letter of transmittal
To the Congress of the United States:
I have the honor to submit herewith the fourth semiannual report on operations under the Mutual Defense Assistance Control Act of 1951 (Battle Act), the administration of which is a part of my responsibilities.
The period covered is July through December 1953.
A large part of this report is an examination of what the Soviet Union has been doing in its trade relations with the free world. In order to put the Russian activities of the last half of 1953 in a more understandable framework we have ranged back over the last 30 years to show how foreign trade fits into their economy and serves their purposes. To study Soviet trends and tactics is obviously important to the economic defense of the free world. To make a report to the Congress and the public on these matters should also be useful. There has been much public interest in the subject.
The selection of this theme, however, does not mean that Soviet trade activities are the only important consideration to be taken into account in the formulation of U. S. economic defense policy. They are not. Many other factors enter in, as told in Chapter V.
In preparing the report my staff has drawn heavily upon the expert knowledge of the Department of State and other agencies. But of course the responsibility for the report is ours.
In my last Battle Act report I said that the strategic trade control program had been hampered by lack of public knowledge. This is still true, but to a less extent, it seems to me. There is a better understanding of the Government’s policies, a greater realization that the soundness of East-West trade policy is to be judged not primarily on the amount of trade, but more on what kind of goods move back and forth, and on what terms they move.
Harold E. Stassen,
Director, Foreign Operations Administration.
May 17, 1954.
| CONTENTS | ||
| INTRODUCTION: | Page | |
| Note on “Strategic” and “Nonstrategic” | 1 | |
| CHAPTERS: | ||
| I. | Stalin’s Lopsided Economy | [3] |
| Emphasis on Heavy Industry | ||
| How Forced Industrialization Affects Trade | ||
| How the Kremlin Controls Trade | ||
| West Has Never Barred Peaceful Exports | ||
| Stalin’s Last Gospel | ||
| II. | The New Regime and the Consumer | [11] |
| Letting Off Pressure | ||
| The “New Economic Courses” | ||
| Malenkov’s Big Announcement | ||
| Khrushchev and the Livestock Lag | ||
| Mikoyan Advertises the Program | ||
| Has Stalin Been Overruled? | ||
| III. | The Kremlin’s Recent Trading Activities | [19] |
| The New Trade Agreements | ||
| More Consumer Goods Ordered | ||
| A Shopping Spree for Ships | ||
| Most of All, They Want Hard Goods | ||
| Something Different in Soviet Exports | ||
| They Have Dug Up Manganese | ||
| The Emergence of Russian Oil | ||
| Gold Sales Expanded | ||
| Reaching Outside Europe | ||
| IV. | What’s Behind It All | [35] |
| The Kremlin and Peace | ||
| A Mixture of Motives | ||
| Their Objectives Haven’t Changed | ||
| Their Practices Haven’t Changed | ||
| The Challenge | ||
| V. | U. S. Policy on Strategic Trade Controls | [43] |
| The Background | ||
| Basic Policy Reaffirmed | ||
| The New Direction of Policy | ||
| Reviewing the Control Lists | ||
| East-West Trade: Road to Peace | ||
| Trade Within the Free World | ||
| The China Trade Falls Off | ||
| They Play by Their Own Rules | ||
| United States Policy on the China Trade | ||
| VI. | The Battle Act and Economic Defense | [55] |
| Battle Act Functions | ||
| The Money and the Manpower | ||
| Meshing the Gears | ||
| Improving the Machinery | ||
| The Termination-of-Aid Provision | ||
| Miscellaneous Activities | ||
| Summary of the Report | ||
| APPENDICES | ||
| A. | Trade Controls of Free World Countries | [65] |
| B. | Statistical Tables | [89] |
| C. | Text of Battle Act | [99] |
| CHARTS | ||
| 1. | Volume of Trade of OEEC Countries With European Soviet Bloc | [6] |
| 2. | Free World Trade With the Soviet Bloc | [21] |
| 3. | EDAC Structure | [57] |
[INTRODUCTION]
Note on “Strategic” and “Nonstrategic”
To help protect the security of the free world, the United States and certain other countries have been working together for more than four years to withhold strategic goods from the Soviet bloc.
But how can you tell strategic goods from nonstrategic goods? A good many people have asked that question. It is a reasonable question and it deserves a nontechnical answer.
The answer is that strategic goods, as understood in the day-to-day operations of the program, are those goods which would make a significant contribution to the warmaking power of the Soviet bloc.
This is a practical guide to action. There is no rigid definition that holds good for all times, places, and circumstances. All strategic goods don’t have the same degree of strategicness. The free countries have embargoed some, merely limited others in quantity, and kept still other items under surveillance so that controls could be imposed if necessary. Even the same item may vary in strategic importance, depending on the destination, the changing supply situation behind the Iron Curtain, and other circumstances which may change from time to time. Whether an item includes advanced technology is an important consideration. In specific cases, two experts of equal competence may disagree on these things. Two agencies of government, differing in function, may bring different points of view to a given problem. The same is true of governments.
Since there is no distinctly visible boundary between “strategic” and “nonstrategic,” some people insist there is no such thing as a nonstrategic item at all. It is true that even bicycles, typewriters, or ordinary hardware may help the other fellow by strengthening his general economy. And these people argue that anything that contributes to the general economy helps in a military way, too.
That is a correct concept in actual warfare but it is not an acceptable concept of “strategic” in the present situation, for trade on certain terms can help the free nations too. They carry on two-way trade with the Soviet bloc for concrete commercial benefits. The problem is to gain those benefits without permitting the Kremlin to accelerate the growth of military power or to divide the free world.
In rating items as strategic or nonstrategic, it is clear that there are innumerable commodities, used entirely or mainly for civilian purposes, which would not make a clearly significant contribution to war potential. No one would have trouble drawing a line between a jet plane and a suit of clothing, to take an extreme example. Few would have difficulty putting cobalt on one side of the line and butter on the other. As for the border area where it is less clear what contribution an item would make, the allied governments put their heads together, pool their facts, and try to arrive at mutually acceptable judgments.
As President Eisenhower has said, “Unity among free nations is our only hope for survival in the face of the worldwide Soviet conspiracy backed by the weight of Soviet military power.”
[CHAPTER I]
Stalin’s Lopsided Economy
The weakest link of the socialist chain is merchandising and distribution; if this can be strengthened, present difficulties will be overcome. Upon it the Kremlin has wisely concentrated attention. The Kremlin’s immediate objective, as recently announced by the resolutions voted at the plenary session of Bolshevik leaders, is to increase the supply of foodstuffs and consumers’ goods and stimulate their mutual exchange.
That quotation is from a Moscow dispatch to the New York Times. The dispatch was written by Walter Duranty and printed on November 6, 1932.
As long ago as that, and even before, the Russian people were wondering when something was going to be done about the supply of food and other things they needed, and the dictatorship was making motions—but not very helpful—in that direction. Goals were set and decrees were issued. But the results were disappointing, and the standards of living of the Russian people stayed low.
Stalin’s First Five-Year Plan called for a 50 percent rise in gross farm production during 1928-32 inclusive. But by 1932, farm production had declined by 20 percent. The difficulties have continued ever since. For example, the Third Five-Year Plan, beginning with 1938, was scheduled to bring a large increase in consumer goods—larger than the increase being promised nowadays—but instead the supply of consumer goods actually decreased, even in the three prewar years of the period. Per capita consumption in the Soviet Union is lower now than it was in the 1920’s, before the 5-year plans commenced.