The Secretary of State informs the Officer in Charge that the Department
has been considering the advisability of abrogating the existing United
States Commercial Agreement with the USSR,1 which because [Page 1093] of its one-sided nature,
conferring no advantages on the United States, and because our export
controls are at variance with the provisions of the Agreement, is
believed to be disadvantageous to this country. It has been suggested
that abrogation of the Agreement, in order to offset the unfavorable
propaganda effects of such action, might be coupled with an offer to
negotiate a broader Treaty of Commerce and Navigation with the USSR
during the six months period before the termination becomes
effective.
The main lines of the initial thinking as well as the essential facts in
this matter are set forth in the two papers enclosed, entitled
“Abrogation of US–USSR Commercial Agreement” and “Possible Reactions to
American Proposal”.2 The Department
invites the Embassy’s careful consideration of the pros and cons of the
proposed course of action, summarized in these papers, and would
appreciate the Embassy’s comments and recommendations at an early
date.3
[Enclosure]
secret
Abrogation of US–USSR Commercial Agreement
4
The Problem:
Should the United States terminate its commercial agreement with the
USSR?
Background:
The United States and the USSR concluded a commercial agreement in
19375 under which
the Soviet Government, which controls the export and import trade of
the Soviet Union, undertook to increase substantially the purchase
of American products, while the Government of the U.S. undertook on
its part to accord to the commerce of the Soviet Union unconditional
most-favored-national treatment. This agreement was renewed on an
annual basis until July 31, 1942, at which time it was renewed for
an indefinite period subject to termination on six months’ notice by
either government.
In the earlier years of the agreement the Soviet Union presented
separate notes, along with each renewal, committing itself to a
minimum [Page 1094] total of
purchases in the U.S., varying from $30,000,000 to $40,000,000
during the forthcoming year. These notes were discontinued, however,
following the 19416 and 1942
renewals, with the result that the post-war obligations of the
agreement fell solely upon the U.S.
In addition, Soviet actions following the war have been such that the
U.S. has felt it necessary to impose export controls on all goods
going to Europe (including the USSR), and it is general information,
although not officially admitted, that the principal effect of these
controls has been to restrict very severely exports to the Soviet
Union and its Satellites. These restrictions, as Mr. Molotov7 pointed out on May 9, 1948, are completely at
variance with the MFN section of the
Agreement reading: “Similarly, natural or manufactured products
exported from the territory of the United States of America and
consigned to the territory of the Union of Soviet Socialist
Republics shall in no case be subject with respect to exportation
and in regard to the above-mentioned matters, to any duties, taxes,
or charges other or higher, or to any rules or formalities other or
more burdensome, than those to which the like products when
consigned to the territory of any third country are or may hereafter
be subject.”
The only security exception which the Agreement contains is not
sufficiently broad to cover our action in prohibiting exports to the
Soviet Union of certain items, normally considered to be of a
commercial character, while we at the same time permit their export
to other countries. The exception reads as follows:
“Nothing in this Agreement shall be construed … to prevent the
adoption of such measures as the Government of the United States
of America may see fit with respect to the control of the export
or sale for export of arms, ammunition or implements of war,
and, in exceptional cases, all other military supplies.”
Hence the U.S. finds itself in the difficult position of being party
to an agreement which imposes obligations without granting
compensatory privileges. In addition, conditions have so changed
that the U.S. no longer is able to live up to said obligations and
is vulnerable at any time to charges of failing to honor its solemn
commitments.8
Alternative Courses of Action:
- 1.
- Since the US–USSR commercial agreement is “subject to
termination on six months’ written notice by either
government”, and since the agreement is of no value to the
United States as it now stands, notice could be given of
official termination on the basis of the present
one-sidedness of the obligations, with a statement added
that the termination [Page 1095] is not intended to affect trade
between the two countries in any way, but merely to remove
from the records an agreement which has become outmoded with
the passage of time.
- 2.
