number of additional reports were nearing completion.
(TABS A, B and C) Reports currently in process cover several problems
of importance to the policy agencies, such as Bloc uses of boron compounds
2-
Approved For Release 1999/09/0 9-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
for rocket, missile and jet fuel, and pending Bloc shipbuilding orders
with the. West. In addition to~this coordination and review of reports,
EDIC continued to distribute and discuss selected papers prepared by
individual agencies. (TAB D)
2:. Su oort for Commodity Controls
In the spring of 1954 a comprehensive review of inter-
national security list ratings was undertaken in COCOM. EDIC facilities
were not employed for the production and coordination of intelligence
required for this review because of the "crash" nature of the operation;
however, following the list revisions of 16. August, EDIC set out to
assess the adequacy of the intelligence support which had been provided.
EDIC considered also the establishment of a permanent record of the
intelligence contributions made to JOC during the list review but
concluded that such an interagency effort was not warranted. CIA subse-
quently compiled a "black book" of such "spot" commodity intelligence
contributions and noted that this compilation would be available to the
entire intelligence conununity.
3. Support for Analysis of Soviet Trade Tactics
This Committee's previous annual report indicated EDIC
interest in appraising Soviet trade tactics and described the
Consultative Group resolution of April 1954 to devote increased
attention to this subject. At the request of FOA/MDAC, OIR/Stars
prepared a paper on Soviet Bloc exportation of petroleum. This paper
was reviewed in FDIC and CIA/ORR subsequently furnished additional data
incorporating estimates of future Soviet capabilities for production
and export of petroleum and petroleum products.
Another aspect of the trade tactics problem occupied EDIC
attention during April and May. CIA suggested the need for examining
the pattern of Soviet Bloc exports of capital equipment and industrial
materials to the West. ERIC undertook to review such trade with a
view to detecting possible significant changes in commodity composition,
amount, or Western countries involved.
-3-
Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
 Approved For Rel aerie 1999/09/02 : CIA-RDP79-01203A000100060004-5
tale
B. Efforts to Improve Collection (TAB E)
1. General
EPIC has sought continually to improve collection of
economic defense intelligence needed for purposes of conarrodity
negotiations, trade policy (teterminations, and implementation of
enforcement measures. It will be recalled that rational policy
places increased emphasis on improving the availability and utili-
zation of current intelligence in matters relating to enf orcem~int
of free world controls. EDIC has a special mission in this field
since under its Terms of Reference it is r:sponsible fc'r recommending
to appropriate agencies collection requiremeLts designed to fill
specific gaps in available intelligence.
Central Intelligence Age:_icZ - Surveying he status of
intelligence collection, EDIC agreed to April discussions that
CIA collection of enforcement intelligence was of major
importance in this field. With this in mind, CIA took certa..n
important steps to strengthen field collections arrangements
and collection guidance in order to improve its support to
thR policy and action agencies. Concurrently, an Economic
Dense Intelligence Reporting Guide was prepared as a means
of informing appropriate Agency officials of the nature and
scope of intelligence information which is needed to support
U.3, economic defense programs and policies.
Department of Defense - In April 1954 the SecretaMy of
Defense hart requested the Secretaries of the Aemy, Navy and Air
Force (and other Defense elements) to assist OSD (International
Security Affairs) ''in connection with multi].teral consideration
of East-West trade control problems." In August 1954 he further
requested an indication of the contr.bation which the several
elements.of the Department of Defense could make to the various
projects in the export control proorn.
In response to this directive, the three military intelli-
gence agencies prepared intelligence collection guises for their
respective attaches abroad, which outlined the U. 5, economic
defense program pertaining to East-West trade controls and focused
attention on reporting intelligence related to this program.
Approved For Release 1999/0 _ : 79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
2. Surveillance of Decontrolled Commodities
By July 1954 it was apparent that action agencies would
need information on the movement of decontrolled items to Soviet Bloc
destinations, in order to assess the effects of decontrol on the export
control program. It was considered important to watch such trade to
determine its nature and magnitude and the benefit derived by the
Soviet Bloc economy. The significance of the problem was highlighted
by the placing of large Soviet orders in Western countries for copper
wire and boring machines.
