Foreign Relations of the United States, 1961–1963, Volume V, Soviet Union

346. Memorandum of Conversation⁰

Pitsunda, August 9, 1963, 10:15 a.m.

PARTICIPANTS

• US:
  • The Secretary
  • Ambassador Kohler
  • Ambassador Thompson
  • Mr. Richard Davis, EUR
  • Mr. Akalovsky, ACDA/IR
• USSR:
  • Mr. Khrushchev
  • Foreign Minister Gromyko
  • Ambassador Dobrynin
  • Mr. Vinogradov

SUBJECT

• Part III—Trade¹

US/MC/6

After some discussion of the German problem, Khrushchev suggested that it be put aside and that a more innocent subject be taken up. He said he wished to discuss US/USSR trade.

Khrushchev asked whether US capitalists wanted to get big orders for chemical equipment. US industrialists should be given opportunity to resolve this problem; theUSSR would reach agreement with them, and they wanted agreement, but Congressional laws interfered.

The Secretary said he had received reports from Under Secretary Harriman and Secretary Freeman about their conversations on the subject with Mr. Khrushchev. Also, he had discussed this matter with the President before leaving for Moscow. He had had an informal and rather incomplete discussion of the problem with Mr. Gromyko while flying down here.² There were two types of problems concerning trade. Some could be resolved without Congressional action, while others required such action. As far as chemical plants were concerned, he did not believe this matter required legislative action, but could rather be handled by the Executive Branch. The Secretary said he would look into this matter when he was back in Washington.

However, the Secretary continued, he wanted to make some general observations as regards trade. Mr. Khrushchev had said, and quite rightly, that trade meant peace and that those who traded wanted peace, whereas those who did not trade did not want peace. But if one looked at Soviet trade transactions with the West, one saw that it involved something like 5-1/2 billion dollars a year. As to the United States, we had very little trade with the Soviet Union, and he believed we must improve this situation. But given the considerable difficulties on other problems, such as, for example, West Berlin, the question arose among the American people whether trade really went together with peace, and people wonder whether considerable trade between the Soviet Union and Western Europe really went hand in hand with peace. As far as he personally was concerned, he believed that it was so, but he wished Mr. Khrushchevʼs comment on this. The Secretary reiterated that we regarded trade as part of good relations and we would be glad to see channels for trade between West and East develop, including with the United States.

Khrushchev said that trade was not a matter where one party was obliging the other. No tradesman traded to oblige the other fellow; he traded only when it was profitable to do so. On the other hand, prohibition of trade with this or that tradesman was a matter of policy, because a country having such laws was guided by unkind intentions. The Soviet Union was for free trade with all countries of the world; it would be good if the United States adopted the same approach and if it convinced in this respect Ambassador Kohler, who was taking a cold war position on this matter and was against US-USSR trade, as well as against trade between the West and the socialist countries in general.

Khrushchev went on that Soviet specialists were not exactly keen on placing orders for chemical plants in the United States, for they believed US-manufactured equipment was the most expensive and they preferred to place their orders in other countries where prices were more favorable. Thus the USSR could place very large orders in the US only if commercial credit were allowed and if prices were comparable to world market prices. This meant that the Soviet Union wanted trade with the United States, but not under any circumstances. If those provisos were not met, the Soviet Union would place its orders elsewhere or build the equipment itself.

The Secretary reiterated he would look into the matter of chemical plants upon his return to Washington. He observed in this connection that there might be legislative inhibitions with regard to credit.

Khrushchev interjected he was speaking not of government credit but rather of commercial credit; while he would welcome government credit he understood this was a difficult problem involving matters of policy. He also wished to observe that as far as commercial credit was concerned the Soviet Union had such credit available to it in quantities greater than it could use.

The Secretary continued that as far as Ambassador Kohler was concerned, the latter acted on instructions and he, the Secretary, had seen him receive many bruises in Congress while trying to liberalize trade with specialist countries. We had no deus ex machina here, this question was a matter of governmental policy in which the President had a great personal interest.

The Secretary said he wished to conclude the discussion of this subject by recalling the suggestion he had made to Mr. Gromyko, namely, that at some stage he and Ambassador Dobrynin could take up details of the problem in Washington and attempt to work out solutions advantageous to both countries.

Khrushchev said he welcomed this. However, he wished to emphasize—and he hoped the Secretary would understand this—that this matter should be handled on the basis of equality. He was not pleading or holding out his hand; he was an equal partner and he would buy only what he needed and only if the prices were comparable to world market prices.

The Secretary observed we called this Yankee trading. In other words, both sides bargained hard but both derived advantage from the transaction.

Khrushchev said the USSR had had good trade partners in United States such as Du Pont and other solid companies. Those companies were eager to have trade relations resumed if only the government did not stand in the way.

The Secretary acknowledged that some American companies had approached the US Government in recent weeks

Khrushchev concluded the discussion on trade by saying some US industrialists were displeased with US trade policy. They felt, and quite rightly so, that they were losing their markets to the UK, Japan, France, and other countries with which the Soviet Union had extensive trade relations.

The Secretary then raised the subject of Laos, the discussion of which is covered in part IV of this memorandum of conversation.

0. Source: Kennedy Library, National Security Files, Countries Series,USSR, Khrushchev Talks. Secret; Eyes Only. No drafting information appears on the source text, but it was approved in S on August 28. The meeting was held at Khrushchevʼs dacha.
1. For Part II on Germany and Berlin, see Foreign Relations, 1961–1963, vol. XV, pp. 563–570; for Part IV on Laos, see ibid., vol. XXIV, pp. 1043–1045. Part I on a NATO-Warsaw non-aggression pact is not printed. (US/MC/4; Kennedy Library, National Security Files, Countries Series, USSR, Khrushchev/Rusk) A summary of the complete conversation was transmitted in Secto 53 from Moscow, August 9. (Department of State, Central Files, ORG 7 S)
2. See Document 345.