- Notice of termination could be given with a paragraph
included stating: “The Government of the United States
affirms its willingness to discuss at any time with the
Government of the USSR the commercial relations between the
two countries on the basis of the program and policies
outlined in Article VII of the Lend-Lease Agreement between
the two countries.9 The United States
Government also wishes to emphasize that the present
termination in no way affects current trade relations
between the Soviet Union and the United States. The benefits
of most-favored-nation treatment, including the
generalization of tariff reductions granted by the United
States pursuant to trade agreements entered into under the
authority of the Trade Agreements Act,10 will continue to be extended to the Soviet
Union pending subsequent negotiations.”
- 3.
- Notice of termination could be given, coupled with an
offer to negotiate a broader Treaty of Commerce and
Navigation during the six-month period before the
termination became official.
- 4.
- The problem could be ignored until a further attack, based
on the agreement, against United States trade discrimination
was made. Then the United States could terminate the
agreement, saying it had long recognized the one-sidedness
of the arrangement, but had preferred to permit its
continuance as a gesture of friendship toward the Soviet
Union. But the Communists could not expect both to take
advantage of the commercial privileges afforded them
unilaterally in the agreement as they had been doing, and
then attack the United States because it felt it necessary,
in view of Soviet aggressive actions, to deny the USSR
certain goods deemed to be of war potential
significance.
Discussion:
The principal objection to a renunciation of the agreement at the
present time stems almost entirely from political considerations.
Previously, fear of the stoppage of manganese and chrome ore exports
by the Soviets was a factor which weighed heavily in the decision to
not take such action. The USSR, however, has already reduced
shipments of manganese to this country, and urgent steps, in
anticipation of a complete cessation, are being taken by appropriate
U.S. agencies to insure adequate supplies of manganese from other
more reliable sources. Such sources for chrome ore already exist,
and commercial considerations are, and have been, the main
motivation of both the U.S. and USSR in chrome transactions. The
blow to the United States program of stockpiling strategic materials
which the Russians might previously have delivered in retaliation to
the termination of the agreement would not now be as severe, and in
the foreseeable future could be discounted entirely. It should also
be noted that the [Page 1096] Soviet
Union requires no overt reasons for completely stopping trade with
the U.S. whenever such an action is desired; in fact such a course
would be more in keeping with their basic philosophy than their
present unusual policy of operating under a very negative trade
balance.
Political repercussions might still be of major importance, however.
The agreement is of no more value to the Soviet Union than it is to
the United States commercially, for the Russians are not receiving
unconditional most-favored-nation treatment, and what purchases they
are permitted to make could be consummated with equal facility if
the agreement did not exist. It is obvious, however, that the
Communists would not permit the occasion of the ending of the
agreement to go by without leveling barrages of propaganda against
the United States, most probably in line with the general policy of
accusing the U.S. of preparations for war, and, more specifically,
of preparing for even further discrimination against trade with the
Soviet Union and the countries of Eastern Europe.
While such accusations probably would fall on fallow ground in most
countries, if properly phrased they would receive attention not
usually granted Communist communiqués because of a tendency
prevalent in Western nations, particularly the U.S., to compare 1939
with the present day. Commentators are certain to point out the
precedent of U.S.-Japanese relations wherein the Japanese in the
summer of 1940 were given notice by the U.S. of the termination,
according to its six-months clause, of a Treaty of Friendship,
Commerce and Navigation dating from 1911.11 The Treaty
became officially void in January, 1941, and this was followed by a
freezing of Japanese assets in this country in July 194112—a
procedure, concerning the assets of the USSR, under active
consideration today among government agencies.
On the basis of the foregoing discussion, it is felt that Course of
Action (1) should not be attempted because of the propaganda
disadvantage in which it would leave the United States. We would
have made an overt move which would generally be interpreted as
antagonistic. Regardless of timing, the Soviets would be engaged
either in spreading cold-war peace feelers or threatening new
aggression, and our termination would act either as cold water or
gasoline, depending upon the situation. Under almost no conceivable
circumstances would the United States’ termination be accepted on
its purely economic basis. Course (2) combines the difficulties of
(1), plus bringing the ITO and the
Soviet Union into closer juxtaposition than would be good for the
ITO.