In view of the evident reluctance of some COCCI members
to report their exports of unlisted commodities to the Bloc, an EDIC
subgroup was assigned the task of determining which decontrolled items
moving in West-East trade should be kept under surveillance and of
devising ways and means of obtaining information on such trade. At
the request of this Subgroup, the Joint Operating Committee (JOC)
prepared a list of significant items and the Department of Commerce
furnished the Department of Defense with the names of foreign manu-
facturers of the items on the JOC list. Defense undertook to explore
the possibility of obtaining information on free-world exports of.
listed items from any firms on the Commerce list which hold MDAP
contracts, but reported that Defense personnel are placed in MDAP
plants for the sole purpose of expediting production, and have a very
limited capability for reporting trade information. The Department.
of State will consider the desirability of special reporting ar-
rangements on selected items of particular importance.
C. Efforts to Improve Dissemination (TAB E)
1. Current Intelligence
The intelligence process involves not only collection of
information but measures to insure that information once collected is
made available to action and policy agencies. EDIC determined. that
through such mechanisms as the Diversion Control Net (DCN), enforcement
intelligence is adequately collated, analyzed and transmitted from
intelligence to action agencies. EDIC"s problem was. to determine whether
dissemination of current information reports other than those required
for enforcement purposes was being promptly and effectively accomplished.
After a series of discussions on the subject, EDIC concluded that
distribution of intelligence from CIA and State to action agencies was
already being adequately handled. Moreover, it agreed that adequate
Approved For Release 1999/09/ -01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-012033A000100060004-5
requirements for distribution of intelligence had been submitted by the
Departments of State and Commerce to the military intelligence agencies.
However. the military services indicated that they had not received the
requirements of FOA/MDAC. As a result of this EDIC survey these require-
ment3 were promptly transmitted.
2. Shipper Intelligence
Another EDIC problem concerned ONI reports of ship
movements. Early in 1954 it was learned that owing to budget and
personnel reductions the publication and dissemination of such reports
by ONI had been delayed and was considerably, in.arrears. At the request
of MDAC, EDIC reviewed the requirements of the economic defense community
for shipping and cargo data (ref: IWG/AM-22 of 4 August 1954). At an
EDIC-sponsored meeting of 16 August ONI agreed to make monthly reports
on movements and cargoes of Soviet and non-Soviet registered merchant
ships, and on arrivals of all merchant ships in Communist Chinese ports;
to maintain central files of such information; and to meet, within its
personnel limitations, spot requests from EDAC for special compilations
and analyses of such information.
FDIC agreed that these allocations of activity were
consistent with IAC directives, which assign to ONI the bulk of responsi-
bility for this category of intelligence support. CIA's responsibility
in this field, and its collaboration with ONI in the production of
shipping and cargo intelligence, was acknowledged. It was noted that
the availability of cargo intelligence was still not adequate. Steps
have been taken in recent months to improve the exploitation of manifest
information, particularly with regard to cargo moving between Western
k,`urope and Communist China. In the meantime, ONI has resumed production
and distribution of its serial reports on vessel movements.
D. Assistance in Downgrading of COCCM Documents
In November 1954 the U.S. Delegation to COCOM suggested that
EDIC examine the intelligence implications of downgrading CG/COCOM/CHINCOM
documents to Confidential. It was recognized in ERIC, however, that each
individual agency was obliged to discharge this responsibility under its
own regulations and within its own area of competence. With a view toward
protecting intelligence sources and methods, CIA undertook to review the
documents. The EDIC Secretariat identified thirteen categories of docu-
ments,, established criteria to determine their classification as either,
Approved For Release 1999/09/02 CIA.-RDP79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-0120000100060004-5
Secret or C~nfidantiai, and with the issistance of apD.oprirtkj offices
in CIA complete! tL.e item-by-item review of 3,094 c, /COCA/~HTNCCE
documents. The CIA position of downgrading of CG,'000CM/C ''NCOM documentr,,
which was adopt ad by other responsible agencies, was transmitted to tae
Chairman of the Executive Commi-:.tee in ~iay.
E. Programming of Research Requirements (TAB E)
The s3cord annual IWG (ERIC) repcrt called attention to the
substantial improvement which could be effected i.i intelligence support
for economic defense If the Executive Committee would urdertake, in
collaboration with FDIC, advance programming and planning of ECAC
intelligence needs. At the request of the Acting Chairman of FDIC,
the Executive Committee in September zgreec, to develop :with intelligence
representatives a statement of research requirements, based in part on
:,he "S~hhelling" report and its evaluation. This statement could then
nerve as a basis for discussion and informal allocation in EDIC of
agency production responsibilities. Ate ad hoc committee (the Wright
Committee) consistir.g of both policy and intelligence representatives
was subsequently astahlished under State chairmanship to f:rmulate
research requireni3nts on the basis of the "Schelling" report entitled
"Soviet Economic Trends r,nd Their Implications for Last-West Trade."
