460.509/3–2053
Memorandum of Conversation, by the Chief of the Economic Defense Staff (Goodkind)1
- Subject:
- Discussion on East-West Trade with Staff of Senate Permanent Subcommittee on Investigations
- Participants Mr. Vernon, EDT
- Mr. Goodkind, EDS
- Mr. Francis D. Flanagan, General Counsel, Senate Permanent Subcommittee on Investigations
- Mr. Robert Kennedy, Assistant Counsel, Senate Permanent Subcommittee on Investigations
On Friday morning, March 20, a discussion lasting about an hour and a half took place between the above four participants in the office of Mr. Flanagan, and at his request. The conversation ranged widely over the East-West trade field, the topics considered being mainly responsive to Mr. Flanagan’s questions. Occasional requests for information to be furnished were interjected by Mr. Flanagan, some out of a serious desire to obtain information, but some apparently with a view to observing reaction to the requests. The following records the main topics considered.
Mr. Vernon described the organization within the Government handling economic defense matters, noting briefly the responsibilities of the key agencies involved. Mention of the Economic Defense Advisory Committee brought a question from Mr. Flanagan as to whether minutes were kept of the meetings of this Committee, and when he was advised that there were such minutes, he said that he wanted to see all of them. It was indicated that he would have to turn to the Battle Act Administrator, as Chairman of this Committee, for any such request. Mr. Flanagan was curious to know who had responsibility over the COCOM Delegation, and the way in which this was handled, both before and after the shift to SRE, was [Page 944] described. Some stress was laid on the role of State as the negotiator, with the negotiating objectives, however, being agreed in EDAC or set by the Battle Act Administrator.
Mr. Vernon described the various lists employed in the economic defense field, with particular emphasis on the difference between primary and secondary strategic items. It was explained that there was no list which indicated the scope of the Battle Act Administrator’s interest under Title II of the Act. Mr. Flanagan was interested in the correlation between lists and identification of the items on the Battle Act embargo lists which do not appear on the international lists, or items on the U.S. embargo lists which do not appear on the Battle Act lists. On these questions he was referred to the Department of Commerce.
There was some discussion of the Battle Act as an instrument for achieving U.S. policy objectives in the economic defense field, and Mr. Vernon used the Danish tanker case, with which Mr. Flanagan was already familiar, as an illustration of the ineffectiveness of the termination of aid provisions as sanctions for export controls.
A substantial portion of the discussion was devoted to the topics of China trade and China shipping, and Mr. Vernon attempted to put these matters in some perspective by citing the various factors bearing on the significance of the trade and shipping being carried on, and by citing and explaining the positions taken by other countries involved. In the latter connection it was stressed that this Government did not necessarily agree with the reasons and that these positions were being stated only to indicate the negotiating obstacles encountered and the need on our part for substantial arguments to counter these positions if further controls were to be achieved. Stress was laid on the need for wholehearted cooperation in order to attain effective controls. Mr. Flanagan was interested in the participation of Western shipping in intra-bloc services, as well as in the China trade, and asked the State Department representatives to furnish a description of the shipping controls cited by them as having been put into effect by Panama, Honduras, Costa Rica and Liberia, and also the text of the legislation just adopted by the Government of Greece.
Mr. Flanagan inquired about the shipments of rubber by the United Kingdom to the Soviet bloc, indicating his feeling that such shipments frustrated any attempt to cut off rubber to Communist China. Mr. Vernon described the U.K. position as to the limitations put on these shipments and their reasons for continuing such shipments. Mr. Flanagan asked the State Department to furnish a full account of the discussions or negotiations between this Government and the United Kingdom concerning shipments of rubber to the Bloc.
[Page 945]Mr. Flanagan brushed aside the problem of classification until toward the end of the discussion, but then listened with some apparent sympathy and understanding to Mr. Vernon’s explanation of the problem of secrecy which hampers this Government in speaking of the substantial controls being applied by other countries over shipments of strategic materials. Mr. Vernon cited the reasons given by other countries for insisting on the maintenance of secrecy, although indicating our own feeling that much would be gained by breaking down part of this secrecy barrier.
Mr. Flanagan had to leave toward the end of the conversation and left it to Mr. Kennedy to discuss the question whether the State Department should appear officially at a public hearing to be held by the Committee on Monday, March 30, at which Mr. Stassen would be a witness and also Mr. Frank Nash, of Defense. Mr. Kennedy said that the Committee would be happy to have someone appear for State and that he would think State would regard such appearance as necessary in its own interest in view of the type of testimony which Mr. Kennedy contemplated that the Department of Defense in particular would present. However, Mr. Kennedy said that they were not insisting on State’s presenting a witness. Mr. Vernon indicated that State would consider the problem, but pointed out the difficulty that would lie in the path of a State Department representative trying to make an effective presentation in a public hearing in view of the secrecy restrictions which he had just described.
After the meeting, arrangements were made to furnish unclassified documents through Mr. Hansen in DMS, in response to the requests which Mr. Flanagan had made for the production of data from the State Department.
- Drafted by Goodkind on Mar. 26. The conversation recorded here was preparatory to hearings held by Senator Joseph R. McCarthy on control of trade with the Soviet bloc on Mar. 30 and 31. At the hearings, the discussion focused largely on the shipment of materials by the United States and its allies to Communist China, and more specifically on the efficacy in reducing this trade of a voluntary agreement concluded between a number of Greek shippers living in the United States and the staff of Senator McCarthy’s subcommittee. Documentation on the reaction by the Department of State to this agreement, which was announced by Senator McCarthy on Mar. 28, is in Department of State file 493.009. For the transcript of the hearings, which were resumed on May 4 and 20, see U.S. Congress, Senate, Permanent Subcommittee on Investigations of the Committee on Government Operations, 83d Cong., 1st sess., Control of Trade with the Soviet Bloc. Hearings, Pts. I and II, 1953. For the report of the subcommittee, see ibid., Control of Trade with the Soviet Bloc. Interim Report, Senate Report 606, July 21, 1953.↩