[Page 1097]
Course (4) leaves the United States in a vulnerable position both mow
and in the future regarding its policies on international trade.
Other governments are currently supporting us against discrimination
charges levied by the satellite countries, but it is generally
evident that they are not convinced that we are free of guilt. By
continuing in force an agreement pledging nondiscrimination (with no
valid security exception) and then rather openly denying equality to
the Soviet Union, the United States is setting a precedent which
logically could be recalled by other countries in the future when
their immediate aims called for temporary measures contrary to
obligations previously assumed.
Recommendation:
Course of Action number three should be implemented. The
counter-offer of a Treaty of Commerce and Navigation would be a more
important gesture of conciliation than the termination would be of
aggravation. The entire procedure could be presented by the United
States as yet another effort on its part to achieve a better
understanding with the USSR. While admitting that goods of war
potential have not been going to the Soviet Union, the U.S. might
state that there is no good reason why such items should be sent
another power which is constantly making provocative statements
against this country. Increased trade through usual commercial
channels, on the other hand, might lead to closer contacts between
the peoples of the two nations and greatly allay many of the mutual
suspicions which are doing so much to aggravate the present tension.
The former antiquated commercial agreement did nothing to foster
such a program; a Treaty of Commerce and Navigation would open
specific avenues down which friendly commerce in growing amounts
could travel.
The most immediate danger in such a course—Soviet acceptance—could be
ruled out by the phrasing used in the treaty. For example, the draft
Treaty of Commerce and Navigation between the U.S. and the USSR,
prepared by the Department in 1946,13 has as its
first article “Entry and activities of foreign nationals”. Paragraph
one of said article reads: “The nationals of either High Contracting
Party shall be permitted to enter the territories of the other High
Contracting Party, and shall be permitted freely to reside and
travel within such territories.” Article XI, Religious, intellectual
and mortuary activities, declares in paragraph 2 “the principles of
freedom of the press and of free interchanges of information” by the
High Contracting Parties, including guarantees to nationals and
corporations of freedom of transmission to the public of material
for radio and publication, must [Page 1098] be adhered to. Obviously, the USSR could not
sign a treaty incorporating such articles without a complete about
face of not only its international but internal policy.
Should the Soviet Union, in spite of the wording of the proposed
treaty, still accept it, and should the negotiations which would
follow indicate that the Russians intended to honor the commitments,
a basic objective of U.S. foreign policy would have been achieved
and an entire rephrasing of U.S. strategy toward the USSR be
necessary. Regardless of acceptance expectations, however, an
exception similar to Article XIX of the General Agreement on Tariffs
and Trade14 should be included in the proposed treaty so
as to exempt from the Treaty both present and future export controls
deemed necessary by the United States. Again it should be emphasized
that the Soviet Union’s acceptance is felt to be impossible.
In summation, if the present Commercial Agreement between the United
States and the USSR is allowed to continue, the United States gains
nothing from it and is constantly open to charges of discrimination.
While the Soviet Union could still level accusations against United
States export policy as being in violation of the principles and
purposes of the UN Charter, as has been done by Poland in the
General Assembly, and as will be presented by Czechoslovakia at the
forthcoming meeting of GATT, the
current United States policy is to minimize such charges when they
are presented and to justify the steps taken as in the interests of
United States national security. But termination of the Agreement
would remove the onus of direct treaty violation.
The termination of the agreement must be carefully timed and combined
with a thoroughly planned propaganda campaign by the United States;
and there are risks inherent in any action involving the USSR and
the United States. But it is felt that the simultaneous presentation
of the offer to negotiate a broader treaty of Commerce and
Navigation will take the sting out of the announcement of
termination of the Commercial Agreement, do away with the most overt
instance of United States commercial policy duplicity, and perhaps
bring forth a propaganda victory from what otherwise undoubtedly
would be a losing engagement.15