Further EDIC action has been postponed pending completion by, the ad h.,?$
committee of.its project.
FUTURE ACTIVITIES
During the period of this report there has been an increasing
tendency for the economic defense community to deal directly with' indi-
vi.dual,intelligence components. Recognizing that there may be e,me
merit in this trend, ERIC nevertheless, felt that itb functions .should
be re-evaluated; and in April the Secretariat prepared a "Balance-Sheet
of FDIC Accomplishments and Shortcomings under its Terms of Reference."
In the light, of this evaluation, it is believed that in the coming
.year EDIC can make a greater contribution to the economic defense program
through more active participation in both the programming of intelli-
gence research for economic defense and in the production of coordinatod
intelligence. Furthermore, it is felt that EDIC can continue to serve
effectively as an intelligence "catalyst" in studying and recommending
solutions to problems of general interest to the economic defense
intelligence. community.
25X1A9a
Acting Chairman
Approved For Release 1999/09/02 : CIA7-..FIDP79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-0122003A000100060004-5
TAB A
List of Completed ERIC Studies and Reviews
1 July 1954 - 30 June 1955
Studies
Designation Title
IW /R-19 Second Annual Progress Report of
the Intelligence Working Group
Ih/m-32 "China's Trading Agency in East
Berlin"
Final Report on "Soviet Production
of Jeeps"
CIA/AFOIN/OIR Statement of "Strategic
Significance of Indium to the Soviet
Bloc"
Reviews
"West European Exports of Copper
Wire and Cable to the Soviet B],oa"
"Exports of Capital Equipment and
Industrial Materials from the Soviet
Bloc"
ERIC/C&88 3 "Soviet Trade Trends and Tactics:
Soviet Bloc Exportation of Petroleum"
Date Issued
1 September 1954
19 July 1954
17 February 1955
9 December 1954
December 1954
April 1955
December, 1954
Approved For Release 1999/09/027 I - DP79-01203A000100060004-5
 Approved For Relep 1999/09/02 : CIA-RDP79-012 3i 000100060004-5
TAB B
Cases Pending, 30 June 195
Deli gnnatian
EDIC Case 3
EDIC Case 4
ERIC Cape 5
FDIC Case b
EDIC Case 7
FDIC Case 8
FDIC Came 9
FDIC Case 10
Title
Soviet Trade Trends and Tactices Soviet Bloc
Exportation of Petroleum (Draft. Paper for COOM
Presentation)
French COCCM Delegate Proposal for Exchange of
Information on China Trade
Pending Bloc Shipbuilding Orders
Information on Firms Reportedly Purchasing and
Operating Ships for Communist Chinas (a) (b)
Export of Ortho-Toluidine to Communist China
Soviet Bloc Use of Borax Products (Boric'Acid and
Borate - I/L 3715) for Rocket Fuel and Other Jet
Plane Application
Intelligence on Trade in Decontrolled Commodities
Pattern of Soviet Bloc Strategic Exports to the
West
Approved For Release 1999/09/02: CIA-RDP79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-0011203A000100060004-5
~MAlb!!1~
TAB C
List of Cases Closed_ Other Than by Completed Study
1 July 1954 - 30 June 1955
Designation Title
VG Case 7 Collection Requirements on East-West Trade
IWC Case 36 Intelligence Data for U.S. Delegate to CHINCOM
IWC Case 56. Proposed Study of Soviet Trade Activities and
Tactics in Non-COCOM Areas
IWC Case 62 Intelligence Support for U.S. Delegation to
Eighth General Assembly of the United Nations,.
and Other International Forum
IWO Case 76 Intelligence on Trade in Decontrolled Commodities
(superseded by EDIC Case 9)
Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
-101~ 14w
^
Desi ,nat on
TAB D
List of All Information Documents Distributed
1 July 1954 - 30 June 1955
Title
Date Issued
4 August
11G/ID-33 OIR Intell&.gence Report on "Significance
of Soviet Bloc Petroleum Shipments to
the Free World, 1951 - 1954"
XMG/ID-34 ONI Contribution Sale of Tinker-vo
Communist China
IWG/IP35 ONI Contribution "Palish-Flag Merchant
Ships Believ3d Ownerl by Communist China"
IM/ID-36 OIR Intelligence Report on "Recent
Developments in Soviet~Bloc Trade with
South Asia"
IWG/1D-37 ONI Contribution - Shipment of Life
Belts to Communist China
EDIC/ID-i ONI Contribution - Communist China Trade
and Soviet Bloc Merchant Ships
EDIC/ID-2 Translavion of Article Revealing Finnish
Communist Plans to Use Eastern Trade fcr
Political Purposes
28 September
4 October
1.1 October
11 October
29 October
2 November
EDIC/ID-3 Soviet Procurement of Technical Data, 3 November
Models and Prototypes in the United States
.EDIC/ID-4 OIR Intelligence Report on "Current Trade 3 November
of West Berlin Electrical Industry with
East Germany"
EDIC/ID-5 ONI Contribution - Soviet Bloc Merchant . 10 November
Ships Bunkering and Loading Cargo at
T3 1ikpapan
-w-mm-AnL-rn on
Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
TAB D . (Cont'd)
Designation
EDIC/ID-6
OIR Intelligence Report on "West European
Exports of Copper Wire and Cable to the
Soviet Bloc"
Date Issued
1 December
EDIC/ID-7
EDIC/ID-6
EDIC/ID-9
EDIC/ID 11
EDIC/ID-12
EDIC/ID-13
ONI Contribution - Arms Shipment to
Communist China
Comments on Security Trade Controls
and Conditions in Soviet Satellites
ONIContribution - Finnish Merchant
Ships for Communist China
ONI Contribution - Soviet Bloc and
Non-Bloc Vessels Calling at the Port
of Balikpapan, Borneo
CIA Contribution - Russian Ship Orders
for Japanese Yards
CIA Statement on "Exports of Capital
Equipment and Industrial Materials
from the Soviet Bloc"
7 December
B December
10 February
18 February
17 March
27 April
NOTE: In addition to the foregoing listed Information Documents, a series of
OIR intelligence reports were distributed informally to FDIC.
Approved For Release I 999/0 .. 79-01203A000100060004-5
 Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
Special Activities
Exchange of information on economic defense support activities
of' th individual intelligence agencies.
Briefing on economic defense activities in CIA. (IWG/M-67)
A
.
B. Briefing on economic defense activities in OIR/State. (EDIC/M-1)
Co Briefing on the production and revision of MDAC fact sheets.
(EDIC/M-7)
D. Discussion of intelligence support for Economic Defense Officers
25X1 X7 E. Discussion of Bloc imports of
copper. (ERIC - & 7
Efforts to improve collectionn and distribution of information.
A. Approval of continued dissemination of EDIC/ID series. (EDIC/M-4)
B. Examination of the transmittal of current economic defense
intelligence to the EDAC agencies. (IWG/AM-4)
0. Transmittal of an alphabetical index of strategic commodities,
(EDIC/M-6)
D. Discussion of means to improve the receipt by action agencies
of information from military intelligence agencies.(EDIC/M-4)
E. Examination of the development of covert collection requirements.
(EDIC/M-B)
.F. Review of the problem of acquiring information on trade in
(EDIC/M-7
8 & 9)
dities
d
ll
t
d
,
.
e
commo
econ
ro
EDAC requirements for cargo and shipping data.. (IWG/AM-22 and
EDIC/M-1)
Proposed exchange of information with foreign governments.
A. Inquiry into possible multilateral or bilateral exchanges of
enforcement information with other COCCt4 countries. (IWG/4i--63)
25X1X6 B. Consideration of exchange of information on Communist China
trade . (EDIC/M-6)
- 13 -
Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5.
 Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5
-4w~ 1%W
TAB E (Cont'd)
Downgrading of COCOIK docume nts.
A. Discussion of the downgrading of CG/COCCK/CHINCCY1 documents
in accordance with U.B. security requirements. (EDIC/M-7 & 10)
Joint. programming of
agencies.
intelligence research with policy and action
A. Discussion of intelligence research program for EDAC. (IWC/M-67
and EDIC/M-9) .
Examination of criteria and intelligence support for possible
review of China Controls. (EDI04-4, 5 & 7)
Co Proposed FY 1955 OIR Economic Defense Staffing Program.
(IW/AM-26)
Program requirements to cover "External Financial Operations
of the Soviet Bloc" (EDIC/M.-5, 6 & 7)
E. Discussion of "Balance-Sheet" of FDIC Capabilities and
Deficiencies. (EDIC/M-6 & 9)
Approved For Release 1999/09/02 : CIA-RDP79-01203A000100060004-5